UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to

Commission File Number: 001-39289

__________________________________________

Cano Health, Inc.

(Exact name of registrant as specified in its charter)

__________________________________________

Delaware

(State or other jurisdiction of incorporation or organization)

9725 NW 117th Avenue, Miami, FL

(Address of principal executive offices)

98-1524224

(IRS Employer Identification No.)

33178

(Zip Code)

(855) 226-6633

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	CANO	The New York Stock Exchange
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share	CANO/WS	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ☒

Non-accelerated filer     ☐

Accelerated filer         ☐

Smaller reporting company    ☐

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 9, 2023 the registrant had 285,474,630 shares of Class A common stock outstanding and 253,208,965 shares of Class B common stock outstanding.

Table of Contents

	Page
PART I FINANCIAL INFORMATION
Cautionary Note Regarding Forward-Looking Statements
Item 1. Financial Statements	6
Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	6
Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2023 and June 30, 2022	7
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months ended June 30, 2023 and June 30, 2022	8
Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2023 and June 30, 2022	10
Notes to Interim Condensed Consolidated Financial Statements	12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	59
Item 4. Controls and Procedures	59
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	60
Item 1A. Risk Factors	60
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3. Defaults Upon Senior Securities	61
Item 4. Mine Safety Disclosures	61
Item 5. Other Information	61
Item 6. Exhibits	61
SIGNATURES	63

i

CAUTIONARY NOTE REGARDING 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 ability to achieve or maintain profitability;

ii.our expectations regarding executing our business plan and strategies, such as (a) our long-term strategy to focus our business on Medicare Advantage and ACO Reach in markets that can deliver positive cash flow performance; (b) our plans to exit the California, New Mexico and Illinois markets by the fall of 2023; (c) our performing a strategic review of our medical centers located in Texas and Nevada and, to generate additional liquidity, we are reviewing the sale of all of our assets related to servicing our Medicaid members; (d) our plans to pursue a process to identify interest in the sale of the Company or all or substantially all of its assets;

iii.our plans to achieve our expected business and financial results, including patient membership objectives, targeted medical claims expense ratios, estimated reimbursement rates, estimated revenues, estimated gross margins, and estimated cost levels, such as our plans to significantly reduce our investments in de novo medical centers in 2023;

iv.our expectations regarding the impact of changes in applicable laws, rules or regulations, including with respect to health plans and payors and our relationships with such plans and payors, and provisions that impact Medicare and Medicaid programs;

v.our expectations regarding our sources and uses of cash and liquidity, such as (a) our expectation that our existing cash position, along with our expected cash generation through operations and our CS Revolving Line of Credit will not be sufficient to fund our operating and capital expenditure requirements through at least the next 12 months from the date of issuance of our unaudited condensed consolidated financial statements included in this Form 10-Q; (b) our expectation that our net cash used in investing activities will be less in 2023 due to a significant reduction in spending on de novo medical centers; (c) our expectation that our interest expense will increase by approximately $18.0 million in 2023 driven by the 2023 Term Loan; (d) our reduction in expected capital expenditures; (e) our expectation that in 2023, we will incur approximately $81.0 million in cash interest payments (which excludes approximately $19.0 million of non-cash PIK interest under the 2023 Term Loan) and approximately $15.0 million in capital expenditures; and (f) our expectation that, having secured the 2023 Side-Car Amendment on August 10, 2023, we will repay a significant portion of the CS Revolving Line of Credit by the end of September 2023;

vi.our expectations regarding the outcome of any pending legal or regulatory proceedings; such as our (a) expectation that we have meritorious defenses to the allegations in the lawsuit captioned Alberto Gonzalez v. Cano Health, Inc. f/k/a Jaws Acquisition Corp., et al. Alberto Gonzalez v. Cano Health, Inc. f/k/a Jaws Acquisition Corp., et al. (No. 1:22-cv-20827) and our plans to vigorously defend against such action; and (b) our expectation that the resolution of various other asserted and unasserted potential claims encountered in the normal course of business will not have a material effect on our consolidated financial position, results of operations or cash flows;

ii

vii.our estimates and judgments regarding our various tax positions, including regarding our deferred tax assets, our belief that no tax uncertainties exist based on analyzing our filing positions in the Federal, State, local and foreign jurisdictions where we are required to file income tax returns for all open tax years and our belief that we have adequately provided for any reasonably foreseeable outcomes related to the IRS tax examination of our income tax return for the year ended December 31, 2020 and that any settlement related thereto will not have a material adverse effect on our consolidated financial statements;

viii.our expectations regarding the shift in our strategic direction, such as our plans to focus our membership base towards Medicare Advantage and ACO Reach; sell certain assets and operations and exiting California, New Mexico and Illinois markets by the fall of 2023; exit our Puerto Rico operations by January 1, 2024, conduct a strategic review of the Company's Medicaid business in Florida, medical centers located in Texas and Nevada, pharmacy assets and other specialty practices; consolidating underperforming owned medical centers; lowering third party medical costs through negotiations with payors; reducing operating expenses, including reduction of permanent staff; significantly reducing all other non-essential spending; and delaying renovations and other capital projects, including our belief that the Company will be better positioned to achieve positive financial performance upon completion of these initiatives, as well as our expectation to remain focused on driving growth through filling capacity in our planned remaining existing centers and delivering the same high-quality, healthcare to our members and delivering positive outcomes, while more effectively controlling costs; and

ix.our expectations regarding our plan to further restructure our operations to streamline and simplify the organization to improve efficiency and reduce costs, including workforce reductions, and the expected reduction in our selling, general and administrative costs in future periods compared to current levels, including reducing staffing by approximately 700 employees, or 17% of our workforce in the third quarter of 2023, with approximately 40% of the workforce reductions being attributable to exiting operations in certain markets, with the remainder attributable to other operating centers and our expectation that these actions are expected to yield approximately $50 million of annualized cost reductions beginning in the third quarter of 2023 and through the end of 2024, and result in our recording a restructuring charge in the third quarter of 2023 of approximately $4 million, the majority of which is expected to be paid in 2023 and a lesser amount in 2024, consisting primarily of employee-related costs, such as severance, retention and other contractual termination benefits.

These forward-looking statements are based on information available to us at the time of this report and our current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known or unknown factors, and it is impossible for us to anticipate all factors that could affect our actual results. It is uncertain whether any of the events anticipated by our 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 our forward-looking statements include, among others, changes in market or industry conditions, changes in 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.

iii

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 SEC, including, without limitation, the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 15, 2023, as amended by our Annual Report on Form 10-K/A, filed with the SEC on April 7, 2023 (the “2022 Form 10-K”), as well as our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC during 2023 (which may be viewed on the SEC’s website at http://www.sec.gov or on our website at http://www.investors.canohealth.com/ir-home), as well as reasons including, without limitation:

i.unexpected developments that adversely impact our ability to achieve or maintain profitability, such as due to (a) less than anticipated capacity utilization at our medical centers; (b) higher than expected costs and expenses; (c) less than anticipated growth in revenues, Adjusted EBITDA margins and/or cash flows; (d) difficulties and/or delays in improving our operational execution, enhancing our cost discipline, and/or achieving positive free cash flow, such as due to a broad recessionary economic environment, higher interest rates and/or a higher inflationary environment; (e) our inability to predict changes to the Medicare Advantage, ACO Realizing Equity, Access, and Community Health ("ACO REACH") and Medicare patients under Accountable Care Organizations ("ACO") programs as it relates to benchmarks and shared savings;

ii.unexpected developments that adversely impact our ability to execute our business plan and strategies, such as due to (a) unexpected changes in the payor mix of our patients and potential decreases in our reimbursement rates; (b) unexpected developments with respect to the renegotiation, non-renewal or termination of capitation agreements with health plans; (c) difficulties and/or delays in procuring sufficient space on terms that are acceptable to us or that the costs of procuring and outfitting such space becomes uneconomical, such as due to the prevailing difficult conditions in the global supply chain environment; (d) less than expected consumer acceptance of our services and offerings and/or less than expected member retention rates; (e) greater than anticipated competition in our industry, less than anticipated advantages of our services, products and technology over competing services, products and technology existing in the market, and other competitive factors, including with respect to technological capabilities, cost and scalability; (f) difficulties or delays in exiting certain market and/or selling the Company or all or substantially all of its assets, such as due to tightness in the credit markets, higher inflation or other factors, regulatory disruptions or delays and/or securing third party agreements and approvals; (g) unexpected developments that adversely impact our ability to execute our plan to identify opportunities to maximize shareholder value, including the sale of the Company, such as due to our inability to consummate one or more transactions, whether due to higher interest rates, regulatory restrictions or other market factors; and (h) possible actions that vendors and other third parties that we deal with may take to impose enhanced credit controls that effectively increase our cost base or make it difficult for us to maintain services and supplies required to conduct business;

iii.unexpected developments that adversely impact our ability to achieve our expected financial results, such as due to (a) unexpected changes in anticipated Medicare reimbursement rates or changes in the rules governing the Medicare program; (b) unexpected changes in reimbursements by third-party payors and payments by individuals; (c) unexpected changes in Medicare’s risk adjustment payment system; (d) unexpected developments with respect to our estimates of revenues and refund liabilities that we recognize under our risk agreements with health plans; (e) unexpected developments with respect to our estimates about our third-party medical costs (including incurred but not report medical service accruals), including our expectation that our third-party medical costs will increase given the healthcare spending trends within the Medicare population;

iv.unanticipated changes in laws, rules and/or regulations, such as those that result in less than expected payments from health plans and other payors;

v.less than anticipated sources of liquidity, such as due to (a) delays in or our inability to complete non-core asset sales, in whole or in part; (b) unanticipated demands on our available sources of cash; (c) tightness in the credit or M&A markets; (d) unexpected changes in our future capital requirements which depend on many factors, including our growth rate, medical expenses and/or our review of all aspects of our value-based care platform;

iv

vi.unexpected developments regarding the outcome of any pending legal or regulatory proceedings;

vii.unexpected developments impacting our tax positions, such as our deferred tax assets not being realized in future periods in expected amounts, which could result in adjustments to our valuation allowances and provision for income taxes and/or unexpected developments in our tax audit;

viii.unexpected developments with respect to the shift in our strategic direction that could adversely affect our plans to reduce our costs and expenses and/or generate additional sources of liquidity, such as, among other things, our inability, in whole or in part to complete one or more asset sales and/or negotiate for better payment terms and conditions, such that we are not unable to achieve positive financial performance on an acceptable timeline; and/or less than expected benefits from and/or higher than expected costs and expenses related to our restructuring program, such as delays in realizing or less than the expected cost reductions.

For a detailed discussion of other risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, please refer to our risk factor disclosure included in our filings with the SEC, including, without limitation, our 2022 Form 10-K. Investors should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. Factors other than those listed above could also cause our results to differ materially from expected results. Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation or duty to publicly update or revise any forward-looking statement, whether to reflect actual results of operations; changes in financial condition; changes in general U.S. or international economic, industry conditions; changes in estimates, expectations or assumptions; or other circumstances, conditions, developments or events arising after the issuance of this report. Additionally, the business and financial materials and any other statement or disclosure on or made available through our websites or other websites referenced herein shall not be incorporated by reference into this report.

v

CANO HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	27,721	$	27,329
Accounts receivable, net of unpaid service provider costs	107,164		233,816
Prepaid expenses and other current assets	31,450		79,603
Total current assets	166,335		340,748
Property and equipment, net	129,330		131,325
Operating lease right-of-use assets	174,581		177,892
Goodwill	480,044		480,375
Payor relationships, net	551,913		567,704
Other intangibles, net	199,761		226,059
Other assets (net of allowance for credit losses of $62.0 million as of June 30, 2023)	5,358		4,824
Total assets	$	1,707,322	$	1,928,927
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses (Related parties comprised $2,992 and $2,669 as of June 30, 2023 and December 31, 2022, respectively)	$	124,821	$	105,733
Current portion of notes payable, net of debt issuance costs	109,667		6,444
Current portion of finance lease liabilities	2,972		1,686
Current portions due to sellers	46,506		46,016
Current portion of operating lease liabilities	24,958		24,068
Other current liabilities	28,010		24,491
Total current liabilities	336,934		208,438
Notes payable, net of debt issuance costs	922,232		997,806
Long term portion of operating lease liabilities	163,972		166,347
Warrant liabilities	7,042		7,373
Long term portion of finance lease liabilities	7,770		3,364
Due to sellers, net of current portion	1,050		15,714
Long term portion of contingent consideration	1,400		2,800
Other liabilities	31,149		32,810
Total liabilities	1,471,549		1,434,652
Stockholders’ Equity
Shares of Class A common stock $0.0001 par value (6,000,000,000 shares authorized and 281,517,626 and 224,118,566 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)	28		22
Shares of Class B common stock $0.0001 par value (1,000,000,000 shares authorized and 253,208,965 and 268,794,608 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)	25		27
Additional paid-in capital	601,589		538,614
Accumulated deficit	(454,935)		(286,032)
Total Stockholders' Equity before non-controlling interests	146,707		252,631
Non-controlling interests	89,066		241,644
Total Stockholders' Equity	235,773		494,275
Total Liabilities and Stockholders' Equity	$	1,707,322	$	1,928,927

The accompanying Notes are an integral part of these Condensed Financial Statements

6

CANO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	2023		2022		2023		2022
Revenue:
Capitated revenue	$	743,324	$	655,493	$	1,584,397	$	1,329,844
Fee-for-service and other revenue	23,422		33,880		49,258		63,671
Total revenue	766,746		689,373		1,633,655		1,393,515
Operating expenses:
Third-party medical costs	769,629		541,317		1,477,960		1,077,097
Direct patient expense (Related parties comprised $3,073 and $7,188 in the three months ended June 30, 2023 and 2022, respectively, and $3,064 and $4,518 in the six months ended June 30, 2023 and 2022, respectively)	56,757		52,647		125,184		113,323
Selling, general, and administrative expenses (Related parties comprised $1,452 and $2,496 in the three months ended June 30, 2023 and 2022, respectively, and $3,305 and $5,452 in the six months ended June 30, 2023 and 2022, respectively)	99,418		106,179		195,890		202,849
Depreciation and amortization expense	27,251		19,836		54,473		38,872
Transaction costs	9,125		6,207		19,211		14,583
Change in fair value of contingent consideration	(11,800)		(5,764)		(15,900)		(10,425)
Credit loss on other assets	62,000		—		62,000		—
Total operating expenses	1,012,380		720,422		1,918,818		1,436,299
Income (loss) from operations	(245,634)		(31,049)		(285,163)		(42,784)
Other income (expense):
Interest expense	(26,719)		(13,134)		(50,224)		(26,418)
Interest income	90		2		99		3
Loss on extinguishment of debt	—		—		—		(1,428)
Change in fair value of warrant liabilities	(1,677)		30,175		331		57,337
Other income (expense)	1,323		251		1,755		530
Total other income (expense)	(26,983)		17,294		(48,039)		30,024
Net income (loss) before income tax expense	(272,617)		(13,755)		(333,202)		(12,760)
Income tax expense (benefit)	(1,872)		809		(1,872)		1,889
Net income (loss)	$	(270,745)	$	(14,564)	$	(331,330)	$	(14,649)
Net income (loss) attributable to non-controlling interests	(129,992)		(9,231)		(162,427)		(9,976)
Net income (loss) attributable to Class A common stockholders	$	(140,753)	$	(5,333)	$	(168,903)	$	(4,673)
Net income (loss) per share attributable to Class A common stockholders, basic	$	(0.51)	$	(0.03)	$	(0.66)	$	(0.02)
Net income (loss) per share attributable to Class A common stockholders, diluted	$	(0.51)	$	(0.03)	$	(0.66)	$	(0.03)
Weighted-average shares outstanding:
Basic	274,640,987		210,053,037		257,317,776		200,783,129
Diluted	527,849,952		474,580,471		257,317,776		465,310,563

The accompanying Notes are an integral part of these Condensed Financial Statements

7

CANO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

Three and Six Months Ended June 30, 2023 and 2022

(in thousands, except shares)	Class A Shares			Class B Shares			Additional Paid-in Capital		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
BALANCE—March 31, 2023	261,819,529	$	26	263,638,069	$	26	$	594,994	$	(314,182)	$	223,537	$	504,401
Stock-based compensation expense, net	—	—		—	—		2,017		—		—		2,017
Issuance of Class A common stock upon vesting of restricted stock units	1,469,730	—		—	—		(4,984)		—		4,984		—
Issuance of common stock for acquisitions	—	—		—	—		99		—		—		99
Exchange of Class B common stock for Class A common stock	10,429,104	1		(10,429,104)	(1)		9,463		—		(9,463)		—
Warrants Exercised	7,799,263	1		—	—		—		—		—		1
Net income (loss)	—	—		—	—		—		(140,753)		(129,992)		(270,745)
BALANCE—June 30, 2023	281,517,626	$	28	253,208,965	$	25	$	601,589	$	(454,935)	$	89,066	$	235,773

(in thousands, except shares)	Class A Shares			Class B Shares			Additional Paid-in Capital		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
BALANCE—March 31, 2022	205,026,367	$	20	276,722,704	$	28	$	464,262	$	(78,100)	$	451,567	$	837,777
Stock-based compensation expense, net	—	—		—	—		17,783		—		—		17,783
Issuance of Class A common stock upon vesting of restricted stock units	807,315	1		—			(5,086)		—		5,085		—
Exchange of Class B common stock for Class A common stock	12,195,270	1		(12,195,270)	(1)		18,682		—		(18,682)		—
Net income (loss)	—	—		—	—		—		(5,333)		(9,231)		(14,564)
BALANCE—June 30, 2022	218,028,952	$	22	264,527,434	$	27	$	495,642	$	(83,433)	$	428,739	$	840,997

The accompanying Notes are an integral part of these Condensed Financial Statements

8

CANO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

(in thousands, except shares)	Class A Shares			Class B Shares			Additional Paid-in Capital		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
BALANCE—December 31, 2022	224,118,566	22		268,794,608	27		538,614		(286,032)		241,644		$	494,275
Stock-based compensation expense, net	—	—		—	—		11,368		—		—		11,368
Issuance of Class A common stock upon vesting of restricted stock units	1,510,066	—		—			(5,080)		—		5,080		—
Issuance of common stock for acquisitions	9,724,852	1		—	—		14,401		—		—		14,402
Exchange of Class B common stock for Class A common stock	15,585,643	2		(15,585,643)	(2)		13,033		—		(13,033)		—
Warrants Exercised	29,420,204	3		—	—		214		—		—		217
Debt discount - warrants issued	—	—		—	—		45,698		—		—		45,698
Employee Stock Purchase Plan issuance	1,158,295	—		—	—		1,143		—		—		1,143
Impact of transactions affecting non-controlling interests	—	—		—	—		(17,802)		—		17,802		—
Net income (loss)	—	—		—	—		—		(168,903)		(162,427)		(331,330)
BALANCE—June 30, 2023	281,517,626	$	28	253,208,965	$	25	$	601,589	$	(454,935)	$	89,066	$	235,773

(in thousands, except shares)	Class A Shares			Class B Shares			Additional Paid-in Capital		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
BALANCE—December 31, 2021	180,113,551	$	18	297,385,981	$	30	$	397,443	$	(78,760)	$	479,837	$	798,568
Stock-based compensation expense, net	—	—		—	—		31,600		—		—		31,600
Issuance of Class A common stock upon vesting of restricted stock units	807,315	1		—	—		(5,086)		—		5,085		—
Issuance of common stock for acquisitions	2,857,167	—		—	—		15,771		—		—		15,771
Exchange of Class B common stock for Class A common stock	32,858,547	3		(32,858,547)	(3)		51,765		—		(51,765)		—
Employee Stock Purchase Plan issuance	1,392,372	—		—	—		9,707		—		—		9,707
Impact of transactions affecting non-controlling interests	—	—		—	—		(5,558)		—		5,558		—
Net income (loss)	—	—		—	—		—		(4,673)		(9,976)		(14,649)
BALANCE—June 30, 2022	218,028,952	$	22	264,527,434	$	27	$	495,642	$	(83,433)	$	428,739	$	840,997

The accompanying Notes are an integral part of these Condensed Financial Statements

9

CANO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
(in thousands)	2023		2022
Cash Flows (used in) from Operating Activities:
Net loss	$	(331,330)	$	(14,649)
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation and amortization expense	54,473		38,872
Change in fair value of contingent consideration	(15,900)		(10,425)
Change in fair value of warrant liabilities	(331)		(57,337)
Loss on extinguishment of debt	—		1,428
Fixed asset abandonment	1,709		—
Amortization of debt issuance costs	2,560		1,570
Non-cash lease expense	1,642		3,642
Stock-based compensation, net	11,368		31,600
Paid in kind interest expense	7,380		—
Credit loss on other assets	62,000		—
Changes in operating assets and liabilities:
Accounts receivable, net	126,652		(67,557)
Other assets	(649)		7,158
Prepaid expenses and other current assets	654		(17,834)
Interest accrued due to sellers	—		100
Accounts payable and accrued expenses (Related parties comprised $(295) and $1,331 for the six months ended June 30, 2023 and 2022, respectively)	28,289		(9,362)
Other liabilities	6,528		10,621
Net cash (used in) provided by operating activities	(44,955)		(82,173)
Cash Flows (used in) from Investing Activities:
Purchase of property and equipment (Related parties comprised $766 and $3,567 for the six months ended June 30, 2023 and 2022, respectively)	(11,270)		(20,431)
Acquisitions of subsidiaries including non-compete intangibles, net of cash acquired	—		(4,995)
Payments to sellers	(6,431)		(3,847)
Net cash (used in) provided by investing activities	(17,701)		(29,273)
Cash Flows (used in) from Financing Activities:
Payments of long-term debt	(3,223)		(3,222)
Debt issuance costs	(9,256)		(88)
Proceeds from long-term debt	150,000		—
Proceeds from CS Revolving Line of Credit	55,000		—
Repayments of CS Revolving Line of Credit	(129,000)		—
Proceeds from insurance financing arrangements	2,690		2,529
Payments of principal on insurance financing arrangements	(1,467)		(1,380)
Other	(1,696)		(1,716)
Net cash (used in) provided by financing activities	63,048		(3,877)
Net increase (decrease) in cash, cash equivalents and restricted cash	392		(115,323)
Cash, cash equivalents and restricted cash at beginning of year	27,329		163,170
Cash, cash equivalents and restricted cash at end of period	$	27,721	$	47,847

The accompanying Notes are an integral part of these Condensed Financial Statements

10

CANO HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Supplemental cash flow information:
Interest paid	40,476	27,670
Income taxes paid	—	82
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange of lease liabilities	16,558	50,297
Issuance of Class A common stock for acquisitions	14,402	15,771
Due to sellers in connection with acquisitions	—	3,533
Addition to construction in process funded through accounts payable	906	3,580
Humana Affiliate Provider clinic leasehold improvements	363	2,928
Employee Stock Purchase Plan issuance	1,143	9,707
Warrants issued	45,698	—

The accompanying Notes are an integral part of these Condensed Financial Statements

11

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.    NATURE OF BUSINESS AND OPERATIONS

Nature of Business

Cano Health, Inc. (“Cano Health”, or the “Company”), formerly known as Primary Care (ITC) Intermediate Holdings, LLC (“PCIH” or the "Seller"), provides value-based medical care for its members. The Company focuses on providing high-touch population health and wellness services to Medicare Advantage, Accountable Care Organization Realizing Equity, Access, and Community Health ("ACO REACH"), Medicare patients under ACO and Medicaid capitated members, particularly in underserved communities by leveraging our proprietary technology platform to deliver high-quality health care services. The Company also operates pharmacies in the network for the purpose of providing a full range of managed care services to its members.

On June 3, 2021 (the “Closing Date”), Jaws Acquisition, Corp. (“Jaws”) consummated the business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of November 11, 2020 (as amended, the “Business Combination Agreement”) by and among Jaws, Jaws Merger Sub, LLC, a Delaware limited liability company (“Merger Sub”), PCIH, and PCIH’s sole member, and the Seller (each as defined in the Business Combination Agreement). Upon the closing of the Business Combination, Jaws was reincorporated in the State of Delaware and changed its name to "Cano Health, Inc."

Unless the context requires, "the Company", "we", "us", and "our" refer, for periods prior to the completion of the Business Combination, to PCIH and its consolidated subsidiaries, and for periods upon or after the completion of the Business Combination, to Cano Health and its consolidated subsidiaries, including PCIH and its subsidiaries.

Pursuant to the Business Combination Agreement, on the Closing Date, Jaws contributed cash to PCIH in exchange for 69.0 million common limited liability company units of PCIH ("PCIH Common Units") equal to the number of shares of Jaws' Class A ordinary shares outstanding on the Closing Date, as well as 17.25 million Class B ordinary shares owned by Jaws Sponsor, LLC (the "Sponsor"). In connection with the Business Combination, the Company issued 306.8 million shares of the Company’s Class B common stock to existing stockholders of PCIH. The Company also issued 80.0 million shares of the Company’s Class A common stock in a private placement for $800.0 million (the "PIPE Investors").

Following the consummation of the Business Combination, substantially all of the Company’s assets and operations are held and conducted by PCIH and its subsidiaries. As the Company is a holding company with no material assets other than its ownership of PCIH Common Units and its managing member interest in PCIH, the Company has no independent means of generating revenue or cash flow. The Company’s ability to pay taxes and dividends depends on the financial results and cash flows of PCIH and the distributions it receives from PCIH. The Company’s only assets are equity interests in PCIH, which represented a 35.1% and 52.6% controlling ownership as of the Closing Date and as of June 30, 2023, respectively. Certain members of PCIH who retained their common unit interests in PCIH held the remaining 64.9% and 47.4% non-controlling ownership interests as of the Closing Date and as of June 30, 2023, respectively. These members hold an economic interest in PCIH through PCIH Common Units and a corresponding number of non-economic Class B common stock, which entitles the holder to one vote per share.

Our organizational structure following the completion of the Business Combination is commonly referred to as an umbrella partnership-C (or Up-C) corporation structure. This organizational structure allowed the Seller, the former sole owner and managing member of PCIH, to retain its equity ownership in PCIH, an entity that is classified as a partnership for U.S. federal income tax purposes, in the form of PCIH Common Units (as defined in the Business Combination Agreement). The former stockholders of Jaws and the PIPE Investors who, prior to the Business Combination, held Class A ordinary shares or Class B ordinary shares of Jaws, by contrast, received equity ownership in Cano Health, Inc., a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes.

Subject to the terms and conditions set forth in the Business Combination Agreement, the Seller and its equity holders received aggregate consideration with a value equal to $3,534.9 million, which consisted of (i) $466.5 million of cash and (ii) 306.8 million shares of Class B common stock valued at $3,068.4 million based on a reference stock price of $10.00 per share.

12

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Following the closing of the Business Combination, Class A stockholders owned direct controlling interests in the combined results of PCIH and Cano Health while the Seller, as the sole Class B stockholder, owned indirect economic interests in PCIH shown as non-controlling interests in Cano Health's unaudited condensed consolidated financial statements. The Seller holds these indirect economic interests in the form of PCIH Common Units that are redeemable for shares of Cano Health Class A common stock, together with the cancellation of an equal number of shares of Cano Health Class B common stock. The non-controlling interests will decrease over time as shares of Class B common stock and PCIH Common Units are exchanged for shares of Cano Health's Class A common stock.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The portion of an entity not wholly-owned by the Company is presented as non-controlling interests. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The Company has interests in various entities and 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 rights (“variable interest entities” or “VIEs”) 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. Included in the Company's consolidated results are Cano Health Texas, PLLC, Cano Health Nevada, PLLC, Cano Health California, PC, CHC Provider Network, PC and Cano Health Illinois, PLLC (collectively, the "Physicians Groups"), which the Company has concluded are VIEs. All material intercompany accounts and transactions have been eliminated in consolidation.

Risks and Uncertainties

For additional information on the Company’s risk factors, please see Item 1A, "Risk Factors,” included in the Company’s 2022 Form 10-K, as supplemented by Part II, Item 1A, “Risk Factors,” included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 9, 2023 (the “Q1 2023 Form 10-Q") and in this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 (the “Q2 2023 Form 10-Q”).

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. Such reclassifications impacted the classification of: repayments of equipment loans, repayment of finance lease obligation and employee stock purchase plan contributions within the statement of cash flows. Additionally, there were reclassifications related to revenue and direct patient expense within variable interest entities. These reclassifications had no impact on net loss as previously presented.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company described its significant accounting policies in Note 2, “Summary of Significant Accounting Policies,” included in the audited consolidated financial statements for the year ended December 31, 2022 included in its 2022 Form 10-K. During the six months ended June 30, 2023, there were no significant changes to those accounting policies.

Recent Accounting Pronouncements 

The Company has evaluated recent accounting pronouncements through June 30, 2023 and believes that none of them will have a material effect on our unaudited condensed consolidated financial statements.

3.    GOING CONCERN

The Company’s accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended June 30, 2023, the Company generated a net loss of $331.3 million and used $45.0 million of cash from operations.

13

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s current liquidity as of August 9, 2023 was approximately $101.5 million, consisting of cash and cash equivalents (excluding restricted cash of approximately $14.1 million). As of August 10, 2023, the CS Revolving Line of Credit was fully drawn to ensure that the Company had access to liquidity while it was negotiating the 2023 Side-Car Amendment (each as discussed under Note 12, “Debt”); provided, however, having secured the 2023 Side-Car Amendment on August 10, 2023, the Company currently expects to repay a significant portion of such line of credit by the end of September 2023. The Company currently believes that this amount of liquidity is not sufficient to cover the Company’s operating, investing and financing cash uses for the next 12 months. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next 12 months to improve the Company’s liquidity and profitability, as discussed below.

Management has evaluated the significance of these relevant conditions in relation to the Company’s ability to meet its obligations and has concluded that there is substantial doubt about the Company’s ability to continue as going concern within one year after the date that the financial statements are issued.

The Company is pursuing several initiatives to improve its profitability liquidity and net cash, such as controlling and reducing operating expenses, limiting capital expenditures, selling assets and operations and exiting certain markets. The Company’s efforts to reduce operating expenses include reducing permanent staff, lowering its third party medical costs through negotiations with payors, consolidating underperforming medical centers, delaying renovations and other capital projects and significantly reducing nonessential spending.

Other Company efforts to improve its liquidity include a strategic review of its Medicaid business in Florida, medical centers located in Texas and Nevada, pharmacy assets and other specialty practices.

The Company is in the process of closing medical centers and exiting markets in California, New Mexico and Illinois. The Company also plans to exit its Puerto Rico operations by January 1, 2024.

In addition to the above, the Company is pursuing a comprehensive process to identify and evaluate interest in a sale of the Company, or all or substantially all of its assets, consistent with the terms and conditions of the 2023 Side-Car Amendment, discussed below. The Company has engaged advisors to assist in the process. The Company has not set a timetable for the conclusion of this process and there is no assurance that the process will result in any transaction.

Additionally, as discussed in Note 12, “Debt,” the Side-Car Credit Agreement contains a financial maintenance covenant, requiring the Borrower to maintain a First Lien Net Leverage Ratio (i.e., total first lien senior secured net debt to Consolidated Adjusted EBITDA) not to exceed 5.80:1.00 on the last day of any four consecutive fiscal quarter period. Capitalized terms used, but not defined, in this Note are defined in Note 12, “Debt.” With a First Lien Leverage Ratio of approximately 12.00:1.00 at June 30, 2023, the Borrower was not in compliance with this financial maintenance covenant as of such date. Under the Side-Car Credit Agreement, the Borrower has a right to cure noncompliance with the financial maintenance covenant by obtaining sufficient equity proceeds, which may be sourced from equity or debt financings by the Company, that will be deemed added to the Borrower’s Consolidated Adjusted EBITDA for purposes of recalculating the financial maintenance covenant when such proceeds are contributed to the Borrower. The cure right may be exercised by the Borrower no more than 2 times in any 4 consecutive testing periods and no more than 5 times during the term of the Side-Car Credit Agreement. Accordingly, on July 28, 2023, the Borrower delivered to the 2023 Term Loan Administrative Agent a notice of its intent to cure such noncompliance by September 5, 2023, which would require the Company to raise approximately $71 million of new capital, which amount, if raised, would be contributed to the Borrower to consummate the cure.

Thereafter, on August 10, 2023, the Borrower obtained a waiver of such noncompliance and entered into an amendment of the Side-Car Credit Agreement (the “2023 Side-Car Amendment”) under which the Company will not be required to test compliance with the Side-Car Credit Agreement’s financial maintenance covenant until the fiscal quarter ending September 30, 2024. The 2023 Side-Car Amendment provides, among other modifications to the Side-Car Credit Agreement, that: (i) the Company will formally launch, announce and pursue a comprehensive process in an effort to yield one or more offers for a sale of all or substantially all of the assets or businesses of, or direct or indirect equity interests in, the Borrower and its subsidiaries with a purchase price that includes cash proceeds sufficient to pay the obligations under the Side-Car Credit Agreement, and will use its commercially reasonable efforts to promptly close such a transaction; (ii) the interest rate for the 2023 Term Loan will be increased to 16% during the payment-in-kind period ending on February 24, 2025; (iii) a premium

14

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

payment of 5% of the outstanding principal amount of the 2023 Term Loan will be paid in kind by capitalizing such payment to the principal amount of the 2023 Term Loan; (iv) the applicable prepayment premium will be required in connection with any voluntary or mandatory prepayment or repayment of the 2023 Term Loan; and (v) the lenders will have participation rights in certain new debt financings incurred by the Borrower or any of its subsidiaries. Absent such waiver, the 2023 Term Loan Administrative Agent, acting at the direction of the lead lender, and at the requisite lenders request, could have immediately terminated all commitments under the 2023 Term Loan and accelerated the maturity of all principal, interest and other amounts due thereon. Pursuant to the terms of the 2023 Side-Car Amendment, the Borrower will not be required to pursue its cure right.

Under the Credit Suisse Credit Agreement, if the Borrower was unable to obtain such waiver from the lenders under the 2023 Term Loan Agreement, or cure any such noncompliance by September 5, 2023, then the administrative agent under the Credit Suisse Credit Agreement would have been entitled to, and acting at the direction of the requisite lenders, could have, among other things, immediately terminated all commitments under the CS Term Loan and the CS Revolving Line of Credit and accelerated the maturity of all principal, interest and other amounts due thereunder. Under the Senior Notes, if (i) the Borrower was unable to obtain such waiver from the lenders under the 2023 Term Loan Agreement, or cure any such noncompliance by September 5, 2023; (ii) the lender under such facility or under the Credit Suisse Credit Agreement accelerated the maturity of $50 million or more of the amount outstanding thereunder; and (iii) the Borrower failed to pay such amount when due, then the trustee for the Senior Notes or the holders of at least 30% in principal amount of the Senior Notes would have been entitled to immediately accelerate the maturity of the Senior Notes, including all principal, interest and other amounts due thereon.

4.    REVENUE AND ACCOUNTS RECEIVABLE

The Company’s revenue streams for the three and six months ended June 30, 2023 and 2022, respectively, were as follows:

	Three Months Ended June 30,
	2023				2022
(in thousands)	Revenue $		Revenue %		Revenue $		Revenue %
Capitated revenue
Medicare	$	695,612	90.7	%	$	602,613	87.4	%
Other capitated revenue	47,712		6.2	%	52,880		7.6	%
Total capitated revenue	743,324		96.9	%	655,493		95.0	%
Fee-for-service and other revenue
Fee-for-service	4,282		0.6	%	9,701		1.4	%
Pharmacy	15,559		2.0	%	12,759		1.9	%
Other	3,581		0.5	%	11,420		1.7	%
Total fee-for-service and other revenue	23,422		3.1	%	33,880		5.0	%
Total revenue	$	766,746	100.0	%	$	689,373	100.0	%

15

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30,
	2023				2022
(in thousands)	Revenue $		Revenue %		Revenue $		Revenue %
Capitated revenue
Medicare	$	1,489,240	91.2	%	$	1,217,831	87.5	%
Other capitated revenue	95,157		5.8	%	112,013		8.0	%
Total capitated revenue	1,584,397		97.0	%	1,329,844		95.5	%
Fee-for-service and other revenue
Fee-for-service	15,975		1.0	%	19,671		1.4	%
Pharmacy	27,664		1.7	%	24,274		1.7	%
Other	5,619		0.3	%	19,726		1.4	%
Total fee-for-service and other revenue	49,258		3.0	%	63,671		4.5	%
Total revenue	$	1,633,655	100.0	%	$	1,393,515	100.0	%

Accounts Receivable

The Company's accounts receivable balances are summarized for the periods indicated below. The Company’s accounts receivable are presented net of the unpaid service provider costs. A right of offset exists when all of the following conditions are met: 1) each of the two parties owed the other determinable amounts; 2) the reporting party has the right to offset the amount owed with the amount owed to the other party; 3) the reporting party intends to offset; and 4) the right of offset is enforceable by law. The Company believes all of the aforementioned conditions existed as of June 30, 2023 and December 31, 2022.

	As of
(in thousands)	June 30, 2023		December 31, 2022
Accounts receivable	$	459,633	$	388,122
Medicare risk adjustment	24,868		49,586
Unpaid service provider costs	(377,337)		(203,892)
Accounts receivable, net	$	107,164	$	233,816

Concentration of Risk

Three payors represented greater than 10% of our total revenue for the three and six months ended on each of June 30, 2023 and June 30, 2022.

	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Revenues	64.6%	64.7%	66.3%	64.9%

Three payors represented, in aggregate, the following percentages of accounts receivable as of June 30, 2023 and December 31, 2023, respectively.

	As of
	June 30, 2023	December 31, 2022
Accounts receivable, net	36.6%	56.3%

16

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following as of June 30, 2023 and December 31, 2022, respectively:

(in thousands)	June 30, 2023		December 31, 2022
Third party receivables	$	—	$	60,400
Contingent consideration asset	14,500		—
Other	16,950		19,203
Prepaid expenses and other current assets	$	31,450	$	79,603

Third party receivables represent amounts due from MSP Recovery Inc. ("MSP"). MSP provides healthcare claims reimbursement recovery services using data analytics to identify and recover improper payments made by Medicare, Medicaid and commercial health insurers (each a “Health Plan”), and charged to the Company under risk agreements, when the Health Plan is not the primary payor under the Medicare Secondary Payer Act and other state and federal laws. The Company has assigned certain past claims data to MSP, which could have been paid in either cash or equity at MSP's option. On July 7, 2023, the Company received 199,000,001 shares of MSP Class A common stock to settle certain receivables from MSP. As of June 30, 2023, the Company classified the receivables of $62.0 million from MSP in other assets due to the belief that at the balance sheet date the asset is not expected to be realized into cash within the next 12 months.

On August 2, 2023, MSP announced that the SEC initiated an investigation of MSP on August 11, 2022. In addition, MSP announced that it received a subpoena on March 10, 2023 from the U.S. Attorney's Office in the U.S. District Court for the Southern District of Florida. As a result of (i) these recent disclosures by MSP; (ii) MSP's delinquent filing of its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023; and (iii) MSP's not being in compliance with the NASDAQ listing requirements, the Company decided to utilize a third-party valuation specialist to provide a market value analysis of the shares of Class A common stock that MSP issued to the Company on July 7, 2023. As of June 30, 2023, the Company has recognized an allowance for credit losses of $62.0 million.

Contingent consideration asset relates to a 2022 acquisition with various contingent consideration arrangements. The contingent consideration is valued based on the future performance of two acquired payor contracts using Monte-Carlo simulations. As of June 30, 2023, one of the plans was in a deficit resulting in a contingent consideration asset as the seller is required to pay the Company a multiple of the 2023 deficit.

6.    UNPAID SERVICE PROVIDER COSTS

Activity in unpaid service provider costs for the six months ended June 30, 2023 and 2022, respectively, is summarized below:

(in thousands)	2023		2022
Balance as of January 1,	$	318,554	$	129,110
Incurred related to:
Current year	1,270,245		843,427
Prior years	2,317		2,576
	1,272,562		846,003
Paid related to:
Current year	885,119		543,984
Prior years	286,528		120,997
	1,171,647		664,981
Balance as of June 30,	$	419,469	$	310,132

17

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The foregoing reconciliation reflects an increase in our estimate of unpaid service provider costs during the six months ended June 30, 2023 of $2.3 million and an increase in our estimate of unpaid service provider costs during the six months ended June 30, 2022 of $2.6 million driven by higher than expected utilization. $20.9 million and $18.5 million of accounts receivable, net of $42.1 million and $32.7 million of the liabilities for unpaid service provider costs, were included in other current liabilities in the condensed consolidated balance sheet as these plans were in a net deficit position as of June 30, 2023 and June 30, 2022, respectively.

The Company maintains a provider excess loss insurance policy to protect against claim expenses exceeding certain levels that are incurred by the Company on behalf of members. As of both June 30, 2023 and June 30, 2022, the Company's excess loss insurance deductible was $0.2 million and maximum coverage was $2.0 million per member per calendar year. The Company recorded excess loss insurance premiums of $1.4 million and $2.4 million for the three and six months ended June 30, 2023, respectively, and reimbursement of $0.7 million and $1.4 million for the three and six months ended June 30, 2023, respectively. The Company recorded excess loss insurance premiums of $2.5 million and $4.9 million for the three and six months ended June 30, 2022, respectively, and reimbursements of $1.6 million and $3.6 million for the three and six months ended June 30, 2022. The Company recorded these amounts on a net basis in the caption third-party medical costs in the accompanying unaudited condensed consolidated statements of operations.

7.    GOODWILL

Activity impacting the Company's goodwill balance during the six months ended June 30, 2023 is summarized below:

(in thousands)
Goodwill as of December 31, 2022	$	480,375
Other	(331)
Goodwill as of June 30, 2023	$	480,044

We test goodwill for impairment annually on October 1st, or under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be an impairment. In the second quarter of 2023, due to the Company's significant losses, the Company determined there was a triggering event for a goodwill impairment test. With the assistance of a third-party specialist, management performed a quantitative assessment of the Company's fair value using the Market Approach and the Income Approach. We are required to impair goodwill only when our assessment determines the Company’s carrying value exceeds its fair value as we operate as one reporting unit. It was determined that the Company's fair value exceeded the carrying value and that no supplemental impairment was necessary.

8.    PAYOR RELATIONSHIPS AND OTHER INTANGIBLES, NET

As of June 30, 2023, the Company’s total intangibles, net, consisted of the following:

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangibles:
Trade names	$	1,409	$	(1,024)	$	385
Brand names	183,877		(43,612)		140,265
Non-compete agreements	85,461		(37,115)		48,346
Customer relationships	880		(257)		623
Payor relationships	631,186		(79,273)		551,913
Provider relationships	19,842		(9,700)		10,142
Total intangibles, net	$	922,655	$	(170,981)	$	751,674

    

18

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of December 31, 2022, the Company’s total intangibles, net consisted of the following:

(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangibles:
Trade names	$	1,409	$	(945)	$	464
Brand names	183,878		(29,169)		154,709
Non-compete agreements	85,476		(28,341)		57,135
Customer relationships	880		(233)		647
Payor relationships	631,214		(63,510)		567,704
Provider relationships	19,842		(6,738)		13,104
Total intangibles, net	$	922,699	$	(128,936)	$	793,763

The Company recorded amortization expense of $21.0 million and $42.1 million for the three and six months ended June 30, 2023, respectively, and $15.5 million and $30.6 million for the three and six months ended June 30, 2022, respectively.

Expected amortization expense for the Company’s existing amortizable intangibles for the next 5 years, and thereafter, as of June 30, 2023 is as follows:

(in thousands)		Amount
2023 - remaining	$	40,835
2024		60,855
2025		57,166
2026		46,996
2027		40,230
Thereafter		505,592
Total	$	751,674

We periodically assess our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Changes or consolidation of the use of any of our brand names could result in a reduction in their remaining estimated economic lives, which could lead to increased amortization expense.

9.    LEASES

The Company leases offices, operating medical centers, vehicles and medical equipment. Leases consist of finance and operating leases, and have a remaining lease term of 1 year to 15 years. The Company elected the practical expedient, which allows the Company to exclude leases with a lease term less than 12 months from being recorded on the balance sheet. The Company adopted the practical expedient related to the combining of lease and non-lease components, which allows us to account for the lease and non-lease components as a single lease component.

Future minimum lease payments under operating and finance leases as of June 30, 2023 were as follows:

19

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands)	Operating		Finance		Total
2023 - remaining	$	19,121	$	2,075	$	21,196
2024	36,796		3,941		40,737
2025	33,984		3,515		37,499
2026	31,232		2,922		34,154
2027	28,651		801		29,452
Thereafter	99,961		—		99,961
Total minimum lease payments	249,745		13,254		262,999
Less: amount representing interest	(60,815)		(2,512)		(63,327)
Lease liabilities	$	188,930	$	10,742	$	199,672

The Company recorded rent expense of $9.7 million and $19.3 million for the three and six months ended June 30, 2023, respectively, and $8.2 million and $15.4 million for the three and six months ended June 30, 2022, respectively.

20

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10.    OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following as of June 30, 2023 and December 31, 2022, respectively:

(in thousands)	June 30, 2023		December 31, 2022
Service fund liability1	$	20,934	$	16,652
Other	7,076		7,839
Other current liabilities	$	28,010	$	24,491

1 The balance reflected in service fund liability related to service funds in a deficit position and reflects the net amount of medical services incurred but not reported ("IBNR") and accounts receivable. The IBNR and accounts receivable reclassified to other current liabilities was $42.1 million and $21.2 million, respectively, as of June 30, 2023 and $114.7 million and $98.0 million, respectively, as of December 31, 2022.

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CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11.    CONTRACT LIABILITIES

As further explained in Note 15, “Related Party Transactions,” in these unaudited condensed consolidated financial statements, the Company entered into certain agreements with Humana, Inc. ("Humana") under which the Company receives administrative payments in exchange for providing care coordination services at certain clinics licensed to the Company over the term of such agreements. The Company’s contract liabilities balance related to these payments from Humana was $5.1 million and $6.5 million as of June 30, 2023 and December 31, 2022, respectively. The short-term portion was recorded in other current liabilities and the long-term portion was recorded in other liabilities. The Company recognized $0.7 million and $1.4 million in revenue from contract liabilities recorded during the three and six months ended June 30, 2023, respectively, and $0.7 million and $1.3 million in the three and six months ended June 30, 2022, respectively.

A summary of significant changes in the contract liabilities balance during the period is as follows:

(in thousands)		For the three months ended June 30, 2023
Balance at March 31, 2023	$	5,786
Revenues recognized from current period increases		(675)
Balance at June 30, 2023	$	5,111

(in thousands)		For the six months ended June 30, 2023
Balance at December 31, 2022	$	6,461
Revenues recognized from current period increases		(1,350)
Balance at June 30, 2023	$	5,111

Of the June 30, 2023 contract liabilities balance, the Company expects to recognize the following amounts as revenue in the succeeding years:

Years ended December 31,		Amount (in thousands)
2023 - remaining	$	1,349
2024		2,514
2025		1,183
2026		65
Total	$	5,111

12.    DEBT

At June 30, 2023, and December 31, 2022, the Company's current notes payable were as follows:.

Current Notes Payable	As of,
(in thousands)	June 30, 2023		December 31, 2022
2023 Term Loan1	157,380		—
Current portion of CS term loan	6,444		6,444
	163,824		6,444
Less: Debt issuance costs	(54,157)		—
Current notes payable, net of debt issuance costs	$	109,667	$	6,444

1.Includes $7.4 million of Paid-in-Kind ("PIK") interest that was incurred under the 2023 Term Loan through June 30, 2023.

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CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

At June 30, 2023 and December 31, 2022, the Company’s long-term notes payable were as follows:

Long-Term Notes Payable	As of,
(in thousands)	June 30, 2023		December 31, 2022
CS Term Loan	$	628,322	$	631,544
CS Revolving Line of Credit	10,000		84,000
Senior Notes	300,000		300,000
	938,322		1,015,544
Less: Debt issuance costs	(16,090)		(17,738)
Long-term notes payable, net of debt issuance costs	$	922,232	$	997,806

Credit Suisse Credit Agreement

Pursuant to the Credit Suisse Credit Agreement, the Company, through its wholly owned operating subsidiary, Cano Health, LLC (the “Borrower”), has a senior secured term loan (as amended, the “CS Term Loan”) and a revolving credit facility (as amended, the “CS Revolving Line of Credit”). The Obligations under the Credit Suisse Credit Agreement are secured by substantially all of the Borrower’s assets. The Credit Suisse Credit Agreement contains a financial maintenance covenant (which is for the benefit of the lenders under the CS Revolving Line of Credit only), requiring the Borrower to not exceed a total first lien secured net debt to Consolidated Adjusted EBITDA (as defined therein) ratio, which is tested quarterly only if the Borrower has exceeded a certain amount drawn under the CS Revolving Line of Credit, which is approximately 35% of the total commitment under the CS Revolving Line of Credit, or approximately $42 million. As of June 30, 2023, the available balance on the CS Revolving Line of Credit was $110 million, and as of August 10, 2023 such line of credit was fully drawn to ensure that the Company had access to liquidity while it was negotiating the 2023 Side-Car Amendment, discussed under “2023 Term Loan Agreement;” provided, however, having secured the 2023 Side-Car Amendment on August 10, 2023, the Company currently expects to repay a significant portion of such line of credit by the end of September 2023. Accordingly, as of June 30, 2023, the Company was not required to test its compliance with the financial maintenance covenant under the Credit Suisse Credit Agreement. Please see the discussion below regarding the Company’s noncompliance with the financial maintenance covenant under the Side-Car Credit Agreement as of June 30, 2023 and the Company’s receipt of a waiver of such noncompliance on August 10, 2023.

While the Company currently believes that the Borrower will not be required to test the financial maintenance covenant under the Credit Suisse Credit Agreement for the testing period ending September 30, 2023, if it were required to test such financial maintenance covenant and if, at such time, it is not in compliance with the financial maintenance covenant, the Borrower would be required to cure or seek a waiver of such noncompliance from the requisite revolving lenders under the Credit Suisse Credit Agreement by December 6, 2023. Under the Credit Suisse Credit Agreement, the Borrower has a right to cure any such noncompliance by obtaining sufficient equity proceeds, which may be sourced from equity or debt financings by the Company, that would be deemed added to the Borrower’s Consolidated Adjusted EBITDA for purposes of recalculating the financial maintenance covenant when such proceeds are contributed to the Borrower. The cure right may be exercised by the Borrower no more than 2 times in any 4 consecutive testing periods and no more than 5 times during the term of the Credit Suisse Credit Agreement. If the Borrower is unable to obtain a waiver of, or to cure, any such noncompliance, then the administrative agent under the Credit Suisse Credit Agreement would be entitled to, and acting at the direction of the requisite lenders could, among other things, immediately terminate the CS Term Loan and CS Revolving Line of Credit commitments and accelerate the maturity of all principal, interest and other amounts due under such facilities. If such circumstances were to arise, the Company can provide no assurances that the Borrower would be able to obtain such waiver or timely consummate such cure or repay or refinance any accelerated principal, interest and other amounts that may become due, if any.

Under the Side-Car Credit Agreement, if the Borrower becomes required to test the financial maintenance covenant under the Credit Suisse Credit Agreement and if, at such time, the Borrower is not in compliance with such financial maintenance covenant and was unable to obtain a waiver of, or cure, any such noncompliance by December 6, 2023, then the 2023 Term Loan Administrative Agent would be entitled to, and acting at the direction of the requisite lenders, could, among other things, immediately terminate all commitments under the 2023 Term Loan and accelerate the maturity of all principal, interest and other amounts due thereunder. Under the Senior Notes, if (i) the Borrower becomes required to test the financial maintenance covenant

23

CANO HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS