CareMax, Inc.

Greetings. Welcome to CareMax Incorporated's fourth quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Samantha Swerdlund, Vice President, Investor Relations at CareMax. Thank you. You may begin.

Thank you. And good morning, everyone. Welcome to CareMax's fourth quarter and full year 2021 earnings call. On the call with me today are Carlos DeSolo, our Chief Executive Officer, and Kevin Worges, our Chief Financial Officer. During the call, we will be discussing certain forward-looking information. These forward-looking statements are based on assumptions and assessments made by CareMax's management in light of their experience and assessment of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. And forward-looking statements made during this call are made as of today, and CareMax undertakes no duty to update or revise such statements, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results, developments, and business decisions to differ materially from the forward-looking statements are described in the company's filings with the SEC, including the section entitled Risk Factors. In today's Remarks by Management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial metrics to the most comparable GAAP measures can be found in this morning's earnings press release. With that said, I'd now like to turn the call over to Carlos.

Thank you, Samantha. Good morning, everyone, and thank you for joining our call today. I am proud to report that we closed our fourth quarter with strong revenue and membership growth and a quarter-over-quarter decline in our medical expense ratio. For the full year 2021, we delivered membership and MER ahead of expectations despite COVID and feel encouraged by our momentum entering into 2022. We are making meaningful progress towards achieving our 2022 de novo goal and are pleased to announce that we recently opened our first two centers in Memphis, Tennessee, and our first center in New York City. Our expansion into these new markets is an exciting milestone in our national de novo strategy and will serve as building blocks to bring our transformative whole person health model to more communities than ever. We believe our strong growth while still maintaining a best-in-class MER is a testament to our team and our model. By utilizing our whole-person health clinical program and our integrated proprietary point-of-care technology platform, Care Optimize, our physicians and care teams truly partner with our members to improve health outcomes and overall well-being. We do this by working in some of the most underserved neighborhoods, many of which are otherwise healthcare deserts, addressing patients with significant barriers to care. Our model does well by doing good, and we look forward to expanding to those communities that will benefit the most. Turning now to our performance. For the fourth quarter 2021 pro forma, for the combination of CareMax and IMC, we achieved revenue of $118 million, up 34% from $88 million in the fourth quarter of 2020. Notably, we saw 95% of our members during the year and to date in Q1 have seen risk reimbursement rates return to pre-COVID levels. Our fourth quarter gap net loss was $3.6 million, bringing our full year gap net loss to $6.7 million. Our 2021 pro forma run rate revenue was $515 million, and our pro forma run rate adjusted EBITDA was approximately $35 million, both in line with the expectations we set last year. As a reminder, these were illustrative figures that help frame our steady state earnings power heading into 2022. But all 2022 guidance given today, as Kevin will discuss, will reflect performance we expect to report in the current year. Our total membership as of December 31st, 2021 was over 83,000, and our Medicare Advantage membership was over 33,500, both exceeding our guidance. Our focus on de novo openings, specifically in areas where our partners have a concentration of membership in our own grassroots marketing efforts, are expected to contribute to strong membership growth in the future. Like others, early in the first quarter, We experienced higher COVID cases related to the Omicron variant. However, hospital admissions were below levels seen during prior spikes, and of those members admitted, the average length of stay was shorter than in prior waves. We attribute this to our COVID rapid response program. Our medical staff have been diligent about the outreach in educating our members, which has led to early diagnosis and more effective treatment plans. Despite the continued impact from COVID, during the fourth quarter, our clinical model continues to perform well. For the fourth quarter, we recorded a healthy 71.5% medical expense ratio, which has an improvement of approximately 400 basis points from the third quarter of 2021. Normalizing for estimated direct impacts from COVID, our MER would have been 69.5%. To provide a bit more context how we are lowering overall healthcare costs, our results show that ex-COVID, we continue to reduce our external provider costs in absolute dollars spent on a per-member, per-month basis. It bears repeating that historically, we have achieved an MER reduction by patient cohort of 47 percentage points over three to four years, including a 40% reduction in medical expense per-member, per-month. which contributes to much needed savings in our healthcare system. Next, I would like to provide an update on our operational initiatives. We believe we have now captured substantially all $5 million of the previously announced combination synergies that we anticipated with IMC, including benefits from the consolidation of member panels under certain health plans. As you might imagine, human capital is our most valuable asset. and we are continually looking for ways to invest in our talent. First, in the fourth quarter, we brought up on key leadership to support our regional and corporate operations, including a southeast market president, a chief compliance officer, and a chief people officer. We believe that we have assembled the right talent to execute on our growth plans and will continue to add capabilities to our regional and corporate teams. Second, Our frontline associates worked tirelessly last year to keep our centers operational during the pandemic and to keep our members safe. We're in the process of adjusting compensation across medical and center support staff, knowing that employee retention and experience translate into higher quality of care for our members. We are already benefiting from the investments we made last year in patient experience. I am pleased to announce that in 2021, we achieved a five-star quality rating across all of our centers. This underscores our ability to maintain best-in-class care as we grow rapidly. Further, we received a net promoter score of 96 for member satisfaction and had a 98% physician retention over the past year. Moving to our strategic initiatives, we continue to be impressed by the amount of inbound interest from those looking to collaborate with us to improve outcomes and efficiencies in the healthcare system. Two of those, which we will provide an update on, Related and Anthem. The Related collaboration gives us the opportunity to work closely with one of the largest owner-operators of affordable housing in the U.S. The initial focus of our collaboration with Related has been in New York City, where we are on track to opening centers this year. Our vision is to bring CareMax's vertically integrated whole-person healthcare model directly to affordable housing communities, providing convenient access to care to those seniors who need it the most. We have demonstrated that this model works well, as we have highlighted in the past, with the growth of our Pembroke Pines Florida Medical Center, which opened on the ground floor of a retirement community. This center experienced among the fastest membership ramp and path to profitability in our center footprint. With Related, we look forward to bringing this model to communities across the country to expand convenient access to value-based care. We are also progressing nicely with our strategic collaboration with Anthem and are encouraged by the level of engagement Anthem has provided to help us fill our centers. With their support, we believe we are able to reduce upfront operating losses at DeNovo's, speed up the path of full-risk economics, and pull forward break-even platform contribution margins. all while accelerating the shift of Anthem's membership to value-based care. In addition to these two important strategic collaborations, we continue to work with our other payers to assist in our collective goal, bringing best-in-class medical care to underserved communities. As we've discussed in prior presentations, we believe De Novo's represent our highest ROI use of capital. and that we have the right team, the right infrastructure, and the right secular tailwinds in place to pursue that opportunity. In some instances, we are able to get a de novo break-even center profit with as little as $1 to $2 million of upfront platform contribution investment after leveraging tenant improvement financing and funding from strategic payer partners. This is possible through our disciplined strategy for de novo openings. When assessing new markets, we look for growth. where our partners have a concentration of membership. The partners are looking to improve costs, quality outcomes, or both. Our model is specifically designed to deliver these outcomes in a replicable way. By going where patients already exist, we lower our patient acquisition cost and ensure we have a large local TAM to deliver our model. Our member sourcing is supported by these partners and our own grassroots efforts. By embedding ourselves in the communities through our local events and hiring from within those communities, we bring a unique, culturally sensitive, and hyper-local focus to our medical centers so that our model resonates with the communities that we are serving. Financially, this approach results in a scaled member base that generates attractive, predictable cash flows in any economic environment. We believe each of our standard-sized Denovo's has the ability to generate $4 to $5 million of platform contribution and maturity. We are reaffirming prior guidance of opening 15 de novos in 2022. We have already executed leases across Florida, Tennessee, Louisiana, and New York. While we are experiencing very high interest in building out more locations than we've highlighted, we remain disciplined and deliberate in our approach by selecting quality sites that we believe will provide the best returns and allow us to make the biggest impact in improving health outcomes for our members. Lastly, I'd like to touch on our tech-enabled MSO strategy and how it plays into our national expansion plans. Our MSO has been part of our model for the past 11 years and gives providers in the community a path to value-based care. As we have previously communicated, we have begun transitioning our care optimized platform into our MSO from its prior use as a consulting SAS-based model. Our MSO provides independent physicians with the technology, education, and support to deliver better outcomes for their patients with more favorable financial results for all stakeholders. Payers and health systems have expressed interest in this model as it assists them in reliably managing their independent physician networks. These arrangements provide us with the ability to reach critical mass in a market while giving us a faster path to profitability. We have the flexibility to begin these contracts as a non-risk or partial risk with a path to full risk as we professionalize the practices. And historically, these arrangements have generated margins comparable to those of our own centers. With that, I will turn it over to Kevin to provide more color on our results and our outlook for 2022.