Cano Health Announces Financial Results for the Third Quarter 2022
MIAMI, November 9, 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 third quarter ended September 30, 2022.
Third Quarter Financial Results
- Total membership of 294,596, including 168,346 Medicare capitated members, an increase of 40% year-over-year for both
- Total revenue of $665.0 million, an increase of 33% year-over-year
- Net loss of $(112.0) million, unfavorably impacted by a $65.7 million fair value adjustment of warrant liabilities
- Adjusted EBITDA1 of $42.5 million, compared to $13.6 million in the third quarter of 2021, an increase of 211% year over year
The Company continues to demonstrate financial and operational improvement year-over-year, with higher revenue, an improved medical cost ratio2, or MCR, and a higher Adjusted EBITDA margin. Total third-party medical costs per member per month, or PMPM, were better than expected in the third quarter, however, capitated revenue PMPM was approximately (5%) lower than the prior year and approximately (9%) lower than the second quarter of 2022, primarily due to a lower-than-expected capitated rates from new patients. This resulted in a higher medical cost ratio in the quarter than expected. The MCR was 78.2% in the third quarter, compared to 80.5% in the prior year, primarily driven by lower third-party medical costs PMPM, which more than offset the decline in capitated revenue PMPM.
“Cano Health delivered improved profitability while achieving steady organic growth,” said Dr. Marlow Hernandez, Chairman and Chief Executive Officer at Cano Health. “While financial results were below our expectations due to lower revenue from new membership growth, existing membership performed in line with expectations. As these new members integrate into our care platform, we expect they will perform similarly to existing members in future periods. In response to our rapid growth and the higher cost of capital in the current economic environment, we are optimizing key areas of the business to leverage existing assets and prioritize cash flow. We are confident Cano Health’s operating model will continue to deliver better health outcomes for our patients and sustainable long-term value creation for our shareholders.”
(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.”
(2) Medical Claims Expense Ratio (MCR) is calculated as third-party medical expense divided by capitated revenue
The Company is updating its guidance for full year 2022 provided on August 9, 2022. The updated guidance for full year 2022 is as follows:
- Membership in the range of 300,000 to 305,000, unchanged from the prior guidance range
- Total revenue in the range of $2.70 billion to $2.75 billion, a decrease from the prior guidance range of $2.85 billion to $2.90 billion, primarily driven by lower-than-expected capitated revenue PMPM from new members
- Total medical cost ratio (MCR) in the range of 79.5% to 80.5%, an increase from the prior range of 78.0% to 79.0%, driven by the aforementioned lower-than-expected capitated revenue PMPM from new members
- The second half of 2022 is still expected to be lower than total MCR in the first half of 2022, primarily driven by normal seasonality in medical costs and cost recoveries
- Adjusted EBITDA of approximately $150 million to $160 million, a decrease from the prior guidance of approximately $200 million
- The Company added eight medical centers in the quarter, bringing total medical centers to 151, as of September 30, 2022, and 162 as of November 9, 2022; the Company expects to operate 170 by the end of 2022, a decrease from the prior guidance of 184 to 189, consistent with the focus on cash flow improvement
As of November 4, 2022, the Company had approximately 245 million shares of Class A common stock and 250 million shares of Class B common stock issued and outstanding. Total share count for the purposes of calculating market capitalization was approximately 494 million.
Conference Call Information
Cano Health will host a conference call today at 5:00 PM ET to review the Company’s business and financial results for the third quarter ended September 30, 2022.
To access the live call and webcast, please dial (888) 660-6359 for U.S. participants, or +1 (929) 203-0867 for international participants, and reference the Cano Health Third Quarter 2022 Earnings Conference Call and Conference ID 8371699. 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.
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, 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; changes in our strategy, future operations, prospects and plans; developments and uncertainties related to the Direct Contracting Entity (“DCE”) DCE program; adverse effects on the Company’s business as a result of the restatement of our previously issued financial statements; our ability to realize expected financial results, including with respect to patient membership, total revenue and earnings; our ability to predict and control our medical cost ratio; our ability to grow market share in existing markets or enter into new markets and continue our growth; our ability to integrate our acquisitions and achieve desired synergies; our ability to maintain our relationships with health plans and other key payors; the impact of COVID-19 on our business and results of operations; 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 net income (loss) before interest, 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 costs associated with the ramp up of new medical centers and losses incurred for the twelve months after the opening of a new facility), acquisition transaction costs (consisting of transaction costs and corporate development payroll costs), restructuring and other charges, fair value adjustments in contingent consideration, loss on extinguishment of debt, 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 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.”
The Company has not reconciled its expectations as to non-GAAP measures in future periods to their most directly comparable GAAP measure because certain costs and expenses are outside of its 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 the Company’s results computed in accordance with GAAP.
About Cano Health
Cano Health (NYSE: CANO) is a high-touch, technology-powered healthcare company delivering personalized, value-based primary care to more than 290,000 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 4,500 employees, and operates primary care medical centers and supports affiliated providers in nine states and Puerto Rico. For more information, visit canohealth.com or investors.canohealth.com.
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