Form: 8-K

Current report filing

August 7, 2023

 

Exhibit 99.1

 

Apollo Medical Holdings, Inc. Reports Second Quarter 2023 Results

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

 

ALHAMBRA, Calif., August 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 second quarter ended June 30, 2023.

 

Brandon Sim, Co-Chief Executive Officer of ApolloMed, stated, “Our strong second quarter performance reflects the sustained momentum and scalability of the ApolloMed model, with revenue up 29%, net income attributable to ApolloMed up 10%, and adjusted EBITDA up 44% compared to a year ago. We remain focused on our three key operational goals of growing our membership, empowering our providers, and improving patient outcomes, and we continue to drive meaningful progress in all three areas in California, Nevada, Texas, and beyond.”

 

“We want to thank our providers and teammates for their hard work and dedication that resulted in our continued solid financial performance in the second quarter of 2023 and our confidence in reiterating our previously provided guidance for full-year 2023.”

 

Financial Highlights for Second Quarter Ended June 30, 2023:

 

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

 

Total revenue of $348.2 million, up 29% from $269.7 million

 

Care Partners revenue of $325.2 million, up 32% from $247.3 million

 

Net income attributable to ApolloMed of $13.2 million, up 10% from $12.0 million

 

Adjusted EBITDA of $35.8 million, up 44% from $24.9 million

 

Financial Highlights for Six Months Ended June 30, 2023:

 

All comparisons are to the six months ended June 30, 2022 unless otherwise stated.

 

Total revenue of $685.5 million, up 29% from $533.0 million

 

Care Partners revenue of $639.9 million, up 31% from $488.6 million

 

Net income attributable to ApolloMed of $26.3 million, up 2% from $25.7 million

 

Adjusted EBITDA of $65.6 million, up 11% from $59.3 million

 

Recent Operating Highlights Subsequent to the End of the Second Quarter:

 

On July 12, 2023, the Company announced that it had entered into a definitive agreement to acquire assets of Texas Independent Providers, LLC (“TIP”), a value-based provider network with over 120 primary care providers that is expected to be an anchor for our high-quality Care Partners business in Houston. Through this transaction, ApolloMed intends to empower TIP’s provider network to deliver best-in-class clinical outcomes and to improve the healthcare experience for patients. This transaction is expected to close in the third quarter of 2023, and TIP’s providers are expected to be onboarded onto ApolloMed’s Care Enablement platform by the end of 2023.

 

On July 27, 2023, the Company formed a long-term partnership with a primary care group operating in California with over 50 providers. The group is expected to be onboarded onto ApolloMed’s Care Enablement platform by September 1, 2023.

 

 

 

 

On July 31, 2023, the Company announced a partnership with IntraCare, an operator of a value-based primary care provider network with over 425 providers located in Dallas, Fort Worth, El Paso, Austin, and Oklahoma City. Through this partnership, IntraCare’s providers are expected to join ApolloMed’s high-quality Care Partners business in these regions and onboarded onto ApolloMed’s Care Enablement platform by the end of 2023. In addition, ApolloMed will lend IntraCare a $25 million senior secured convertible promissory note maturing in 2028 to further IntraCare’s mission and growth.

 

Segment Results for the Second Quarter Ended June 30, 2023:

 

    Three Months Ended June 30, 2023  
    Care
Enablement
    Care
Partners
    Care
Delivery
    Other     Intersegment
Elimination
    Corporate
Costs
    Consolidated
Total
 
Total revenues   $ 34,975     $ 325,246     $ 26,718     $ 157     $ (38,887 )   $     $ 348,209  
% change vs. prior year quarter     18 %     32 %     14 %                       29 %
                                                         
Cost of services     15,162       292,119       22,523       70       (36,998 )           292,876  
General and administrative(1)     12,175       5,298       3,626       926       (2,933 )     9,212       28,304  
Total expenses     27,337       297,417       26,149       996       (39,931 )     9,212       321,180  
                                                         
Income (loss) from operations   $ 7,638     $ 27,829     $ 569     $ (839 )   $ 1,044 (2)   $ (9,212 )   $ 27,029  
% change vs. prior year quarter     4 %     250 %     (83 )%                       76 %

 

(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 reiterating the following guidance for total revenue, net income, EBITDA, Adjusted EBITDA, and EPS - diluted, 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  
    Low     High  
Total revenue   $ 1,300.0     $ 1,500.0  
Net income   $ 49.5     $ 71.5  
EBITDA   $ 89.5     $ 129.5  
Adjusted EBITDA   $ 120.0     $ 160.0  
EPS – diluted   $ 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 (Monday, August 7, 2023), during which management will discuss the results of the second quarter ended June 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 (877) 858-9810
International (Toll): +1 (201) 689-8517

 

The conference call can also be accessed via webcast at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=SC6cioUx.

 

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 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 StockholdersEquity, Certain Treasury Stock and Earnings Per Share

 

As of the date of this press release, 140,954 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 six months ended June 30, 2022.

 

FOR MORE INFORMATION, PLEASE CONTACT:

 

Investor Relations
(626) 943-6491
investors@apollomed.net

 

Carolyne Sohn, The Equity Group
(408) 538-4577
csohn@equityny.com

 

 

 

 

APOLLO MEDICAL HOLDINGS, INC. 

CONSOLIDATED BALANCE SHEETS 

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 

(UNAUDITED)

 

    June 30,
2023
    December 31,
2022
 
          (Restated)  
Assets                
                 
Current assets                
Cash and cash equivalents   $ 293,921     $ 288,027  
Restricted cash     345        
Investments in marketable securities     3,789       5,567  
Receivables, net     66,927       49,631  
Receivables, net – related parties     82,820       65,147  
Other receivables     1,201       1,834  
Prepaid expenses and other current assets     15,088       14,798  
Loans receivable     973       996  
Loan receivable – related party           2,125  
                 
Total current assets     465,064       428,125  
                 
Non-current assets                
Land, property, and equipment, net     123,859       108,536  
Intangible assets, net     74,421       76,861  
Goodwill     274,029       269,053  
Income taxes receivable, non-current     15,943       15,943  
Investments in other entities – equity method     45,831       40,299  
Investments in privately held entities     2,896       896  
Operating lease right-of-use assets     17,905       20,444  
Other assets     7,229       6,056  
                 
Total non-current assets     562,113       538,088  
                 
Total assets(1)   $ 1,027,177     $ 966,213  
                 
Liabilities, mezzanine equity and equity                
                 
Current liabilities                
Accounts payable and accrued expenses   $ 49,904     $ 49,562  
Fiduciary accounts payable     8,603       8,065  
Medical liabilities     100,047       81,255  
Income taxes payable     19,628       4,279  
Dividend payable     638       664  
Finance lease liabilities     591       594  
Operating lease liabilities     3,027       3,572  

 

 

 

 

    June 30,
2023
    December 31,
2022
 
          (Restated)  
Current portion of long-term debt     2,630       619  
Total current liabilities     185,068       148,610  
                 
Non-current liabilities                
Deferred tax liability     12,383       14,217  
Finance lease liabilities, net of current portion     1,078       1,275  
Operating lease liabilities, net of current portion     17,852       19,915  
Long-term debt, net of current portion and deferred financing costs     205,136       203,389  
Other long-term liabilities     21,383       20,260  
                 
Total non-current liabilities     257,832       259,056  
                 
Total liabilities(1)     442,900       407,666  
                 
Mezzanine equity                
Non-controlling interest in Allied Physicians of California, a Professional Medical Corporation     14,523       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, 46,553,517 and 46,575,699 shares issued and outstanding, excluding 10,569,340 and 10,299,259 treasury shares, at June 30, 2023, and December 31, 2022, respectively     47       47  
Additional paid-in capital     357,246       360,097  
Retained earnings     208,720       182,417  
   Total stockholders’ equity     566,013       542,561  
                 
Non-controlling interest     3,741       1,749  
                 
Total equity     569,754       544,310  
                 
Total liabilities, mezzanine equity and equity   $ 1,027,177     $ 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 $520.8 million and $515.1 million as of June 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 $145.8 million and $133.5 million as of June 30, 2023 and December 31, 2022, respectively. The VIE balances do not include $325.5 million of investment in affiliates and $5.4 million of amounts due to affiliates as of June 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 PER SHARE AMOUNTS)

(UNAUDITED)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2023     2022 (restated)     2023     2022 (restated)  
Revenue                                
Capitation, net   $ 300,549     $ 227,623     $ 600,753     $ 449,682  
Risk pool settlements and incentives     20,121       18,793       33,583       36,868  
Management fee income     12,493       9,984       22,389       20,457  
Fee-for-service, net     13,262       11,740       25,324       22,835  
Other revenue     1,784       1,557       3,404       3,112  
                                 
Total revenue     348,209       269,697       685,453       532,954  
                                 
Operating expenses                                
Cost of services, excluding depreciation and amortization     292,876       230,070       582,273       450,798  
General and administrative expenses     24,056       19,894       45,236       31,837  
Depreciation and amortization     4,248       4,351       8,541       8,725  
                                 
Total expenses     321,180       254,315       636,050       491,360  
                                 
Income from operations     27,029       15,382       49,403       41,594  
                                 
Other income (expense)                                
Income from equity method investments     2,723       1,512       5,207       2,945  
Interest expense     (3,632 )     (1,854 )     (6,901 )     (2,927 )
Interest income     3,327       421       6,335       467  
Unrealized gain (loss) on investments     859       (1,866 )     (5,533 )     (10,829 )
Other income     1,185       3,034       2,389       3,647  
                                 
Total other income (expense), net     4,462       1,247       1,497       (6,697 )
                                 
Income before provision for income taxes     31,491       16,629       50,900       34,897  
                                 
Provision for income taxes     14,009       5,352       20,930       12,170  
                                 
Net income     17,482       11,277       29,970       22,727  
                                 
Net income (loss) attributable to non-controlling interest     4,312       (673 )     3,668       (2,987 )
                                 
Net income attributable to Apollo Medical Holdings, Inc.   $ 13,170     $ 11,950     $ 26,302     $ 25,714  
                                 
Earnings per share – basic   $ 0.28     $ 0.27     $ 0.57     $ 0.57  
                                 
Earnings per share – diluted   $ 0.28     $ 0.26     $ 0.56     $ 0.56  

 

 

 

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(in thousands)   2023     2022 (restated)     2023 (restated)     2022 (restated)  
Net income   $ 17,482     $ 11,277     $ 29,970     $ 22,727  
Interest expense     3,632       1,854       6,901       2,927  
Interest income     (3,327 )     (421 )     (6,335 )     (467 )
Provision for income taxes     14,009       5,352       20,930       12,170  
Depreciation and amortization     4,248       4,351       8,541       8,725  
EBITDA     36,044       22,413       60,007       46,082  
                                 
Income from equity method investments     (297 )     (180 )     (546 )     (328 )
Other, net     (1,618 ) (1)           (216 )(1)      
Stock-based compensation     4,213       3,920       7,658       6,975  
APC excluded assets costs     (2,570 )     (1,247 )     (1,304 )     6,537  
Adjusted EBITDA   $ 35,772     $ 24,906  (2)   $ 65,599     $ 59,266  (2)

 

(1) Other, net for the three and six months ended June 30, 2023 relates to non-cash changes 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) Adjusted EBITDA under the historical method for the three and six months ended June 30, 2022 was $36.9 million and $75.1 million, respectively. See “Use of Non-GAAP Financial Measures” below for additional information on change of methodology.

 

Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

    2023 Guidance Range  
(in thousands)   Low     High  
Net income   $ 49,500     $ 71,500  
Interest expense     1,000       1,000  
Provision for income taxes     23,000       38,000  
Depreciation and amortization     16,000       19,000  
EBITDA     89,500       129,500  
                 
Loss (income) from equity method investments     (750 )     (750 )
Other, net     3,250       3,250  
Stock-based compensation     16,000       16,000  
APC excluded assets costs     12,000       12,000  
Adjusted EBITDA   $ 120,000     $ 160,000  

 

 

 

 

Use of Non-GAAP Financial Measures

 

This earnings release 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 calculated differently from similar 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. 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.