CareMax, Inc.
Q4 2023 Earnings Call Transcript

Published: 18 Mar 2024

[Operator:]

Good morning and welcome to CareMax' Fourth Quarter 2023 Earnings Call. Please note this call is being recorded. I would now like to turn the conference call over to Roger Ou, Senior Vice President of Investor Relations. Please go ahead.

[Roger Ou:]

Good morning and welcome to CareMax' fourth quarter 2023 earnings call. I'm Roger Ou, Senior Vice President of Investor Relations. And I'm joined today by Carlos de Solo, our Chief Executive Officer; and Kevin Wirges, 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' management in light of their experience and assessment 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 filings with 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. Now I'd like to turn the call over to Carlos.

[Carlos de Solo:]

Good morning, everyone, and thank you for joining our call. Today, I will begin by talking about our near-term strategy to preserve our earnings power and liquidity given recent trends in the sector. I will then be discussing the steps we've taken to begin rightsizing our business for the current environment. Afterward, Kevin will discuss our Q4 financials. Over the course of 2023, we have navigated challenges, including some related to our rapid growth over the past couple of years and others affecting our industry overall. We met our membership targets with 111,500 Medicare Advantage members at the year-end and we met our guidance on full-year revenue. However, full-year adjusted EBITDA was unfavorably impacted by prior-year developments, increased flex card utilization and higher-than-expected medical utilization. Additionally, as we noted last quarter, some of the unfavorability had to do with claims payment patterns which developed differently from prior years. In light of these headwinds, we have worked with our lenders to receive limited waivers on certain financial covenants contained in our credit facility in the short term. The cumulative effects of our prior year developments and rising medical expense ratios have lengthened the time in which health plans normally pay us. In the fourth quarter, we drew the remaining $60 million of our delayed-draw term loans to continue funding our operations, all while implementing cost-saving initiatives across the organization. These actions and others that we are undertaking may help bridge us to our expected MSSP payment later this year. In the interim, we aim to drive more structural changes operationally, financially and strategically that are designed to protect and maximize the long-term value of CareMax. As I'll discuss, these may include strategic options to monetize the value of certain assets and right size the capital structure of the company. As noted on our Third Quarter Call, we have undergone a comprehensive operational review of the company. We have begun implementing large-scale changes, with three main goals in mind

[Kevin Wirges:]

Thanks, Carlos. And good morning. As discussed in our third quarter call, since 2021, we have grown rapidly in membership, consolidated health plan contracts from acquisitions and added a significant number of new contracts. Our fourth quarter results reflect additional prior-year developments or PYDs primarily related to updated data arising from these integrations. We have established a regular cadence of service fund reporting with most payers and continued to refine our data flows to mitigate these types of impacts in the future. In the fourth quarter, revenues and adjusted EBITDA were negatively impacted by a combination of prior-year developments, increased medical and flex card utilization and a provision for adverse deviation which we treat as an explicit reserve separate from PYD. As a reminder

[Operator:]