NEWS & BLOG

Cano Health Announces Financial Results for the Fourth Quarter and Full Year 2021

Increases 2022 Guidance for Membership, Total Revenue and Adjusted EBITDA 

MIAMI, March 14, 2022 /PRNewswire/ — Cano Health, Inc. (“Cano Health” or the “Company”) (NYSE: CANO), a leading value-based primary care provider and population health company, today announced financial results for the fourth quarter and full year ended December 31, 2021.

 

Financial Results and Recent Highlights
Fourth quarter results

  • Total membership of 227,005, including 125,999 Medicare capitated members, an increase of 115% and 69%, respectively year-over-year
  • Total revenue of $492.3 million, an increase of 90% year-over-year
  • Net income of $0.5 million, benefiting from a $58.3 million fair value adjustment to warrant liabilities
  • Adjusted EBITDA(1) of $11.1 million, compared to $18.1 million for the fourth quarter of 2020

Full year results

  • Total revenue of $1.6 billion, an increase of 94% year-over-year
  • Full year net loss of $116.7 million, benefiting from an $82.9 million fair value adjustment to warrant liabilities
  • Full year Adjusted EBITDA(1) of $27.3 million, compared to $72.8 million for the year ended December 31, 2020

As of March 11, 2022, the Company had approximately 200 million shares of Class A common stock and 284 million shares of Class B common stock issued and outstanding. Total share count for the purposes of calculating market capitalization was approximately 484 million.

“Cano Health’s fourth quarter results reflect the continued positive momentum in the growth of our operations,” said Dr. Marlow Hernandez, Chairman and CEO of Cano Health.  “We exceeded our most recent membership guidance and expanded our clinical capacity in eight states and Puerto Rico, allowing us to accelerate growth in 2022.  Since founding the company over 10 years ago, I have never been more excited about what the Cano Health team is going to accomplish this year.”

(1) Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure is provided in the Reconciliation of Non-GAAP Adjusted EBITDA table included in this press release. An explanation of this measure and how it is calculated is also included under the heading “Non-GAAP Financial Measures.”

COVID-19 Update and Medical Claims Expense Ratio
In December of 2021, the highly transmissible Omicron variant of COVID-19 became prevalent in the U.S.  Cano Health members experienced a significant, but transient, increase in COVID-19 case incidence. However, Cano Health’s monthly total hospital admissions per thousand remained stable, and through February 2022, COVID-19 average admissions per thousand remained well below prior peak levels.  Additional detail is provided in the Financial Supplement found on the Investor Relations section of our website (investors.canohealth.com).

Restatement of the Company’s 2021 Quarterly Periods
As disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2022, the Company concluded that the previously issued financial results for the quarterly periods for March 31, 2021, June 30, 2021 and September 30, 2021 require restatement.  The restatement results from the Company’s correction of its accounting for Medicare Risk Adjustment (MRA) revenue within Medicare Advantage contracts.  The correction changes the timing of the revenue recognition associated with MRA, which resulted in adjustments to capitated revenue, direct patient expense, accounts receivable, net of unpaid service provider costs, and accounts payable and accrued expenses.  The restatement did not impact the Company’s cash from operations, its cash position, or estimated collectability of receivables. The Company’s restated quarterly financial results for 2021 will be included in the Annual Report on Form 10-K for the year ended December 31, 2021 to be filed today.  The Company, in consultation with its independent auditors, concluded that the effect of the adjustments was not material as of and for the fiscal years ended December 31, 2019 and 2020.

Impact on 2021 Results and 2022 Guidance
As a result of the restatement, approximately $122 million of MRA revenue related to care provided in 2021 that would have previously been recognized in 2021 is expected to be recognized in 2022. The corresponding $122 million reduction in 2021 revenue is partially offset by $10 million in MRA revenue that was previously recognized in 2020 under the prior accounting methodology, for a net negative impact to 2021 revenue of approximately $112 million.

Also, as a result of the restatement, approximately $101 million of Adjusted EBITDA related to the change in MRA revenue described above, as well as other non-cash items, is expected to be recognized in 2022.  The corresponding $101 million reduction in 2021 Adjusted EBITDA is partially offset by $10 million of Adjusted EBITDA that was previously recognized in 2020 under the prior accounting methodology, for a negative impact to 2021 Adjusted EBITDA of $91 million.

For the fiscal year 2022 revenue guidance, the net positive impact from the restatement is expected to be approximately $69 million.  This consists of $122 million of MRA revenue related to care provided in 2021, net of $53 million of MRA revenue included in previous 2022 guidance that is now expected to be recognized in 2023.

For fiscal year 2022 Adjusted EBITDA guidance, the net positive impact from the restatement is expected to be approximately $58 million.  This consists of $101 million of Adjusted EBITDA that will now be recognized in 2022, partially offset by $43 million in Adjusted EBITDA included in previous 2022 guidance that is now expected to be recognized in 2023.

The Company is updating its guidance for full year 2022 provided on November 9, 2021.  Consistent with that guidance, the outlook below does not include the impact of additional acquisitions.  The updated outlook for full year 2022 is as follows:

  • Membership in the range of 290,000 to 295,000; an increase from the prior guidance of 280,000 to 285,000; membership as of March 31, 2022 is expected to be approximately 265,000, an increase from approximately 253,000 members as of January 1, 2022
  • Total revenue in the range of $2.8 billion to $2.9 billion, an increase from the prior guidance of $2.6 to $2.7 billion
  • Medical claims expense ratio (MCR) in the range of 76.0% to 76.5%, an improvement from 80.5% for 2021, primarily reflecting the recognition of MRA revenue associated with members cared for in 2020 and 2021, offset in part by a higher MCR for Direct Contracting Entity (DCE) members
  • Adjusted EBITDA in the range of $230 million to $240 million, an increase from the previous range of $170 million to $175 million, reflecting the impact of the restatement and operational improvements
  • The Company plans to further expand clinical capacity during the year and expects to operate 184-189 medical centers by the end of 2022, compared to 130 medical centers in operation on December 31, 2021
  • The Company expects to be able to achieve its 2022 guidance without the need for additional financing

We have not reconciled our expectations as to non-GAAP measures in future periods to their most directly comparable GAAP measure because certain costs and expenses are outside of our control or cannot be reasonably predicted. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to our results computed in accordance with GAAP.

Conference Call Information
Cano Health will host a conference call today at 5:00 PM Eastern Time to review the Company’s business and financial results for the quarter and full year ended December 31, 2021.

To access the live call and webcast, please dial (844) 684-0650 for U.S. participants, or +1 (343) 761-2594 for international participants, and reference the Cano Health Fourth Quarter 2021 Earnings Conference Call. The conference call will also be webcast live in the “Events & Presentations” section of the Investor page of the Cano Health website.

A replay will be available in the “Events & Presentations” section of the Cano Health website for on-demand listening shortly after the completion of the call and will be available for 30 days.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to future events and involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and could materially affect actual results, performance or achievements. Such forward-looking statement include, without limitation, our anticipated results of operations, including our financial guidance for the 2022 fiscal year, including the anticipated impact of the restatement on such guidance, the anticipated revenue and Adjusted EBITDA included in previous 2022 guidance that is now expected to be recognized in 2023, our business strategies, our projected costs, prospects and plans, and other aspects of our operations or operating results. These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on our results of operations and financial condition. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, changes in market or industry conditions, regulatory environment, competitive conditions, and receptivity to our services; adverse effects on the Company’s business as a result of the restatement; our ability to realize expected results with respect to patient membership, total revenue and earnings; our ability to enter into new markets and continue our growth; our ability to integrate our acquisitions and achieve desired synergies; changes in laws and regulations applicable to our business; our ability to maintain our relationships with health plans and other key payors; the impact of COVID-19 on our business and results of operation; our future capital requirements and sources and uses of cash, including funds to satisfy our liquidity needs; and our ability to recruit and retain qualified team members and independent physicians. For a detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (the “SEC”). All information provided in this press release is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures as defined by the SEC rules. EBITDA and Adjusted EBITDA have not been prepared in accordance with United States generally accepted accounting principles (“GAAP”). EBITDA is defined as GAAP net income (loss) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA, adjusted to add back the effect of certain expenses, such as stock-based compensation expense, de novo losses (consisting of losses incurred in the twelve months after the opening of a new facility), acquisition transaction costs (consisting of transaction costs, fair value adjustments in contingent consideration, management fees and corporate development payroll costs), restructuring and other charges, changes in fair value of contingent consideration, loss on extinguishment of debt, changes in fair value of an embedded derivative, and changes in fair value of warrant liabilities. We believe these non-GAAP financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing our financial measures with other similar companies. We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. These non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense, income and other items are excluded or included in determining these non-GAAP financial measures. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation of those measures to their most directly comparable GAAP measures is available under the heading “Reconciliation of Non-GAAP Measures.”

About Cano Health
Cano Health (NYSE: CANO) is a high-touch, technology-powered healthcare company delivering personalized, value-based primary care to more than 250,000 members. With its headquarters in Miami, Florida, Cano Health is transforming healthcare by delivering primary care that measurably improves the health, wellness, and quality of life of its patients and the communities it serves. Founded in 2009, Cano Health has more than 4,000 employees, and operates primary care medical centers and supports affiliated providers in eight states and Puerto Rico. For more information, visit canohealth.com or investors.canohealth.com.

Investor Relations Contact:
Derek Fiebig
Cano Health, Inc.
(786) 206-1930
derek.fiebig@canohealth.com

Media Relations Contact:
Georgi Morales Pipkin
Cano Health, Inc.
(786) 206-3322
georgi.pipkin@canohealth.com

 

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
December 31,

Twelve Months Ended
December 31,

(in thousands, except share and per share data)

2021

2020

2021

2020

Revenue:

Capitated revenue

$         464,516

$         248,257

$      1,529,120

$         796,373

Fee-for-service and other revenue

27,739

10,183

80,249

35,203

Total revenue

492,255

258,440

1,609,369

831,576

Operating expenses:

Third-party medical costs

362,870

182,708

1,231,047

564,987

Direct patient expense

59,141

28,951

179,353

101,358

Selling, general and administrative expenses

93,347

33,728

252,133

103,962

Depreciation and amortization expense

18,695

5,758

49,441

18,499

Transaction costs and other

7,988

13,091

44,262

42,945

Change in fair value of contingent consideration

(7,528)

65

(11,680)

65

Total operating expenses

534,513

264,301

1,744,556

831,816

Income (loss) from operations

(42,258)

(5,861)

(135,187)

(240)

Other income and expense:

Interest expense

(14,928)

(12,274)

(51,291)

(34,002)

Interest income

81

4

320

Loss on extinguishment of debt

110

(23,277)

(13,115)

(23,277)

Change in fair value of embedded derivative

(7,320)

(12,764)

Change in fair value of warrant liabilities

58,349

82,914

Other income (expense)

6

(300)

(48)

(450)

Total other income (expense)

43,537

(43,090)

18,464

(70,173)

Net loss before income tax benefit (expense)

1,279

(48,951)

(116,723)

(70,413)

Income tax expense (benefit)

776

357

14

651

Net income (loss)

$                503

$          (49,308)

$        (116,737)

$          (71,064)

Net income (loss) attributable to non-controlling interests

(158)

(98,717)

Net loss attributable to Class A common stockholders

$                661

$                   —

$          (18,020)

$                   —

Net loss per share attributable to Class A common stockholders, basic

$                  —

N/A

$              (0.11)

N/A

Net loss per share attributable to Class A common stockholders, diluted

$             (0.12)

N/A

$              (0.28)

N/A

Weighted-average shares used in computation of earnings per share:

Basic

177,649,657

N/A

170,507,194

N/A

Diluted

174,480,588

N/A

475,697,225

N/A

 

 

CONSOLIDATED BALANCE SHEETS

As of,

(in thousands)

December 31,
2021

December 31,
2020

Assets

Current assets:

Cash, cash equivalents and restricted cash

$         163,170

$           33,807

Accounts receivable, net of unpaid service provider costs

133,433

67,353

Inventory

1,107

922

Prepaid expenses and other current assets

19,525

8,937

Total current assets

317,235

111,019

Property and equipment, net

85,261

38,126

Operating lease right of use assets

132,173

Goodwill

769,667

234,328

Payor relationships, net

576,648

189,570

Other intangibles, net

248,973

36,785

Other assets

13,582

4,362

Total assets

2,143,539

614,190

Liabilities and stockholders’ equity / members’ capital

Current liabilities:

Current portion of notes payable

6,493

4,800

Current portion of equipment loans

510

314

Current portion of finance lease liabilities

1,295

876

Current portion of contingent consideration

3,123

Accounts payable and accrued expenses

72,772

31,370

Deferred revenue

1,815

988

Current portions due to sellers

25,414

26,554

Current portion operating lease liabilities

15,275

Other current liabilities

34,339

2,278

Total current liabilities

161,036

67,180

Notes payable, net of current portion and debt issuance costs

915,266

456,745

Long-term portion of operating lease liabilities

122,935

Warrants liabilities

80,144

Equipment loans, net of current portion

1,329

873

Long term portion of operating lease liabilities

2,181

1,580

Deferred revenue, net of current portion

4,244

4,277

Due to sellers, net of current portion

479

13,976

Contingent consideration

35,300

5,172

Other liabilities

22,057

14,762

Total liabilities

1,344,971

564,565

Stockholders’ Equity / Members’ Capital

Shares of Class A common stock

18

Shares of Class B common stock

30

Members’ capital

157,591

Additional paid-in capital

397,443

Accumulated deficit

(78,760)

(107,832)

Notes receivable, related parties

(134)

Total Stockholders’ Equity / Members’ Capital

attributed to Class A

318,731

49,625

Non-controlling interests

479,837

Total Stockholders’ Equity / Members’ Capital

798,568

49,625

Total Liabilities and Stockholders’ Equity / Members’ Capital

$      2,143,539

$         614,190

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twelve Months Ended

December 31,

(in thousands)

2021

2020

Cash Flows from Operating Activities:

Net loss

$       (116,737)

$         (71,064)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

49,441

18,499

Change in fair value of contingent consideration

(11,680)

65

Change in fair value of embedded derivative

12,764

Change in fair value of warrant liabilities

(82,914)

Loss on extinguishment of debt

13,115

23,277

Amortization of debt issuance costs

4,887

6,716

Non-cash lease expense

664

Write off of other liabilities

531

Equity-based compensation

27,983

528

Paid in kind interest expense

7,287

Changes in operating assets and liabilities:

Accounts receivable, net

(15,135)

(30,309)

Inventory

(185)

(275)

Other assets

(16,409)

(2,760)

Prepaid expenses and other current assets

(11,779)

(5,152)

Accounts payable and accrued expenses

33,723

27,325

Interest accrued due to seller

1,464

1,698

Payment of in kind interest on extinguishment of debt

(7,287)

Deferred rent

1,147

Deferred revenue

693

5,265

Other liabilities

(5,658)

2,510

Net cash used in operating activities

(128,527)

(9,235)

Cash Flows from Investing Activities:

Purchase of property and equipment

(34,354)

(12,072)

Acquisitions of subsidiaries including non-compete intangibles, net of cash acquired

(1,070,307)

(207,625)

Payments to sellers

(26,587)

(53,201)

Other

4,532

Net cash used in investing activities

(1,131,248)

(268,366)

Cash Flows from Financing Activities:

Contributions from member

103,016

Distributions to member

(106,143)

Business combination and PIPE financing

935,362

Payments of long-term debt

(657,917)

(318,754)

Debt issuance costs

(17,394)

(31,111)

Proceeds from long-term debt

1,120,000

664,096

Prepayment fees on extinguishment of debt

(27,969)

Proceeds from revolving credit facility

9,700

Repayments of revolving credit facility

(9,700)

Proceeds from insurance financing arrangements

1,701

2,865

Payments of principal on insurance financing arrangements

(1,701)

(2,865)

Repayments of equipment loans

(314)

(235)

Repayments of capital lease obligations

(1,227)

(684)

ESPP Contributions

10,494

Other

134

Net cash provided by financing activities

1,389,138

282,216

Net increase (decrease) in cash, cash equivalents and restricted cash

129,363

4,615

Cash, cash equivalents and restricted cash at beginning of year

33,807

29,192

Cash, cash equivalents and restricted cash at end of period

$        163,170

$          33,807

 

 

 

Reconciliation of Non-GAAP

Adjusted EBITDA

Three Months Ended
December 31,

Twelve Months Ended
December 31,

(in thousands)

2021

2020

2021

2020

Net income (loss)

$          503

$    (49,308)

$ (116,737)

$    (71,064)

Interest income

(81)

(4)

(320)

Interest expense

14,928

12,274

51,291

34,002

Income tax expense (benefit)

776

357

14

651

Depreciation and amortization expense

18,695

5,758

49,441

18,499

EBITDA

$     34,902

$    (31,000)

$   (15,995)

$    (18,232)

Stock-based compensation

14,853

351

27,983

528

De novo losses (1)

16,001

4,289

40,562

8,662

Acquisition transaction costs (2)

9,006

13,212

48,303

43,333

Restructuring and other

2,370

606

7,883

2,435

Change in fair value of contingent consideration

(7,528)

65

(11,680)

65

Loss on extinguishment of debt

(110)

23,277

13,115

23,277

Change in fair value of embedded derivative

7,320

12,764

Change in fair value of warrant liabilities

(58,349)

(82,914)

Adjusted EBITDA

$     11,146

$     18,120

27,257

$     72,832

(1) De novo losses include those costs associated with the ramp up of new facilities and that are not expected to be incurred past the first 12 months after opening. These costs collectively are higher than comparable expenses incurred once such a facility has been open and generating revenue and would not have been incurred unless a new facility was being opened.

(2) Acquisition transaction costs included  $4.0 million and $0.4 million of corporate development payroll costs for the twelve months ended December 31, 2021 and 2020, respectively, and $1.0 million and $0.1 million of corporate development payroll costs for the three months ended December 31, 2021 and 2020, respectively. Corporate development payroll costs include those expenses directly related to the additional staff needed to support our increased acquisition activity.

 

 

Key Metrics

Three Months Ended
December 31,

2021

2020

% Change

Members:

Medicare Advantage

118,348

74,644

58.5%

Medicare DCE

7,651

100.0%

Medicaid

66,500

19,314

244.3%

ACA

34,506

11,749

193.7%

Total members

227,005

105,707

114.7%

Member months:

Medicare Advantage

346,967

224,627

54.5%

Medicare DCE

23,068

100.0%

Medicaid

196,754

57,191

244.0%

ACA

90,715

32,742

100.0%

Total member months

657,504

314,560

109.0%

Per Member Per Month (“PMPM”):

Medicare Advantage

$             1,098

$                949

15.7%

Medicare DCE

$             1,261

$                  —

100.0%

Medicaid

$                258

$                605

(57.4)%

ACA

$                  43

$                  17

152.9%

Total PMPM

$                706

$                789

(10.5)%

Owned medical centers

Twelve Months Ended
December 31,

2021

2020

% Change

Members:

Medicare Advantage

118,348

74,644

58.5%

Medicare DCE

7,651

100.0%

Medicaid

66,500

19,314

244.3%

ACA

34,506

11,749

193.7%

Total members

227,005

105,707

114.7%

Member months:

Medicare Advantage

1,167,848

708,505

64.8%

Medicare DCE

69,707

100.0%

Medicaid

518,335

193,849

167.4%

ACA

286,005

125,319

128.2%

Total member months

2,041,895

1,027,673

98.7%

Per Member Per Month (“PMPM”):

Medicare Advantage

$             1,066

$                949

12.3%

Medicare DCE

$             1,276

$                  —

100.0%

Medicaid

$                355

$                623

(43.0)%

ACA

$                  39

$                  24

62.5%

Total PMPM

$                749

$                775

(3.4)%

Owned medical centers

130

71

 

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SOURCE Cano Health, Inc.

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