Apollo Medical Holdings, Inc. Reports Third Quarter 2023 Results

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November 7, 2023 4:15 PM EST

Company to Host Conference Call on Tuesday, November 7, 2023, at 2:30 p.m. PT/5:30 p.m. ET

ALHAMBRA, Calif., Nov. 7, 2023 /PRNewswire/ -- Apollo Medical Holdings, Inc. ("ApolloMed," and together with its subsidiaries and affiliated entities, the "Company") (NASDAQ: AMEH), a leading physician-centric, technology-powered healthcare company focused on enabling providers in the successful delivery of value-based care, today announced its consolidated financial results for the third quarter ended September 30, 2023.

"I'm pleased to report strong third quarter performance with total revenue up 10% and capitated revenue up 34% compared to a year ago. We delivered a 15% adjusted EBITDA margin, we narrowed our guidance range for the full year, and we ended the third quarter well-positioned to generate sustainable and profitable growth going forward," said Brandon Sim, Co-Chief Executive Officer of ApolloMed.

"Today, we also announced our intent to acquire assets relating to Community Family Care Medical Group, which currently manages total cost of care for over 200,000 members, diversifying our membership mix and providing us a pathway to expand our value-based Care Partners business. Additionally, we announced two other provider group partnerships this quarter, which bring a combined membership of approximately 30,000, and our total number of provider group partnerships signed this year so far to five," continued Mr. Sim.

Mr. Sim concluded, "During the third quarter, we continued to make strong progress against our key operational goals, successfully managing our value-based care population, and delivering high-quality care. Our platform's momentum is accelerating as we work towards our mission of ensuring that everyone across the country has access to high-quality and high-value healthcare, and I am very excited about our opportunities ahead."

Financial Highlights for Third Quarter Ended September 30, 2023:

All comparisons are to the quarter ended September 30, 2022 unless otherwise stated.

  • Total revenue of $348.2 million, up 10% from $317.0 million
  • Care Partners revenue of $326.5 million, up 11% from $293.6 million
  • Net income attributable to ApolloMed of $22.1 million, compared to $23.2 million
  • Earnings per share - diluted ("EPS - diluted") of $0.47, compared to $0.50 per share
  • Adjusted EBITDA of $52.0 million, compared to $57.1 million

Financial Highlights for Nine Months Ended September 30, 2023:

All comparisons are to the nine months ended September 30, 2022 unless otherwise stated.

  • Total revenue of $1,033.6 million, up 22% from $850.0 million
  • Care Partners revenue of $966.4 million, up 24% from $782.2 million
  • Net income attributable to ApolloMed of $48.4 million, compared to $48.9 million
  • EPS-diluted of $1.03, compared to $1.06 per share
  • Adjusted EBITDA of $117.6 million, compared to $116.4 million

Recent Operating Highlights:

  • On November 3, 2023, the Company entered into a Third Amendment to the Amended and Restated Credit Agreement which provides a new term loan to the Company in an aggregate amount of up to $300.0 million. This increases the Company's facility to $700.0 million with our existing $400.0 million revolver. Pursuant to the Third Amendment, among other changes, ApolloMed (i) increased the maximum levels of certain forms of permitted indebtedness, (ii) increased the maximum levels of certain forms of restricted payments, including the ability to pursue certain specified share repurchases (up to $300 million) subject to certain conditions and (iii) increased the maximum levels for certain permitted investments.
  • On November 6, 2023, the Company entered into a stock repurchase agreement with Allied Physicians of California, a Professional Medical Corporation ("APC"), to repurchase approximately $100.0 million of the Company's common stock from APC. The Company intends to finance the share repurchase with borrowings under its Third Amendment to the Amended and Restated Credit Agreement.
  • On November 7, 2023, the Company announced that it and its affiliated professional entity have entered into an agreement to acquire assets relating to Community Family Care Medical Group IPA, Inc. ("CFC"), including the CFC independent physician association, the CFC Health Plan and CFC's management services organization entities. CFC manages the healthcare of over 200,000 members in the Los Angeles, California area, serving patients across Medicare, Medicaid, and Commercial payers and has a Restricted Knox Keene ("RKK") license for Medicaid members. The Company intends to finance the acquisition with cash on hand and borrowings under its Third Amendment to the Amended and Restated Credit Agreement. The CFC acquisition remains subject to customary closing conditions.
  • On November 7, 2023, the Company announced a partnership with Associated Hispanic Physicians, a group of over 150 primary care providers and over 450 specialists in Los Angeles with around 25,000 Medicaid, Medicare, and Commercial members in value-based care arrangements, in order to support their group with our Care Enablement offering. We expect Associated Hispanic Physicians' providers will be onboarded onto our Care Enablement platform by March of 2024.
  • On November 7, 2023, the Company announced its expanded relationship with Advantage Health Network, a group of approximately 15 primary care providers and several hundred specialists in Los Angeles which supports around 4,500 Medicaid, Medicare, and Commercial members in value-based care arrangements. As part of the partnership, Advantage's providers are slated to join our Care Partners business. We also acquired five primary care clinics in the Advantage Health Network, which will be integrated into our Care Delivery business.
  • On November 7, 2023, the Company announced its strategic partnership with Wider Circle, a peer-based community health organization working with payers and providers to connect neighbors for better health. Under this partnership, the two organizations will provide comprehensive patient-centered care and Enhanced Care Management for Medicaid members with complex needs, an integral component of the California Advancing and Innovating Medi-Cal, or CalAIM, initiative.

Segment Results for the Third Quarter Ended September 30, 2023:


Three Months Ended September 30, 2023

($ in thousands)

Care
Partners


Care
Delivery


Care
Enablement


Other


Intersegment
Elimination



Corporate
Costs


Consolidated
Total

Total revenues

$    326,499


$     29,261


$      36,910


$          294


$         (44,791)



$                 —


$           348,173

% change vs. prior year quarter

11 %


18 %


22 %

























Cost of services

279,769


25,647


13,658


76


(43,775)



—


275,375

General and administrative(1)

6,390


4,649


16,804


875


(2,086)



7,083


33,715

Total expenses

286,159


30,296


30,462


951


(45,861)



7,083


309,090
















Income (loss) from operations

$      40,340


$     (1,035)


$        6,448


$        (657)


$             1,070

(2)


$          (7,083)


$             39,083

% change vs. prior year quarter

(13) %


(133) %


27 %











(1) Balance includes general and administrative expenses and depreciation and amortization.

(2) Income from operations for the intersegment elimination represents rental income from segments renting from other segments. Rental income is presented within other income which is not presented in the table.

Guidance:

ApolloMed is narrowing its full-year 2023 guidance. The net income and EBITDA guidance ranges below include the impact of the excluded assets held by APC, which are solely for the benefit of APC and its shareholders. Any gains or losses associated with these excluded assets do not have an impact on Adjusted EBITDA and earnings per share — diluted. These guidance ranges are based on the Company's existing business, current view of existing market conditions, and assumptions for the year ending December 31, 2023.

($ in millions)

2023 Guidance Range


2023 Guidance Range


(as of November 7, 2023)


(as of February 23, 2023)


Low


High


Low


High

Total revenue

$             1,340.0


$             1,390.0


$             1,300.0


$             1,500.0

Net income

$                   59.5


$                   71.5


$                   49.5


$                   71.5

EBITDA

$                 114.5


$                 129.5


$                   89.5


$                 129.5

Adjusted EBITDA

$                 135.0


$                 150.0


$                 120.0


$                 160.0

EPS – diluted

$                   1.10


$                   1.20


$                   0.95


$                   1.20

See "Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA" and "Use of Non-GAAP Financial Measures" below for additional information. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. See "Forward-Looking Statements" below for additional information.

Conference Call and Webcast Information:

ApolloMed will host a conference call at 2:30 p.m. PT/5:30 p.m. ET today (Tuesday, November 7, 2023), during which management will discuss the results of the third quarter ended September 30, 2023. To participate in the conference call, please use the following dial-in numbers about 5 minutes prior to the scheduled conference call time:

U.S. & Canada (Toll-Free):

+1 (866) 682-6100

International (Toll):                   

+1 (862) 298-0702

The conference call can also be accessed via webcast at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=woZLVfk8.

An accompanying slide presentation will be available in PDF format on the "IR Calendar" page of the Company's website (https://www.apollomed.net/investors/news-events/ir-calendar) after issuance of the earnings release and will be furnished as an exhibit to ApolloMed's current report on Form 8-K to be filed with the SEC, accessible at www.sec.gov.

Those who are unable to attend the live conference call may access the recording at the above webcast link, which will be made available shortly after the conclusion of the call.

Note About Consolidated Entities

The Company consolidates entities in which it has a controlling financial interest. The Company consolidates subsidiaries in which it holds, directly or indirectly, more than 50% of the voting rights, and variable interest entities ("VIEs") in which the Company is the primary beneficiary. Noncontrolling interests represent third party equity ownership interests in the Company's consolidated entities (including certain VIEs). The amount of net income attributable to noncontrolling interests is disclosed in the Company's consolidated statements of income.

Note About Stockholders' Equity, Certain Treasury Stock and Earnings Per Share

As of the date of this press release, 41,048 holdback shares have not been issued to certain former shareholders of the Company's subsidiary, Network Medical Management, Inc. ("NMM"), who were NMM shareholders at the time of closing of the merger, as they have yet to submit properly completed letters of transmittal to ApolloMed in order to receive their pro rata portion of ApolloMed's common stock and warrants as contemplated under that certain Agreement and Plan of Merger, dated December 21, 2016, among ApolloMed, NMM, Apollo Acquisition Corp. ("Merger Subsidiary") and Kenneth Sim, M.D., as amended, pursuant to which Merger Subsidiary merged with and into NMM, with NMM as the surviving corporation. Pending such receipt, such former NMM shareholders have the right to receive, without interest, their pro rata share of dividends or distributions with a record date after the effectiveness of the merger. The Company's consolidated financial statements have treated such shares of common stock as outstanding, given the receipt of the letter of transmittal is considered perfunctory and ApolloMed is legally obligated to issue these shares in connection with the merger.

Shares of ApolloMed's common stock owned by Allied Physicians of California, a Professional Medical Corporation d.b.a. Allied Pacific of California ("APC"), a VIE of the Company, are legally issued and outstanding but excluded from shares of common stock outstanding in the Company's consolidated financial statements, as such shares are treated as treasury shares for accounting purposes. Such shares, therefore, are not included in the number of shares of common stock outstanding used to calculate the Company's earnings per share.

About Apollo Medical Holdings, Inc.

ApolloMed is a leading physician-centric, technology-powered, risk-bearing healthcare company. Leveraging its proprietary end-to-end technology solutions, ApolloMed operates an integrated healthcare delivery platform that enables providers to successfully participate in value-based care arrangements, thus empowering them to deliver outcomes-based medical care to patients in a cost-effective manner.

Headquartered in Alhambra, California, ApolloMed's subsidiaries and affiliates include management services organizations (MSOs), affiliated independent practice associations (IPAs), and entities participating in the Centers for Medicare & Medicaid Services Innovation Center (CMMI) innovation models. For more information, please visit www.apollomed.net.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company's guidance for the year ending December 31, 2023, ability to meet operational goals, ability to meet expectations in deployment of care coordination and management capabilities, ability to decrease cost of care while improving quality and outcomes, ability to deliver sustainable revenue and EBITDA growth as well as long-term value, ability to respond to the changing environment, and successful implementation of strategic growth plans, acquisition strategy, and merger integration efforts. Forward-looking statements reflect current views with respect to future events and financial performance and therefore cannot be guaranteed. Such statements are based on the current expectations and certain assumptions of the Company's management, and some or all of such expectations and assumptions may not materialize or may vary significantly from actual results. Actual results may also vary materially from forward-looking statements due to risks, uncertainties and other factors, known and unknown, including the risk factors described from time to time in the Company's reports to the SEC, including, without limitation, the risk factors discussed in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2022, and any subsequent quarterly reports on Form 10-Q. Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

 Restatement

In connection with a review of the Company's income tax filing structure, the Company identified unintentional errors in its accounting for the income tax effects of certain intercompany dividends and certain net operating losses, which resulted in an understatement of income tax expense in prior periods and also had an impact on purchase accounting (goodwill) as a portion of the net operating losses affected by the errors pertained to acquisitions in prior periods. As a result of the errors, the Company has restated the December 31, 2022 consolidated balance sheet and the consolidated statement of operations for each of the three and nine months ended September 30, 2022.

FOR MORE INFORMATION, PLEASE CONTACT:

Investor Relations
(626) 943-6491
[email protected]

Asher Dewhurst, ICR Westwicke
[email protected]

 

  

APOLLO MEDICAL HOLDINGS, INC.

 CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)









September 30,
2023


December 31,
2022



(Unaudited)


As restated

Assets










Current assets





Cash and cash equivalents


$           273,941


$           288,027

Investments in marketable securities


3,021


5,567

Receivables, net


95,892


49,631

Receivables, net – related parties


86,948


65,147

Other receivables


1,501


1,834

Prepaid expenses and other current assets


13,953


14,798

Loans receivable


973


996

Loan receivable – related party


—


2,125






Total current assets


476,229


428,125






Non-current assets





Land, property, and equipment, net


128,575


108,536

Intangible assets, net


74,209


76,861

Goodwill


275,528


269,053

Income taxes receivable, non-current


15,943


15,943

Loan receivable, non-current


25,040


—

Investments in other entities – equity method


44,428


40,299

Investments in privately held entities


2,896


896

Restricted cash, non-current


345


—

Operating lease right-of-use assets


21,482


20,444

Other assets


8,586


6,056






Total non-current assets


597,032


538,088






Total assets(1)


$       1,073,261


$           966,213






Liabilities, mezzanine equity and equity










Current liabilities










Accounts payable and accrued expenses


$             53,136


$             49,562

Fiduciary accounts payable


6,257


8,065

Medical liabilities


97,519


81,255

Income taxes payable


30,112


4,279

Dividend payable


638


664

Finance lease liabilities


655


594

Operating lease liabilities


3,528


3,572

Current portion of long-term debt


2,991


619

Other liabilities 


8,121


—

Total current liabilities


202,957


148,610






Non-current liabilities





Deferred tax liability


12,145


14,217

Finance lease liabilities, net of current portion


1,195


1,275

Operating lease liabilities, net of current portion


21,006


19,915

Long-term debt, net of current portion and deferred financing costs


206,213


203,389

Other long-term liabilities


14,105


20,260






Total non-current liabilities


254,664


259,056






Total liabilities(1)


457,621


407,666






Mezzanine equity





Non-controlling interest in Allied Physicians of California, a Professional Medical Corporation


17,931


14,237






Stockholders' equity





Series A Preferred stock, par value $0.001; 5,000,000 shares authorized (inclusive of
Series B Preferred stock); 1,111,111 issued and zero outstanding


—


—

Series B Preferred stock, par value $0.001; 5,000,000 shares authorized (inclusive of
Series A Preferred stock); 555,555 issued and zero outstanding


—


—

Common stock, $0.001 par value per share; 100,000,000 shares authorized,
46,607,356 and 46,575,699 shares issued and outstanding, excluding 10,569,340 and
10,299,259 treasury shares, at September 30, 2023, and December 31, 2022,
respectively


47


47

Additional paid-in capital


362,889


360,097

Retained earnings


230,778


182,417

   Total stockholders' equity


593,714


542,561






Non-controlling interest


3,995


1,749






Total equity


597,709


544,310






Total liabilities, mezzanine equity and equity


$       1,073,261


$           966,213


(1) The Company's consolidated balance sheets include the assets and liabilities of its consolidated variable interest entities ("VIEs"). The consolidated balance sheets include total assets that can be used only to settle obligations of the Company's consolidated VIEs totaling $554.0 million and $523.7 million as of September 30, 2023 and December 31, 2022, respectively, and total liabilities of the Company's consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $142.4 million and $131.8 million as of September 30, 2023 and December 31, 2022, respectively. The VIE balances do not include $317.7 million of investment in affiliates and $16.3 million of amounts due to affiliates as of September 30, 2023 and $304.8 million of investment in affiliates and $30.3 million of amounts due from affiliates as of December 31, 2022 as these are eliminated upon consolidation and not presented within the consolidated balance sheets.

 

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)










Three Months Ended

September 30,


Nine Months Ended

September 30,



2023


2022


2023


2022





(Restated)




(Restated)

Revenue









Capitation, net


$      305,678


$      227,571


$      906,430


$      677,253

Risk pool settlements and incentives


15,022


64,849


48,605


101,717

Management fee income


9,898


10,030


32,287


30,487

Fee-for-service, net


15,892


12,859


41,216


35,694

Other revenue


1,683


1,692


5,087


4,804










Total revenue


348,173


317,001


1,033,625


849,955










Operating expenses









Cost of services, excluding depreciation and amortization


275,375


240,768


857,648


691,566

General and administrative expenses


29,410


21,388


74,648


53,224

Depreciation and amortization


4,305


4,754


12,846


13,480










Total expenses


309,090


266,910


945,142


758,270










Income from operations


39,083


50,091


88,483


91,685










Other income (expense)









(Loss) income from equity method investments


(2,104)


1,452


3,104


4,397

Interest expense


(3,779)


(2,422)


(10,680)


(5,348)

Interest income


3,281


223


9,617


690

Unrealized loss on investments


(342)


(6,763)


(5,875)


(17,591)

Other income (expense)


1,876


(1,318)


4,265


2,328










Total other (expense) income, net


(1,068)


(8,828)


431


(15,524)










Income before provision for income taxes


38,015


41,263


88,914


76,161










Provision for income taxes


10,042


17,366


30,971


29,537










Net income


27,973


23,897


57,943


46,624










Net income (loss) attributable to non-controlling interest


5,914


712


9,582


(2,275)










Net income attributable to Apollo Medical Holdings, Inc.


$        22,059


$        23,185


$        48,361


$        48,899










Earnings per share – basic


$             0.47


$             0.52


$             1.04


$             1.09










Earnings per share – diluted


$             0.47


$             0.50


$             1.03


$             1.06










Weighted average shares used in computing earnings per share:









Basic


46,547,502


44,946,725


46,527,350


44,795,295

Diluted


46,920,607


46,152,536


46,881,567


45,993,001

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA


















Three Months Ended September 30,


Nine Months Ended September 30,


(in thousands)


2023


2022


2023


2022






(Restated)




(Restated)


Net income


$           27,973


$           23,897


$           57,943


$           46,624


Interest expense


3,779


2,422


10,680


5,348


Interest income


(3,281)


(223)


(9,617)


(690)


Provision for income taxes


10,042


17,366


30,971


29,537


Depreciation and amortization


4,305


4,754


12,846


13,480


EBITDA


42,818


48,216


102,823


94,299












Income from equity method investments


2,016


(1,469)


(3,160)


(4,358)


Other, net


1,723

(1)

1,382

(2)

1,507

(1)

1,382

(2)

Stock-based compensation


5,706


3,502


13,364


10,477


APC excluded assets costs


(289)

 (3)

5,505


3,039

(3)

14,574


Adjusted EBITDA


$           51,974


$           57,136


$         117,573


$         116,374



(1) Other, net for the three and nine months ended September 30, 2023 relates to transaction costs incurred for our investments and tax restructuring fees and non-cash changes related to change in the fair value of our financing obligation to purchase the remaining equity interests, changes in the fair value of our contingent liabilities, and changes in the fair value of the Company's Collar Agreement.

(2) Other, net for the three and nine months ended September 30, 2022 relates to transaction costs incurred, net of the write-off related to APCMG contingent consideration to reflect the fair value as of September 30, 2022.

(3) Certain APC minority interests where APC owns the asset but not the right to the dividends is reclassified from APC excluded asset costs to income from equity method investments

 

Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA










2023 Guidance Range


2023 Guidance Range


(as of November 7, 2023)


(as of February 23, 2023)

(in thousands)

Low


High


Low


High

Net income

$             59,500


$             71,500


$             49,500


$             71,500

Interest expense

1,500


1,500


1,000


1,000

Provision for income taxes

36,500


39,500


23,000


38,000

Depreciation and amortization

17,000


17,000


16,000


19,000

EBITDA

114,500


129,500


89,500


129,500









Loss (income) from equity method investments

(4,500)


(4,500)


(750)


(750)

Other, net

1,000


1,000


3,250


3,250

Stock-based compensation

20,000


20,000


16,000


16,000

APC excluded assets costs

4,000


4,000


12,000


12,000

Adjusted EBITDA

$           135,000


$           150,000


$           120,000


$           160,000

Use of Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q contains the non-GAAP financial measures EBITDA and Adjusted EBITDA, of which the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles ("GAAP") is net income. These measures are not in accordance with, or alternatives to GAAP, and may be different from other non-GAAP financial measures used by other companies. The Company uses Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization, excluding income or loss from equity method investments, non-recurring and non-cash transactions, stock-based compensation, and APC excluded assets costs. Beginning in the third quarter ended September 30, 2022, the Company has revised the calculation for Adjusted EBITDA to exclude provider bonus payments and losses from recently acquired IPAs, which it believes to be more reflective of its business.

The Company believes the presentation of these non-GAAP financial measures provides investors with relevant and useful information, as it allows investors to evaluate the operating performance of the business activities without having to account for differences recognized because of non-core or non-recurring financial information. When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company's ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating operational performance, allocating resources, and planning and forecasting future periods. Non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for, GAAP financial measures. Other companies may calculate both EBITDA and Adjusted EBITDA differently, limiting the usefulness of these measures for comparative purposes. To the extent this release contains historical or future non-GAAP financial measures, the Company has provided corresponding GAAP financial measures for comparative purposes. The reconciliation between certain GAAP and non-GAAP measures is provided above.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/apollo-medical-holdings-inc-reports-third-quarter-2023-results-301980677.html

SOURCE Apollo Medical Holdings, Inc.


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