November 7, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			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)


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)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

AMEH

Nasdaq Capital Market

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.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

As of October 28, 2022, there were 56,723,447 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


		PAGE
	Introductory Note	5
	Note About Forward-Looking Statements	5

	PART I FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	5
	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	6
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	9
	Consolidated Statements of Mezzanine and Stockholders ’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	10
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	13
	Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	73
Item 4.	Controls and Procedures	74

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76

Glossary

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:


Accountable Health Care			Accountable Health Care IPA, a Professional Medical Corporation
AHMC			AHMC Healthcare Inc.
AIPBP			All-Inclusive Population-Based Payments
AKM			AKM Medical Group, Inc.
Alpha Care			Alpha Care Medical Group, Inc.
AMG			AMG, a Professional Medical Corporation
AMG Properties			AMG Properties, LLC
AMH			ApolloMed Hospitalists, a Medical Corporation
AMM			Apollo Medical Management, Inc.
AP-AMH			AP-AMH Medical Corporation
AP-AMH 2			AP-AMH 2 Medical Corporation
APAACO			APA ACO, Inc.
APC			Allied Physicians of California, a Professional Medical Corporation
APCMG			Access Primary Care Medical Group
APC-LSMA			APC-LSMA Designated Shareholder Medical Corporation
BAHA			Bay Area Hospitalist Associates
CAIPA MSO			CAIPA MSO, LLC
CDSC			Concourse Diagnostic Surgery Center, LLC
CMS			Centers for Medicare & Medicaid Services
DMHC			California Department of Managed Healthcare
DMG			Diagnostic Medical Group of Southern California
GPDC			Global and Professional Direct Contracting
HSMSO			Health Source MSO Inc., a California corporation
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, LLC
NGACO			Next Generation Accountable Care Organization
NMM			Network Medical Management, Inc.
PMIOC			Pacific Medical Imaging and Oncology Center, Inc.
SCHC			Southern California Heart Centers
Sun Labs			Sun Clinical Laboratories
Tag 6			Tag-6 Medical Investments Group, LLC
Tag 8			Tag-8 Medical Investments Group, LLC
UCAP			Universal Care Acquisition Partners, LLC
UCI			Universal Care, Inc.
VIE			variable interest entity
ZLL			ZLL Partners, LLC

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 Report, including statements describing the participation of APA ACO, Inc. (“APAACO”) in the Next Generation Accountable Care Organization (“NGACO”) model, or the Global and Professional Direct Contracting (“GPDC”) 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, any statements about our business, financial condition, operating results, plans, objectives, expectations, and intentions, any projections of earnings, revenue, EBITDA, Adjusted EBITDA, or other financial items, such as projected payments from CMS and our future liquidity; 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, GPDC 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, 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2022, 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

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


	September 30, 2022		December 31, 2021
	(Unaudited)
Assets

Current assets
Cash and cash equivalents	$	184,016	$	233,097
Investments in marketable securities	33,281		53,417
Receivables, net	69,386		10,608
Receivables, net – related parties	91,208		69,376
Income taxes receivable	12,224		—
Other receivables	41,799		9,647
Prepaid expenses and other current assets	11,702		18,637
Loan receivable – related party	—		4,000

Total current assets	443,616		398,782

Non-current assets
Land, property, and equipment, net	104,149		53,186
Intangible assets, net	73,231		82,807
Goodwill	257,482		253,039
Loans receivable	518		569
Loan receivable - related party	2,125		—
Investments in other entities – equity method	38,954		41,715
Investments in privately held entities	896		896
Operating lease right-of-use assets	16,338		15,441
Other assets	6,097		5,928

Total non-current assets	499,790		453,581

Total assets (1)	$	943,406	$	852,363

Liabilities, mezzanine equity, and stockholders’ equity

Current liabilities

Accounts payable and accrued expenses	$	47,366	$	43,951
Fiduciary accounts payable	6,506		10,534
Medical liabilities	94,884		55,783
Income taxes payable	—		652
Dividend payable	556		556
Finance lease liabilities	509		486
Operating lease liabilities	3,208		2,629


	September 30, 2022		December 31, 2021
	(Unaudited)
Current portion of long-term debt	3,162		780

Total current liabilities	156,191		115,371

Non-current liabilities
Deferred tax liability	4,701		9,127
Finance lease liabilities, net of current portion	931		973
Operating lease liabilities, net of current portion	16,143		13,198
Long-term debt, net of current portion and deferred financing costs	199,150		182,917
Other long-term liabilities	12,964		14,777

Total non-current liabilities	233,889		220,992

Total liabilities (1)	390,080		336,363

Commitments and contingencies (Note 12)

Mezzanine equity
Non-controlling interest in Allied Physicians of California, a Professional Medical Corporation	39,820		55,510

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, 44,884,522 and 44,630,873 shares issued and outstanding, excluding 11,175,702 and 10,925,702 treasury shares, as of September 30, 2022 and December 31, 2021, respectively	45		45
Additional paid-in capital	315,115		310,876
Retained earnings	195,278		143,629
	510,438		454,550

Non-controlling interest	3,068		5,940

Total stockholders’ equity	513,506		460,490

Total liabilities, mezzanine equity, and stockholders’ equity	$	943,406	$	852,363

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 VIEs. The consolidated balance sheets include total assets that can be used only to settle obligations of the Company’s consolidated VIEs totaling $590.7 million and $567.0 million as of September 30, 2022 and December 31, 2021, 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 $129.2 million and $91.7 million as of September 30, 2022 and December 31, 2021, respectively. The VIE balances do not include $435.9 million of investment in affiliates and $37.8 million of amounts due from affiliates as of September 30, 2022 and $802.8 million of investment in affiliates and $6.6 million of amounts due from affiliates as of December 31, 2021 as these are eliminated upon consolidation and not presented within the consolidated balance sheets. See Note 16 — “Variable Interest Entities (VIEs)” for further detail.

APOLLO MEDICAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue
Capitation, net	$	227,571	$	149,059	$	677,253	$	438,350
Risk pool settlements and incentives	64,849		59,923		101,717		94,146
Management fee income	10,030		9,652		30,487		26,345
Fee-for-service, net	12,859		7,260		35,694		14,968
Other income	1,692		1,223		4,804		5,006

Total revenue	317,001		227,117		849,955		578,815

Operating expenses
Cost of services, excluding depreciation and amortization	240,768		147,473		691,566		424,303
General and administrative expenses	21,388		21,813		53,224		45,476
Depreciation and amortization	4,754		4,671		13,480		13,105

Total expenses	266,910		173,957		758,270		482,884

Income from operations	50,091		53,160		91,685		95,931

Other (expense) income
Income (loss) from equity method investments	1,452		132		4,397		(3,680)
Gain on sale of equity method investment	—		2,193		—		2,193
Interest expense	(2,422)		(967)		(5,348)		(4,343)
Interest income	223		420		690		1,331
Unrealized (loss) gain on investments	(6,763)		(60,943)		(17,591)		22,826
Other (expense) income	(1,318)		500		2,328		(14,080)

Total other (expense) income, net	(8,828)		(58,665)		(15,524)		4,247

Income (loss) before provision for income taxes	41,263		(5,505)		76,161		100,178

Provision for (benefit from) income taxes	13,867		(120)		26,101		31,575

Net income (loss)	27,396		(5,385)		50,060		68,603

Net income (loss) attributable to non-controlling interest	1,410		(39,664)		(1,589)		8,515

Net income attributable to Apollo Medical Holdings, Inc.	$	25,986	$	34,279	51,649		$	60,088

Earnings per share – basic	$	0.58	$	0.77	$	1.15	$	1.38

Earnings per share – diluted	$	0.56	$	0.74	$	1.12	$	1.33

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 – Non-controlling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Non-controlling Interest		Stockholders’ Equity
			Shares	Amount
Balance at January 1, 2022	$	55,510	44,630,873	$	45	$	310,876	$	143,629	$	5,940	$	460,490
Net (loss) income	(3,129)		—	—		—		14,264		938		15,202
Purchase of non-controlling interest	—		—	—		—		—		(200)		(200)
Sale of non-controlling interest	—		—	—		—		—		36		36
Share buy back	(230)		—	—		—		—		—		—
Shares issued for vesting of restricted stock awards	—		81,779	—		—		—		—		—
Shares issued for exercise of options and warrants	—		124,735	—		1,573		—		—		1,573
Share-based compensation	—		—	—		3,055		—		—		3,055
Issuance of shares for business acquisition	—		18,756	—		1,000		—		—		1,000
Cancellation of restricted stock awards	—		(11,084)	—		(457)		—		—		(457)
Dividends	—		—	—		—		—		(1,178)		(1,178)
Balance at March 31, 2022	$	52,151	44,845,059	$	45	$	316,047	$	157,893	$	5,536	$	479,521
Net (loss) income	(2,154)		—	—		—		11,399		1,346		12,745
Shares issued for vesting of restricted stock awards	—		108,933	—		(253)		—		—		(253)
Shares issued for exercise of options and warrants	—		15,718	—		165		—		—		165
Purchase of treasury shares	—		(250,000)	—		(9,250)		—		—		(9,250)
Share-based compensation	—		—	—		3,920		—		—		3,920

Investment in non-controlling interest	—		—	—		—		—		371		371
Dividends	(10,000)		—	—		—		—		(1,374)		(1,374)
Balance at June 30, 2022	$	39,997	44,719,710	$	45	$	310,629	$	169,292	$	5,879	$	485,845
Net (loss) income	(9)		—	—		—		25,986		1,419		27,405
Purchase of non-controlling interest	—		—	—		—		—		(4,138)		(4,138)
Sale of non-controlling interest	—		—	—		—		—		28		28
Share buy back	(168)		—	—		—		—		—		—
Shares issued for vesting of restricted stock awards	—		2,570	—		(62)		—		—		(62)
Shares issued for exercise of options and warrants	—		162,242	—		1,046		—		—		1,046
Share-based compensation	—		—	—		3,502		—		—		3,502
Dividends	—		—	—		—		—		(120)		(120)
Balance at September 30, 2022	$	39,820	44,884,522	$	45	$	315,115	$	195,278	$	3,068	$	513,506


	Mezzanine Equity – Non-controlling Interest in APC							Retained Earnings
			Common Stock Outstanding			Additional Paid-in Capital				Non-controlling Interest		Stockholders’ Equity
			Shares	Amount
Balance at January 1, 2021	$	114,237	42,249,137	$	42	$	261,011	$	69,771	$	87	$	330,911
Net income	760		—	—		—		13,151		547		13,698
Purchase of non-controlling interest	(150)		—	—		—		—		(75)		(75)
Sale of non-controlling interest	—		—	—		—		—		37		37
Shares issued for vesting of restricted stock awards	—		7,689	—		—		—		—		—
Shares issued for exercise of options and warrants	—		421,002	1		4,255		—		—		4,256
Purchase of treasury shares	—		(34,158)	—		(342)		—		—		(342)
Share-based compensation	—		—	—		1,346		—		—		1,346
Cancellation of restricted stock awards	—		(5,281)	—		(144)		—		—		(144)
Balance at March 31, 2021	$	114,847	42,638,389	$	43	$	266,126	$	82,922	$	596	$	349,687
Net income	46,859		—	—		—		12,658		13		12,671
Sale of non-controlling interest	150		—	—		—		—		—		—
Sale of shares by non-controlling interest	—		1,638,045	1		40,132		—		—		40,133
Shares issued for vesting of restricted stock awards	—		22,284	—		—		—		—		—
Shares issued for exercise of options and warrants	—		53,504	—		561		—		—		561
Purchase of treasury shares	—		(100,000)	—		(2,450)		—		—		(2,450)
Share-based compensation	—		—	—		1,556		—		—		1,556
Cancellation of restricted stock awards	—		(5,426)	—		(189)		—		—		(189)
Investment in non-controlling interest	—		—	—		—		—		3,769		3,769
Dividends	(20,000)		—	—		—		—		(1,156)		(1,156)
Balance at June 30, 2021	$	141,856	44,246,796	$	44	$	305,736	$	95,580	$	3,222	$	404,582
Net income	(40,356)		—	—		—		34,279		692		34,971
Shares issued for exercise of options and warrants	—		190,254	—		1,785		—		—		1,785
Purchase of treasury shares	—		(40,000)	—		(2,947)		—		—		(2,947)
Share-based compensation	—		—	—		1,420		—		—		1,420
Acquisition of noncontrolling interest	—		—	—		—		—		500		500
Noncontrolling interest capital charge	—		—	—		—		—		10		10
Dividends	(10,000)		—	—		—		—		—		—
Balance at September 30, 2021	$	91,500	44,397,050	$	44	$	305,994	$	129,859	$	4,424	$	440,321

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,
	2022		2021
Cash flows from operating activities
Net income	$	50,060	$	68,603
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,480		13,105
Amortization of debt issuance cost	703		900
Share-based compensation	10,477		4,322
Gain on sale of investments	(2,272)		(2,193)
Unrealized loss (gain) on investments	21,894		(22,826)
(Income) loss from equity method investments	(4,397)		3,680
Impairment of beneficial interest	—		15,723
Unrealized (gain) loss on interest rate swaps	(4,302)		1,069
Deferred tax	(2,330)		6,847
Other	901		189
Changes in operating assets and liabilities, net of business combinations:
Receivables, net	(58,325)		(10,686)
Receivables, net – related parties	(21,832)		(4,367)
Other receivables	(31,988)		(1,477)
Prepaid expenses and other current assets	3,228		5,064
Right-of-use assets	2,843		2,440
Other assets	(682)		(954)
Accounts payable and accrued expenses	765		14,362
Fiduciary accounts payable	(4,029)		(815)
Medical liabilities	37,491		(7,633)
Income taxes payable	(14,555)		(300)
Operating lease liabilities	(3,059)		(2,528)
Other long-term liabilities	3,118		—
Net cash (used in) provided by operating activities	(2,811)		82,525

Cash flows from investing activities
Payments for business acquisition, net of cash acquired	(5,614)		(2,575)
Proceeds from repayment of loans receivable – related parties	4,051		41
Purchase of marketable securities	(1,750)		(1,009)
Purchase of investment – equity method	—		(13,384)
Proceeds from sale of equity method investment	—		6,375
Purchases of property and equipment	(22,054)		(16,420)
Cash received from consolidation of VIE	—		3,322
Proceeds from sale of marketable securities	6,438		1,106
Distribution from investment - equity method	400		—
Contribution to investment - equity method	(1,785)		—
Net cash used in investing activities	(20,314)		(22,544)

Cash flows from financing activities


	Nine Months Ended September 30,
	2022		2021
Dividends paid	(12,676)		(31,089)
Repayment of long-term debt	(3,714)		(238,254)
Payment of finance lease obligations	(417)		(81)
Proceeds from the exercise of stock options and warrants	2,784		6,601
Repurchase of shares	(9,648)		(5,739)
Proceeds from sale of non-controlling interest	67		48
Purchase of non-controlling interest	(4,338)		(75)
Borrowings on loans	1,986		180,000
Proceeds from sale of shares	—		40,133
Payment of debt issuance costs	—		(727)
Net cash used in financing activities	(25,956)		(49,183)

Net (decrease) increase in cash, cash equivalents and restricted cash	(49,081)		10,798

Cash, cash equivalents, and restricted cash, beginning of period	233,097		193,970

Cash, cash equivalents, and restricted cash, end of period	$	184,016	$	204,768

Form: 10-Q

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