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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___.
Commission File No. 001-37392
Apollo Medical Holdings, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
95-4472349 |
(State or Other Jurisdiction |
(I.R.S. Employer |
of Incorporation) |
Identification Number) |
1668 S. Garfield Avenue, 2nd Floor, Alhambra, California 91801
(Address of principal executive offices and zip code)
(626) 282-0288
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on Which Registered |
Common Stock, $0.001 par value per share |
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AMEH |
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Nasdaq Capital Market |
As of November 2, 2020, there were 54,265,602 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.
APOLLO MEDICAL HOLDINGS, INC.
INDEX TO FORM 10-Q FILING
TABLE OF CONTENTS
Glossary
The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:
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Accountable Health Care |
Accountable Health Care IPA, a Professional Medical Corporation |
AHMC |
AHMC Healthcare Inc. |
AIPBP |
All-Inclusive Population-Based Payments |
Alpha Care |
Alpha Care Medical Group, Inc. |
AMG |
AMG, a Professional Medical Corporation |
AMH |
ApolloMed Hospitalists, a Medical Corporation |
AMM |
Apollo Medical Management, Inc. |
AP-AMH |
AP-AMH Medical Corporation |
APAACO |
APA ACO, Inc. |
APC |
Allied Physicians of California, a Professional Medical Corporation |
APC-LSMA |
APC-LSMA Designated Shareholder Medical Corporation |
BAHA |
Bay Area Hospitalist Associates |
Bright |
Bright Health Company of California, Inc. |
CDSC |
Concourse Diagnostic Surgery Center, LLC |
CMS |
Centers for Medicare & Medicaid Services |
CQMC |
Critical Quality Management Corporation |
CSI |
College Street Investment LP, a California limited partnership |
DMHC |
California Department of Managed Healthcare |
DMG |
Diagnostic Medical Group |
HSMSO |
Health Source MSO Inc., a California corporation |
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ICC |
AHMC International Cancer Center, a Medical Corporation |
IPA |
independent practice association |
LMA |
LaSalle Medical Associates |
MMG |
Maverick Medical Group, Inc. |
MPP |
Medical Property Partners |
NGACO |
Next Generation Accountable Care Organization |
NMM |
Network Medical Management, Inc. |
PASC |
Pacific Ambulatory Health Care, LLC |
PMIOC |
Pacific Medical Imaging and Oncology Center, Inc. |
SCHC |
Southern California Heart Centers |
UCAP |
Universal Care Acquisition Partners, LLC |
UCI |
Universal Care, Inc. |
VIE |
variable interest entity |
INTRODUCTORY NOTE
Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Apollo Medical Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “ApolloMed” refers to Apollo Medical Holdings, Inc.
The Centers for Medicare & Medicaid Services (“CMS”) have not reviewed any statements contained in this Quarterly Report on Form 10-Q describing the participation of APA ACO, Inc. (“APAACO”) in the Next Generation Accountable Care Organization (“NGACO”) Model.
Trade names and trademarks of the Company and its subsidiaries referred to herein and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about the Company's guidance for the year ending December 31, 2020, any statements about our business (including the impact of the 2019 Novel Coronavirus (COVID-19) pandemic on our business), financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, such as our projected capitation from CMS for the year ending December 31, 2020 or otherwise, and our future liquidity, including cash flows and any payments under the $545.0 million loan we made to our VIE, AP-AMH; any statements of any plans, strategies and objectives of management for future operations such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; any statements regarding the outlook on our NGACO Model or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.
Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations and certain assumptions of management. Some or all of such beliefs, expectations and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on March 16, 2020, including, the risk factors discussed under the heading “Risk Factors” in Part I, Item IA thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes and results to differ materially from those indicated by such statements.
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
166,082 |
|
|
$ |
103,189 |
|
Restricted cash |
— |
|
|
75 |
|
Investment in marketable securities |
118,309 |
|
|
116,539 |
|
Receivables, net |
18,257 |
|
|
11,004 |
|
Receivables, net – related parties |
41,518 |
|
|
48,136 |
|
Other receivables |
3,988 |
|
|
16,885 |
|
Prepaid expenses and other current assets |
12,119 |
|
|
10,315 |
|
Loan receivable |
6,425 |
|
|
6,425 |
|
Loan receivable – related parties |
— |
|
|
16,500 |
|
|
|
|
|
Total current assets |
366,698 |
|
|
329,068 |
|
|
|
|
|
Noncurrent assets |
|
|
|
Restricted cash |
746 |
|
|
746 |
|
Land, property and equipment, net |
10,929 |
|
|
12,130 |
|
Intangible assets, net |
90,781 |
|
|
103,012 |
|
Goodwill |
239,053 |
|
|
238,505 |
|
Investment in other entities – equity method |
27,220 |
|
|
28,427 |
|
Investments in privately held entities |
37,075 |
|
|
896 |
|
Operating lease right-of-use assets |
19,298 |
|
|
14,248 |
|
Other assets |
22,473 |
|
|
1,681 |
|
|
|
|
|
Total noncurrent assets |
447,575 |
|
|
399,645 |
|
|
|
|
|
Total assets (1)
|
$ |
814,273 |
|
|
$ |
728,713 |
|
|
|
|
|
Liabilities, mezzanine equity and stockholders’ equity |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
40,474 |
|
|
$ |
27,279 |
|
Fiduciary accounts payable |
3,986 |
|
|
2,027 |
|
Medical liabilities |
57,455 |
|
|
58,725 |
|
Income taxes payable |
16,169 |
|
|
4,529 |
|
Dividend payable |
485 |
|
|
271 |
|
Finance lease liabilities |
102 |
|
|
102 |
|
Operating lease liabilities |
3,290 |
|
|
2,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
|
|
|
|
Current portion of long-term debt |
9,500 |
|
|
9,500 |
|
Total current liabilities |
131,461 |
|
|
105,423 |
|
|
|
|
|
Noncurrent liabilities |
|
|
|
Deferred tax liability |
11,659 |
|
|
18,269 |
|
Finance lease liabilities, net of current portion |
337 |
|
|
416 |
|
Operating lease liabilities, net of current portion |
16,616 |
|
|
11,373 |
|
Long-term debt, net of current portion and deferred financing costs |
226,051 |
|
|
232,172 |
|
|
|
|
|
Total noncurrent liabilities |
254,663 |
|
|
262,230 |
|
|
|
|
|
Total liabilities (1)
|
386,124 |
|
|
367,653 |
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
Mezzanine equity |
|
|
|
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation |
198,731 |
|
|
168,725 |
|
|
|
|
|
Stockholders’ equity |
|
|
|
Series A Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series B Preferred stock); 1,111,111 issued and zero outstanding |
— |
|
|
— |
|
Series B Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series A Preferred stock); 555,555 issued and zero outstanding |
— |
|
|
— |
|
Common stock, $0.001 par value per share; 100,000,000 shares authorized, 36,775,817 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, as of September 30, 2020 and December 31, 2019, respectively |
37 |
|
|
36 |
|
Additional paid-in capital |
168,653 |
|
|
159,608 |
|
Retained earnings |
59,714 |
|
|
31,905 |
|
|
228,404 |
|
|
191,549 |
|
|
|
|
|
Noncontrolling interest |
1,014 |
|
|
786 |
|
|
|
|
|
Total stockholders’ equity |
229,418 |
|
|
192,335 |
|
|
|
|
|
Total liabilities, mezzanine equity and stockholders’ equity |
$ |
814,273 |
|
|
$ |
728,713 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
(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 $877.6 million and $849.3 million as of September 30, 2020 and December 31, 2019, 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 $113.0 million and $114.5 million as of September 30, 2020 and December 31, 2019, respectively. See Note 15 – Variable Interest Entities (VIEs) for further detail.
APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
|
|
|
|
|
|
|
Capitation, net |
$ |
135,032 |
|
|
$ |
130,807 |
|
|
$ |
416,402 |
|
|
$ |
305,548 |
|
Risk pool settlements and incentives |
30,916 |
|
|
11,355 |
|
|
54,155 |
|
|
32,640 |
|
Management fee income |
8,707 |
|
|
8,518 |
|
|
26,212 |
|
|
27,867 |
|
Fee-for-service, net |
3,737 |
|
|
4,100 |
|
|
9,434 |
|
|
12,059 |
|
Other income |
1,731 |
|
|
1,280 |
|
|
4,194 |
|
|
3,753 |
|
|
|
|
|
|
|
|
|
Total revenue |
180,123 |
|
|
156,060 |
|
|
510,397 |
|
|
381,867 |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Cost of services |
121,823 |
|
|
131,130 |
|
|
402,106 |
|
|
315,925 |
|
General and administrative expenses |
16,270 |
|
|
7,950 |
|
|
39,660 |
|
|
30,031 |
|
Depreciation and amortization |
4,674 |
|
|
4,920 |
|
|
14,004 |
|
|
13,793 |
|
Provision for doubtful accounts |
— |
|
|
— |
|
|
— |
|
|
(1,363) |
|
Impairment of intangibles |
— |
|
|
1,994 |
|
|
— |
|
|
1,994 |
|
|
|
|
|
|
|
|
|
Total expenses |
142,767 |
|
|
145,994 |
|
|
455,770 |
|
|
360,380 |
|
|
|
|
|
|
|
|
|
Income from operations |
37,356 |
|
|
10,066 |
|
|
54,627 |
|
|
21,487 |
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
|
|
|
|
|
|
Income from equity method investments |
403 |
|
|
2,054 |
|
|
3,291 |
|
|
1,162 |
|
Gain on sale of equity method investment |
— |
|
|
— |
|
|
99,647 |
|
|
— |
|
Interest expense |
(2,466) |
|
|
(828) |
|
|
(8,007) |
|
|
(1,350) |
|
Interest income |
752 |
|
|
509 |
|
|
2,544 |
|
|
1,305 |
|
Other income |
130 |
|
|
2,620 |
|
|
1,514 |
|
|
2,832 |
|
|
|
|
|
|
|
|
|
Total other (expense) income, net |
(1,181) |
|
|
4,355 |
|
|
98,989 |
|
|
3,949 |
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
36,175 |
|
|
14,421 |
|
|
153,616 |
|
|
25,436 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
10,751 |
|
|
3,682 |
|
|
44,204 |
|
|
6,483 |
|
|
|
|
|
|
|
|
|
Net income |
25,424 |
|
|
10,739 |
|
|
109,412 |
|
|
18,953 |
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest |
8,711 |
|
|
7,035 |
|
|
81,603 |
|
|
11,564 |
|
|
|
|
|
|
|
|
|
Net income attributable to Apollo Medical Holdings, Inc. |
$ |
16,713 |
|
|
$ |
3,704 |
|
|
$ |
27,809 |
|
|
$ |
7,389 |
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
0.46 |
|
|
$ |
0.11 |
|
|
$ |
0.77 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
Earnings per share – diluted |
$ |
0.45 |
|
|
$ |
0.10 |
|
|
$ |
0.75 |
|
|
$ |
0.20 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
Equity –
Noncontrolling
Interest in APC
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
|
|
|
|
|
Common Stock Outstanding |
|
Additional
Paid-in Capital
|
|
|
Noncontrolling
Interest
|
|
Shareholders’
Equity
|
|
|
Shares |
|
Amount |
|
|
|
|
Balance at January 1, 2020 |
$ |
168,725 |
|
|
35,908,057 |
|
|
$ |
36 |
|
|
$ |
159,608 |
|
|
$ |
31,905 |
|
|
$ |
786 |
|
|
$ |
192,335 |
|
Net (loss) income |
(1,161) |
|
|
— |
|
|
— |
|
|
— |
|
|
4,052 |
|
|
95 |
|
|
4,147 |
|
Purchase of treasury shares |
— |
|
|
(16,897) |
|
|
— |
|
|
(301) |
|
|
— |
|
|
— |
|
|
(301) |
|
Purchase of noncontrolling interest |
(125) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for exercise of options and warrants |
— |
|
|
151,601 |
|
|
— |
|
|
722 |
|
|
— |
|
|
— |
|
|
722 |
|
Share-based compensation |
— |
|
|
— |
|
|
— |
|
|
1,058 |
|
|
— |
|
|
— |
|
|
1,058 |
|
Dividends |
(10,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at March 31, 2020 |
$ |
157,439 |
|
|
36,042,761 |
|
|
$ |
36 |
|
|
$ |
161,087 |
|
|
$ |
35,957 |
|
|
$ |
881 |
|
|
$ |
197,961 |
|
Net income |
73,667 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,044 |
|
|
291 |
|
|
7,335 |
|
Purchase of noncontrolling interest |
(126) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for vesting of restricted stock awards |
— |
|
|
24,453 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for exercise of options and warrants |
— |
|
|
242,299 |
|
|
— |
|
|
2,283 |
|
|
— |
|
|
— |
|
|
2,283 |
|
Share-based compensation |
— |
|
|
— |
|
|
— |
|
|
852 |
|
|
— |
|
|
— |
|
|
852 |
|
Cancellation of restricted stock awards |
— |
|
|
— |
|
|
— |
|
|
(236) |
|
|
— |
|
|
— |
|
|
(236) |
|
Dividends |
(20,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(347) |
|
|
(347) |
|
Balance at June 30, 2020 |
$ |
210,980 |
|
|
36,309,513 |
|
|
$ |
36 |
|
|
$ |
163,986 |
|
|
$ |
43,001 |
|
|
$ |
825 |
|
|
$ |
207,848 |
|
Net income |
8,522 |
|
|
— |
|
|
— |
|
|
— |
|
|
16,713 |
|
|
189 |
|
|
16,902 |
|
Purchase of noncontrolling interest |
(771) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for cashless exercise of warrants |
— |
|
|
66,517 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for exercise of options and warrants |
— |
|
|
399,787 |
|
|
1 |
|
|
4,019 |
|
|
— |
|
|
— |
|
|
4,020 |
|
Share-based compensation |
— |
|
|
— |
|
|
— |
|
|
648 |
|
|
— |
|
|
— |
|
|
648 |
|
Dividends |
(20,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at September 30, 2020 |
$ |
198,731 |
|
|
36,775,817 |
|
|
$ |
37 |
|
|
$ |
168,653 |
|
|
$ |
59,714 |
|
|
$ |
1,014 |
|
|
$ |
229,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine
Equity –
Noncontrolling
Interest in APC
|
|
|
|
|
|
|
|
Retained
Earnings
|
|
|
|
|
|
|
Common Stock Outstanding |
|
Additional
Paid-in Capital
|
|
|
Noncontrolling
Interest
|
|
Shareholders’ Equity |
|
|
Shares |
|
Amount |
|
|
|
|
Balance at January 1, 2019 |
$ |
225,117 |
|
|
34,578,000 |
|
|
$ |
35 |
|
|
$ |
162,723 |
|
|
$ |
17,788 |
|
|
$ |
998 |
|
|
$ |
181,544 |
|
Net (loss) income |
(3,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
140 |
|
|
410 |
|
|
550 |
|
Purchase of treasury shares |
(40) |
|
|
(93,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Shares issued for exercise of options and warrants |
155 |
|
|
17,000 |
|
|
— |
|
|
140 |
|
|
— |
|
|
— |
|
|
140 |
|
Share-based compensation |
202 |
|
|
2,000 |
|
|
— |
|
|
143 |
|
|
— |
|
|
— |
|
|
143 |
|
Dividends |
(10,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at March 31, 2019 |
$ |
212,434 |
|
|
34,504,000 |
|
|
$ |
35 |
|
|
$ |
163,006 |
|
|
$ |
17,928 |
|
|
$ |
1,408 |
|
|
$ |
182,377 |
|
Net income |
6,896 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,545 |
|
|
223 |
|
|
3,768 |
|
Shares issued for exercise of options and warrants |
50 |
|
|
135,000 |
|
|
— |
|
|
758 |
|
|
— |
|
|
— |
|
|
758 |
|
Share-based compensation |
203 |
|
|
— |
|
|
— |
|
|
128 |
|
|
— |
|
|
— |
|
|
128 |
|
Dividends |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(942) |
|
|
(942) |
|
Balance at June 30, 2019 |
$ |
219,583 |
|
|
34,639,000 |
|
|
$ |
35 |
|
|
$ |
163,892 |
|
|
$ |
21,473 |
|
|
$ |
689 |
|
|
$ |
186,089 |
|
Net income |
6,285 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,704 |
|
|
751 |
|
|
4,455 |
|
Shares issued for exercise of options and warrants |
— |
|
|
184,000 |
|
|
— |
|
|
1,502 |
|
|
— |
|
|
— |
|
|
1,502 |
|
Share-based compensation |
202 |
|
|
— |
|
|
— |
|
|
128 |
|
|
— |
|
|
— |
|
|
128 |
|
Stock subscriptions |
550 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock issued in connection with a business combination |
414 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Cost related to issuance of preferred shares |
(804) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Dividends |
(50,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at September 30, 2019 |
$ |
176,230 |
|
|
34,823,000 |
|
|
$ |
35 |
|
|
$ |
165,522 |
|
|
$ |
25,177 |
|
|
$ |
1,440 |
|
|
$ |
192,174 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Cash flows from operating activities |
|
|
|
Net income |
$ |
109,412 |
|
|
$ |
18,953 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
Depreciation and amortization |
14,004 |
|
|
13,793 |
|
Impairment of intangibles |
— |
|
|
1,994 |
|
Amortization of debt issuance costs |
1,004 |
|
|
— |
|
Provision for doubtful accounts |
— |
|
|
(1,363) |
|
Share-based compensation |
2,558 |
|
|
1,006 |
|
Unrealized loss (gain) from investment in equity securities |
23 |
|
|
(6) |
|
Income from equity method investments |
(3,291) |
|
|
(1,162) |
|
Gain on sale of equity method investments |
(99,647) |
|
|
— |
|
Gain on loan assumption |
— |
|
|
(2,250) |
|
Deferred tax |
(6,137) |
|
|
(186) |
|
Changes in operating assets and liabilities, net of business combinations: |
|
|
|
Receivables, net |
(6,953) |
|
|
1,904 |
|
Receivables, net – related parties |
6,618 |
|
|
5,864 |
|
Other receivables |
12,898 |
|
|
(13,719) |
|
Prepaid expenses and other current assets |
(1,804) |
|
|
(2,914) |
|
Right-of-use assets |
2,601 |
|
|
1,877 |
|
Other assets |
(5,090) |
|
|
(525) |
|
Accounts payable and accrued expenses |
12,644 |
|
|
4,868 |
|
Fiduciary accounts payable |
1,958 |
|
|
196 |
|
Medical liabilities |
(1,566) |
|
|
(6,226) |
|
Income taxes payable |
11,642 |
|
|
(10,229) |
|
Operating lease liabilities |
(2,110) |
|
|
(1,790) |
|
Net cash provided by operating activities |
48,764 |
|
|
10,085 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
Payments for business acquisition, net of cash acquired |
— |
|
|
(49,403) |
|
Proceeds from repayment of loans receivable – related parties |
16,500 |
|
|
— |
|
Advances on loans receivable |
— |
|
|
(7,425) |
|
Purchases of marketable securities |
(1,793) |
|
|
(20) |
|
Purchases of investments – equity method |
(500) |
|
|
(2,949) |
|
Proceeds from sale of equity method investment |
52,743 |
|
|
— |
|
Purchases of property and equipment |
(553) |
|
|
(807) |
|
Dividend received |
— |
|
|
240 |
|
Net cash provided by (used in) investing activities |
66,397 |
|
|
(60,364) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
Repayment of bank loan and lines of credit |
— |
|
|
(52,640) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
Dividends paid |
(50,133) |
|
|
(60,670) |
|
Repayment of term loan |
(7,125) |
|
|
— |
|
Payment of finance lease obligations |
(78) |
|
|
(76) |
|
Proceeds from the exercise of stock options and warrants |
6,552 |
|
|
2,400 |
|
Repurchase of shares |
(1,559) |
|
|
(40) |
|
Borrowings on line of credit |
— |
|
|
289,600 |
|
Proceeds from common stock offering |
— |
|
|
755 |
|
Cost of debt and equity issuance costs |
— |
|
|
(5,622) |
|
|
|
|
|
Net cash (used in) provided by financing activities |
(52,343) |
|
|
173,707 |
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash |
62,818 |
|
|
123,428 |
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
104,010 |
|
|
107,637 |
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
$ |
166,828 |
|
|
$ |
231,065 |
|
|
|
|
|
Supplementary disclosures of cash flow information: |
|
|
|
Cash paid for income taxes |
$ |
37,900 |
|
|
$ |
17,900 |
|
Cash paid for interest |
6,961 |
|
|
1,000 |
|
|
|
|
|
Supplemental disclosures of non-cash investing and financing activities |
|
|
|
Dividend declared included in dividend payable |
$ |
485 |
|
|
$ |
271 |
|
Deferred tax liability adjustment to goodwill |
$ |
— |
|
|
$ |
11,540 |
|
Deferred tax liability adjustment related to warrant exercises |
$ |
473 |
|
|
$ |
— |
|
APC stock issued in exchange for AMG |
$ |
— |
|
|
$ |
414 |
|
Preferred shares received from sale of equity method investment |
$ |
36,179 |
|
|
$ |
— |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total amounts of cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
2019 |
|
2018 |
Cash and cash equivalents |
$ |
103,189 |
|
|
$ |
106,892 |
|
Restricted cash – current |
75 |
|
|
— |
|
Restricted cash – non-current |
746 |
|
|
745 |
|
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |
$ |
104,010 |
|
|
$ |
107,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
2020 |
|
2019 |
Cash and cash equivalents |
$ |
166,082 |
|
|
$ |
230,299 |
|
Restricted cash – current |
— |
|
|
20 |
|
Restricted cash – non-current |
746 |
|
|
746 |
|
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |
$ |
166,828 |
|
|
$ |
231,065 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
APOLLO MEDICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business
Overview
Apollo Medical Holdings, Inc. ("ApolloMed") together with its affiliated physician groups and consolidated entities (collectively, the “Company”) is a leading physician-centric, technology-enabled healthcare management company. Leveraging its proprietary population health management and healthcare delivery platform, ApolloMed operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner.
Headquartered in Alhambra, California, ApolloMed's subsidiaries include management services organizations ("MSOs"), affiliated independent practice associations ("IPAs") and a Next Generation Accountable Care Organization ("NGACO"). Network Medical Management, Inc. ("NMM") and Apollo Medical Management, Inc. ("AMM") are the administrative and managerial services companies for the affiliated physician owned professional corporations that contract with independent physicians to deliver medical services in-office and virtually under the Allied Physicians of California, a Professional Medical Corporation d.b.a. Allied Pacific of California IPA ("APC"), Alpha Care Medical Group, Inc. and Accountable Health Care IPA brands. These affiliates are supported by ApolloMed Hospitalists, a Medical Corporation ("AMH") and Southern California Heart Centers, a Medical Corporation ("SCHC"). The Company's NGACO operates under the APA ACO, Inc. ("APAACO") brand and participates in the Centers for Medicare & Medicaid Services program that allows provider groups to assume higher levels of financial risk and potentially achieve a higher reward from participation in the program's attribution-based risk sharing model.
The Company provides care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups and health plans. The Company’s physician network consists of primary care physicians, specialist physicians, and hospitalists.
NMM was formed in 1994 as an MSO for the purposes of providing management services to medical companies and IPAs. The management services primarily include billing, collection, accounting, administration, quality assurance, marketing, compliance, and education. Following a business combination, NMM became a wholly-owned subsidiary of ApolloMed in December 2017.
APC was incorporated in 1992, for the purpose of arranging healthcare services as an IPA. APC has contracts with various health maintenance organizations (“HMOs”) and other licensed healthcare service plans as defined in the California Knox-Keene Health Care Service Plan Act of 1975. Each HMO negotiates a fixed amount per member per month (“PMPM”) that is to be paid to APC. In return, APC arranges for the delivery of healthcare services by contracting with physicians or professional medical corporations for primary care and specialty care services. APC assumes the financial risk of the cost of delivering healthcare services in excess of the fixed amounts received. Some of the risk is transferred to the contracted physicians or professional corporations. The risk is also minimized by stop-loss provisions in contracts with HMOs.
In July 1999, APC entered into an amended and restated management and administrative services agreement with NMM (the initial management services agreement was entered into in 1997) for an initial fixed term of 30 years. In accordance with relevant accounting guidance, APC is determined to be a variable interest entity (“VIE”) of the Company as NMM is the primary beneficiary with the ability to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance through its majority representation on the APC Joint Planning Board; therefore APC is consolidated by NMM.
AP-AMH Medical Corporation (“AP-AMH”) was formed in May 2019, as a designated shareholder professional corporation. Dr. Thomas Lam, a shareholder, and the Chief Executive Officer and Chief Financial Officer of APC and Co-Chief Executive Officer of ApolloMed, is the sole shareholder of AP-AMH. ApolloMed makes all the decisions on behalf of AP-AMH and funds and receives all the distributions from its operations. ApolloMed has the rights to receive benefits from the operations of AP-AMH and has the option, but not the obligation, to cover losses. Therefore, AP-AMH is controlled and consolidated by ApolloMed as the primary beneficiary of this VIE.
In September 2019, ApolloMed completed the following series of transactions with its affiliates, AP-AMH and APC;
1.ApolloMed loaned AP-AMH $545.0 million pursuant to a 10-year secured loan agreement (the “AP-AMH Loan”). The loan bears interest at a rate of 10% per annum simple interest, is not prepayable (except in certain limited circumstances), requires quarterly payments of interest only in arrears, and is secured by a first priority security interest in all of AP-AMH’s assets, including the shares of APC Series A Preferred Stock purchased by AP-AMH, as described below. To the extent that AP-AMH is unable to make any interest payment when due because it has received dividends on the APC Series A Preferred Stock insufficient to pay in full such interest payment, then the outstanding principal amount of the loan will be increased by the amount of any such accrued but unpaid interest, and any such increased principal amounts will bear interest at the rate of 10.75% per annum simple interest.
2.AP-AMH purchased 1,000,000 shares of APC Series A Preferred Stock for aggregate consideration of $545.0 million in a private placement. Under the terms of the APC Certificate of Determination of Preferences of Series A Preferred Stock (the “Certificate of Determination”), AP-AMH is entitled to receive preferential, cumulative dividends that accrue on a daily basis and that are equal to the sum of (i) APC’s net income from healthcare services (as defined in the Certificate of Determination), plus (ii) any dividends received by APC from certain of APC’s affiliated entities, less (iii) any Retained Amounts (as defined in the Certificate of Determination).
3.APC purchased 15,015,015 shares of ApolloMed’s common stock for total consideration of $300.0 million in private placement. In connection therewith, ApolloMed granted APC certain registration rights with respect to ApolloMed’s common stock that APC purchased, and APC agreed that APC votes in excess of 9.99% of ApolloMed’s then outstanding shares will be voted by proxy given to ApolloMed’s management, and that those proxy holders will cast the excess votes in the same proportion as all other votes cast on any specific proposal coming before ApolloMed’s stockholders.
4.ApolloMed licensed to AP-AMH the right to use certain trade names for certain specified purposes for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The license fee is payable out of any Series A Preferred Stock dividends received by AP-AMH from APC.
5.Through its subsidiary, NMM, the Company agreed to provide certain administrative services to AP-AMH for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The administrative fee also is payable out of any APC Series A Preferred Stock dividends received by AP-AMH from APC.
As part of the series of transaction, APC and AP-AMH entered into Second Amendment to Series A Preferred Stock Purchase Agreement clarifying the term excluded assets ("Excluded Assets"). Excluded Assets means (i) assets received from the sale of shares of the Series A Preferred equal to the Series A Purchase Price, (ii) the assets of the Company that are not Healthcare Services Assets, including the Company’s equity interests in Universal Care, Inc., Apollo Medical Holdings, Inc., and any entity that is primarily engaged in the business of owning, leasing, developing or otherwise operating real estate, (iii) any assets acquired with the proceeds of the sale, assignment or other disposition of any of the assets described in clauses (i) or (ii), and (iv) any proceeds of the assets described in clauses (i), (ii) and (iii).