CareMax, Inc.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the CareMax, Inc. first quarter 2023 financial results and earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Samantha Swerdlin, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to CareMax's first quarter 2023 earnings call. I'm Samantha Swerdlin, Vice President of Investor Relations, and I'm joined this morning by 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 assessments of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any 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 filing for the SEC, including the section entitled Risk Factors. In today's remarks by management, we will be discussing certain 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, I'd now like to turn the call over to Carlos.

Thank you, Samantha. Good morning, everyone, and thank you for joining our call. There are three things I plan to review today. An overview of our first quarter performance, the progress we have made expanding our MSO, and our general outlook. Starting with our Q1 financial performance, we had developments that had an unfavorable impact on our revenue and adjusted EBITDA. Specifically, we recognized two prior period developments that together lowered Q1 revenue by $26.6 million and adjusted EBITDA by $14.6 million. The first development was related to MSO membership with one of our health plans, and the second was related to higher acuity admissions in Q4, which Kevin will discuss in more detail. While some prior period development is common for risk-based providers like CareMax, we believe the MSO membership PPD was an anomaly in terms of its nature and impact, and the Q4 acuity was isolated to a period related to an earlier-than-normal flu season coupled with RSV, even though overall admissions remained flat during the period. Despite these headwinds, underlying results for the quarter came in ahead of our expectations, reflecting a disciplined execution of our strategy. We are encouraged by our Q1 run rate performance and expect to achieve our 2023 guidance despite the prior period developments. As of the quarter end, we had approximately $44 million in cash. and $95 million of undrawn capacity on our delayed draw term loans. We believe that this provides us with sufficient capital to bridge us to reach sustainable free cash flow by Q4 of 2024. Now turning to some highlights from the quarter. We are pleased to report that our Medicare Advantage platform continues to grow, with 95,500 lives on our platform as of quarter end, representing approximately $1.3 billion of revenue under management. Of these, 62% are currently in partial risk arrangements and 36% are in full risk. By 2026, we expect nearly all of our current MA membership to be in full risk arrangements. Medical expense ratio for the quarter was 75.2% compared to 72.6% for Q1 last year, due primarily to the impact from prior period development. As we discussed during our recent investor day, we take a prudent approach to taking full risk in new markets, typically with an 18 to 24 month glide path to risk. This approach allows us to take limited downside risk, while our physicians implement medical management practices and we gain profitable scale in the new markets we enter. It's also worth noting that during the year, we may opportunistically shift contracts to full risk early in our MSO network. If you recall, when we shift contracts to full risk, they drive higher revenue and incremental adjusted EBITDA dollars, but may not yet be mature and could generate MERs above our historical MSO average of 85%. While the negative MER impact of electing full risk early is not contemplated in our guidance, we may do so when it's accretive to adjusted EBITDA and cash flow. During the quarter, we continue to deliver solid operational performance at our centers and remain focused on ensuring our members have access to consistent, high-quality care. Our quality initiatives have already resulted in 50% of quality gaps closed in Q1, putting us on track for a sustained five-star rating in 2023. Moreover, our investments in patient experience continue to deliver CAHPS survey measures at the 90th percentile among peer groups as of Q1. Ensuring timely access to care is key to our operating success, and we are proud to report that our primary care providers have seen over 75% of our members at our centers as of Q1. Furthermore, our specialty care services are readily accessible both in-house and through our preferred network. and we have now expanded our network to offer over 50 different specialties through our multi-specialty network. Last year, we expanded our reach beyond our core Florida markets, and the results have been very encouraging. During the new quarter, new member growth was strong, and now we have over 3,000 members in our 2022 de novos. Additionally, we have expanded our dental services across New York and recently signed agreements to add in-house cardiology, nutritionist, and podiatry services. By offering these services in-house, we're able to provide our members with comprehensive care that is designed to lead to best-in-class outcomes, lower costs, and ultimately healthier members. Now I'd like to provide an update on our MSO expansion. The integration of our steward VBC acquisition is on track, and we are confident that we will achieve our membership growth targets that we announced in March. We are working closely with our affiliate groups and they are excited about the opportunity. Each market in the MSO network is participating in monthly joint operating committee meetings where we combine the operational and clinical teams to review performance best practices from our centers that can be implemented into the MSO and what resources they need to effectively practice value-based care. As we discussed in detail at our investor day, we're also making significant progress on the payer side. as we transition Steward contracts into CareMax VBC contracts. We've completed the ingestion of almost all payer data from Steward into our care optimized technology platform and have built an internal infrastructure to accelerate the ingestion of new payer contracts and claims data so that we can provide accurate and timely insights to our clinical and operations teams. Furthermore, we're continually expanding our EMR connector portfolio and are pleased to report that we now have access to data for over 30 EMRs, connecting the majority of our provider network to Care Optimize. As the year progresses, we expect to see further implementation of our technology platform, enabling us to better serve our members and deliver high-quality care through efficient and effective data management. In addition, we are improving our capabilities to incorporate recent technology developments. This quarter, we launched a new machine learning module for risk stratification, which is designed to enable us to better manage chronic condition acuity and provide even more personalized and efficient care to our members. Moving forward, we intend to continue enhancing and developing our care optimized technology to drive operational efficiencies and reduce the administrative burden for our care teams. Although this quarter didn't turn out as expected due to the prior period developments, our Q1 run rate gives us confidence in our ability to achieve both our short-term and long-term objectives. Since founding CareMax and growing it to where we are today, we have remained dedicated to revolutionizing healthcare delivery through disciplined growth in a capital-efficient manner. We believe this approach will ultimately deliver the best returns for our shareholders. We look forward to updating you on our progress over the coming months. With that, I'll now turn things over to Kevin to provide more details on our financial performance in the quarter.