Cano Health(CANO) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Cautionary Note Regarding Forward-Looking Statements Forward-looking statements in this report are subject to risks and uncertainties, and actual results may differ materially, with no obligation for updates - Statements regarding future events, financial performance, strategy, operations, and regulatory changes are forward-looking[8] - Risks include the ability to recognize business combination benefits, financial performance, regulatory changes, market share growth, and the impact of COVID-19[8] - Actual results may differ due to factors like NYSE listing maintenance, stock price volatility, industry competition, the need for additional capital, and difficulties in managing growth and expanding operations[11] Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements and detailed notes for Q1 2022 and FY 2021 Condensed Consolidated Balance Sheets The balance sheet shows the company's financial position as of March 31, 2022, compared to December 31, 2021, with key changes including decreased cash and increased accounts receivable | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash, cash equivalents and restricted cash | $113,052 | $163,170 | | Accounts receivable, net | $191,724 | $133,433 | | Total assets | $2,171,765 | $2,143,539 | | Total liabilities | $1,333,988 | $1,344,971 | | Total Stockholders' Equity | $837,777 | $798,568 | Condensed Consolidated Statements of Operations For Q1 2022, total revenue significantly increased, and net loss substantially reduced compared to Q1 2021, driven by higher capitated revenue and fair value changes | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $704,337 | $274,602 | | Loss from operations | $(11,456) | $(4,775) | | Net loss | $(85) | $(16,114) | | Net income attributable to Class A common stockholders | $660 | $0 | | Net income per share attributable to Class A common stockholders, basic | $0.00 | N/A | Condensed Consolidated Statements of Stockholders' Equity / Members' Capital Total stockholders' equity increased from December 31, 2021, to March 31, 2022, primarily due to additional paid-in capital from stock-based compensation and common stock issuance for acquisitions | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Additional paid-in capital | $464,262 | $397,443 | | Accumulated deficit | $(78,100) | $(78,760) | | Total Stockholders' Equity | $837,777 | $798,568 | - Stock-based compensation expense contributed $13,816 thousand to additional paid-in capital[20] - Issuance of common stock for acquisitions added $15,771 thousand to additional paid-in capital[20] Condensed Consolidated Statements of Cash Flows For Q1 2022, the company experienced a net decrease in cash, cash equivalents, and restricted cash, primarily due to significant cash used in operating and investing activities | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(37,203) | $(14,688) | | Net cash used in investing activities | $(13,457) | $(9,699) | | Net cash provided by (used in) financing activities | $542 | $(2,818) | | Net decrease in cash, cash equivalents and restricted cash | $(50,118) | $(27,205) | | Cash, cash equivalents and restricted cash at end of period | $113,052 | $6,602 | - Non-cash investing and financing activities included $26,364 thousand for right-of-use assets obtained in exchange for lease liabilities and $15,771 thousand for issuance of Class A common stock for acquisitions[26] Notes to Interim Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering business nature, accounting policies, revenue, expenses, debt, fair value measurements, and other financial details 1. NATURE OF BUSINESS AND OPERATIONS Cano Health provides value-based medical care through a network of primary care physicians, focusing on Medicare Advantage, DCE, ACO, and Medicaid members, particularly in underserved communities - Cano Health provides value-based medical care via primary care physicians in the U.S. and Puerto Rico, targeting Medicare Advantage, DCE, ACO, and Medicaid members[29] - The company's organizational structure is an Up-C corporation, with substantially all assets and operations held by PCIH and its subsidiaries[32][33] - Cano Health, Inc. holds a 42.6% controlling ownership in PCIH as of March 31, 2022, with non-controlling interests holding the remaining 57.4%[32] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section reiterates that there were no significant changes to the company's accounting policies during Q1 2022, and mentions the adoption of ASU 2020-04 and the upcoming ASU 2021-08 - No significant changes to accounting policies during the three months ended March 31, 2022[47] - Adopted ASU 2020-04 (Reference Rate Reform), which did not impact net income[48] - Evaluating ASU 2021-08 (Business Combinations - Accounting for Contract Assets and Liabilities) effective January 1, 2023[49] 3. REVENUE AND ACCOUNTS RECEIVABLE Total revenue for Q1 2022 significantly increased to $704.3 million, primarily driven by capitated revenue, especially from Medicare, with accounts receivable also increasing | Revenue Type (in thousands) | Three Months Ended March 31, 2022 | Revenue % (2022) | Three Months Ended March 31, 2021 | Revenue % (2021) | | :-------------------------- | :-------------------------------- | :--------------- | :-------------------------------- | :--------------- | | Capitated revenue (Total) | $674,351 | 95.7% | $261,357 | 95.2% | | - Medicare | $615,217 | 87.3% | $220,178 | 80.2% | | Fee-for-service and other revenue (Total) | $29,986 | 4.3% | $13,245 | 4.8% | | Total revenue | $704,337 | 100.0% | $274,602 | 100.0% | | Accounts Receivable (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Accounts receivable, net | $191,724 | $133,433 | - Three payors accounted for 65.1% of total revenue for the three months ended March 31, 2022[55] 4. UNPAID SERVICE PROVIDER COSTS Unpaid service provider costs significantly increased to $222.1 million as of March 31, 2022, primarily due to higher utilization rates, with the company using provider excess loss insurance to mitigate risk | Metric (in thousands) | March 31, 2022 | January 1, 2022 | | :-------------------- | :------------- | :-------------- | | Balance as of | $222,142 | $129,110 | | Incurred related to current year | $401,771 | N/A | | Paid related to current year | $207,279 | N/A | - Increase in estimate of $3.3 million for Q1 2022 due to higher utilization rates[58](