Cano Health Issues Letter to Shareholders
Cano Health has reaffirmed its commitment to enhancing shareholder value through a letter from its Board of Directors. The Board emphasizes their confidence in the company's fundamentals and potential for long-term growth, citing a projected $1.7 trillion addressable market due to the aging U.S. population and a shift towards value-based care. In 2022, Cano Health achieved approximately $2.7 billion in total revenues and $74 million in Adjusted EBITDA. The company aims to improve operational efficiency and cash flow through strategies like optimizing medical capacity, enhancing patient engagement, and consolidating operations. Additionally, Cano Health has appointed a new Chief Strategy Officer to boost organizational effectiveness and enhance governance by separating the roles of Chairman and CEO. The Board is taking steps to counter criticisms from former directors, maintaining that their focus is on long-term shareholder interests.
- Achieved approximately $2.7 billion in total revenues for 2022.
- Generated $74 million in Adjusted EBITDA in 2022.
- Plans to fill existing medical center capacity to unlock profitability.
- Expectations to double member capacity without adding new centers.
- Recent closure of a $150 million term loan for increased liquidity.
- Appointment of a new Chief Strategy Officer to optimize operations.
- Enhanced governance structure by separating CEO and Chairman roles.
- Recent criticisms from former directors could impact investor confidence.
Board of Directors underscores deep confidence in Company's fundamentals and strong long-term value creation potential
Highlights immediate action being taken to realize intrinsic value of business model by driving greater efficiency, productivity, and sustainable profitability
Former directors' disruptive and selective criticisms of past decisions they themselves architected, supported, and approved are in service of personal short-term gain over long-term interests of shareholders
Dear Fellow Cano Health Shareholder,
Your Board of Directors and management team are committed to enhancing value for all shareholders. We believe that by running the Company more effectively and efficiently we can capitalize on the fundamentals of
As the
Since entering the public markets we have grown rapidly and outperformed competitors across key operating metrics.1 In 2022, we delivered approximately
Now, as we turn our focus to optimizing our cost and organizational structures, we are well-positioned to leverage our competitive advantage and our scale to deliver continued growth in 2023 and accelerate our path towards achieving positive free cash flow. We are by no means satisfied with our recent stock price performance, but with unanimous alignment at the Board level, we are taking immediate action intended to realize the intrinsic value of our model by driving greater efficiency, productivity, and sustainable profitability.
This action plan includes the following:
- Unlocking embedded profitability by filling our existing medical center capacity: With the combination of a significant shortage of primary care providers and
Cano Health's differentiated model being highly appealing to patients, we continue to see significant organic membership growth and are positioned to double member capacity without adding a single medical center beyond what we have already guided to in 2023. Further, given thatCano Health's growth is due in large part to referrals from existing patients, we have significantly reduced overall patient acquisition costs across core markets. - Improving patient engagement to drive stronger financial performance: We deliver industry-leading patient engagement and clinical outcomes, as demonstrated by our average primary care physician visits per patient per year, high-risk patient visits, and admissions per thousand. As our patient cohort continues to mature and we continue to deploy center-based care management tools, we expect further improvements in patient outcomes and revenue, while decreasing our third-party medical and administrative costs as a percentage of revenue.
- Taking action to further accelerate free cash flow generation and improve liquidity: We recently closed a
term loan, which provides additional liquidity to strengthen and grow our operations. Also, we have trimmed our Medicare Advantage and ACO REACH provider network and are consolidating medical centers and payer contracts to drive medical expense ratio improvement. We are committed to reviewing all aspects of our platform to further improve cash flow and liquidity and sharpen our focus on capital management, while accelerating growth from capital-light models such as ACO REACH and improving our overall cost structure.$150 million - Optimizing operational effectiveness to support longer-term growth: As an initial important step, we recently announced the appointment of industry veteran
Mark Kent as Chief Strategy Officer to optimize our platform, including consolidating and coordinating key administrative functions such as contracting, billing and coding, and payor relations. As a result of this appointment and the consolidation of multiple functions, the Company has been able to eliminate redundant positions, driving improved SG&A efficiency. - Evaluating non-core asset sales: We are focused on maximizing the operations of our high-performing Medicare Advantage-focused medical centers. As mentioned during our fourth quarter 2022 earnings call, the Company has been evaluating select asset dispositions to improve free cash flow and re-deploy capital into initiatives which will have the highest return for our shareholders.
- Enhancing governance by separating the roles of Chairman and CEO: The Board has named
Solomon Trujillo as the non-executive Chairman of the Board, effective immediately. The Board determined that separating the roles of Chairman and CEO will allow the CEO to focus his full attention on executing our operating plan, while enhancing the Company's governance structure and Board oversight.
While your Board and management continued working diligently to improve the Company's performance, three directors who recently resigned from the Board have taken destructive actions that appear to be aimed at serving their own short-term interests at the expense of long-term value creation for all our shareholders. We are disappointed by the inaccurate, disruptive, and misleading public comments made by these ex-directors.
The comments made by each of the former directors were especially surprising, given that:
- Two members of the group had the opportunity to complete substantial diligence as part of their decision to invest in
Cano Health , either when Cano was a private company in 2016 or in connection with the de-SPAC process in 2020/2021. Yet they are now criticizing related party transactions that existed in 2020/2021, which not only were they fully aware of at the time, but alsoJAWS Acquisition Corp. , the SPAC of whichBarry Sternlicht was chairman, even described in its registration statement filed in connection with the de-SPAC transaction. - All strategic and governance decisions that were taken by our Board since the de-SPAC – including the acquisitions of
University Healthcare andDoctors Medical Center for approximately in the summer of 2021 as well as$900 million Cano Health's expansion outside ofFlorida – came after full Board deliberation and were the result of unanimous Board support, including from each of the former directors who now criticize those transactions as well.
Rather than work constructively with our current Board to realize the full potential of
We have a highly qualified and independent Board, whose interests are aligned with our shareholders and who collectively own more than 35 million shares in the Company. Our directors have decades of combined service as directors and executives of public companies, representing over a trillion dollars in market capitalization (as of
This is a pivotal time for
Thank you for your support.
The Board of Directors of
About
Forward-Looking Statements: This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to future events and involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and could materially affect actual results, performance or achievements. Such forward-looking statements include, without limitation, our anticipated performance, operations, financial strength, potential, and prospects for long-term shareholder value creation, our anticipated results of operations, including our business strategies, our projected costs, prospects and plans, and other aspects of our operations or operating results. These forward-looking statements generally can be identified by phrases such as "will," "expects," "anticipates," "believes," "foresees," "forecasts," "plans," "intends," "estimates" or other words or phrases of similar import, including, without limitation, (i) our Board of Directors being deeply confident in Company's fundamentals and strong long-term value creation potential; (ii) our plans to realize intrinsic value of business model by driving greater efficiency, productivity, and sustainable profitability; (iii) our belief that by running the Company more effectively and efficiently we can capitalize on the fundamentals of
It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on our results of operations and financial condition. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, changes in market or industry conditions, the regulatory environment, competitive conditions, and/or consumer receptivity to our services; changes in our strategy, future operations, prospects and plans; developments and uncertainties related to the Direct Contracting Entity program; our ability to realize expected financial results, including with respect to patient membership, total revenue and earnings; our ability to predict and control our medical cost ratio; our ability to grow market share in existing markets and continue our growth; our ability to integrate our acquisitions and achieve desired synergies; our ability to maintain our relationships with health plans and other key payors; our future capital requirements and sources and uses of cash, including funds to satisfy our liquidity needs; our ability to attract and retain members of management and our Board of Directors; and/or our ability to recruit and retain qualified team members and independent physicians. Actual results may also differ materially from such forward-looking statements for a number of other reasons, including those set forth in our filings with the
This press release contains certain information concerning the Company's services and industry, including market size and growth rates of the markets in which the Company participates and performance of the Company's competitors, that are based on industry surveys and publications or other publicly available information, other third-party survey data and research reports, which the Company has not independently verified, and the Company's internal sources. This information is selected by the Company and involves many assumptions and limitations, including the assumption that the publicly available data on our competitors is comparable to the data presented on our business and results; therefore, there can be no guarantee as to the accuracy or reliability of such assumptions and you are cautioned not to give undue weight to this information.
Important Additional Information and Where to Find It
Certain Information Regarding Participants
The Company, its directors and certain of its executive officers and other employees may be deemed to be participants in the solicitation of proxies from shareholders in connection with the 2023 Annual Meeting. Additional information regarding the identity of these potential participants, none of whom, other than Dr.
Media Contact
Kekst CNC
Anntal Silver /
anntal.silver@kekstcnc.com / nicholas.capuano@kekstcnc.com
Investor Contact
Cano Health IR
investors@canohealth.com
1 In making this statement, the Company has considered publicly available information on key operating metrics of its competitors that it considers to be comparable to its own. However, other companies may calculate such key operating metrics differently, and therefore the Company's key operating metrics may not be directly comparable to similarly titled measures of other companies.
2 Adjusted EBITDA is a non-GAAP financial measure. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Metrics" included in the Company's Annual Report on Form 10-K for the year ended
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