Cano Health receives NYSE notice of non-compliance with MCC

Cano Health, Inc. announced that it was notified by NYSE Regulation Inc. that it is not in compliance with Section 802.01B of the NYSE Listed Company Manual because the Company’s total market capitalization has been less than $50 million over a 30 trading-day period and its stockholders’ equity is less than $50 million.

Pursuant to the Listing Rule, the Company has 10 business days from receipt of the Notice to send a letter to the NYSE confirming receipt of the Notice and to indicate whether it intends to cure the deficiencies. If the Company determines to cure such deficiencies, the Company would then submit a business plan (the “Plan”) within 45 days of receipt of the Notice that demonstrates that the Company will regain compliance with the Listing Rule within 18 months of receipt of the Notice. Upon receipt of the Plan, the NYSE would have up to 45 days to review and determine whether the Company has made a reasonable demonstration of its ability to come into conformity with the relevant standards within the cure period. The NYSE may either accept the Plan, at which time the Company would be subject to ongoing quarterly monitoring for compliance with the Plan, or the NYSE may not accept the Plan and the Company would be subject to suspension and delisting proceedings. Under the NYSE rules, during the 18-month cure period, the Company’s Class A common stock will remain eligible for continued listing and trading on the NYSE, subject to the Company’s compliance with other continued listing requirements.

The current noncompliance with the NYSE Listing Rule does not affect the Company’s ongoing business operations or its U.S. Securities and Exchange Commission (“SEC”) reporting requirements, nor does it trigger any violation of its material debt or other obligations.

As previously disclosed by the Company, including in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC on November 13, 2023, the Company has shifted its strategic direction to focus on executing its Transformation Plan that is designed to: (i) improve the Company’s Medical Cost Ratio (“MCR”); (ii) reduce its direct patient expense (“DPE”) and selling, general & administrative (“SG&A”) expenses; (iii) improve the Company’s gross profit and Adjusted EBITDA; and (iv) maximize the Company’s productivity, cash flow and liquidity. The Transformation Plan primarily includes the following measures:

• Driving medical cost management initiatives to improve the Company’s MCR;
• Lowering third party medical costs through negotiations with payors, including restructuring contractual arrangements with payors and specialty network;
• Expanding initiatives to optimize its DPE and SG&A expenses–
  • reducing operating expenses, including reduction of permanent staff; and
  • significantly reducing all other non-essential spending;
• Prioritizing the Company’s Medicare Advantage and ACO Reach lines of business through improving patient engagement and access;
• Divesting and consolidating certain assets and operations, inclusive of exiting certain markets–
  • exiting its Puerto Rico operations by the beginning of 2024;
  • conducting a strategic review of the Company’s Medicaid business in Florida, pharmacy assets and other specialty practices; and
  • consolidating underperforming owned medical centers and delaying renovations and other capital projects;
• Evaluating the performance its affiliate provider relationship—
  • terminating underperforming affiliate partnerships; and
• Pursuing a comprehensive process to identify and evaluate interest in a sale of the Company, or all or substantially all of its assets, including having engaged advisors to assist in the process.

As a result of accelerating these initiatives, the Transformation Plan is now targeted to achieve approximately $290 million of cost reductions by the end of 2024, inclusive of the $65 million of planned cost reductions previously disclosed. The Company expects to recognize approximately $30 million in pre-tax charges to implement these plans during 2024, consisting principally of lease exit costs and employee termination benefits. The Company expects that substantially all of these charges will be paid in cash over 2024 and 2025.

As part of this strategic shift, the Company also has been engaged in reviewing and continues to review strategic alternatives to recapitalize, refinance or otherwise optimize its capital structure (the “Ongoing Review”), which may ultimately result in the Company pursuing one or more significant corporate transactions or other remedial measures. The Ongoing Review includes an evaluation of available options to regain compliance with the Listing Rule. The Company can provide no assurances that it will be able to satisfy any of the steps outlined above and maintain the listing of its shares on the NYSE or the results of the Ongoing Review.
MB Bureau