Apollo Medical Holdings, Inc. Reports Third Quarter 2023 Results

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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. 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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