Good afternoon, and welcome to Cano Health second quarter 2022 earnings call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. Hosting today's call are Dr. Marlow Hernandez, Chairman and Chief Executive Officer, and Brian Koppy, Chief Financial Officer. The Cano Health press release, webcast link, and other related materials are available on the investor relations section of Cano Health's website. As a reminder, this call contains forward-looking statements regarding future events and financial performance, including our guidance for the 2022 fiscal year. Investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. We caution you that the forward-looking statements reflect our best judgment as of today, based on factors that are currently known to us, and such statements are subject to risks, uncertainties, and assumptions that could cause actual future events or results to differ materially from those discussed as a result of various factors, including but not limited to risks and uncertainties discussed in our SEC filings. We do not undertake or intend to update any forward-looking statements after this call or as a result of new information. During the call, we will also discuss non-GAAP financial measures. The non-GAAP financial measures we will discuss today are not prepared in accordance with GAAP. A reconciliation of the GAAP and non-GAAP result is provided in today's press release and on the investor relations section of our website. With that, I'll turn the conference over to Dr. Marlow Hernandez, Chairman and CEO of Cano Health. Please go ahead. Thank you and welcome to the call. We appreciate your joining us today. To start, I'd like to recognize the entire Cano Health team for their hard work and dedication to our mission. When you enter a Cano Health center and speak to our patients, you can immediately appreciate just how special our services are because of the people who treat them like family. Our team is dedicated to transforming patient care by delivering superior primary care services while forging lifelong bonds with our members. Cano Health delivered another quarter of strong membership growth and is now caring for over 280,000 members. Patients and providers continue to join Cano Health across the country in large numbers. Due to this strong membership growth, we're now on pace to end the year with 10,000 more members than we included in our most recent guidance for 2022. Year- to- date, we have added nearly 55,000 members, all organic. For context, we ended 2020 and 2021 with approximately 106,000 and 227,000 members, respectively. This accelerated membership growth came with higher utilization than we expected, putting pressure on our consolidated medical cost ratio or MCR, which was 82.6% in the second quarter. This was due to a higher proportion of new members who came in with higher acuity than our historical experience. Third-party medical expense from these new members was higher than expected due to higher cost for hospital admissions and outpatient procedures and branded prescription medications. Importantly, our core utilization management programs are performing well, as demonstrated by stable admissions per thousand across our membership base, stable generic prescription drug dispensing rates, high patient engagement, and industry-leading quality metrics. Moreover, we continue to observe the historical trend of decreasing MCR the longer a member is with Cano Health. Therefore, we expect the MCR for these new patients to decrease over the next 12 months as we diagnose and manage the conditions of these new members. For 2022, we are increasing our estimated MCR range to 78%-79%, up from the previous guidance range of 76%-76.5%. This increase is driven primarily by incremental third-party medical expenses from new Medicare Advantage and Medicaid members, which we estimate at approximately $60 million for the full year. This is partially offset by approximately $40 million in lower provider payments and higher fee-for-service revenue for a net impact to adjusted EBITDA of $20 million for the calendar year. Additionally, while DCE performed well during the quarter, we realized a $6 million unfavorable prior year development, primarily due to higher than anticipated delayed claims for 2021 third party medical expenses. Given periodic benchmark updates, we're decreasing our expected 2022 contribution from DCE by approximately $9 million. The combined impact from these items is expected to reduce our full- year adjusted EBITDA by $15 million. Overall, the combined impact from new member growth and DCE resulted in approximately $35 million reduction to our 2022 adjusted EBITDA guidance. Nevertheless, we view these factors as investments which affect 2022 only, and we expect proportionally better revenue per member per month in earnings in 2023 as we diagnose and manage the health of these members. We believe the clinical capacity we have built, the natural maturation of the new member cohort, and the accelerated growth resulting position us very well for the near and long term. The momentum of our business can be best observed by looking at our care margin. The care margin is the gross profit we generate from operations, and it's defined as our total revenue minus our third-party medical expenses and our direct patient expenses. Year-to-date, our care margin is $203 million, which is already more than what we generated in the full- year, 2021, and this is despite the new patient and DCE headwinds I just discussed. Turning now to new positions we created within our executive team, it has been over a year since we went public, and we have grown significantly while expanding our operational infrastructure and management team. To support future growth and ensure operational excellence in new and existing markets, we announced Bob Camerlinck as Chief Operating Officer. Bob previously served as our President of Health Partners Medical Centers and Affiliates. He is now overseeing our daily business operations and will work closely with the rest of our executive team to implement Cano Health strategy and drive sustained performance. We also announced that Amy Charley has joined the company as Chief Administrative Officer. Amy comes to Cano Health from Alteon Health, where she served as Chief Legal and Administrative Officer. She is responsible for the management of administrative functions and oversees strategy development, organization and governance, and change management. Both leaders bring an impressive record of building comprehensive business solutions, and we believe they will be invaluable in helping us to achieve the highest operational standards and strengthen the execution of Cano Health unique national care platform. This is an exciting time at Cano Health. Our total membership grew 80% from the prior year. What is more encouraging is that we continue to see strong year-over-year and sequential organic growth, particularly in our Medicare population. We ended the quarter with approximately 164,000 total capitated Medicare patients, which included over 124,000 Medicare Advantage members and over 40,000 Medicare DCE members. Further, we continue to expect the total Medicare membership to represent about 60% of total members throughout 2022 due to continued growth in Medicare Advantage. During the quarter, Cano Health realized revenue growth of 101% year-over-year, which reflects the ongoing execution of our build, buy, and manage growth strategy. We are encouraged by the growth we have seen so far and are raising our membership and revenue guidance for 2022. Brian will provide more detail on our second quarter performance and updated 2022 guidance. I'm very proud of our expanding national care platform. We ended the quarter with 143 medical centers, up from 137 at the end of Q1, and expect to achieve our guidance of 184-190 medical centers for the full- year. As we look forward, we expect to end the year with over 300,000 members, and by January 1st, 2023, we expect to have over 340,000 members, which includes an incremental 40,000 Medicare DCE members. Cano Health National Care Platform continues to improve access, quality, and wellness in the communities we serve. The role we play in the U.S. Healthcare system positions us well to transform and redefine how America delivers primary care, which is critical for all Americans, and in particular for those in underserved communities. We will continue to capitalize on our momentum, our leading market position, and the societal tailwinds that underpin why our model is in such demand. Now I'll turn the call over to our CFO, Brian Koppy, who will walk you through our financial performance and guidance. Thank you, Marlow, and thanks everyone for joining us today. As Marlow said earlier, total membership increased 80% year-over-year to nearly 282,000 members in the second quarter. This represents an increase of more than 125,000 members from the second quarter of 2021. In the second quarter, 44% of our members were Medicare Advantage, 14% were Medicare DCE, 25% were Medicaid, and 17% were ACA. Total revenue for the quarter was approximately $689 million, up from approximately $344 million a year ago, but down slightly from $704 million in the first quarter. Total capitated revenue was approximately $655 million in the quarter, down 3% sequentially from the first quarter. This slight decline was driven by a reduction in Medicare Advantage and Medicaid capitated revenue per member per month or PMPMs. The sequential Medicare Advantage PMPM decline was primarily driven by a higher percentage of new members, which, as Marlow mentioned, generally have more undiagnosed conditions. The sequential decline in Medicaid PMPM was primarily driven by certain contract conversions to non-risk. We expect the Medicaid PMPM to be approximately $250 PMPM for the full year. Our Medicare DCE PMPM was essentially in line with the prior quarter. CMS regularly updates its evaluation of premium benchmarks, and we have factored that into the results we have reported and our estimates for the remainder of the year. Additional information about our membership mix and our PMPM by line of business is available in our press release and updated financial supplement slides posted on our website. Our MCR in the quarter was 82.6% compared to 88.6% a year ago, primarily driven by our effective diagnosis and management of our members. Excluding DCE, our MCR was approximately 80.6%. This was lower than the second quarter of 2021 MCR, excluding DCE, of approximately 87.6%. DCE performed above expectations in the first half of the year. However, given the early stage of the program, we are being more cautious in the second half of the year and are projecting a full- year MCR DCE of approximately 93%, slightly above our prior expectations. As we have said before, DCE is a profitable business today and positively contributes to our results. There is incredible momentum, and we believe there is an attractive value creation opportunity in this program. Furthermore, it is capital light and provides a strong return on investment. As Marlow mentioned, for 2022, we expect a total MCR in the range of 78%-79% in 2022. This reflects our continued expectation that the total MCR in the second half will be significantly lower than the total MCR in the first half. This is primarily driven by normal seasonality in medical costs and cost recoveries. It is important to note that the data is clear. Our Medicare Advantage and Medicaid admissions per thousand, average annual visits per staff model Medicare Advantage member, general prescription drug dispensing rates and prices, quality ratings, and other metrics are performing very well. The challenge in the quarter was higher costs related to the proportion of new higher acuity members. We have demonstrated that we can reduce MCR over time from primary care engagement and population health management, improving member health and satisfaction while reducing the need for avoidable and costly care. As a result, we believe these new members will contribute positively to our earnings momentum. We expect to see improving MCRs for these new members as a function of time within the Cano Health model. Direct patient expense was 7.6% of revenue in the second quarter. As in the first quarter, this metric was lower than historical levels due to the growth in our DCE revenue, which has lower direct patient expenses. SG&A in the quarter was 15.4% of revenue, or 12.8% excluding stock-based compensation. Adjusted EBITDA in the quarter of $29 million was lower than our expectations, but up from a loss of $15.2 million a year ago, resulting in an adjusted EBITDA margin of 4.3%. As mentioned, the second quarter results include $6 million of unfavorable prior year development related to the DCE line of business. The full- year adjusted EBITDA is expected to be approximately $200 million, down from the prior guidance range of $230 million-$240 million. The lower estimate is primarily driven by $20 million of net impact from higher third-party medical expenses, partially offset by lower provider payments and higher fee-for-service revenue, $6 million of unfavorable prior year development from DCE, and $9 million related to our estimated higher MCR for DCE. Now let me turn to our cash flow and liquidity. We ended the second quarter with about $48 million in cash, and our $120 million revolving line of credit was undrawn. Total debt at the end of the second quarter was $938 million and includes current and long-term debt, capital leases, and payments due to sellers. Our total net debt was $890 million, defined as total debt less cash. During the first six months of 2022, cash used in operating activities was $82 million. This was largely related to working capital requirements. As of June 30th, approximately $38 million in Medicare Risk adjustment payments have been posted to our accounts. We continue to expect the MRA to be posted this year to be approximately $130 million. The actual cash to our balance sheet from this MRA was partially reduced by the higher third-party medical expenses, which we discussed a few minutes ago. Given the higher than expected third-party medical expenses from new Medicare Advantage and Medicaid members and the lower performance expectations for DCE, we now expect cash used in operating activities to be in the range of -$80 million to -$90 million. We continue to expect to achieve our 2022 guidance without the need for additional financing. Now let me summarize our updated 2022 guidance for full year 2022. We expect membership for 2022 to be in the range of 300,000- 305,000, an increase from the prior guidance range of 290,000- 295,000. Total revenue is expected in the range of $2.85 billion-$2.9 billion, an increase from the prior range of $2.8 billion-$2.9 billion. We expect our MCR will be in the range of 78%-79%, up from the prior range of 76%-76.5%. Our adjusted EBITDA is now expected to be approximately $200 million, a decrease from the prior range of $230 million-$240 million. Medical centers are expected to remain in the range of 184-189, no change from prior guidance. Additional guidance for 2022 includes interest expense of approximately $60 million, de novo loss add back of approximately $70 million, stock-based compensation expense of approximately $65 million, and capital expenditures of roughly $40 million-$60 million. In conclusion, Cano Health continues to build momentum and drive long-term value creation. With that, I will ask the operator to open the call to your questions. Thank you, sir. Once again, that is star one to ask a question. Up first is Gary Taylor, Cowen. Okay, thanks. Good evening. I guess I had two questions I wanted to ask, but I just wanted to start with the higher costs on new members and just what additional color you could provide or such as are those primarily all class of 2022 members? Is that newest centers or newest states or newest affiliates? Is there any other pattern that you're observing in that higher cost cohort? Yeah. Let me take that, Gary, and thanks for the question. We are seeing that across the board in terms of new member. That quantum of new members is quite significant. Mentioned in my remarks that we've grown 55,000 members since December 31st. Take just a little bit back to the last three quarters, and we've grown 70,000 net new members. Those new members for this year, and take another quarter before, are coming at MCRs that are higher than our historical estimates. What we believe is a reason which there could be a component of regional impact in Florida is likely related to COVID-associated delays in care, as patients new to Cano didn't have as many encounters in 2020 or 2021. This is particularly true for underserved communities. As you know, we predominantly serve underserved communities. It's well documented that they have not been getting the care they needed, and this was aggravated over the past two years. In some cases, their conditions have worsened due to this prior lack of care, and these new members are driving higher costs. As I mentioned in my remarks, we are seeing savings in the prices of branded prescription medications as part of the many things that we do once a patient is established in our platform. We control better their conditions many times with equivalent generics, which are more affordable to them. We continue to observe the historical trend of improving MCR or medical cost ratio over time with the company. We improve outcomes and ultimately are rewarded for that. We're caring for an incredible amount of new members, and they are coming in with higher than historical MCR. We're also seeing already early evidence that those costs are coming down more consistent with historical as it relates to new members moving forward. Got it. Sounds like pretty broad. I'll work with that. My second question, and then I'll let you go, would just be to Brian, just thinking about the EBITDA cadence in the back half. Maybe if you could some help. $200 million EBITDA for the year. We did $68 million in the first half. That's $136 million in the back half, or $132 million or so. Does that look pretty evenly split at this point between 3Q, 4Q? Do you think 4Q with MCR coming down should be the highest? How should we think about modeling the seasonality? Yeah. I think the seasonality is not gonna change, and we certainly expect that seasonal trend to favor more the fourth quarter. I would expect, you know, fourth quarter to be higher than the third quarter. We've talked a lot about the seasonality and just the overall utilization that happens in the fourth quarter, as well as certain cost recoveries around stop loss, et cetera, that can weigh more heavily towards the fourth quarter in terms of improving the results in that quarter. That's kinda how I would think of it as you think the back half of the year. Okay. Thanks. Thanks, Gary. Next up from Credit Suisse is A.J. Rice. Thanks. Hi, everybody. Just thinking through this issue with the higher cost newer members. I know last quarter you talked about how stop loss helps you out in the fourth quarter, and I don't know specifically for sure where your stop loss is targeted. Is that part of the reason why you're optimistic about later in the year, or is that not a relevant factor here? Yeah. No. I think you hit it exactly right. That's one of the key factors as we look at the seasonality for the back half of the year, as some of these higher acute members will hit the stop loss and will help the overall performance from a trend perspective for sure. Then obviously, from an operational, clinical, and care management, we start, you know, you have more time to engage with those members, changing their behavior and ensuring that they start to come into the clinic, start to ensure they take their medication, start to ensure they're doing the right thing to take care of their health and manage any of the chronic conditions that they may have and follow the direction of the primary care doctor, which is the most critical thing and why it's important for that member engagement to take hold. As Marlow mentioned. You know, all of our operating metrics are performing well. We continue to believe that will continue to engage with that, our members and see that performance occur throughout the back half of the year as it normally would have. When you step back and look at what you've observed here and these members coming to you, I can't think through it on the fly here and come up with anything. Is there any reason to think that this is sort of a pool of new members that have an adverse selection element to it that have come to you for some reason? Any way to talk through that about how you think you ended up with that? Is that just the luck of the draw in any given period of time when you're growing rapidly? Yeah. I don't believe we've been adversely selected in any systematic way. We are serving a tremendous number of new patients, and as one of the very few providers across the markets and certainly in the communities we serve that has a proven track record for improving outcomes, we're on high demand. What we have shown is that we're able to manage patients with higher acuity and chronic conditions in a way that you know results in them having longer, healthier lives. When you're talking about this significant number of members and not having the benefit of the funding catching up or of having platform acquisitions which establish members, you know, we're seeing those higher cost pressure the rest of the business. Come the next six to 12 months, with the diagnoses and management of these members, we will see a nice positive momentum to our earnings. Okay. Maybe last question, if I can slip it in. Obviously, I appreciate the comments about your certainly having sufficient funding to get through this year with your growth objectives. You are growing quite rapidly and do have, you know, a significant growth profile in front of you. We've seen, not a close peer, but another peer in the broad space, choose to align with Amazon. I guess it gives them deep pockets to pursue their growth objectives. How do you think about the next few years of all the markets we're in, the potential for capital needs and how you might satisfy that? Do you have any updated thoughts on that? Yeah, I'll start, and then Marlow can jump in. You know, I think the first thing that's really important to note is, you know, to some extent, this is a good problem to have. We're growing, we're growing fast. We're engaging with members that need care. Really the way we view this is a phenomenon of our accelerated growth, our attractiveness in the marketplace, and members looking to Cano Health to receive better high-quality care. The key here for us is to engage with those members, diagnose those members, and then manage those conditions. As we do that, we see the incremental revenue and earnings potential into 2023. From that perspective, I kind of view this as short-term 2022 impact and nature. As we turn the corner to 2023, all the benefits of our engagement should fully play out into our financial results. I agree with Brian. I would just add that to your question, we see an acceleration of consolidation in our space, given how critical it is for the present and future of healthcare. At this point, we're focused on growing our business, this tremendous demand that we're serving, but as always, remain open to considering all strategic alternatives that allow us to accelerate value creation. All right. Thanks a lot. Your next question comes from Adam Ron, Bank of America. Hey, thanks for the question. I was just wondering if you could talk about the cash in a little more detail. It sounds like the cash burn this year with the cash flow from operations and CapEx will be kinda similar to the cash and revolver that you have. But then it sounds like there's the boost from the MRA payment. Generally, I think about the first quarter of 2023 as like a cash drag from a working capital perspective. Just curious if you could walk through how you're thinking about cash. I think you filed a mixed shelf offering in the quarter, and so curious if that's going to need to be tapped to fund, you know, growth. Yeah. I would say the shelf was not related. It was just procedural. We hit our one-year anniversary mark, so that's really the first time you could file for that. You know, that's more going public corporate activities more than anything. You know, as far as the cash, you know, clearly, you know, the results of the quarter have lowered our cash position and projections. You know, I think we have several options and believe we have the flexibility that we need in order to meet our financial commitments. You know, we'll continue to manage through very diligently our working capital and always are working with the business leaders and the operational leaders. to Make sure we're controlling our spend through our de novos, overall SG&A, which can certainly enhance our overall cash position. Then obviously, we have our very strong clinical and care management teams that are continually working to improve the overall financial performance and ensure that engagement. You know, that gives us opportunities to enhance the overall financial performance, which then will enhance the cash projections as we have today. Right now, you know, we'll manage through what we have and certainly think we're positioned for enhanced performance as we turn the corner into 2023. In terms of the levers, is there anything in the guidance assuming further M&A from here, or is everything in terms of the center growth, de novo? Yeah, no, there's no additional, I'll call it M&A, built into our guidance. It's really finishing up our de novo builds that we've started and wrapping those up. Once again, those de novos are a critical component of our continued growth. They open up capacity, they provide additional opportunities within our markets for scale and density, and then really gives us that ramp as we enter 2023, and particularly during the important annual enrollment period as well. A lot of those de novos will start coming online in the next few months here. Okay. Got it. Thanks. Yep. Thank you. Up next is Andrew Mok, UBS. Great. First, wanted to follow up on Gary's question. It sounds like you're at least partially attributing higher costs to regional differences outside of South Florida. Are you able to point to specific geographies, and have you reflected on why there might be higher acuity in those regions beyond COVID, whether it's networks, maturity, or recruitment? Yeah. Well, as you know, most of our business today is in Florida. We're growing quite rapidly outside of Florida, but most of our business today is in Florida, and we are then seeing the majority of that new patient impact in totality from the growth, the continued strong growth in Florida. What I can tell you there is, we are seeing higher drug branded spend from new members, as well as higher cost admissions, outpatient procedures. That is above our historical averages. Just given the quantity of new members in relation to the base as we described, the proportion of new acuity members not having that care over the last couple of years, as it perhaps has been in the past, is what you know we can at this point talk about. We may have overshot our conservatism in this first half and rolling some of that forward into second half dynamics. As I said, we have early data of perhaps some more normalization of that MCR among new patients in the last couple of months. We need more complete data before we can definitively, you know, say how it will perform. Thus, you know, taking all of the measures that Brian you know described to manage the good problem of having very high demand and very high growth. Got it. Of those drivers of higher costs you just mentioned, hospitalizations, outpatient procedures, and branded drugs, one, can you give us the relative weighting of each in terms of what's driving medical costs higher? Two, are there specific branded drugs you can point to driving the increase? Thanks. I can tell you that branded medication costs are a significant factor. Also, the per admission cost in general for new members in particular has been above and beyond historicals. While you know, we can definitely as we get more completed data get back to you on more specifics. It does accumulated issues from years of not getting the care. Then, we now are making sure they're catching up to their preventive screenings. We're making sure that we're controlling chronic conditions. We're making sure that we get those undiagnosed conditions treated. We're doing so at a very significant scale, which I put in perspective during Mark's remarks and during Gary's question, with respect to the MCR. Let me give you just another our initial membership guidance for 2022, when we set our outlook was approximately 277,000 members. We already care for more than that number today, and we've done it entirely organic within six months. When you look at all lines of business, Medicare, non-Medicare, you know, Medicare alone, since December 31st, growing 38,000 members. Given just the natural, you know, dynamics that we have served historically of those patients plugging into the platform and getting their care, you know, managed, we've got to work through that. As I've said, you know, very optimistic as to January 1 next year when we will add at least another 40,000 Medicare members for 340 + or so that we'll be caring for. At that point, we'll have funding catch up as well as the required time to manage the conditions of our patients and lower costs as we have repeatedly published. Okay. If I could sneak in just one more, maybe one for Brian. You mentioned that DCE is profitable today, but I think you said there's a 90% MLR in that population, and your G&A load is north of 10%. I'm just trying to square those comments. Is the G&A for those members less than your MA members? For sure. Okay. It's much less. There's very little cost, and that's why, you know, I mentioned very capital light business. You know, I would say, you know, on a year-to-date basis, that MLR is gonna be, you know, just around 90%. There's a little bit of SG&A. You know, I think overall, as we said, you know, full- year of approximately 93%. I think the important piece to remember is for the DCE business, you know, it is just a slight number of members that are served through our staff model. Most are served through our affiliates. You know, that's why you see the very low cost of that member within our operations. It provides a really strong revenue opportunity for us. If you can continue to manage it, you know, with the low SG&A, you can get some really nice drop through to earnings. That's, you know, like I said, we've seen a good performance year- to- date. We're being very cautious given a lot of the noise in the marketplace and et cetera around CMS and its benchmarks. We didn't wanna get ahead of the game. We wanted to watch this program play out. As you know, it's new. It's just over a year. We think we're doing the right thing in terms of taking a slow, methodical, prudent approach to this program, yet remain very bullish. As Marlow mentioned, we're gonna have an additional 40,000 or so DCE members come in on 1/1, and you know, and we think they provide a nice launching point for us to continue to grow our overall operations and expand that scale and density in the markets that we serve. Great. Thanks for the color. Next up is Josh Raskin, Nephron Research. Hi, thanks, and apologize for beating this dead horse. These new lives, I'm just curious, where are they coming from? Are these individuals that were new to MA? You know, are these health plan assignment type of lives? Are these new providers to Cano that are bringing them in? Then why isn't there a risk adjustment offset, you know, sort of an accrual of higher revenues if there's, you know, higher chronic conditions with, or if these are just procedure costs even? Right. Josh, let me take the second part first. In the past, we would accrue the acuity at the time that we're providing service. Now, we're just booking the cash generated, which is informed by the care provided the previous year. These new patients were not cared for by us, and thus, there is a lag as these patients now get their chronic conditions documented, and for that matter, acute and others, that have a particular risk score that then would inform the funding for the subsequent year. In that subsequent year is where we would have that funding line up with the acute. The first part of the question is, where are we getting the new patients from? Well, overwhelmingly, 90%+ selecting us, whether it is at our medical centers, our new medical centers, or providers selecting us, getting them now contracts being on our platform and then selecting those affiliate providers as part of the kind of platform. We get a negligible number of assignments. The only assignments, quote-unquote, would be whatever a broker or community sales, you know, agent, you know, puts under us based on the patient asking for a Cano Health fee. We generally do not do bulk assignments. We've done that very rarely in the past, not that we are not open to working with our payer partners, but we get the overwhelming majority of our patients through organic growth, selecting our providers. As you know, just to round out the question, you know, where it's predominantly at the new centers and at the tuck-in centers. Brian talked about the investments we've made in the de novos and tuck-ins to expand that clinical capacity. We're getting it there. That also offload some of our other centers, and so we get new patients there as well. You know, we are seeing most of that in Florida, given that's where most of our medical centers and affiliates are. Hope I answered your question. Yeah. That's helpful. Yeah. Okay, sorry, Brian, go ahead. No, I was gonna say, Josh, I just add in. We continue to see that our new members are coming through word of mouth. You know, what that means is the current existing patients are referring their friends and family, and they know the type of care they receive in our centers, and they want their friends and neighbors, et cetera, to be part of that, particularly those that desperately need the care. You know, that's kind of where. There's no adverse selection. It's really just the desire for what, you know, we call five-star quality care in some of these underserved communities. That's really the key generator of the new membership we're seeing across all of our centers. Just on the centers, you know, you've opened 13 in the first half, and it was, you know, six centers this quarter, seven last quarter, and you've got guidance for another, I think 41-46 or so in the second half. Maybe talk a little about the visibility into that. I assume it's gotta be pretty high by August. Is there any sense of slowing down center openings in light of, you know, the cost trends for the newest members? Yeah, no. You're right. We are moving rapidly towards opening a number of these centers. I think you're hitting on a good point. We're continually working with our field teams to see where we can control costs, what are some of the options going. You know, we don't wanna stifle the growth engine. I think it's important to keep that momentum going. We can continue to, you know, finance these as we move through the year. As these members come on, particularly during the annual enrollment period, that's really gonna give us that boost in the fourth quarter and into 2023. You know, that's a critical leg to our growth strategy. It's not just new centers. These really are an important part of the scale and density. As you open these up, your SG&A broader gets leverage. You open up capacity and centers that may be nearing full capacity, which then allows us to continue to have that full opportunity to engage and meet the needs of these new patients and the existing patients. I'm sorry, one last clarification. I heard the, you know, the comment, no need for external capital through the end of the year. Is that, you know? Was that comment just through the end of 2022? Is there any contemplation of, you know, the growth that you guys are expecting for 2023? Are you saying you don't need capital for the next year, foreseeable future? Was that just, we're good through the end of 2022? Yeah, I mean, it was clearly a 2022 comment, but, you know, think about, add in the other commentary around how the expectation is for the results of the business that we're growing this year, should start to generate additional revenue, additional earnings into 2023. You know, I'll say, you know, we should be able to continue to generate the organic financing needs that we need for further expansion and further growth as we go into 2023. Ties into what Marlow was mentioning. You know, there is this delayed revenue that comes in based on the way we see the patients and the accounting for that. As we plan towards the future, we certainly believe that what we're seeing today will help us hit our growth targets for 2023. Perfect. Thanks. Thank you. Your next question is from Jason Cassorla, Citi. Great. Thanks for taking my questions. Just, I hate to beat a dead horse on this as well, but just on the high acuity, would you be able to completely offset that $20 million of EBITDA impact next year through risk adjustment, or are there other considerations that we should be mindful of as we think of 2023 that wouldn't allow you to completely offset there? Just as a quick follow-up, I guess you continue to target pretty hefty membership growth, but that $20 million impact compares to the $29 million of EBITDA in the quarter. I guess I'm just wondering, are there ways to help offset the possibility of this type of impact occurring in the future? What I would say is that our expectation with both funding catching up and management of medical costs that it would more than offset for the near-term pressure we're getting on our base business as a result of these new patients. There is a significant ROI, and that's effectively what our business model is and how we're providing so much value to all stakeholders because we are rewarded for improving the health of our patients. Well, Brian, do you wanna add any further color? Yeah, no, I think that it's just this simple, we continue to view, yes, you'll pick up the additional revenue, but as our model's shown, we also leverage down and improve the cost of that care. You can go back to some of the published data that we have is we certainly see the management of the care gives us that leverage to improve the financial performance over time. You know, I think we can certainly more than make up the headwinds we're seeing this year as we move into 2023. Got it. Okay. Thanks for that color. Maybe just going back to your commentary on cash generation, apologies if I missed it, but does, you know, your cash generation year- to- date change the expectations you've given like given previously on reaching free cash flow positive for 2023 at this time? Thanks. Yeah. Like I said, clearly our expectations for cash this year is changing. You know, I would say how I'm thinking about free cash flow in 2023, I think given the change in dynamics at this time, it's a little too early to update any projections for 2023. You know, we're gonna continue to focus on managing overall working capital, et cetera, as I talked about. You know, it's high focus of the organization, but we also don't want to let off the accelerator for the growth because it is a investment that will pay strong dividends in the years ahead. Got it. Okay, thanks. Parker Snure, Raymond James is up next. Hey, how's it going? Thanks for taking the question. Yeah, this is Parker on for John Ransom. Some of your peers have mentioned a 7.5% retroactive adjustment to DCE revenue. I was wondering if you guys could quantify the impact there. Just to be clear, that wasn't the PYD that you mentioned. Was that factored into your full year guidance, and how do you expect that to continue to affect you in the back half of the year? Let me take that. We've always taken a more conservative approach to DCE than most of our peers. We don't think margins are going to be equivalent to Medicare Advantage, at least not in the near term. Thus, we continue to take a prudent view, which is reflective of our numbers and trends. We are seeing less contribution than anticipated from these new members. As I explained, we expect this to be temporary in nature due to care management, and to a lesser extent for the DCE program documentation of acuity. Yeah, I'll just add, you know, we've factored in a number of these, I'll call it population specific variables into the DCE program, as you know, in Q1, et cetera. You know, we factor that into our forecast. You know, we feel good about our projections for the business. We have a great management team running this business. They have significant momentum at their back, and has given us that, the long-term value opportunities. Just, you know, to reiterate or put a finer point on it, you know, it is a very capital light business that generates strong revenues and provides us a nice drop through of earnings as that business will continue to improve. We remain very bullish on it. Okay. Just one quick follow-up. The operating cash flow guidance of -$90 million to -$80 million, I believe before you guys were saying cash flow positive or cash flow from operations positive, but your EBITDA guidance only moves lower by $35 million. So that's a, you know, maybe a $50 million delta in there. What exactly in your working capital assumptions is changing that's driving that difference? Yeah, I'd have to go through your math a little bit. You know, I would say just the cash from operations, a lot of that's just the working capital. A lot of that is the MRA that, you know, is being offset by these, higher third party medical expenses that we've been discussing. You know, and I think, you know, all of that, it's a, it's a number of factors, that are playing through to the cash. But generally, you know, we feel good about how, we can manage through, the next couple quarters here and, you know, continue to be diligent in our, focus on enhancing the operations of the organization to strengthen our cash position for sure. All right, great. Thanks. Next up is Justin Lake, Wolfe Research. Thanks. A few questions here. First, just starting on the membership side. You've mentioned the growth in DCE members, and I'm just curious, you know, how many of those are new patients, I should say, to your business in 2022 versus existing patients that were there on a fee for service basis that you've converted over? The overwhelming majority, Justin, are new to us. Maybe there's a couple thousand or so that are being served at our center, 5,000 or so perhaps out of 40,000 that already have been in the kind of model. The overwhelming majority would be new. I guess I find that a little bit unusual just because you're growing Medicare Advantage this year- to- date, you know, a few thousand for, you know, 3,000-5,000 members by my math, and you're saying you're growing DCE by 35,000. Right when the split there. Yeah, that was all January 1. Keep in mind, the DCE. I'm sorry to interrupt. The DCE comes in January 1, so think about you get that one time period where you can enhance your membership for January 1, and then you get another one the next January 1. That's what Marlow was mentioning earlier, is that additional 40,000 is coming in on January 1 of 2023. You know, that's what our DCE management team's working on, is finding those providers that are willing to work with us, willing to be part of the organization, willing to engage and establish and continue to manage through high-quality care. Those are the types of providers that we're very selective in seeking out. You know, all of that factor into the growth within the DCE program. Justin, just for further clarity, we mentioned in the first quarter call that we would see conversions into Medicare Advantage during the year. Now you're at somewhere in the 6,000 net new MA patients at this quarter. We see that continuing to grow quite significantly. As I mentioned in my remarks, we continue to expect around 60% of our membership to be Medicare. As you know, the current DCE lives will slowly decrease, and then they'll now increase by 40,000 on the number that we end the year. The growth in Medicare will come exclusively from Medicare Advantage for the balance of the year, as it did for this quarter, for example. Doing the math, you know, at around 60% of the 300,000, almost exclusive Medicare Advantage. Then on top of that, you're gonna add another 40,000 Medicare DCE lives, so that January 1 we're at least 340,000 members. That's how much growth in DCE. That does not count additional growth during the AEP period, for example. At this point, we're not giving guidance on that. As we get closer, we'll be more specific. Okay. On the ACA side, you know, there's been a pretty good ramp over the last few quarters on ACA membership. Is that in-center, or is that coming from these physician relationships that you're driving? What kind of margin do we expect to get on an ACA member? I think, you know, previously you'd said that's kind of a low single-digit margin business. Why the focus on growth there? Yeah, listen, its low single digits, and it's in our centers. We're also seeing significant growth in Medicaid patients, predominantly in our centers. It goes to the kind of ethos of we don't turn patients away. We're able to manage the conditions of all of our value-based members. They're voting with their feet. They're telling their friends and family. We have incredibly strong organic growth rates, and a pipeline for our Medicare members. We will continue to work hard to serve you know the population and create that clinical capacity, while making the necessary adjustments as we work through significantly higher than anticipated growth. Got it. Thanks for that. Then on the de novos, I think you've opened, you know, low teens year- to- date, but you've taken up the losses there from I think $57 million-$70 million. What's driving the increase in losses given that, you know, so much of this growth seems back-end loaded? I would think the losses would be going down, not up. Yeah, I would say that I think the losses are still the same what we're projecting. I think the cost per center is going up. You know, as you remember, we're doing roughly $40 million or so de novos this year. So certainly, the cost per center is going up a little bit, and we talked about that as part of our, you know, our discussions and previously is cost delays in timing, et cetera, is pushing those costs a little bit higher than we anticipated initially. You know, part of, I think we've done what $35 million of de novo add backs year- to- date. We project another $35 million for the back half to get to the $70 million. So the $70 million still in line with what we were thinking initially. Okay, great. Just last question. You know, everyone focused on the cash side. Brian, maybe you could just give us an end of year, you know. Given your guidance, where do you expect to end the year on cash and, you know, how much drawn down on the revolver? Thanks. Yeah. Thank you. It's as I mentioned, you know, we're managing through it. You know, we're not gonna put out a projection on any cash balance. We certainly don't need additional financing or additional capital to finish the year. You know, as I said right now, I don't think we have any intention on drawing down the revolver. It's nice to have if we need it. You know, right now we're gonna continue to diligently manage our working capital to meet the needs of the business for this year. You know, as we move towards the back half of the year, we'll give some additional color on how we're viewing that 2023. All right. Thanks. We'll go back to Gary Taylor, Cowen. Hi. Thanks. Just a couple of quick follow-ups. One, I just wanna make sure I got this down right. Brian, I'd initially written down, I thought you said you were assuming full year DCE MLR 99%, but then later I wrote down 93%. So I just wanna make sure I do have your right DCE assumption for the year. Nope, you got it right. Yeah. We said roughly approximately 93% for the full year for DCE, which if you remember, is maybe a slight uptick to what we said what we're thinking initially. That's kind of what we mentioned around the pressure we're seeing or at least I'll call it the projections that we're putting into the outlook would push that full year DCE MCR up to around 93%. Okay. Just my last one was just going back to the DCE retro trends adjustment that, you know, went out to the entire industry. The $6 million that you called out this quarter, was that the impact on your prior revenue accruals, which isn't really apparent because the per member per month in DCE looked pretty stable sequentially? Or was that actually negative development in the traditional sense where what you actually wanted to accrue for medical expense for that population you needed to boost? Yeah, that was primarily the. I'll call it the. I like your word, sense of PYD. You know, I would say we've also, you know, we factored in some of those variables around the benchmarks previously. Once again, you know, we're gonna continue to watch it. That's, I don't wanna say it too much, but we are being prudent on this and cautious. You're right. We certainly saw PYD and the majority of that in the traditional sense within that business which, you know, for me, I'm looking at that. I wanna make sure, you know, these completion factors are a little bit longer than I was initially anticipating for the reserve setting. I wanna make sure we're being smart as we go through the rest of this year until we see some more experience on this membership base, particularly as we saw a large ramp up on Q1 that we just were talking about. See how that plays out. Also keep a close eye on how CMS is developing this program. You know, it is a new program, and you know, I've seen a lot of government programs around the healthcare sector and, you know, they'll make tweaks as they go as well. We gotta be smart about that. Thanks. That does conclude our question and answer session. I'll hand things back to our speakers for any additional or closing remarks. Nothing on our end. Thank you very much for joining us, and I appreciate everyone. Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.