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CI

CareMax, Inc. (CMAX)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 was exceptionally weak: revenue fell to $151.8M, MER spiked to 122.7%, adjusted EBITDA was ($71.8)M, and GAAP net loss was $465.8M driven by a $369.2M non‑cash goodwill impairment .
  • FY 2023 revenue reached $751.1M, meeting the company’s raised guidance range from earlier in the year, but FY adjusted EBITDA deteriorated to ($63.1)M and MER rose to 91.5% amid prior period developments (PYD), flex card utilization and reserves .
  • Management withdrew 2024 financial outlook while “exploring strategic options,” obtained limited covenant waivers, and implemented ~$20M annualized cost savings and center consolidations to preserve liquidity and earnings power .
  • Quality remains a bright spot (aggregate 5‑Star for the third consecutive year); MA membership ended at 111,500 (+19% YoY), total membership 270,000 (+4% YoY), but a pivot away from de novos and toward core operations is underway .
  • Potential stock narrative catalysts: withdrawal of 2024 guidance and strategic alternatives; going‑concern risk disclosure; outsized non‑cash impairment; and expectations for MSSP cash later in 2024 to bridge liquidity .

What Went Well and What Went Wrong

What Went Well

  • “We have made difficult but necessary decisions to de‑emphasize certain longer duration investments… and to refocus efforts on driving medical margin within our core centers and MSO while implementing cost saving initiatives across the organization.” — CEO Carlos de Solo .
  • Aggregate 5‑Star quality rating across centers for the third consecutive year; management expects care processes to improve MER YoY at centers in 2024 vs. 2023 .
  • Government VBC programs (MSSP/ACO REACH) tracked favorably, with management optimistic on similar or better savings rates, and MSSP payments expected to help bridge liquidity later in 2024 .

What Went Wrong

  • MER surged to 122.7% in Q4 (vs. 69.5% prior year) driven by PYDs and a provision for adverse deviation; external provider costs outpaced risk revenue materially .
  • Adjusted EBITDA collapsed to ($71.8)M in Q4 (vs. $4.5M prior year), reflecting PYDs, flex card utilization and center‑level losses; FY adjusted EBITDA fell to ($63.1)M .
  • A $369.2M non‑cash goodwill impairment hit Q4; management withdrew 2024 outlook citing uncertainty and strategic review, intensifying valuation and solvency concerns .

Financial Results

Quarterly Performance (oldest → newest)

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$224.4 $201.8 $151.8
MER (%)84.6% 88.0% 122.7%
Adjusted EBITDA ($USD Millions)$7.0 $2.1 ($71.8)
Platform Contribution ($USD Millions)$28.6 $21.1 ($55.6)

YoY Comparison (Q4 2022 → Q4 2023)

MetricQ4 2022Q4 2023
Total Revenue ($USD Millions)$164.3 $151.8
Net (Loss) Income ($USD Millions)$10.4 ($465.8)
Basic EPS ($USD)$3.10 ($124.53)
MER (%)69.5% 122.7%
Adjusted EBITDA ($USD Millions)$4.5 ($71.8)
Platform Contribution ($USD Millions)$25.6 ($55.6)

Segment Revenue Breakdown (oldest → newest)

Segment ($USD Millions)Q2 2023Q3 2023Q4 2023
Medicare risk-based revenue$155.5 $134.1 $108.7
Medicaid risk-based revenue$30.1 $24.0 $26.3
Government value-based care revenue$22.2 $28.1 $7.4
Other revenue$16.7 $15.7 $9.5
Total revenue$224.4 $201.8 $151.8

KPIs and Operating Metrics

KPIQ3 2023Q4 2023
Total membership270,000 (full year end commentary) 270,000
MA membership107,000 111,500
Centers62 56
Markets7 7
Patients (MCREM)228,700 229,300
Platform Contribution margin (%)10.5% (36.6%)
De novo pre-opening + post-opening losses (Q4)—$5.9

Note: Adjusted EBITDA and Platform Contribution are non‑GAAP; see reconciliations and definitions in the release .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2023$700M–$750M (original) $750M–$800M (raised in Q2) Raised
Adjusted EBITDAFY 2023$25M–$35M (prior) $15M–$25M (lowered in Q3) Lowered
Financial OutlookFY 2024Not provided previouslyCompany not providing 2024 outlook Withdrawn / Not provided

Earnings Call Themes & Trends

TopicQ2 2023 (Prior Two Quarters)Q3 2023 (Prior Quarter)Q4 2023 (Current)Trend
Flex card/supplemental benefits impact~190 bps MER impact; working with payers to mitigate Persisting headwind; OTC counted in cards; comparable 2024 total cost expected Major headwind to adjusted EBITDA; ~>$30M medical expenses in 2023; expect deceleration in 2024 Worsened in FY; management mitigation efforts ongoing
Prior period developments (PYD)$21M 1H23 PYD; Medicaid data migration issue $22M net unfavorable PPD/PYD in risk; $8M favorable government revenue ~$21M net unfavorable PYDs in Q4; +$15M adverse deviation reserve Elevated, but processes to reduce PYD going forward
Government VBC (MSSP/ACO REACH)YTD improvement; accruals increased; savings at least 2022 levels Mid‑ to high single‑digit savings rate expected; strong trends Favorable trends; MSSP payment expected to aid liquidity later in 2024 Improving; cash timing supportive
MA risk strategy (MSO glide path)Adding contracts; accretive medical margin; full‑risk PMPM up Focus on profitability and discipline; risk increasing in 2024 for 13 contracts Full‑risk share in MSO MA ~35% vs ~15% in 2023; emphasis on core profitability More selective risk, targeted accretion
Cost actions / footprintDe novo pipeline paced; disciplined spend Business review; cost optimization; guidance lowered ~$20M savings; workforce streamlining ($15M), 6 consolidations ($5M); lenders waivers Accelerated cost cuts; consolidations
Liquidity and leverage$55M cash; DDTL undrawn; expect draw to Q4 2024 Cash $32M; plan for DDTL; MSSP to repay AR facility YE cash ~$65.5M; remaining $60M DDTL drawn in Q4; strategic options to bridge Tight liquidity; bridging to MSSP cash

Management Commentary

  • “We have made difficult but necessary decisions to de‑emphasize certain longer duration investments… and to refocus efforts on driving medical margin within our core centers and management services organization while implementing cost saving initiatives across the organization.” — CEO Carlos de Solo .
  • “Our lenders have also granted us limited waivers of certain financial covenants… as we explore strategic options across our lines of business to maximize the value of certain assets.” — CEO Carlos de Solo .
  • “In the fourth quarter, adjusted EBITDA was impacted in part by approximately $21 million of net unfavorable PYDs… We also booked $15 million of reserves for adverse deviation…” — CFO Kevin Wirges .
  • “We are not providing a 2024 financial outlook at this time.” — Q4 press release .
  • “Across all CareMax centers, we achieved an aggregate 5‑star quality rating for the third consecutive year.” — CEO Carlos de Solo .

Q&A Highlights

  • Analysts probed MER trajectory and PYD mitigation; management expects MER to be “relatively consistent” excluding PYD, and is improving claims/data processes to minimize PYD going forward .
  • Flex card impact detail: inclusion of OTC benefits at certain plans and design changes (co‑pays added) informed 2024 cost expectations; company is collaborating with payers to offset duplicative benefits .
  • Revenue seasonality drivers discussed: PMPMs trend down in 2H; MSSP attribution declines later in the year; Medicaid redeterminations reduce membership and change acuity mix .
  • Strategic posture for 2024: more selective de novo openings and focus on accretive MSO contracts; pivot to operations, efficiency, and cash flow .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for CMAX Q4 2023 EPS and revenue due to a Capital IQ mapping issue in our data source; no estimate comparisons are provided. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Liquidity bridge hinges on anticipated MSSP cash later in 2024; near‑term balance sheet pressure evidenced by drawing the remaining $60M DDTL and YE cash of ~$65.5M .
  • Q4 results reflect structural issues: PYDs, flex card utilization, and explicit adverse deviation reserves — expect continued volatility until payer data cadence and contract unit economics are addressed .
  • Strategic pivot reduces de novo exposure, consolidates centers, and concentrates on core MSO/center profitability — ~$20M run‑rate cash savings identified .
  • Quality leadership persists (aggregate 5‑Star), supporting medium‑term margin recovery at centers as benefit designs are recalibrated and care programs scale .
  • Lack of 2024 guidance and going‑concern risk disclosure elevate uncertainty; monitoring strategic alternatives and lender negotiations is critical for valuation and trading setup .
  • Government VBC is a relative bright spot; favorable expenditure trends and potential for high single‑digit savings could support 2025 revenue/EBITDA inflection per management .
  • Short‑term: expect estimate risk to skew negative given Q4 magnitude and withdrawn outlook; medium‑term: recovery thesis depends on MSO risk accretion, MER normalization, and successful monetization/asset actions .