1,951--12-310001813914Q2P1Ytrue00018139142022-05-012022-05-310001813914cmax:PayorEMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001813914cmax:EarnoutSharesMember2022-01-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputExpectedDividendRateMember2022-06-300001813914us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembercmax:InitialTermLoansMember2022-01-012022-06-3000018139142022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001813914cmax:EffectOfBusinessCombinationMember2021-04-012021-06-300001813914us-gaap:CommonStockMembercmax:EffectOfBusinessCombinationMemberus-gaap:CommonClassAMember2021-04-012021-06-300001813914us-gaap:TrademarksMember2021-12-310001813914us-gaap:SecuredDebtMember2022-06-300001813914cmax:SubscriptionAgreementWithTwoCentersMembercmax:SeriesBWarrantMember2022-06-300001813914us-gaap:RetainedEarningsMember2021-06-300001813914cmax:TwoThousandTwentyOneLongTermIncentivePlanMember2021-04-012021-06-300001813914us-gaap:AdditionalPaidInCapitalMembercmax:EffectOfBusinessCombinationMember2021-04-012021-06-300001813914us-gaap:ProductAndServiceOtherMember2021-04-012021-06-300001813914us-gaap:NoncompeteAgreementsMember2021-12-310001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-04-012022-06-300001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMembercmax:SeniorMedicalAssociatesLLCMember2021-04-012021-06-300001813914cmax:SubscriptionAgreementMemberus-gaap:CommonClassAMember2021-07-130001813914us-gaap:ContractBasedIntangibleAssetsMember2022-06-300001813914us-gaap:AccountingStandardsUpdate201613Member2022-06-300001813914cmax:SecondSharePriceTriggerMember2022-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesBWarrantMember2021-07-130001813914us-gaap:VehiclesMember2021-12-310001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914cmax:DefinitiveMergerAgreementMember2022-04-012022-06-300001813914cmax:IMCMedicalGroupHoldingsMember2021-01-012021-06-300001813914cmax:FirstSharePriceTriggerMember2022-06-300001813914us-gaap:TrademarksMember2021-01-012021-12-310001813914cmax:ConstructionAdvisoryServicesMember2022-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesBWarrantMember2022-04-012022-06-300001813914cmax:PayorBMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914cmax:MembersEquityMember2020-12-310001813914us-gaap:FurnitureAndFixturesMember2022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorAMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesBWarrantMember2021-07-122021-07-130001813914us-gaap:SecuredDebtMember2021-12-310001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-3000018139142021-06-300001813914cmax:DerivativeWarrantLiabilitiesMember2021-12-310001813914cmax:CareMaxMedicalGroupLimitedLiabilityCompanyMembercmax:SecondSharePriceTriggerMember2022-06-300001813914cmax:SeniorMedicalAssociatesLLCMember2021-04-012021-06-300001813914cmax:MedicareMember2021-01-012021-06-300001813914cmax:AdvisoryAgreementMembercmax:SeriesBWarrantMember2022-01-012022-06-300001813914us-gaap:LeaseholdImprovementsMember2021-12-310001813914cmax:DefinitiveMergerAgreementMember2022-05-012022-05-310001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914us-gaap:AdditionalPaidInCapitalMembercmax:SeniorMedicalAssociatesLLCMember2021-04-012021-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputSharePriceMemberus-gaap:FairValueInputsLevel3Member2021-12-310001813914cmax:RelatedCmAdvisorLlcMembercmax:AdvisoryAgreementMember2021-07-130001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputExercisePriceMember2021-12-310001813914cmax:CareMaxMedicalGroupLimitedLiabilityCompanyMembercmax:FirstSharePriceTriggerMember2022-06-300001813914srt:ScenarioForecastMember2026-07-012026-09-300001813914us-gaap:CommonStockMembercmax:EffectOfBusinessCombinationMemberus-gaap:CommonClassAMembercmax:IMCMedicalGroupHoldingsMember2021-01-012021-06-300001813914cmax:PayorAMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914us-gaap:AdditionalPaidInCapitalMembercmax:EffectOfBusinessCombinationMembercmax:IMCMedicalGroupHoldingsMember2021-04-012021-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorBMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914srt:MinimumMember2022-06-300001813914cmax:ExistingCreditAgreementMember2022-04-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001813914us-gaap:PerformanceSharesMember2022-04-012022-06-300001813914us-gaap:AccountingStandardsUpdate201602Member2022-06-300001813914cmax:PayorCMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputPriceVolatilityMember2022-06-300001813914cmax:MedicaidMember2021-04-012021-06-300001813914cmax:DelayedDrawTermLoanFacilityMember2022-05-310001813914us-gaap:TrademarksMember2022-06-300001813914cmax:PayorEMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914cmax:DefinitiveMergerAgreementMemberus-gaap:CommonClassAMember2022-06-300001813914cmax:IMCMedicalGroupHoldingsMembercmax:SecondSharePriceTriggerMember2022-06-300001813914cmax:DefinitiveMergerAgreementMemberus-gaap:CommonClassAMember2022-05-012022-05-310001813914us-gaap:AdditionalPaidInCapitalMembercmax:EffectOfBusinessCombinationMember2021-01-012021-06-300001813914us-gaap:VehiclesMember2022-06-300001813914us-gaap:AdditionalPaidInCapitalMember2022-06-300001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914us-gaap:RetainedEarningsMember2022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorDMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914us-gaap:RetainedEarningsMembercmax:EffectOfBusinessCombinationMember2021-01-012021-06-300001813914us-gaap:CommonClassAMember2022-08-050001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-01-012022-06-3000018139142021-01-012021-06-300001813914cmax:DelayedDrawTermLoanFacilityMember2022-06-300001813914cmax:PayorAMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-06-3000018139142022-03-310001813914us-gaap:SoftwareDevelopmentMember2021-12-310001813914us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001813914cmax:MembersEquityMember2021-03-310001813914cmax:MedicaidMember2022-01-012022-06-300001813914us-gaap:PerformanceSharesMember2022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMembercmax:EffectOfBusinessCombinationMembercmax:IMCMedicalGroupHoldingsMember2021-01-012021-06-300001813914us-gaap:LeaseholdImprovementsMember2022-06-300001813914us-gaap:NoncompeteAgreementsMember2021-01-012021-12-310001813914cmax:OtherMember2022-06-300001813914cmax:MembersEquityMember2021-04-012021-06-300001813914cmax:PayorDMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorCMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914us-gaap:ProductAndServiceOtherMember2022-01-012022-06-300001813914cmax:SeriesAWarrantsAndSeriesBWarrantsMember2022-04-012022-06-300001813914us-gaap:ProductAndServiceOtherMember2021-01-012021-06-300001813914srt:RevisionOfPriorPeriodErrorCorrectionAdjustmentMember2022-06-300001813914cmax:TwoThousandTwentyOneLongTermIncentivePlanMember2022-04-012022-06-300001813914cmax:DefinitiveMergerAgreementMember2022-01-012022-06-3000018139142020-12-310001813914cmax:OtherMember2022-01-012022-06-300001813914cmax:EffectOfBusinessCombinationMemberus-gaap:MemberUnitsMember2021-04-012021-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputPriceVolatilityMember2021-12-3100018139142021-03-3100018139142022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:IPOMembercmax:DeerfieldHealthcareTechnologyAcquisitionsCorpMember2020-07-160001813914srt:MaximumMembercmax:IMCMedicalGroupHoldingsMember2022-06-300001813914cmax:MedicareMember2021-04-012021-06-300001813914cmax:EarnoutSharesMember2022-04-012022-06-300001813914cmax:DerivativeWarrantLiabilitiesMember2022-01-012022-06-300001813914srt:ScenarioPreviouslyReportedMember2022-06-300001813914cmax:PublicWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001813914cmax:PublicAndPrivatePlacementWarrantsMember2022-01-012022-06-300001813914us-gaap:AccountingStandardsUpdate201602Member2022-01-010001813914us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorAMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesBWarrantMember2022-06-300001813914cmax:DerivativeWarrantLiabilitiesMember2022-06-300001813914us-gaap:ContractBasedIntangibleAssetsMember2022-01-012022-06-300001813914cmax:PayorEMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-06-300001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputSharePriceMemberus-gaap:FairValueInputsLevel3Member2022-06-300001813914us-gaap:CommonStockMembercmax:EffectOfBusinessCombinationMemberus-gaap:CommonClassAMember2021-01-012021-06-300001813914cmax:PublicWarrantsMemberus-gaap:IPOMembercmax:DeerfieldHealthcareTechnologyAcquisitionsCorpMember2022-04-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputExpectedDividendRateMember2021-12-310001813914cmax:MembersEquityMember2021-01-012021-06-300001813914cmax:MedicareMember2022-04-012022-06-300001813914cmax:MedicaidMember2022-04-012022-06-300001813914cmax:WarrantsMember2022-01-012022-06-300001813914cmax:CareMaxMedicalGroupLimitedLiabilityCompanyMembercmax:BusinessCombinationAgreementMember2021-06-080001813914us-gaap:RetainedEarningsMember2022-03-310001813914cmax:EffectOfBusinessCombinationMembercmax:IMCMedicalGroupHoldingsMember2021-01-012021-06-300001813914cmax:PublicAndPrivatePlacementWarrantsMember2022-04-012022-06-300001813914us-gaap:CommonClassAMember2022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMembercmax:IMCMedicalGroupHoldingsMember2021-01-012021-06-300001813914cmax:MedicaidMember2021-01-012021-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorBMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914us-gaap:CommonStockMembercmax:IMCMedicalGroupHoldingsMemberus-gaap:CommonClassAMember2021-01-012021-06-300001813914us-gaap:CommonClassBMember2022-08-050001813914cmax:FirstSharePriceTriggerMember2022-04-012022-06-300001813914us-gaap:CommonClassAMembercmax:TwoThousandTwentyOneLongTermIncentivePlanMember2022-04-012022-06-300001813914cmax:TwoThousandTwentyOneLongTermIncentivePlanMember2021-06-300001813914cmax:PayorEMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914cmax:TwoThousandTwentyOneLongTermIncentivePlanMember2022-06-300001813914us-gaap:ConstructionInProgressMember2021-12-310001813914cmax:PayorBMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorCMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914cmax:MembersEquityMembercmax:EffectOfBusinessCombinationMember2021-04-012021-06-300001813914cmax:ExistingCreditAgreementMember2022-01-012022-06-300001813914cmax:DefinitiveMergerAgreementMember2022-05-302022-05-310001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorAMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorBMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914cmax:MedicalCareOfNyPCAndTennesseePllcMember2022-04-012022-06-300001813914cmax:InitialTermLoansMember2022-05-012022-05-310001813914cmax:SubscriptionAgreementMembercmax:SeriesAAndBWarrantMember2021-07-122021-07-130001813914us-gaap:ContractBasedIntangibleAssetsMember2021-12-3100018139142022-04-012022-06-300001813914srt:MaximumMember2022-01-012022-06-300001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-03-310001813914srt:MinimumMember2022-01-012022-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesAAndBWarrantMember2021-07-130001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914cmax:FirstSharePriceTriggerMembercmax:IMCMedicalGroupHoldingsMember2022-06-300001813914us-gaap:RetainedEarningsMember2022-01-012022-06-300001813914cmax:PayorEMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914us-gaap:RetainedEarningsMember2021-12-310001813914srt:MaximumMember2022-06-300001813914cmax:SubscriptionAgreementMembersrt:MaximumMemberus-gaap:CommonClassAMember2021-07-130001813914cmax:MedicareMember2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorBMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001813914cmax:OtherLongTermDebtMember2022-06-300001813914cmax:SubscriptionAgreementMemberus-gaap:CommonClassAMember2021-07-122021-07-130001813914cmax:InitialTermLoansMember2022-05-310001813914us-gaap:TrademarksMember2022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMember2021-12-310001813914cmax:BusinessCombinationAgreementMember2022-04-012022-06-300001813914us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputExercisePriceMember2022-06-300001813914us-gaap:CommonClassAMember2022-06-300001813914cmax:SecondSharePriceTriggerMember2022-04-012022-06-300001813914us-gaap:MemberUnitsMember2020-12-310001813914us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesAWarrantMember2021-07-122021-07-130001813914cmax:CareMaxMedicalGroupLimitedLiabilityCompanyMembersrt:MaximumMember2022-06-300001813914us-gaap:RetainedEarningsMember2021-04-012021-06-300001813914us-gaap:SoftwareDevelopmentMember2022-06-300001813914us-gaap:ConstructionInProgressMember2022-06-300001813914us-gaap:NoncompeteAgreementsMember2022-06-300001813914us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001813914us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001813914cmax:DeerfieldHealthcareTechnologyAcquisitionsCorpMember2022-06-300001813914us-gaap:RetainedEarningsMembercmax:EffectOfBusinessCombinationMember2021-04-012021-06-300001813914cmax:EffectOfBusinessCombinationMember2021-01-012021-06-300001813914us-gaap:CommonStockMembercmax:EffectOfBusinessCombinationMembercmax:IMCMedicalGroupHoldingsMemberus-gaap:CommonClassAMember2021-04-012021-06-300001813914cmax:BusinessCombinationAgreementMembercmax:IMCMedicalGroupHoldingsMember2021-06-080001813914us-gaap:PerformanceSharesMember2022-04-012022-06-300001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMember2021-06-3000018139142021-12-310001813914cmax:EffectOfBusinessCombinationMemberus-gaap:MemberUnitsMember2021-01-012021-06-300001813914us-gaap:NoncompeteAgreementsMember2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorDMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001813914us-gaap:RetainedEarningsMember2022-04-012022-06-300001813914us-gaap:CommonClassAMember2021-12-310001813914cmax:AnthemAetnaCenteneHumanaAndUnitedMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914cmax:TermSOFRMembercmax:InitialTermLoansMember2022-06-300001813914cmax:OtherMember2021-12-3100018139142022-05-310001813914cmax:OtherLongTermDebtMember2021-12-310001813914us-gaap:MemberUnitsMember2021-03-310001813914us-gaap:CreditConcentrationRiskMembercmax:PayorCMemberus-gaap:AccountsReceivableMember2022-01-012022-06-300001813914cmax:EffectOfBusinessCombinationMembercmax:IMCMedicalGroupHoldingsMember2021-04-012021-06-300001813914cmax:PayorEMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-01-012021-12-310001813914us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-310001813914us-gaap:FurnitureAndFixturesMember2021-12-310001813914cmax:MedicalCareOfNyPCAndTennesseePllcMember2022-06-300001813914us-gaap:ProductAndServiceOtherMember2022-04-012022-06-3000018139142021-04-012021-06-300001813914us-gaap:PerformanceSharesMember2022-01-012022-06-300001813914us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001813914us-gaap:ContractBasedIntangibleAssetsMember2021-01-012021-12-310001813914cmax:PrivatePlacementWarrantsMemberus-gaap:IPOMembercmax:DeerfieldHealthcareTechnologyAcquisitionsCorpMember2020-07-162020-07-160001813914cmax:MembersEquityMembercmax:EffectOfBusinessCombinationMember2021-01-012021-06-300001813914us-gaap:FairValueInputsLevel1Membercmax:PublicWarrantsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001813914us-gaap:CommonClassAMembercmax:TwoThousandTwentyOneLongTermIncentivePlanMember2021-06-042021-06-040001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorCMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914us-gaap:AdditionalPaidInCapitalMember2022-03-310001813914cmax:PublicWarrantsMemberus-gaap:IPOMembercmax:DeerfieldHealthcareTechnologyAcquisitionsCorpMember2020-07-160001813914cmax:FirstSharePriceTriggerMembercmax:IMCMedicalGroupHoldingsMember2021-07-090001813914cmax:OtherMember2021-01-012021-12-310001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorDMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914cmax:MedicalCareOfNyPCAndTennesseePllcMember2022-01-012022-06-300001813914us-gaap:CommonClassAMembercmax:TwoThousandTwentyOneLongTermIncentivePlanMember2021-06-040001813914cmax:PayorDMemberus-gaap:CreditConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-01-012022-06-300001813914cmax:SeriesAWarrantsAndSeriesBWarrantsMember2022-01-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorCMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorDMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001813914cmax:SubscriptionAgreementMembercmax:SeriesBWarrantMember2022-01-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:FairValueInputsLevel3Member2021-01-012021-12-310001813914cmax:TwoThousandTwentyOneLongTermIncentivePlanMember2022-01-012022-06-300001813914us-gaap:RevenueFromContractWithCustomerMembercmax:PayorAMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:FairValueInputsLevel3Member2021-12-310001813914cmax:PrivatePlacementWarrantsMemberus-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:FairValueInputsLevel3Member2022-06-300001813914cmax:CareMaxMedicalGroupLimitedLiabilityCompanyMembercmax:FirstSharePriceTriggerMember2021-07-09iso4217:USDxbrli:sharesxbrli:purexbrli:sharescmax:Centercmax:Businessiso4217:USD
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, references in this section to “CareMax,” “we,” “us,” “our,” and the “Company” refers to CareMax, Inc. together with its consolidated subsidiaries. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, capital resources and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q/A (the “Report”).
Forward-Looking Statements
This Report contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. The words “anticipate,” “believe,” “plan,” “expect,” “may,” “could,” “should,” “project,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement in not forward-looking. Actual results could differ materially from those discussed in these forward-looking statements due to a variety of risks and uncertainties and other factors, including, but not limited to those contained in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022, under the caption “Risk Factors” and, the following:
•the impact of the COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operation;
•our ability to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain our key employees;
•our ability to integrate the businesses of CMG, IMC, SMA, DNF, Advantis and other acquisitions;
•our ability to complete acquisitions and to open new centers and the timing of such acquisitions and openings;
•the viability of our growth strategy, including both organic and de novo growth and growth by acquisition, and our ability to realize expected results, as well as our ability to access the capital necessary for such growth;
•our ability to attract new patients;
•the dependence of our revenue and operations on a limited number of key payors;
•the risk of termination, non-renewal or renegotiation of the Medicare Advantage (“MA”) contracts held by the health plans with which we contract, or the termination, non-renewal or renegotiation of our contracts with those plans;
•the impact on our business from changes in the payor mix of our patients and potential decreases in our reimbursement rates;
•our ability to manage our growth effectively, execute our business plan, maintain high levels of service and patient satisfaction and adequately address competitive challenges;
•the impact of restrictions contained in certain of our agreements on our current and future operations;
•competition from primary care facilities and other healthcare services providers;
•competition for physicians and nurses, and shortages of qualified personnel;
•the impact on our business of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the MA program and other programs governing accountable care organizations;
•the impact on our business of state and federal efforts to reduce Medicaid spending;
•a shift in payor mix to Medicare payors as well as an increase in the number of Medicaid patients may result in a reduction in the average rate of reimbursement;
•our assumption under most of our agreements with health plans of some or all of the risk that the cost of providing services will exceed our compensation;
(19)
•risks associated with estimating the amount of revenues and refund liabilities that we recognize under our risk agreements with health plans;
•the impact on our business of security breaches, loss of data, or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
•the impact of our existing or future indebtedness and any associated debt covenants on our business and growth prospects;
•the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
•the potential adverse impact of legal proceedings and litigation;
•the impact of reductions in the quality ratings of the health plans we serve;
•our ability to maintain and enhance our reputation and brand recognition;
•our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
•our ability to obtain, maintain and enforce intellectual property protection for our technology;
•the potential adverse impact of claims by third parties that we are infringing on or otherwise violating their intellectual property rights;
•our ability to protect the confidentiality of our trade secrets, know-how and other internally developed information;
•the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
•our ability to protect data, including personal health data, and maintain our information technology systems from cybersecurity breaches and data leakage;
•our ability to adhere to all of the complex government laws and regulations that apply to our business;
•our reliance on strategic relationships with third-parties to implement our growth strategy;
•the impact on our business if we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform;
•that estimates of market opportunity and forecasts of market and revenue growth included in this Quarterly Report may prove to be inaccurate, if at all;
•our operating results and stock price may be volatile;
•risks associated with estimating the amount of revenues that we recognize under our risk agreements with health plans;
•our ability to navigate rules and regulations that govern our licensing and certification, as well as credentialing processes with private payors, before we can receive reimbursement for their services;
•our ability to develop and maintain proper and effective internal control over financial reporting; and
•the Steward Transaction may not occur, and if it does, it may not be accretive and may cause dilution to our earnings per share, which may negatively affect the market price of our common stock.
Due to the uncertain nature of these factors, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Any forward-looking statement speaks only as of the date on which statement is made, and we undertake no obligation to update any of these statements or circumstances occurring after the date of this Report. New factors may emerge, and it is not possible to predict all factors that may affect our business and prospects.
(20)
Our Business
As of June 30, 2022, CareMax operated 48 centers in Florida, Tennessee and New York and planned to open 15 de novo centers during 2022, inclusive of the three opened during the first half of 2022. CareMax offers a comprehensive range of medical services, including primary and preventative care, specialist services, diagnostic testing, chronic disease management and dental and optometry services under global capitation contracts.
CareMax’s comprehensive, high touch approach to health care delivery is powered by its CareOptimize technology platform. CareOptimize is a proprietary end-to-end technology platform that aggregates data and analyzes that data using proprietary algorithms and machine learning to support more informed care delivery decisions and to focus care decisions on preventative chronic disease management and the social determinants of health. CareMax believes that CareOptimize is designed to drive better outcomes and lower costs. CareMax has shifted from selling the CareOptimize platform to new outside customers for a software subscription fee and is instead focused on providing the software to affiliated practices of its managed services organization ("MSO") to further improve financial, clinical and quality outcomes from the affiliated providers. As of June 30, 2022, this MSO serviced more than 100 independent physician associations ("IPAs").
CareMax’s centers offer 24/7 access to care through employed providers and provide a comprehensive suite of high-touch health care and social services to its patients, including primary care, specialty care, telemedicine, health & wellness, optometry, dental, pharmacy and transportation. CareMax’s differentiated healthcare delivery model is focused on care coordination with vertically integrated ambulatory care and community-centric services. The goal of CareMax is to intercede as early as possible to manage chronic conditions for its patient members in a proactive, holistic, and tailored manner to provide a positive influence on patient outcomes and a reduction in overall healthcare costs. CareMax focuses on providing access to high quality care in underserved communities.
While CareMax’s primary focus is providing care to Medicare eligible seniors who are mostly 65+ (approximately 81% and 73% of revenue for six months ended June 30, 2022 and 2021, respectively, came from these patients), we also provide services to children and adults through Medicaid programs as well as through commercial insurance plans. Substantially all of CareMax’s Medicare patients are enrolled in MA plans which are run by private insurance companies and are approved by and under contract with Medicare. With MA, patients get all of the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage. In many cases, MA plans offer more benefits than original Medicare, including dental, vision, hearing and wellness programs.
We believe we can translate the above premium services into economic benefits. By focusing on interventions that keep our patients healthy, we can capture the cost savings that our care model creates and reinvest them further in our care model. We believe these investments lead to better outcomes and improved patient experiences, which will drive further cost savings, power patient retention and enable us to attract new patients. We believe increasing cost savings over a growing patient population will deliver an even greater surplus to the organization, enabling us to reinvest to scale and fund new centers, progress our care model and enhance our technology.
Pending Steward Transaction
In May 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among (i) the Company, (ii) Sparta Merger Sub I Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (iii) Sparta Merger Sub II Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (iv) Sparta Merger Sub III Inc., a Delaware corporation and wholly-owned subsidiary of the Company, (v) Sparta Merger Sub I LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (vi) Sparta Merger Sub II LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (vii) Sparta Merger Sub III LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company, (viii) Sparta Sub Inc., a Delaware corporation ("SACN Holdco"), (ix) SNCN Holdco Inc. a Delaware corporation ("SNCN Holdco"), (x) SICN Holdco Inc., a Delaware corporation ("SICN Holdco" and, collectively with SACN Holdco, SNCN Holdco, Steward National Care Network, Inc., Steward Integrated Care Network, Inc., and Steward Accountable Care Network, Inc., each a "target" and, collectively, the "Targets"), (xi) Sparta Holding Co. LLC, a Delaware limited liability company (the “Seller”), and (xii) Steward Health Care System LLC, a Delaware limited liability company (referred to collectively with the Seller, the “Seller Parties”), pursuant to which the Company will acquire the Medicare value-based care business of the Seller Parties (such transaction, the “Steward Transaction”).
The aggregate consideration to be paid to the Seller at closing includes cash payment of $25 million, subject to customary adjustments, and 23,500,000 shares, subject to adjustment, of the Company's Class A common stock, $0.0001 par value per
(21)
share ("Class A Common Stock"). In addition, the Merger Agreement provides for earnout share consideration that will be due to the Seller upon achievement of certain milestones. At closing, the Company will also issue to certain equityholders of the Seller shares of a newly designated series of preferred stock of the Company, which will provide voting rights to such Seller equityholders, until the earlier of (i) the two year anniversary of the closing of the Steward Transaction and (ii) the issuance of earnout share consideration on certain discrete matters where such Seller equityholders are permitted to vote the Company's securities in their discretion under the investor rights agreement to be entered into between such equityholders of the Seller and the Company. Finally, at closing, the Company will also pay the Seller an amount equal to the value of the Target's accounts receivable attributable to Medicare value-based payments for the period between January 1, 2021 and the closing, minus the amount of such payments payable to the affiliate physicians of the Targets, and subject to an advance rate that the Company’s lenders may finance (the “Financed Net Pre-Closing Medicare AR”). In order to fund the Financed Net Pre-Closing Medicare AR payment, the Company may draw all or part of the delayed draw term loans under its existing Credit Agreement, dated May 10, 2022 (the “Credit Agreement”), or the Company may secure alternative financing as permitted under the Credit Agreement.
The Steward Transaction is subject to customary closing conditions, including approval by the Company's stockholders for purposes of compliance with the rules of the Nasdaq Stock Market LLC and receipt of regulatory approvals.
During the three and six months ended June 30, 2022, we have recognized $2.8 million of acquisition costs related to the pending Steward Transaction. We will continue to incur acquisition costs, including $8 million in fees to a financial advisor, payment of $3 million of which is contingent upon closing of the Steward Transaction, and payment of $5 million of which is contingent upon payment of the earnout share consideration to the Seller Parties. We will reflect this $8 million fee in our financial statements during the period in which the Steward Transaction closes.
Key Factors Affecting Our Performance
Our Patients
As discussed above, CareMax partners with MA, Medicaid, and commercial insurance plans. While CareMax currently services mostly MA patients, we also accept Medicare Fee-for-Service patients. The chart below shows a breakdown of our current membership on a pro forma basis. This pro forma view assumes the Business Combination with IMC occurred on January 1, 2020 and is based upon estimates which we believe are reasonable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient Count as of* |
Jun 30, 2020 |
|
Sep 30, 2020 |
|
Dec 31, 2020 |
|
Mar 31, 2021 |
|
Jun 30, 2021 |
|
Sep 30, 2021 |
|
Dec 31, 2021 |
|
Mar 31, 2022 |
|
Jun 30, 2022 |
|
Medicare |
|
15,500 |
|
|
16,500 |
|
|
16,500 |
|
|
16,500 |
|
|
21,500 |
|
|
26,500 |
|
|
33,500 |
|
|
34,000 |
|
|
37,000 |
|
Medicaid |
|
22,500 |
|
|
22,500 |
|
|
21,000 |
|
|
23,000 |
|
|
23,500 |
|
|
24,500 |
|
|
28,000 |
|
|
28,500 |
|
|
29,500 |
|
Commercial |
|
13,500 |
|
|
15,000 |
|
|
14,500 |
|
|
15,000 |
|
|
17,500 |
|
|
17,500 |
|
|
21,500 |
|
|
21,500 |
|
|
21,500 |
|
Total Count |
|
51,500 |
|
|
54,000 |
|
|
52,000 |
|
|
54,500 |
|
|
62,500 |
|
|
68,500 |
|
|
83,500 |
|
|
84,000 |
|
|
88,000 |
|
*Figures may not sum due to rounding
Because CareMax accepts multiple insurance types, it uses a Medicare-Equivalent Member (“MCREM”) value in reviewing key factors of its performance. To determine the Medicare-Equivalent, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients. This is due to Medicare patients on average having significantly higher levels of chronic and acute conditions that need higher levels of care. Due to this dynamic, a 3:1 ratio is applied when normalizing membership statistics year over year. The breakdown of membership on a pro forma basis using MCREM is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCREM Count as of* |
Jun 30, 2020 |
|
Sep 30, 2020 |
|
Dec 31, 2020 |
|
Mar 31, 2021 |
|
Jun 30, 2021 |
|
Sep 30, 2021 |
|
Dec 31, 2021 |
|
Mar 31, 2022 |
|
Jun 20, 2022 |
|
Medicare |
|
15,500 |
|
|
16,500 |
|
|
16,500 |
|
|
16,500 |
|
|
21,500 |
|
|
26,500 |
|
|
33,500 |
|
|
34,000 |
|
|
37,000 |
|
Medicaid |
|
7,400 |
|
|
7,500 |
|
|
7,000 |
|
|
7,600 |
|
|
7,900 |
|
|
8,100 |
|
|
9,400 |
|
|
9,400 |
|
|
9,900 |
|
Commercial |
|
4,600 |
|
|
5,000 |
|
|
4,900 |
|
|
5,100 |
|
|
5,900 |
|
|
5,800 |
|
|
7,200 |
|
|
7,200 |
|
|
7,100 |
|
Total MCREM |
|
27,500 |
|
|
29,000 |
|
|
28,400 |
|
|
29,200 |
|
|
35,300 |
|
|
40,400 |
|
|
50,100 |
|
|
50,600 |
|
|
54,000 |
|
*Figures may not sum due to rounding
Medicare Advantage Patients
As of June 30, 2022, CareMax had approximately 37,000 MA patients of which 88% were in value-based, or risk-based, contracts. This means CareMax has been selected as the patient’s primary care provider and is financially responsible for all of
(22)
the patient’s medical costs. For these patients CareMax is attributed an agreed percentage of the premium the MA plan receives from the Centers for Medicare and Medicaid Services (“CMS”) (typically a substantial majority of such premium given the risk assumed by CareMax). A reconciliation is performed periodically and if premiums exceed medical costs paid by the MA plan, CareMax receives payment from the MA plan. If medical costs paid by the MA plan exceed premiums, CareMax is responsible to reimburse the MA plan.
Medicaid Patients
As of June 30, 2022, CareMax had approximately 29,500 Medicaid patients of which approximately 93% were in value-based contracts. Using the MCREM metric, the level of support required to manage these Medicaid patients equates to that of approximately 9,900 Medicare patients. In Florida, most Medicaid recipients are enrolled in the Statewide Medicaid Managed Care program.
Similar to the risk it takes with Medicare, CareMax is attributed an agreed percentage of the premium the Medicaid plan receives (typically a substantial majority of such premium given the risk assumed by CareMax). A reconciliation is performed periodically and if premiums exceed medical costs paid by the Medicaid plan, CareMax receives payment from the Medicaid plan. If medical costs paid by the Medicaid plan exceed premiums, we are responsible to reimburse the Medicaid plan.
Commercial Patients
As of June 30, 2022, CareMax managed approximately 21,500 commercial patients of which approximately 27% were under value-based contracts that provided upside-only financial incentives for quality and utilization performance. Using the MCREM, the level of support required to manage these commercial patients equates to that of approximately 7,100 Medicare patients.
CareMax cares for a number of commercial patients (approximately 15% of CareMax's total patients) for whom it is reimbursed on a fee-for-service basis via their health plan in situations where it does not have a capitation relationship with that particular health plan.
CareMax fee for-service revenue, received directly from commercial plans, on a per patient basis is lower than its per patient revenue for at-risk patients based in part because its fee-for-service revenue covers only the primary care services that it directly provides to the patient, while the risk revenue is intended to compensate it for the services directly performed by it as well as the financial risk that it assumes related to the third-party medical expenses of at-risk patients.
Contract with Payors
Our economic model relies on its capitated partnerships with payors which manage and market MA plans across the United States. CareMax has established strategic value-based relationships with eleven different payors for Medicare Advantage patients, four different payors for Medicaid patients and one payor for Affordable Care Act ("ACA") patients. Our three largest payor relationships were Payor A, Payor B and Payor C, which generated 30%, 18% and 17% of our revenue, respectively, during the six months ended June 30, 2022. During the six months ended June 30, 2021 our largest payor relationships were Payor A, Payor D, and Payor E, which generated 47%, 18%, and 17% of our revenue on a pro forma basis, assuming the Business Combination with IMC occurred on January 1, 2021. These existing contracts and relationships with our partners’ understanding of the value of the CareMax model reduces the risk of entering into new markets as CareMax typically has payor contracts before entering a new market. Maintaining, supporting, and growing these relationships, particularly as CareMax enters new markets, is critical to our long-term success. We believe CareMax’s model is well-aligned with its payor partners - to drive better health outcomes for their patients, enhancing patient satisfaction, while driving incremental patient and revenue growth. This alignment of interests helps ensures our continued success with our payor partners.
Effectively Manage the Cost of Care for Our Patients
The capitated nature of our contracting with payors requires us to prudently manage the medical expense of our patients. Our external provider costs are our largest expense category, representing 65% of our total operating expenses for the six months ended June 30, 2022 and 66% of our total operating expenses for the six months ended June 30, 2021. Our care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. Our patients retain the freedom to seek care at ERs or hospitals; we do not restrict their access to care. Therefore,
(23)
we could be liable for potentially large medical claims should we not effectively manage our patients’ health. We utilize stop-loss insurance for our patients, protecting us for medical claims per episode in excess of certain levels.
Center-Level Contribution Margin
We endeavor to expand our number of centers and number of patients at each center over time. Due to the significant fixed costs associated with operating and managing our centers, we generate significantly better center-level contribution margins as the patient base within our centers increases and our costs decrease as a percentage of revenue. As a result, the value of a center to our business increases over time when the number of patients at a center expands.
Seasonality to our Business
Due to the large number of dual-eligible patients (meaning eligible for both Medicare and Medicaid) we serve, the annual enrollment period does not materially affect our growth during the year. We typically see large increases in ACA patients during the first quarter as a result of the ACA annual enrollment period (October to December). However, this is not a large portion of our business.
Our operational and financial results will experience some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
Per-Patient Revenue
The revenue derived from our at-risk patients is a function of the percentage of premium we have negotiated with our payor partners, as well as our ability to accurately and appropriately document the acuity of a patient. We experience some seasonality with respect to our per-patient revenue, as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to changes in per-patient revenue. As the year progresses, our per-patient revenue declines as new patients join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and patient mortality disproportionately impacts our higher-risk (and therefore greater revenue) patients.
External Provider Costs
External provider costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which can result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of per-patient medical costs in the first and fourth quarters. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another. We would also expect to experience an impact in the future should there be another pandemic such as COVID-19, which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for our patients.
Investments in Growth
We expect to continue to focus on long-term growth through investments in our centers, care model and marketing. In addition, we expect our corporate, general and administrative expenses to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs as a public company, including expenses related to compliance with the rules and regulations of the SEC, Sarbanes Oxley Act compliance, the stock exchange listing standards, additional corporate and director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. As we have communicated, we plan to invest in openings of new de novo centers over the next several years. Historically, de novo centers require upfront capital and operating expenditures, which may not be fully offset by additional revenues in the near-term, and we similarly expect a period of unprofitability in our future de novo centers before they break even. While our net income may decrease in the future because of these activities, we plan to balance these investments in future growth with a continued focus on managing our results of operations and generating positive income from our core centers and scaled acquisitions. In the longer term we anticipate that these investments will positively impact our business and results of operations.
Key Business Metrics
(24)
In addition to our financial information which conforms with generally accepted accounting principles in the United States of America (“GAAP”), management reviews a number of operating and financial metrics, including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate business plans, and make strategic decisions.
Use of Non-GAAP Financial Information
Certain financial information and data contained in this Report is unaudited and does not conform to Regulation S-X. Accordingly, such information and data may not be included in, may be adjusted in, or may be presented differently in, any periodic filing, information or proxy statement, or prospectus or registration statement to be filed by the Company with the SEC. Some of the financial information and data contained in this Report, such as Adjusted EBITDA and Platform Contribution have not been prepared in accordance with GAAP. These non-GAAP measures of financial results are not GAAP measures of our financial results or liquidity and should not be considered as an alternative to net income (loss) as a measure of financial results, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The Company believes these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Management uses these non-GAAP measures for trend analyses and for budgeting and planning purposes.
The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating projected operating results and trends and in comparing the Company’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. For this reason, these non-GAAP measures may not be comparable to other companies' similarly labeled non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. You should review the Company’s audited financial statements contained in the Annual Report.
EBITDA and Adjusted EBITDA
Management defines “EBITDA” as net income or net loss before interest expense, income tax provision, depreciation and amortization, change in fair value of warrant liabilities, and gain or loss on extinguishment of debt. “Adjusted EBITDA” is defined as EBITDA adjusted for special items such as duplicative costs, non-recurring legal, consulting, and professional fees, stock-based compensation, de novo costs for the first 18 months after opening, discontinued operations, acquisition costs and other costs that are considered one-time in nature as determined by management. Additionally, Adjusted EBITDA presented on a pro forma basis gives effect to the acquisitions of IMC and Care Holdings Group, LLC ("Care Holdings"), which owned Care Optimize LLC, as if they had occurred in historical periods, which does not necessarily reflect what the Company’s Adjusted EBITDA would have been had the acquisitions occurred on the dates indicated. Adjusted EBITDA is intended to be used as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Management believes that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measure with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentations of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.
Due to these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on the GAAP results and using
(25)
Adjusted EBITDA on a supplemental basis. Please review the reconciliation of net (loss) income to EBITDA and Adjusted EBITDA below and do not rely on any single financial measure to evaluate the Company’s business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
($ in thousands) |
|
2022 |
|
|
2021 |
|
|
Y/Y Change |
|
|
2022 |
|
|
2021 |
|
|
Y/Y Change |
|
Net (loss) income |
|
$ |
(9,381 |
) |
|
$ |
10,057 |
|
|
$ |
(19,438 |
) |
|
$ |
(26,178 |
) |
|
$ |
11,359 |
|
|
$ |
(37,537 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Pro Forma adjustments (1) |
|
|
- |
|
|
|
(6,186 |
) |
|
|
6,186 |
|
|
|
- |
|
|
|
(8,917 |
) |
|
|
8,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma net (loss) income |
|
|
(9,381 |
) |
|
|
3,871 |
|
|
|
(13,252 |
) |
|
|
(26,178 |
) |
|
|
2,442 |
|
|
|
(28,620 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
3,896 |
|
|
|
1,667 |
|
|
|
2,229 |
|
|
|
5,624 |
|
|
|
3,067 |
|
|
|
2,557 |
|
Depreciation and amortization |
|
|
4,903 |
|
|
|
3,339 |
|
|
|
1,564 |
|
|
|
9,965 |
|
|
|
6,318 |
|
|
|
3,647 |
|
Change in warrant liabilities |
|
|
(7,391 |
) |
|
|
(1,795 |
) |
|
|
(5,596 |
) |
|
|
(3,855 |
) |
|
|
(1,795 |
) |
|
|
(2,060 |
) |
Change in contingent earnout liabilities |
|
|
- |
|
|
|
(17,420 |
) |
|
|
17,420 |
|
|
|
- |
|
|
|
(17,420 |
) |
|
|
17,420 |
|
Loss (gain) on extinguishment of debt |
|
|
6,172 |
|
|
|
806 |
|
|
|
5,366 |
|
|
|
6,172 |
|
|
|
806 |
|
|
|
5,366 |
|
Income tax provision |
|
|
171 |
|
|
|
- |
|
|
|
171 |
|
|
|
351 |
|
|
|
- |
|
|
|
351 |
|
Other expenses |
|
|
45 |
|
|
|
(2,367 |
) |
|
|
2,412 |
|
|
|
507 |
|
|
|
(2,155 |
) |
|
|
2,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
(1,585 |
) |
|
|
(11,900 |
) |
|
|
10,315 |
|
|
|
(7,414 |
) |
|
|
(8,738 |
) |
|
|
1,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring expenses (2) |
|
|
3,104 |
|
|
|
8,257 |
|
|
|
(5,153 |
) |
|
|
9,159 |
|
|
|
11,052 |
|
|
|
(1,893 |
) |
Acquisition costs (3) |
|
|
4,074 |
|
|
|
3,806 |
|
|
|
268 |
|
|
|
7,503 |
|
|
|
4,973 |
|
|
|
2,530 |
|
Stock-based compensation |
|
|
2,788 |
|
|
|
- |
|
|
|
2,788 |
|
|
|
3,875 |
|
|
|
- |
|
|
|
3,875 |
|
De novo losses (4) |
|
|
993 |
|
|
|
364 |
|
|
|
629 |
|
|
|
2,112 |
|
|
|
548 |
|
|
|
1,564 |
|
Discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
1 |
|
Adjusted EBITDA |
|
$ |
9,374 |
|
|
$ |
527 |
|
|
$ |
8,847 |
|
|
$ |
15,236 |
|
|
$ |
7,835 |
|
|
$ |
7,401 |
|
Figures may not sum due to rounding.
(1) Pro Forma figures give effect to the Business Combinations of IMC and Care Holdings as if they had occurred in historical periods.
(2) Includes professional fees, salaries and wages, and other expenses deemed one-time in nature.
(3) Includes transaction costs, integration costs, and other costs to achieve synergies.
(4) Includes non-buildout related costs incurred prior to opening a de novo location and initial opening losses post-center opening up 18 months after center opening.
Platform Contribution
We define Platform Contribution as revenue less the sum of (i) external provider costs and (ii) cost of care. We believe this metric best reflects the economics of our care model as it includes all medical claims expense associated with our patients’ care. As a center matures, we expect the Platform Contribution from that center to increase both in terms of absolute dollars as well as a percentage of capitated revenue. This increase will be driven by improving patient contribution economics over time, as well as our ability to generate operating leverage on the costs of our centers. Our aggregate Platform Contribution may not increase despite improving economics at our existing centers should we open new centers at a pace that skews our mix of centers towards newer centers. We would expect to experience minimal seasonality in Platform Contribution due to minimal seasonality in our patient contribution.
In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The chart below is a pro forma view of our operations. This pro forma view assumes the Business Combination occurred on January 1, 2020, and is based upon estimates which we believe are reasonable.
Non-GAAP Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient & Platform Contribution |
Jun 30, 2020 |
|
Sep 30, 2020 |
|
Dec 31, 2020 |
|
Mar 31, 2021 |
|
Jun 30, 2021 |
|
Sep 30, 2021 |
|
Dec 31, 2021 |
|
Mar 31, 2022 |
|
Jun 30, 2022 |
|
Centers |
|
21 |
|
|
22 |
|
|
24 |
|
|
24 |
|
|
34 |
|
|
40 |
|
|
45 |
|
|
48 |
|
|
48 |
|
Markets |
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
6 |
|
|
6 |
|
Patients (MCREM) |
|
27,500 |
|
|
29,000 |
|
|
28,400 |
|
|
29,200 |
|
|
35,300 |
|
|
40,400 |
|
|
50,100 |
|
|
50,600 |
|
|
54,000 |
|
At-risk |
|
86.7 |
% |
|
85.6 |
% |
|
87.7 |
% |
|
87.0 |
% |
|
84.1 |
% |
|
87.2 |
% |
|
79.3 |
% |
|
79.8 |
% |
|
81.0 |
% |
Platform Contribution ($, Millions) |
$ |
18.1 |
|
$ |
15.5 |
|
$ |
17.9 |
|
$ |
14.7 |
|
$ |
8.2 |
|
$ |
11.0 |
|
$ |
16.0 |
|
$ |
17.3 |
|
$ |
21.7 |
|
(26)
Centers
We define our centers as those primary care centers open for business and capable of attending to patients at the end of a particular period.
Patients (MCREM)
MCREM patients includes both at-risk MA patients (those patients for whom we are financially responsible for their total healthcare costs) as well as risk and non-risk, non-MA patients. We define our total at-risk patients as at-risk patients who have selected us as their provider of primary care medical services as of the end of a particular period. We define our total fee-for-service patients as fee-for-service patients who come to one of our centers for medical care at least once per year. A fee-for-service and at-risk patient remains active in our system until we are informed by the health plan the patient is no longer active. As discussed above, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients.
Impact of COVID-19
The rapid spread of COVID-19 around the world and throughout the United States altered the behavior of businesses and people, with significant negative effects on federal, state and local economies. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients.
We estimate our performance for the six months ended June 30, 2022 has been negatively impacted by approximately $1.0 million of direct COVID-19 costs, with negligible impact noted during the three months ended June 30, 2022.
Management cannot accurately predict the future impacts of COVID-19 due to the uncertainty surrounding future spikes in COVID-19 cases or new variants that may emerge in the future.
Components of Results of Operations
Revenue
Medicare risk-based revenue and Medicaid risk-based revenue. Our capitated revenue consists primarily of fees for medical services provided by us or managed by our MSO under a global capitation arrangement made directly with various MA payors. Capitation is a fixed amount of money per patient per month paid in advance for the delivery of health care services, whereby we are generally liable for medical costs in excess of the fixed payment and are able to retain any surplus created if medical costs are less than the fixed payment. A portion of our capitated revenues are typically prepaid monthly to us based on the number of MA patients selecting us as their primary care provider. Our capitated rates are determined as a percentage of the premium the MA plan receives from CMS for our at-risk members. Those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more in premium, and those with lower acuity patients receive less in premium. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, our capitation payments will change in unison with how our payor partners’ premiums change with CMS. Risk adjustment in future periods may be impacted by COVID-19 and our inability to accurately document the health needs of our patients in a compliant manner, which may have an adverse impact on our revenue.
For Medicaid in Florida, premiums are determined by Florida’s Agency for Health Care Administration ("AHCA") base rates are adjusted annually using historical utilization data projected forward by a third-party actuarial firm. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients quarterly, depending on the scoring of that acuity, and may periodically shift premiums from health plans with lower acuity members to health plans with higher acuity members.
(27)
Other revenue. Other revenue includes professional capitation payments. These revenues are a fixed amount of money per patient per month paid in advance for the delivery of primary care services only, whereby CareMax is not liable for medical costs in excess of the fixed payment. Capitated revenues are typically prepaid monthly to CareMax based on the number of patients selecting us as their primary care provider. Our capitated rates are fixed, contractual rates. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a fee for service basis by a health plan are also included in other revenue. Other revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our affiliated medical groups. Revenue for primary care service for patients in a partial risk or up-side only contract, pharmacy revenue and revenue generated from CareOptimize are reported in other revenue.
We expect capitated revenue will increase as a percentage of total revenues over time because of the greater revenue economics associated with at-risk patients compared to fee-for-service patients.
Operating Expenses
Medicare and Medicaid external provider costs. External provider costs include all services at-risk patients utilize. These include claims paid by the health plan and estimates for unpaid claims. The estimated reserve for incurred but not paid claims is included in accounts receivable as we do not pay medical claims. Actual claims expense will differ from the estimated liability due to factors in estimated and actual patient utilization of health care services, the amount of charges, and other factors. We typically reconcile our medical claims expense with our payor partners on a monthly basis and adjust our estimate of incurred but not paid claims if necessary. To the extent we revise our estimates of incurred but not paid claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance. We expect our medical claims expenses to increase in both absolute dollar terms as well as on a per patient per month ("PPPM") basis given the healthcare spending trends within the Medicare population and the increasing disease burden of patients as they age.
Cost of care. Cost of care includes the costs of additional medical services we provide to patients that are not paid by the plan. These services include patient transportation, medical supplies, auto insurance and other specialty costs, like dental or vision. In some instances, we have negotiated better rates than the health plans for these health plan covered services. In addition, cost of care includes rent and facilities costs required to maintain and operate our centers.
Expenses from our physician groups that contract with our MSO are consolidated with other clinical and MSO expenses to determine profitability for our at-risk and fee-for-service arrangements. Physician group economics are not evaluated on a stand-alone basis, as certain non-clinical expenses need to be consolidated to consider profitability.
We measure the incremental cost of our capitation agreements by starting with our center-level expenses, which are calculated based upon actual expenses incurred at a specific center for a given period of time and expenses that are incurred centrally and allocated to centers on a ratable basis. These expenses are allocated to our at-risk patients based upon the number of visit slots these patients utilized compared to the total slots utilized by all of our patients. All visits, however, are not identical and do not require the same level of effort and expense on our part. Certain types of visits are more time and resource intensive and therefore result in higher expenses for services provided internally. Generally, patients who are earlier in their tenure with CareMax utilize a higher percentage of these more intensive visits, as we get to know the patient and properly assess and document such patient’s health condition.
Selling and marketing expenses. Selling and marketing expenses include the cost of our sales and community relations team, including salaries and commissions, radio and television advertising, events and promotional items.
Corporate general and administrative expenses. Corporate general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development departments. In addition, corporate general and administrative expenses include corporate technology, third party professional services and corporate occupancy costs. We expect these expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business. We also expect our corporate, general and administrative expenses to increase in absolute dollars in the foreseeable future. However, we anticipate corporate, general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.
(28)
Depreciation and amortization. Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized internal-use software costs.
Acquisition related costs. Acquisition related costs consist of legal and other transaction-related expenses.
Nonoperating Income (Expenses)
Interest expense. Interest expense consists primarily of interest payments on our outstanding borrowings.
Gain on remeasurement of warrant liabilities. Loss on remeasurement of warrant liabilities consists of changes in fair value of the Public Warrants and Private Placement Warrants.
Gain on remeasurement of contingent earnout liabilities. Gain on remeasurement of contingent earnout liabilities consists of changes in the fair value of contingent earnout liabilities.
Gain (loss) on extinguishment of debt. Gain (loss) on extinguishment of debt consists primarily of write-offs of unamortized debt issuance costs upon early repayments of debt.
Other income (expense), net. Other income (expense), net, includes research and development costs, franchise tax payments and other miscellaneous corporate expenses.
Results of Operations
Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
($ in thousands) |
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Revenue |
|
|
|
|
|
|
|
|
Medicare risk-based revenue |
$ |
143,664 |
|
$ |
37,761 |
|
$ |
105,903 |
|
|
280.5 |
% |
Medicaid risk-based revenue |
|
19,896 |
|
|
5,449 |
|
|
14,447 |
|
|
265.1 |
% |
Other revenue |
|
8,719 |
|
|
1,709 |
|
|
7,010 |
|
|
410.2 |
% |
Total revenue |
|
172,279 |
|
|
44,919 |
|
|
127,360 |
|
|
283.5 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
External provider costs |
|
120,348 |
|
|
35,535 |
|
|
84,813 |
|
|
238.7 |
% |
Cost of care |
|
30,364 |
|
|
7,867 |
|
|
22,497 |
|
|
286.0 |
% |
Sales and marketing |
|
2,299 |
|
|
775 |
|
|
1,524 |
|
|
196.7 |
% |
Corporate, general and administrative |
|
18,063 |
|
|
8,881 |
|
|
9,182 |
|
|
103.4 |
% |
Depreciation and amortization |
|
4,903 |
|
|
1,437 |
|
|
3,466 |
|
|
241.2 |
% |
Acquisition related costs |
|
2,789 |
|
|
149 |
|
|
2,640 |
|
|
1,772.0 |
% |
Total costs and expenses |
|
178,767 |
|
|
54,643 |
|
|
124,124 |
|
|
227.2 |
% |
Operating (loss) income |
$ |
(6,488 |
) |
$ |
(9,724 |
) |
$ |
3,236 |
|
|
(33.3 |
%) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(3,896 |
) |
|
(792 |
) |
|
(3,104 |
) |
|
391.9 |
% |
Gain on remeasurement of warrant liabilities |
|
7,391 |
|
|
1,795 |
|
|
5,596 |
|
|
311.7 |
% |
Gain on remeasurement of contingent earnout liabilities |
|
- |
|
|
17,420 |
|
|
(17,420 |
) |
|
(100.0 |
%) |
Gain (loss) on extinguishment of debt |
|
(6,172 |
) |
|
1,358 |
|
|
(7,530 |
) |
|
(554.5 |
%) |
Other income (expense), net |
|
(45 |
) |
|
- |
|
|
(45 |
) |
|
(100.0 |
%) |
Nonoperating (expenses) income |
|
(2,722 |
) |
|
19,781 |
|
|
(22,503 |
) |
|
(113.8 |
%) |
(Loss) income before income taxes |
$ |
(9,210 |
) |
$ |
10,057 |
|
$ |
(19,267 |
) |
|
(191.6 |
%) |
Income tax provision |
|
(171 |
) |
|
- |
|
|
(171 |
) |
|
(100.0 |
%) |
Net (loss) income |
$ |
(9,381 |
) |
$ |
10,057 |
|
$ |
(19,438 |
) |
|
(193.3 |
%) |
*Figures may not sum due to rounding
Medicare risk-based revenue. Medicare risk-based revenue was $143.7 million for the three months ended June 30, 2022, an increase of $105.9 million compared to $37.8 million for the three months ended June 30, 2021. This increase was driven primarily by a 257% increase in the total number of at-risk patients primarily from the acquisitions of IMC, SMA, DNF and Advantis and due to conversion of partial risk patients to full risk, partially offset by a 7% reduction in rates, driven by member mix.
(29)
Medicaid risk-based revenue. Medicaid risk-based revenue was $19.9 million for the three months ended June 30, 2022, an increase of $14.5 million compared to $5.4 million for the three months ended June 30, 2021. Medicaid risk-based revenue relates entirely to patients that were acquired from the Business Combination with IMC in June 2021.
Other revenue. Other revenue was $8.7 million for the three months ended June 30, 2022, an increase of $7.0 million compared to $1.7 million for the three months ended June 30, 2021. The increase is related to fee-for-service and pharmacy revenues acquired in various acquisitions and higher HEDIS and other partial risk surplus payments.
External provider costs. External provider costs were $120.4 million for the three months ended June 30, 2022, an increase of $84.8 million compared to $35.5 million for the three months ended June 30, 2021. The increase was primarily due to a 261% increase in at-risk patients, including Medicaid, from the acquisitions of IMC, SMA DNF and Advantis, partially offset by a 6% decrease in PPPM rates, driven by member mix.
Cost of care expenses. Cost of care expenses were $30.4 million for the three months ended June 30, 2022, an increase of $22.5 million compared to $7.9 million for the three months ended June 30, 2021. The increase was due to membership growth from acquisitions of IMC, SMA, DNF and Advantis.
Sales and marketing expenses. Sales and marketing expenses were $2.3 million for the three months ended June 30, 2022, an increase of $1.5 million compared to $0.8 million for the three months ended June 30, 2021. The increase was primarily due to the increase in sales staff and marketing efforts resulting from acquisitions.
Corporate, general & administrative. Corporate, general & administrative expense was $18.1 million for the three months ended June 30, 2022, an increase of $9.2 million compared to $8.9 million for the three months ended June 30, 2021. The increase was primarily from the acquired overhead related to IMC, SMA, DNF, BIX and Advantis, as well as costs associated with becoming a publicly traded company.
Depreciation and amortization. Depreciation and amortization expense was $4.9 million for the three months ended June 30, 2022, an increase of $3.5 million compared to $1.4 million for the three months ended June 30, 2021. This was due to amortization of intangible assets acquired as part of acquisitions of IMC, SMA, DNF, BIX and Advantis.
Acquisition related costs. Acquisition related costs were $2.8 million for the three months ended June 30, 2022, an increase of $2.6 million compared to $149,000 during the three months ended June 30, 2021. This cost relates primarily to the $2.8 million related to the pending Steward Transaction.
Interest expense. Interest expense was $3.9 million for the three months ended June 30, 2022, an increase of $3.1 million compared to $0.8 million for the three months ended June 30, 2021. This increase was due to the increased borrowings and higher weighted-average interest rate.
Change in fair value of derivative warrant liabilities. We have recorded a gain of $7.4 million during the three months ended June 30, 2022, an increase of $5.6 million for the three months ended June 30, 2021. This increase in gain is driven primarily by the decrease in CareMax's stock price.
Gain (loss) on remeasurement of contingent earnout liabilities. We recorded a gain on remeasurement of contingent earnout liabilities of $17.4 million during the three months ended June 30, 2021. Contingent earnout liabilities are no longer remeasured to fair value following their reclassification to equity during the second quarter 2021, accordingly, no gain or loss on contingent earnout liabilities was recognized during the three months ended June 30, 2022.
Gain (loss) on extinguishment of debt. During the three months ended June 30, 2022, in connection with the early extinguishment and termination of the Existing Credit Agreement, we have recognized a loss on extinguishment of debt of $6.2 million. During the three months ended June 30, 2021, we recorded a gain of $2.2 million related to the forgiveness of Paycheck Protection Program (“PPP”) loans partially offset by a loss of extinguishment of debt of $800,000.
Other expenses. Other expenses were $45,000 for the three months ended June 30, 2022 as compared to $0 for the three months ended June 30, 2021. The increase is driven by miscellaneous corporate expenses.
(30)
Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
($ in thousands) |
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Revenue |
|
|
|
|
|
|
|
|
Medicare risk-based revenue |
$ |
251,410 |
|
$ |
65,577 |
|
$ |
185,833 |
|
|
283.4 |
% |
Medicaid risk-based revenue |
|
40,062 |
|
|
5,449 |
|
|
34,613 |
|
|
635.2 |
% |
Other revenue |
|
17,727 |
|
|
1,811 |
|
|
15,916 |
|
|
878.9 |
% |
Total revenue |
|
309,199 |
|
|
72,837 |
|
|
236,362 |
|
|
324.5 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
External provider costs |
|
213,204 |
|
|
53,694 |
|
|
159,510 |
|
|
297.1 |
% |
Cost of care |
|
57,712 |
|
|
13,220 |
|
|
44,492 |
|
|
336.6 |
% |
Sales and marketing |
|
5,600 |
|
|
1,066 |
|
|
4,534 |
|
|
425.4 |
% |
Corporate, general and administrative |
|
37,041 |
|
|
10,676 |
|
|
26,365 |
|
|
247.0 |
% |
Depreciation and amortization |
|
9,965 |
|
|
1,951 |
|
|
8,014 |
|
|
410.7 |
% |
Acquisition related costs |
|
3,055 |
|
|
149 |
|
|
2,906 |
|
|
1,950.5 |
% |
Total costs and expenses |
|
326,577 |
|
|
80,756 |
|
|
245,821 |
|
|
304.4 |
% |
Operating (loss) income |
$ |
(17,378 |
) |
$ |
(7,918 |
) |
$ |
(9,460 |
) |
|
119.5 |
% |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(5,624 |
) |
|
(1,296 |
) |
|
(4,328 |
) |
|
334.0 |
% |
Gain on remeasurement of warrant liabilities |
|
3,855 |
|
|
1,795 |
|
|
2,060 |
|
|
114.8 |
% |
Gain on remeasurement of contingent earnout liabilities |
|
- |
|
|
17,420 |
|
|
(17,420 |
) |
|
(100.0 |
%) |
Gain (loss) on extinguishment of debt, net |
|
(6,172 |
) |
|
1,358 |
|
|
(7,530 |
) |
|
(554.5 |
%) |
Other income (expense), net |
|
(507 |
) |
|
- |
|
|
(507 |
) |
|
(100.0 |
%) |
Nonoperating (expenses) income |
|
(8,448 |
) |
|
19,277 |
|
|
(27,725 |
) |
|
(143.8 |
%) |
(Loss) income before income taxes |
$ |
(25,826 |
) |
$ |
11,359 |
|
$ |
(37,185 |
) |
|
(327.4 |
%) |
Income tax provision |
|
(351 |
) |
|
- |
|
|
(351 |
) |
|
(100.0 |
%) |
Net (loss) income |
$ |
(26,178 |
) |
$ |
11,359 |
|
$ |
(37,537 |
) |
|
(330.5 |
%) |
Medicare risk-based revenue. Medicare risk-based revenue was $251.4 million for the six months ended June 30, 2022, an increase of $185.8 million compared to $65.6 million for the six months ended June 30, 2021. This increase was driven primarily by a 322% increase in the total number of at-risk patients from the acquisitions of IMC, SMA, DNF and Advantis, partially offset by a 9% reduction in rates, driven by member mix.
d
Medicaid risk-based revenue. Medicaid risk-based revenue was $40.0 million for the six months ended June 30, 2022, an increase of $34.6 million compared to $5.4 million for the six months ended June 30, 2021. Medicaid risk-based revenue relates entirely to patients that were acquired from the Business Combination with IMC in June 2021.
Other revenue. Other revenue was $17.7 million for the six months ended June 30, 2022 an increase of $15.9 million compared to $1.8 million for the six months ended June 30, 2021. The increase is related to fee-for-service and pharmacy revenues acquired in various acquisitions and higher HEDIS and other surplus bonuses.
External provider costs. External provider costs were $213.2 million for the six months ended June 30, 2022, an increase of $159.5 million compared to $53.7 million for the six months ended June 30, 2021. The increase was primarily due to a 357% increase in at-risk patients, including Medicaid, from the acquisitions of IMC, SMA, DNF and Advantis, partially offset by a 13% decrease in PPPM rates, driven by member mix.
Cost of care expenses. Cost of care expenses were $57.7 million for the six months ended June 30, 2022, an increase of $44.5 million compared to $13.2 million for the six months ended June 30, 2021. The increase was due to membership growth from acquisitions of IMC, SMA, DNF and Advantis.
Sales and marketing expenses. Sales and marketing expenses were $5.6 million for the six months ended June 30, 2022, an increase of $4.5 million compared to $1.1 million for the six months ended June 30, 2021. The increase was primarily due to the increase in sales staff and marketing efforts resulting from acquisitions.
Corporate, general & administrative. Corporate, general & administrative expense was $37.0 million for the six months ended June 30, 2022, an increase of $26.4 million compared to $10.7 million for the six months ended June 30, 2021. The increase was primarily from the acquired overhead related to IMC, SMA, DNF, BIX and Advantis, as well as costs associated with becoming a publicly traded company.
(31)
Depreciation and amortization. Depreciation and amortization expense was $10.0 million for the six months ended June 30, 2022, an increase of $8.0 million compared to $2.0 million for the six months ended June 30, 2021. This was due to amortization of intangible assets acquired as part of acquisitions of IMC, SMA, DNF, BIX and Advantis.
Acquisition related costs. Acquisition related costs were $3.1 million for the six months ended June 30, 2022, an increase of $2.9 million compared to $149,000 for the six months ended June 30, 2021. This increase is primarily driven by the $2.8 million related to the pending Steward Transaction.
Interest expense. Interest expense was $5.6 million for the six months ended June 30, 2022, an increase of $4.3 million compared to $1.3 million for the six months ended June 30, 2021. This increase was due to the increased borrowings and higher weighted-average interest rate.
Change in fair value of derivative warrant liabilities. We have recorded a gain of $3.9 million during the six months ended June 30, 2022, an increase of $2.1 million for the six months ended June 30, 2021. This increase in gain is driven primarily by the decrease in CareMax's stock price.
Gain (loss) on remeasurement of contingent earnout liabilities. We recorded a gain of $17.4 million during the six months ended June 30, 2021. Contingent earnout liabilities are no longer remeasured to fair value following their reclassification to equity during the second quarter 2021, accordingly, no gain or loss on contingent earnout liabilities was recognized during the six months ended June 30, 2022.
Gain (loss) on extinguishment of debt. During the six months ended June 30, 2022, in connection with the early extinguishment and termination of the Existing Credit Agreement, we have recognized a loss on extinguishment of debt of $6.2 million. During the six months ended June 30, 2021 we recorded a gain of $2.2 million related to the forgiveness of PPP loans partially offset by a loss on extinguishment of debt of $800,000.
Other expenses. Other expenses were $0.5 million for the six months ended June 30, 2022 as compared to $0 for the six months ended June 30, 2021. The increase is driven by miscellaneous corporate expenses.
Liquidity and Capital Resources
Overview
As of June 30, 2022, we had cash on hand of $68.1 million. In addition, our Credit Agreement provides the ability to draw term loans in an amount up to $110 million under certain circumstances to finance permitted acquisitions and similar permitted investments, de novo center growth and optimization of de novo centers and management services organization performance.
Our principal sources of liquidity have been cash generated by our centers and MSO operations, borrowings under our credit facilities and proceeds from equity issuances. We have used these funds to meet our capital requirements, which consist of salaries, labor, benefits and other employee-related costs, product and supply costs, third-party customer service, billing and collections and logistics costs, capital expenditures including patient equipment, center and office lease expenses, insurance premiums, acquisitions and debt service. Our future capital expenditure requirements will depend on many factors, including the pace and scale of our expansion in new and existing markets, any future acquisitions, patient volume, and revenue growth rates. Many of our capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up. We also expect to incur costs related to acquisitions and de novo growth through the opening of new centers, which we expect to require significant capital expenditures, including lease and construction expenses. We may be required to seek additional equity or debt financing, in addition to cash on hand and borrowings under our Credit Facilities in connection with our business growth, including debt financing that may be available to us from certain health plans for each new center that we open under the terms of our agreements with those health plans. In the event that additional financing is required from outside sources, we may not be able to raise it on acceptable terms or at all. If additional capital is unavailable when desired, our business, results of operations, and financial condition would be materially and adversely affected. We believe that our existing cash, amounts available under our Credit Agreement, and amounts available to us under our agreement with Anthem, each as described below, will continue to be sufficient to fund our operations and growth strategies for at least the next 12 months.
(32)
The Impact of COVID-19
As further detailed above in “Impact of COVID-19”, we estimate our performance during the six months ended June 30, 2022 has been impacted by approximately $1.0 million of direct COVID-19 costs, with negligible impact noted during the three months ended June 30, 2022. While it is impossible to predict the scope or duration of COVID-19 or the future impact on our liquidity and capital resources, COVID-19 could materially affect our liquidity and operating cash flows in future periods.
Credit Facilities
In May 2022, the Company entered into the Credit Agreement that provided for an aggregate of up to $300 million in term loans, comprised of (i) initial term loans in aggregate principal amount of $190 million (the “Initial Term Loans”) and (ii) a delayed term loan facility in the aggregate principal amount of $110 million (the “Delayed Draw Term Loans”). The Credit Agreement permits the Company to enter into certain incremental facilities subject to compliance with the terms, conditions and covenants set forth therein. In May 2022, the Company drew $190 million of the Initial Term Loans and used approximately $121 million of the net proceeds from this borrowing to repay its outstanding obligations under the credit agreement dated June 8, 2021, as amended (the “Existing Credit Agreement”). During the three and six months ended June 30, 2022, the Company recognized debt extinguishment losses of $6.2 million related to early repayment of the Existing Credit Agreement.
Based on the elections made by the Company, as of June 30, 2022, the Initial Term Loan borrowings bear interest of Term SOFR (calculated as the Secured Overnight Financing Rate published on the Federal Reserve Bank of New York’s website, plus a spread adjustment of 0.114%), plus an applicable margin rate of 9.00%. As permitted under the Credit Agreement, the Company elected to capitalize 4.00% of the interest as principal amount on the outstanding Term Loans. As a result of this election, the cash interest component of the applicable margin increases by 0.50%. Amortization payments under the Credit Agreement are payable in quarterly installments, commencing on March 31, 2024, in aggregate principal amounts equal to 0.25% of the outstanding principal balance. As of June 30, 2022, no amounts were borrowed under the Delayed Draw Term Loans and $190 million was outstanding under the Initial Term Loans. All amounts owed under the Credit Agreement are due in May 2027.
The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, liens or encumbrances, to make certain investments, to enter into sale-leaseback transactions or sell certain assets, to make certain restricted payments or pay dividends, to enter into consolidations, to transact with affiliates and to amend certain agreements, subject in each case to the exceptions and other qualifications as provided in the Credit Agreement. The Credit Agreement also contains covenants that require the Company to satisfy a minimum liquidity requirement of $50.0 million, which may be decreased to $25.0 million if the Company achieves a certain adjusted EBITDA, and maintains a maximum total leverage ratio based on the Company’s consolidated EBITDA, as defined in the Credit Agreement, with de novo losses excluded from the calculation of such ratio for up to 36 months after the opening of a de novo center, which maximum total leverage ratio will initially be 8.50 to 1.00, commencing with the fiscal quarter ended September 30, 2022 and is subject to a series of step-downs. For the fiscal quarters ending September 30, 2026 and thereafter the Company must maintain a maximum total leverage ratio no greater than 5.50 to 1.00.
Anthem Collaboration Agreement
In connection with our collaboration agreement with Anthem, which was announced in August of 2021, we plan to open centers across eight priority states as part of our de novo strategy to open new centers in additional markets. Anthem has agreed to provide debt financing of up to $1 million for each new center opened in partnership with Anthem. We intend to use such funds to partially offset the costs of opening new centers in connection with our de novo growth strategy.
Cash Flows
The following table summarizes our cash flows for the periods presented:
|
|
|
|
|
|
|
(in thousands) |
Six Months Ended June 30, |
|
|
2022 |
|
2021 |
|
Net cash used in operating activities |
$ |
(27,398 |
) |
$ |
(2,983 |
) |
Net cash used in investing activities |
$ |
(2,893 |
) |
$ |
(211,779 |
) |
Net cash provided by financing activities |
$ |
50,505 |
|
$ |
381,864 |
|
(33)
Operating Activities. Net cash used in operating activities for the six months ended June 30, 2022 was $27.4 million, an increase of $24.4 million as compared to $3.0 million used by operating activities during the six months ended June 30, 2021. This increase is partially due to a net increase of $0.7 million to net loss and non-cash charges, primarily due to the net loss from operations of $26.2 million reported for the six months ended June 30, 2022 compared to the net income from operations of $11.3 million for six months ended June 30, 2021, offset by increases to depreciation and amortization, loss on extinguishment of debt, loss realized on remeasurement of warrant liabilities, and change in fair value of contingent earnout liabilities reported during the six months ended June 30, 2021. In addition, there was a net change of $23.8 million to the Company's operating assets and liabilities, mostly driven by the timing of collections and payments and the growth in the number of patients.
Investing Activities. Net cash used in investing activities for the six months ended June 30, 2022 was $2.9 million consisting primarily of leasehold improvements and medical equipment for our centers, as compared to $211.8 million for the six months ended June 30, 2021, primarily driven by the acquisitions of IMC and SMA.
Financing Activities. Net cash provided by financing activities for the six months ended June 30, 2022 was $50.5 million and was driven by the proceeds of $184 million from borrowings issued under the Credit Agreement, offset by payment of related debt issuance costs of $6.0 million and the early repayment of our Existing Credit Agreement of $121.9 million. Net cash provided by financing activities of $381.9 million during the six months ended June 30, 2021 was primarily related to the Business Combination, and consisted of $125.0 million of borrowings under the Existing Credit Agreement, $410.0 million from issuance and sale of Class A Common Stock, partially offset by cash used in the consummation of the reverse recapitalization of $108.8 million, repayment of borrowings of $24.5 million, equity issuance costs of $12.5 million, payment of deferred financing costs of $6.9 million and payment of debt prepayment penalties of $500,000.
Contractual Obligations and Commitments
Our principal commitments consist of obligations under the Credit Agreement and operating leases for our centers.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2022 or December 31, 2021 other than operating leases.
JOBS Act
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with a public company which is neither an emerging growth company, nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Critical Accounting Policies and Estimates
Other than addition of a policy related to accounting for VIEs, there have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 16, 2022.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity ("VIE"). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting
(34)
rights and determines which business entity is the primary beneficiary of the VIE. The Company consolidates VIEs when it is determined that the Company is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” included in this Report for more information.
