Q1 2023 Caremax Inc Earnings Call
Good morning, My name is Andre and I will be your conference operator today.
At this time I would like to welcome everyone to the Carmax, Inc. First quarter 2023 financial results and earnings Conference call.
Today's conference is being recorded.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
At this time I would like to turn the conference over to Samantha Swerdlin Vice President of Investor Relations. Please go ahead.
Hello, and good morning, everyone welcome to Carmax as first quarter 2023 earnings call.
We have thus far been vice President of Investor Relations and I'm joined this morning by Carlos to sellout, our Chief Executive Officer and Ken.
<unk>, our chief Financial Officer.
During the call we'll be discussing certain forward looking information. These forward looking statements are based on assumptions and assessments made by <unk> management in light of their experience and assessment of historical trends current conditions expected future developments and other factors they believe to be appropriate.
Any forward looking statements made during this call for me as of today and <unk> undertakes no duty to update or revise such statements whether as a result of new information future events or otherwise important factors that could cause actual results developments and business decisions to differ materially from the forward looking statements are described in the Companys filings.
With the SEC, including the section entitled Risk factors in today's remarks by management, we'll be discussing certain non-GAAP financial metrics. A reconciliation of these non-GAAP financial metrics to the most comparable GAAP measures can be found in this morning's earnings press release with that I'd now like to turn the call over to Carlos.
Yeah.
Thank you Amanda good morning, everyone and thank you for joining our call. There are three things I plan to review today, an overview of our first quarter performance. The progress we have made expanding our NSO and our general outlook.
Starting with our Q1 financial performance, we had developments that had a unfavorable impact on our revenue and adjusted EBITA, specifically, we recognized two prior period development that together lowered Q1 revenue by $26 6 million and adjusted EBITDA by $14 6 million.
The first development was related to MSR membership with one of our health plans and the second was related to higher acuity admissions in Q4, which Kevin will discuss in more detail.
While some prior period development is common for risk based providers like <unk>, we believe the MSL membership PPD with an anomaly in terms of its nature and impact in the Q4 acuity was isolated to a period related to an earlier than normal flu season, coupled with RSV, even though overall admissions remained flat during the.
Period.
Despite these headwinds underlying results for the quarter came in ahead of our expectations, reflecting a disciplined execution of our strategy. We are encouraged by our Q1 run rate performance and expect to achieve our 2023 guidance. Despite the prior period development.
As of quarter end, we had approximately $44 million in cash and 95 million of Undrawn capacity on our delayed draw term loans. We believe that this provides us with sufficient capital to bridge us to reach sustainable free cash flow by Q4 of 2024 now turning to some highlights from the quarter.
We are pleased to report that our Medicare advantage platform continues to grow with 95500 lives on our platform as of quarter end, representing approximately $1 3 billion of revenue under management.
These 62% are currently in partial risk arrangements and 36% are in full risk by.
By 2026, we expect nearly all of our current membership to be in full risk arrangements.
Medical expense ratio for the quarter was 75, 2% compared to $72 two 6% for Q1 last year due primarily to the impact from prior period development.
As we discussed during our recent Investor day, we take a prudent approach to taking full risk in new markets typically within 18 to 24 months glide path to risk.
Yeah.
This approach allows us to take limited downside risk, while our physicians implement implement medical management practices and we gained profitable scale in the new markets we enter.
It's also worth noting that during the year, we may opportunistically shift contracts to full risk early in our NSO network. If you recall when we shipped contracts to full risk they drive higher revenue and incremental adjusted EBIT dollars, but may not yet be mature and could generate <unk> above our historical <unk> average.
Of 85%.
While the negative impact of electing full risk early is not contemplated in our guidance. We may do so when it's accretive to adjusted EBITDA and cash flow.
During the quarter, we continued to deliver solid operational performance at our centers and remain focused on ensuring.
Our members have access to consistent high quality care.
Our quality initiatives have already resulted in 50% of quality gaps closed in Q1, putting us on track for a sustained five star rating in 2023.
Moreover, our investments in patient experienced continued to delivered cap survey measures at the 90 percentile among peer groups as of Q1, ensuring timely access to care is key to our operating success and we are proud to report that our primary care providers have seen set over 75% of our members at our centers as of Q.
One.
Furthermore, our specialty care services are readily accessible both in house and through our preferred network and we have now expanded our network to offer over 50 different specialties to our multi specialty network.
Last year, we expanded our reach beyond our core Florida markets and the results have been very encouraging during the quarter New member growth was strong and now we have over 3000 members in our 2022 de novo's.
Additionally, we have expanded our dental services across New York, and recently signed agreements to add.
Our in house, cardiology, nutritionist and for dietary services.
By offering these services in house were able to provide our members with comprehensive care that is designed to lead to best in class outcomes lower costs and ultimately healthier members.
Now I would like to provide an update on our <unk> expansion.
The integration of our Steward V. B C acquisition is on track and we are confident that we will achieve our membership growth targets that we announced in March.
We're working closely with our affiliate groups and they are excited about the opportunity.
Each market in the MSL network is participating in monthly joint operating committee meetings.
Where we combine the operational and clinical teams to review performance best practices from our centers that can be implemented into the MSL and what resources they need to effectively practice value based care.
As we discussed in detail at our Investor Day, We're also making significant progress on the payer side as we transition storage contracts into care Max V. B C contracts.
We've completed the ingestion of almost all payer data from stored into our care optimized technology platform and have built an internal infrastructure to accelerate the ingestion of new payer contracts and claims data so that we can provide.
<unk> and timely insights to our clinical and operations teams. Furthermore, we're continually expanding our EMR connector portfolio and are pleased to report that we now have access to data for over 30, emr's connecting the majority of our provider network to care optimize.
Okay.
As the year progresses, we expect to see further implementation of our technology platform, enabling us to better serve our members and deliver high quality care through efficient and effective data management. In addition, we are improving our capabilities to incorporate recent technology developments. This quarter, we launched a new machine learned.
Module for strict for risk stratification, which is designed to enable us to better manage chronic condition acuity and provide even more personalized and efficient care to our members.
Moving forward, we intend to continue enhancing and developing our care optimize technology to drive operational efficiencies and reduce the administrative burden for eye care teams.
Although this quarter it didn't turn out as expected due to the prior period development. Our Q1 run rate gives us confidence in our ability to achieve both our short term and long term objectives.
Since founding care, Max and growing it to where we are today, we have remained dedicated to revolutionizing health care delivery through disciplined growth and a capital efficient manner.
We believe this approach will ultimately deliver the best returns for our shareholders. We look forward to updating you on our progress over the coming months.
With that I'll now turn things over to Kevin to provide more details on our financial performance in the quarter.
Thanks, Carlos and good morning, we're proud to report meaningful progress in the integration of our acquired NSO business and are well on our way to unlocking the value we envisioned at our March Investor Day.
Non current developments in membership revenues and medical expenses are a normal part of ABC.
Which is why we manage our business and liquidity conservatively.
As of quarter end, we had approximately $44 million in cash and $95 million of Undrawn delayed draw term loans, which we continue to believe is sufficient to bridge us to sustainable free cash flow by Q4 2024 <unk>.
Additionally, we have the ability to raise up to $45 million and super priority revolving facilities.
And we believe we have further upside levers from transitioning profitable contracts to full risk earlier than planned in short we are comfortable with our current capital position and we remain bullish on the missile opportunity ahead of us.
Now I'll walk you through the puts and takes of our first quarter results and explain why we believe our full year 2023 guidance is still achievable.
As a reminder, a reconciliation of GAAP to non-GAAP metrics like adjusted EBITDA can be found in our earnings release and presentation.
As we began doing last quarter, we are no longer adding back in de Novo pre opening cost or de Novo post opening losses to adjusted EBITA and all references to adjusted EBITDAR pertain to our current definition.
We reported first quarter total revenue of $173 million up 26% year over year.
Medicare risk revenue was $122 million up 13% year over year, and Medicaid risk revenue was $26 million up 27% year over year.
We've introduced a new line item.
Government and value based care revenue, which is $10 million, representing a required an SSP an ACO reach in paid losses.
Finally, other revenue was $16 million up 75% year over year, driven by NSO competition as well as growth in our in house pharmacy.
Okay.
<unk> contribution was $25 million up 43% year over year, despite being fully burdened by de Novo preopening cost and post opening losses, which together totaled $6 million in Q1.
Net loss was $82 1 million and adjusted EBITDA was approximately breakeven.
Largely due to topline headwinds I will explain shortly.
Lastly, we recognized a goodwill impairment charge of $98 million driven by the decline in our stock price during the quarter, partially offset by 36 and Logan from revaluation of earn out liabilities.
These have no impact to cash are fundamentals of our business.
Regularly we received from our health plan partners updated data on membership revenues and medical expenses, which often contain true ups to previous routes K reported figures.
Q1, Medicare risk revenue was impacted by $26 6 million of unfavorable prior period development related to full risk membership.
One of our Florida, MSL health plans with a corresponding impact of $6 4 million optical module.
We believe this to be an anomaly both in size and nature.
The true ups and isolated to the Onboarding of a single NSO contract with limited risk of this sort for other plants.
During the quarter, we saw medical expense ratio of 75, 2%, which represents an increase from 72, 6% in Q1 2022.
It's worth noting that our Q1 <unk> was impacted by $8 1 million of unfavorable prior period development in medical expenses.
We believe the unfavorable medical expense PPD can be attributed to an earlier than normal flu season in south, Florida as well as elevated cases of RSV.
This drove unseasonably high cost per admission in Q4.
Even as rates of admissions remained relatively stable during the quarter when compared to Q3.
It's important to mention that our MBR was not materially impacted by the MSL membership TPP, we discussed earlier.
As you can see in our earnings presentation.
<unk> PPG impact was at $27 million revenue headwind and a $15 million medical margin and adjusted EBITDA headwind in the quarter that we believe are not reflective of our run rate profitability.
Even with the PPD, we believe several factors enable us fulfill achieve our 2023 guidance of $700 million to $750 million revenue and 25% to $35 million and adjusted EBITDA.
First our medical margin run rate, excluding the PPD is off to a favorable start to the year compared to our budget.
Second to the extent that we're able to identify profitable NSO contracts transitioned to full risk. We believe doing so may pull forward full risk revenue and positive medical margin earlier than planned.
As a reminder, when we transition to full risk sooner there may be an unfavorable impact to MBR in the near term despite the favorable impact to adjusted EBITDA and cash flow.
Moving on cash used in operating activities was $22 million in Q1, including $7 million of cash interest and other debt service cost.
Cash add backs to adjusted EBITDA decreased significantly in Q1.
Nonrecurring restructuring and acquisition related adjustments roll off from prior quarters.
We continue to believe our adjustments are useful to illustrate the underlying earnings power of our business to.
To the extent, we have more limited M&A activity like in Q1, we expect to see smaller add backs and experienced in the past.
We expect Capex, however to continue to increase as.
As we continue to build out of our 2023 pipeline within all of those.
It's important to understand the working capital dynamics around the VC business.
Particularly related to accounts receivable.
Absolute dollars will continue to grow as we accrue MSP and ACO shared savings, which are recognized in the current performance here, but not paid until almost a year in arrears.
We will also see a related to MSR Medicare advantage contracts increase as newer health plan partners require time to set up a processes to produce and make payments out of our service lines.
Finally, as our legacy <unk> business continues to grow we expect to accrue higher amounts of <unk> for the mid year adjustment and final settlement.
Remember that Ah represents an accrual of net medical margin. So the appropriate denominator for DSO calculations as full risk revenue less external provider costs.
For appropriate comparisons Q1 should also exclude approximately $60 million related to MSP receivables and normalized for prior period development, which may otherwise called volatility and DSO and.
In doing so we find the DSO in the first quarter was materially in line with historical levels.
In terms of seasonality, we expect cash flows in the second half of the year to be favorable to those in the first half driven by the mid year and final suites.
Additionally, this fall we expect to receive the MSP payment for the 2022 performance here of which a portion will go toward repayment of the accounts receivable facility entered into as part of the Stewart transaction.
Beginning next year, we will be able to keep MSP shared savings payments.
To reiterate we remain comfortable with our leverage outlook, our capacity to service our debt and our ability to access our undrawn DVT L. <unk>.
We ended Q1 was $44 million in cash and $95 million of Undrawn delayed draw term loan capacity.
Since the end of Q1, we have drawn another $35 million from the DD TL and had $60 million remaining we.
We believe we are sufficiently funded to reach cash flow profitability by Q4 of 2024, when we expect to receive our MSP shared savings payment for performance year 2023.
In the meantime, our commitment towards investing prudently in our de Novo expansion and MSL capabilities remains unchanged.
Operator, we are ready for questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will take our first question from Andrew Mok at UBS.
Hi, Good morning, I appreciate all the comments around development, but wanted to better understand the two dynamics better first what were the underlying drivers of the negative development on the MSR side and can you help us understand how IBM. Our estimates are conducted for affiliate members.
Thanks.
Yeah, Hey, Andrew it's Kevin Yeah. So.
<unk> <unk>.
Periodically we received updated information from our health plan normal course of business for us.
We received information as we typically do that had a decrease in membership.
And so with that information, we push that decrease in membership through retrospectively, which obviously created this prior period development.
From an IV in our standpoint, the contracts that we use are aggregated together. So when we look at IBM are in setting reserves, we actually look at it on the health plan level.
And so in doing so for the NSO. It's the same process for our wholly owned centers. There is no difference between those two the health plan processes those claims.
Simultaneously.
Within the same payment patterns that you would typically see and so we are comfortable using.
The health plan data together when when estimating our completion factors.
Got it Okay, and secondly, you noted that <unk> admissions trended a bit higher due to an earlier, an elevated flu and RSV RSV I understand that experience, but it wasn't there also an offsetting benefit from fewer COVID-19 admissions in the quarter that you would have reserved for so why is the total respiratory costs coming in so much higher.
Yes, total so total admissions were actually flat to Q3, when we when you look at the data.
So it's not that there was an elevated number of cases, what we're seeing is that the cost per admission was higher.
We are seeing that COVID-19 was relatively.
System among quarters.
But it looks like flu season was just a little sooner than we anticipated Q4 instead of Q1.
And so we needed to make that adjustment and flow through the financials this quarter.
So I would say when we look at that data the the respiratory area that's right.
RSV along with the flu led to just.
Higher acuity of those admissions and further complications as we kind of look at the data on a per admission.
On a per admission basis. So generally when we think about flu season, especially in our core market in South Florida, we typically experienced that in the in Q1 and what happened. This year as we saw that start earlier and as we look at the data that led to two further complications with those admissions hitting us towards the end of.
Q4.
Got it.
And pull forward from Q1.
That's right.
Okay.
And then finally, it looks like corporate G&A increased about $4 million quarter over quarter and $12 million year over year, what are the drivers of that increase and how should we expect that to trend throughout the year. Thanks.
Yeah.
Totally attributable to the acquisition of the Stewart BBC business. If you remember we are we on boarded.
65% to 70 Ftes.
We have additional operating cost to operate that business, we only had basically a couple of months.
One five months or so in Q4.
We have the full period and I would also say that in Q1, you typically have the seasonality from a payroll standpoint, where you pay higher payroll taxes or folks knocked out.
So you have a little bit of seasonality in there.
From that standpoint, we would assume.
Minor bumps from a SG&A standpoint, I think we've on boarded and we brought on most of the costs that we need to manage that book of business. The additional cost is going to be incremental to managing the growth at this point.
Okay.
Got it thanks for all the color.
We will take our next question from Brian <unk> at Jefferies.
Hi, Good morning, you've got <unk> on for Brian . Thanks for taking my question, so going back to the PPD conversation. If you look at the adjusted numbers you would've done like $14 5 million of EBITDA, Let's put you on track to do roughly half of your EBITDA guidance in Q1, if you're using the mid point. So my question is.
How much of TBD headwinds that you have baked into the guidance from what I understand that.
And some of your commentary this is clearly something that.
Happens, it's not a surprise, but it seems like.
The magnitude of it was larger than you expected.
Then as a follow up how should we be thinking about the seasonality of EBIT generation throughout the year.
Yeah.
Yeah. Good question so.
Look I think we took a prudent approach we ingested steward.
Late last year, we wanted to make sure that we came out with the guidance that was reasonable.
And achievable.
And so do we baked and prior period development. We Didnt. However, we wanted to make sure that we did have some levers that we could pull if we needed to.
I would say is this year, if you think about it essentially youre recognizing that Q4 kind of flu in Q1. We would also expect Q4 of them. This year would probably look like Q4 of last year. So what do you think about it as you kind of have a double flu whammy.
In 2023.
From a <unk>.
And typically I think we've talked about this before in the past is typically medical expense ratio improves throughout the quarters folks exhaust benefits you start hitting limitations on the pharmacy side stop loss starts kicking in.
What we would expect to see is I would say a relatively consistent.
EBIT number a quarter on quarter and the reason being is because later in the year, we are going to have.
The de novo's coming on which will have additional expenses associated to them and then in addition to that we would expect to see maybe a little more flu in Q4 of 23, then we have normally anticipated.
Yeah, and I, just think we've always said right. We've ingested a tremendous amount of membership with this acquisition. We wanted to make sure that we were being conservative in our guidance and our numbers.
Having said that there is potential upside in what we've adjusted right and we've discussed that with respect to being able to trigger risk earlier than expected in several contracts in certain in certain key markets.
So I think that.
That's encouraging for us as we kind of think about.
The next year and our long term guidance as well so while this PPD is PPD is typically normal and true ups with health plans as part of this business certainly the one that we experience now we kind of think about.
You know as an anomaly as we adjusted a lot of that MSR membership and that true up.
The size and magnitude, we don't expect to get.
From that perspective, we think it was unusual.
Right I appreciate the color there Carlos and Kevin. So my follow up question is on if I look at your slide deck, you've got it really well laid out just looking at full risk and like other value based care. So just curious in the other value based care bucket can you break out the percentage of patients that are in partial risks.
Versus gained share versus capitation, and then provide some more details on like the different economics right relative to full risk right like I think you were very.
Clear in your Investor day, what the differences between partial risk and what that looks like and how it flows through but can you maybe talk about the delta between gained share in.
Other capitation as well.
Sure.
Yes, that's fair it's market specific I would say on those.
Each market is going to be unique from that standpoint.
Early on as we enter into new de Novo markets, we're not expecting a significant dollar amounts from our gain share standpoint, we're ingesting new members, we're educating physicians on <unk> University and value based care and so unlocking that that upside.
Or partial risk component, we just we don't we're not putting a lot of value in it as we look for.
Our guidance standpoint.
South Florida is obviously, a little different right, but what I would say is all most of our contracts 90 plus percent of our contracts in south, Florida, our R&D triggered full risk.
The other important piece to note is in the government value based care revenue that specifically MSP and ACO reach.
Other revenue is where you would find.
The MSR capitation or heat as bonus accrual any upside gained share as well as.
External revenues from pharmacy and in the end of the care optimize the legacy care optimized clients.
Great. Thank you Kevin that's all my questions.
We'll move next to Joshua Raskin of Nephron research.
Hi, Thanks, good morning.
Could you just help us what is the process around revenue verification from these plans do you just kind of book what they pay you or is there some sort of verification I'm just curious how the.
There were members like where these patients that you had actually seen or where are these patients that you were getting paid for it but had never seen in terms of the prior period adjustment.
Hey, Josh it's Kevin so as we ingest.
Our NSO, Florida business early on last year.
We had conversations with the health plans multi.
Multiple health plans those health plans have provided us information showing that.
These patients.
We are more profitable than what we've received from an MSL competition standpoint.
And so we did decide to go ahead and pull the trigger on the full risk component.
I would tell you is that it takes quite a bit of time for health plans to load information, especially when we're talking about.
The size of the network that we acquired from Stuart.
So loading those tax Ids MPI under our task and getting the contracts set up so that reports can start being generated just takes time and the health plans.
So obviously, we have open communication with our health plans were constant communication with them and we reach out to them and request information. So that we can appropriately book.
Revenue in <unk>.
Medical expense as well as membership.
And so from this standpoint, we just we received updated information in the quarter that.
<unk>.
We went back and said, okay, we needed to make some prior period adjustments based off of information that we received this quarter.
So are these members that are eventually going to be <unk> members now like will this come back.
Yes.
No no no.
In that particular contract now we are working with the health plan, though.
It's a national health plans. So we are working with them in other areas for potential opportunities to grow.
Ship outside of Florida.
Okay and then just second question how are you working with with MA plans for 2024, and specifically are you expecting any benefit reductions.
Your service areas, where you guys have the clinics.
The plans are going to be willing to negotiate higher cap percentages, where you find it necessary.
Yeah.
Thank you.
Go ahead go ahead, Kevin and then ill.
No I was going to say yeah, it's a little early.
A little early right now, but what I would say is that based off of the headwinds that we're seeing from a store standpoint as well as.
Obviously, there was a win there.
With kind of phasing in the model over the three years.
So I think at the end of the day, there will be a slight revisions down from a benefit standpoint, but I think it's a little too early for us to comment on them.
Yes, that's what I was going to say, it's still a little bit early but I think initial conversations are especially as we have kind of this three year phase in.
As to potentially especially in South, Florida, where we're where benefits are really rich is to potentially reduce some of those supplemental benefits I E gift cards and things like that in a way that it probably wouldn't be that impactful or meaningful to kind of a member's overall health outcome et cetera, and still fairly aggressive, but we do anticipate.
Some potential reduction over the next several years.
I think with CMS.
Spreading this out over a three year period, I think those adjustments are easier to make.
Okay. Thanks.
We'll move next to Jessica Hansen at Piper Sandler.
Yes.
Thanks, and thanks for taking the question so in that.
Other government diabetes care revenue line I, just want to make sure I understand.
How is it possible that that include ACO reach and MSP, just if I kind of like.
If I look at the the PMT and.
Or if I assume all of the revenues attributable to ACO reach.
It still.
It looks very low from a PMT perspective, so just.
Where is the NSF fee revenue.
Yes, I guess I guess, despite the PSTN, where we would expect them to be fair fair <unk> CRH.
Yeah, Jessica it's Kevin So on this contract we're not taking most of this start with most of this is MSP right. So 92% of our patients in that line item on the MSP side.
And the ACO reach we are not taking full risk on either alright, and so from both of those standpoints. We are booking revenue on a net basis. So this is essentially the shared savings dollars that we would expect to receive.
Obviously, one quarter of shared savings that we would expect to receive next year.
Okay got it and then just MSC are 100% of those sites and the enhance Jack.
And can you remind us.
Does <unk> get to retain the shared savings generate earned in 2023.
And does that all obligations to steward to return shared savings generated that's kind of.
With 2020 Jam.
Yes, the MSS P lives are all on the enhanced track and I would say, while the enhanced track offers more upside it is still a.
Considered a full risk contract.
From an accounting perspective, which is why we don't book the full revenue and only booked this.
The shared savings.
This year's MSP payment.
Part of that part of that payment will we'll go to Stuart and then B piece of from when we adjusted the membership bright in November .
Kind of November December .
Corresponds to us.
But the payment corresponding to.
2021 dates of service.
Corresponsive Stuart.
Got it thanks.
We'll go to our next question from Joel Anderson at Trust Securities.
Hi, all this is Eduardo Ron on for Joe Andrea Thanks for taking the question.
You guys had 95 and a half thousand MA lives at the end of the quarter and your target for year end is 110 to 120000.
There anything thats already contracted for I guess, how should we expect those lines to roll on throughout the year.
Okay.
Yes, so part of that membership is from our core growth in our core markets and the other part is from adding the additional.
Additional contracts and loading.
All other.
Provider groups that are coming in from the from the Stewart acquisition.
Coming in over the course of the remainder of the year.
So it's a combination.
And you guys you guys talked about potentially pulling forward some full risk.
Revenue I guess.
Impact the life count there.
Well.
In addition from partial risk to full risk wouldn't impact lives what it would impact is the EBITDA margins and the revenue recognition of that membership that that we already have on our platform.
Right.
And I think the prior outlook you guys sort of put you at <unk>.
72% to 73% MLR is that still the expectation in the updated outlook or again is this like sort of pull forward of some full risk revenue.
Potentially pointing you towards the higher MLR.
Yes, I think from an MLR standpoint.
We're not going to manage the business to the MLR I think what we're using the MLR for US just to understand where our legacy centers are performing and ensuring there is no deterioration in that performance.
We're going to be opportunistic if we identify contracts that can generate additional earnings.
We actually identified one or two this quarter.
We were making a small dollar cap percentage.
We received the information from the health plans.
A few thousand patients.
We went ahead and pulled the trigger on that and they are at a 93% medical loss ratio, but.
The incremental.
<unk> that were earning off of it is substantial.
Going from a call it mid teens too.
Plus $50 $60 <unk>, so, it's a pretty meaningful increase even though the MBR.
We will deteriorate or pull down the overall company average MBR.
Alright, and just last one on I guess on that.
How did your own center.
Our compare to your affiliate <unk> in.
In the quarter.
Our centers were trending where we expected them to be.
And that kind of 70 ish range.
So again.
A lot of a lot of the PPD theres a portion of it specifically related to the MSL.
But the portion that was not even as we account for that.
Our clinics were and I would say the low seventy's, which is typically where we would expect Q1 to end up.
Okay alright, thank you.
And we will take our next question from Gary Taylor at Cowen.
Okay.
Hi, good morning.
Two questions first I, just I'm, sorry, I, just want to make sure I understand the NSO thing again.
All of that that revenue in Egypt, EBITDA contribution was related to 'twenty two is that correct.
Yes, that's correct.
And was it I saw it in one of your answers you had I know you had said, Florida, but I thought you had referenced steward, but this is not related to the Stewart, Florida MSL is that correct.
Yes, Gary if you recall early last year, we ran a pilot with Stuart specifically, where we began managing their space coast lives. So it was part of that pilot.
Okay.
Okay. So I thought that Stuart only had maybe 6000.
Lives.
Florida, and this seems to be like almost like half of that.
So if my math is wrong I'm happy to take that offline.
Yes, I think the number was north of that.
Yes happy to have that discussion.
Okay, and then last one for me.
On this topic.
Where their cash flow implications in other words like had this fully settled out and you actually had to give.
Cash back and that impacted cash flow or is this just sitting in your net accrual.
No, yes, youre absolutely right its sitting in the net accrual.
Unfortunately, it just takes the plans.
Long time to get everything under one contract we get reports generated and then actually process payments. So no cash generated I think the other thing I would say is we took a prudent approach when we looked at 2023 cash flows.
And we didn't make any estimates on getting payments.
Time in the future in the near future specifically for those contracts that slipped to risk immediately just because we know it takes such a long time.
Get those loaded.
Last one for me on the reiterated revenue and EBITDA guidance just to confirm.
Youre going to reach those targets using the ones have the GAAP results. The 173 revenue in the in the basically the zero EBITDA in the quarter and then still get to those targets is that right.
That's correct yes.
Okay perfect. Thank you.
And that does conclude the question and answer session. At this time I would like to turn the conference back over to Carlos <unk> for any closing remarks.
So on behalf of the team I'd just like to thank everybody for joining our call today, we look forward to updating you on our progress and have a great day.
And that concludes today's conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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Yes.
Sure.
[music].