CareMax, Inc.

Hello and welcome to the CareMax Incorporated second quarter 2023 financial results and conference call. 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 star 1 on your telephone keypad. If you would like to withdraw your question, again press the star 1. I will now turn the conference over to Samantha Swerden, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to CareMax's second quarter 2023 earnings call. I'm Samantha Swerbel, 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 this 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 an assessment of historical trends, current conditions, expected future development, and other factors they believe to be appropriate. Any forward-looking statements made during the call are made as of today, and CareMax undertakes no duty to update or revise such statements, whether it's a result of new information, future events, or otherwise. Important factors that could cause actual results, development, and business decisions to differ materially from the forward-looking statements are described in the company's filings 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, 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. Today, I plan to review our second quarter performance provide an update on the progress we are making executing our growth strategy, and discuss our outlook for the remainder of the year. Before I review our second quarter results, I want to highlight some of our significant milestones and accomplishments this year. In Q2, we achieved a major milestone by surpassing 100,000 Medicare Advantage members on the CareMax platform. Our platform is now managing over 270,000 value-based care lives spanning a diverse set of health plans, government programs, and geographies. It is remarkable to consider that just two years ago, we had a little over 20,000 Medicare Advantage members, all concentrated in Florida. This progress is a testament to the effectiveness of our growth strategy and the rising demand for our value-based care offerings. Furthermore, we have more than doubled our active MA value-based care contracts since completing the Stewart acquisition and are currently managing over 80 contracts with more than 25 national and local health plans. We believe the breadth of our membership and the ongoing investments in our platform will position us to deliver on our long-term growth targets. Moving on to our second quarter performance, we reported total revenue of $224 million and adjusted EBITDA of $7 million, which was impacted unfavorably by approximately $7 million of prior year developments. This was attributed to data migration issues as a single Medicaid health plan that was acquired by a national payer. We have a well-established relationship with the payer and have engaged in discussions regarding the importance of the availability of data. We also amended our agreement with the payer to reflect better economics, which we believe should translate to improved medical margin going forward. Kevin will provide more detail on this later. Medical expense ratio was 84.6% for the second quarter, bringing our first half MER to 80.4%. It's important to recognize that we believe that absent prior year developments, MSO mix, and enhanced supplemental benefits, the MER of our centers in the first half of the year would have been approximately in line with our historical performance. We believe that our revenue and membership growth demonstrate positive momentum for our platform. putting us on track to exceed our original revenue guidance range for 2023. At the same time, our underlying profitability year to date gives us confidence in achieving our adjusted EBITDA guidance for 2023, despite prior year developments in the first half. As of quarter end, we had approximately 55 million in cash and 60 million of undrawn capacity on our delayed draw term loans. We continue to believe that this provides us with sufficient capital to bridge us to sustainable free cash flow by Q4 of 2024. Now, turning to some additional highlights from the quarter. We are pleased to report that our Medicare inpatient cost trends have outperformed our internal expectations. Our rates of inpatient admissions and cost per admissions have been trending down so far this year, a testament to the effectiveness of our integrated care model in managing patient outcomes. We observed a brief increase in NA outpatient surgical utilization during this quarter. However, this appears to have normalized and utilization trends are now back in line with expectations. Moreover, we have also successfully reduced our external specialty leakage by 10% this year compared to last year. This achievement is a direct result of our efforts to manage more specialist volume in-house, effectively reducing unnecessary utilization and mitigating cost increases in outpatient surgical costs with lower external specialty fee-for-service volume. We believe that our ability to effectively manage inpatient utilization and efficiently control specialty costs through our high-touch integrated care model positions us well to excel in varying market conditions and continue delivering strong results. On the operational side, we continue to deliver solid performance at our centers and remain focused on ensuring our members have access to consistent, high-quality care. Year to date, we have seen 85% of our Medicare members. We are particularly proud of our de novo expansion beyond our core South Florida market and now have over 4,000 Medicare Advantage patients across our 17 centers in New York, Memphis, Houston, and the Space Coast of Florida. We have further expanded our contracted specialty services in New York, adding optometry to existing services like dental, cardiology, and podiatry. We believe that these offerings will be highly attractive to seniors and will serve as a key point of differentiation from others in the market. Additionally, we have expanded into behavioral health services in Memphis, further enhancing the comprehensive care we provide to our members. Now turning to our MSO expansion. We believe the integration of Steward is progressing well, and we are confident in achieving our membership growth targets that were discussed at our investor day in March. We have more than doubled our active Medicare value-based care contracts since completing the acquisition, with more contracts expected to become active over the next year. We believe this expanded base enables us to execute our strategy of transitioning fee-for-service panels to value-based care and also provides the opportunity to add additional members through our organic growth channels. To promote seamless operations and high-quality care, we are actively supporting our providers with risk adjustment and quality resources, which covers over 70% of our patients. Additionally, we are diligently preparing over 100 practices across the portfolio for AEP with sales and broker support. In our commitment to improve patient outcomes, we recently launched a Medicare Advantage clinical liaison program. Through this initiative, we're collaborating with Medicare Advantage payers to facilitate coordinated care between payers, providers, and patients. This program aims to further elevate the level of care our members receive while promoting greater partnership among all stakeholders involved in their healthcare journey. As I shared with you on previous conference calls, we have been diligently working on enhancing our data infrastructure capabilities and implementing Care Optimize in the most efficient way. We recognize the potential in harnessing the vast amount of data we receive daily to drive significant improvements in financial, clinical, and operational aspects of our organization, especially given the rapid growth we've been experiencing. While our new infrastructure continues to evolve, We have already implemented systems and processes that utilize sophisticated data ingestion, cleansing, and validation methods. This is designed to provide a high level of data accuracy to drive insights and operational efficiencies, ultimately leading to better results for our patients. To wrap up, we are very encouraged by our underlying performance in the first half of the year and the progress we are making. integrating our MSO providers into the CareMax platform. Our core centers and underlying MER are performing well, and we believe we have a line of sight into achieving our near-term and long-term membership and financial targets. Since founding CareMax and growing it to where we are today, we've remained dedicated to creating a more sustainable healthcare delivery system through disciplined growth in a capital-efficient manner. We believe our unique and deliberate approach to growth will ultimately deliver the best returns for our shareholders. With that, I'll now turn things over to Kevin to provide more details on our financial performance in the second quarter.