Q1 2021 Apollo Medical Holdings Inc Earnings Call
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Greetings and welcome to the Apollo Medical Holdings first quarter, 2000, and and 'twenty, One financial results Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If you'd like to ask a question you could queue up now by pressing star one on your telephone keypad and you can press star two to remove yourself from the queue.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to our host Carolyne Sohn.
Of the equity group. Thank you you may begin.
Thank you operator, and Hello, everyone. Thank you for joining us on the press release announcing Apollo Medical Holdings, Inc, and felt for the first.
First quarter ended March 31, 2021, and it's available at the investors section of the company's website at Www He got a polymer.
You May also email us and investors at a poll on that that if you would.
A copy.
And by some additional background on these results. The company has made a supplemental deck available on our website. A replay of this broadcast will also be made available at Apollo that bunch site. After the conclusion of this call.
Before we get started I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act at 1995 day.
These forward looking statements can be identified by terms such as anticipate believe expect I can share.
<unk> plan outlook and will and include among other things and statements regarding the company's guidance for the second quarter ending June 30th 2021 and for the year ending December 31, 2021 continued growth acquisition strategy.
To deliver sustainable long term value.
To respond to the changing environment operational focus and strategic growth plans and merger integration efforts and.
That said, the 2020 novel, Coronavirus, or COVID-19, pandemic on our business operations and financial results.
Although the company believes that the expectations, reflecting and forward looking things are reasonable as of today. Those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected there can be no assurance that those expectations will prove to be correct.
Information about the risks associated with investing and Apollo that is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision.
The company does not assume any obligation to update any forward looking statements as a result of new information future events changes and market conditions or otherwise except as required by law.
Regarding the disclaimer language I would also like here for you for flight to go to a conference call presentation for further information.
For those of you following along with the accompanying supplement there is an overview of the company on slide three.
On today's call are attempting to get executive Chairman and co CEO, Dr kind of standard will provide an overview of the first quarter of 2021 highlight.
The company's Chief operating Officer, and Chief Technology Officer, Brandon and soon will then discuss the latest operational developments and Chief Financial Officer, Eric and will follow with a review of a pole and led to results for first quarter 2021.
And we'll conclude the remarks with an update on the company's outlook and long term growth strategy before opening the floor for questions.
And I'll turn the call over to Apollo match, and thank you for Garrett Nichols CEO Dr. Kennedy and please go ahead Doctor said.
Yeah.
Good afternoon, and thank you.
And joining us to discuss.
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With that I'll turn it on.
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Thank you Dr. Sam.
We continue to innovate when it comes to our technology platform as I mentioned on our last call Apollo Medicine has invested heavily in the development of our fully integrated proprietary software platform, including solutions for Tech enabled care coordination population health and risk management revenue cycle management and more.
The Apollo platform creates a powerful virtuous cycle for us.
Which results in better patient care, and measurable improvement and clinical outcomes and reduce the total cost of care.
Our industry, leading data and moat and expertise and machine learning allow us to test ideas faster build better models and perform more accurate risk stratification and adjustment than our competitors do.
This leads to more valuable and more actionable insights data and tools for our providers and therefore better outcomes for our patients.
And turn more and more providers are encouraged to participate and our value based care delivery model, which further widened our lead and both product and and data.
And we're feeding the polymer flywheel by continuing to grow on a provider network aggressively both organically and through M&A activity and by Iterating rapidly with our team of top technologists on the polymer care platform.
This platform, along with our experience and taking risks and scaling profitably across diverse geographies and populations and California will enable us to continue growing rapidly throughout the country, helping providers takeaway successfully and perform value based care to ensure better outcomes for our patients.
Apollo made and its partner physicians now serve members and nine of the top 25 counties and the U S by population growth.
And to bring high quality health care to communities across the nation is just beginning.
We are seeing many opportunities and our pipeline and are excited at the prospect and bringing our highly scalable model to a much larger population over the course of this year.
Operationally, we have set a strong foundation for the rapid growth strategy, we set forth for the company and 2021 and.
And as demonstrated in Q1, our technology solutions continue to generate millions of dollars and savings and annual operating expenses for Parliament.
And we believe that our platform will continue to drive operating margin improvements and new products ramp on line and as we expand our member population.
With that I'll turn it over to Eric true view, our financial results.
Thank you Brandon we achieved strong results and the first quarter of 2021 reporting total revenue of $176 1 million, a 7% increase from the $165 $1 million and the prior quarter and a doctor Sam mentioned earlier. This was driven by two things number one and additional for.
$3 million and capitation revenue, primarily as a result of organic membership growth and ally Pacific IPA and all for care Medical group and number two and $6 8 million dollar and increase.
And the risk for settlement and incentives revenue driven by reduced utilization of our hospital partners due to the suspension of non emergency medical procedures as a result of the COVID-19 pandemic.
Capitation revenue of $144 $7 million represented 82% of our total revenue compared to 85% on total revenue and the first quarter on 2020.
Our membership remained at approximately $1 1 million managed lives at the end of the first quarter ended March 31 2021.
Taking a closer look at our membership.
529000 lives or approximately half of our members were fully backdated through our consolidated IPA.
Total operating expenses decreased about 4% to $154 $3 million and the first quarter on 2021.
That was from $167 million and the prior year period.
This was primarily a result of a $3 $6 million decrease and cost of services driven by a reduction and claims expenditures incurred by our Nextgen ACO as.
And as well as a decrease general and administrative expenses of $2 $4 million, primarily attributable to a reduction and third party consulting and professional costs.
Due to efficiencies gained from the company's technology platform.
And the result of the increase in net revenue and decreased operating expenses net.
Net income attributable to Apollo and <unk> was $13 $2 million and increase of 225% from the $4 $1 million and the first quarter on 2020.
Our earnings per share on a diluted basis was <unk> 30 per share up 173% from 11 cents per share and the prior year period.
Adjusted EBITDA, which excludes the impact of equity method investments and recently acquired IPA and other income and provider bonus payment.
$29 2 million compared to $13 $8 million and the prior year period.
111% increase year over year, driven by the significant increase and net income.
Turning over to the balance sheet, we remain well capitalized and well positioned to execute on our growth initiatives.
We ended the first quarter with 205 $9 million of cash and cash equivalents.
That compares to $193 $5 million at the end of 2020.
Our working capital increased to $243 9 million.
From $223 $6 million at the end of 2020 and.
And total stockholders' equity increased to $349 7 million at March 31, 2021 for.
$339 million at December 31, 20 for one.
Moving further down the balance sheet total debt at the end of the first quarter was $243.3 million.
We are safely and compliance with our debt covenants with consolidated total net leverage ratio of one point for four times.
And bear to a maximum permitted 350 times.
And consolidated interest coverage ratio of 18, two one times compared to a minimum permitted three to five times.
I would now like to turn it back over to Brandon for a discussion of our growth strategy and outlook for the remainder of 2021 random.
Thanks, Eric.
We remain committed to our previously stated goal of growing our member population to approximately 2 million lives by the end of 2021, which will primarily be driven by M&A.
The marketplace is very active these days and we are but we are seeing a healthy set of opportunities for us and we're confident that we will be able to find like minded and physicians and physician groups that we can onboard into a risk bearing model through the Apollo platform.
We anticipate on closing the type of MSR transaction over the course of the next few weeks and we are in active discussions with organizations. We're excited about changing health care with us.
That said, we are pleased to be reiterating our previously provided guidance for 2020, one which is listed on slide 10 of our supplement.
We're also providing the following guidance ranges for the second quarter, ending June 30th 2020, one and an effort to provide greater visibility into how we foresee the fluctuations and utilization returning to pre pandemic levels.
We anticipate.
Revenues of between 163 and $173 million.
Net income of $6 three to $12 $3 million.
Net income attributable to <unk> of $6 five to $10 $5 million.
EBITDA of $15 6 million to $21 $6 million.
And adjusted EBITDA of $20 4 million to $24 $4 million.
Please keep in mind that these guidance metrics do not consider any potential acquisitions or other major business transactions and we may complete over the course of this year.
As any material developments arise, we will be share to update the market and reevaluate guidance as appropriate.
We strongly believe and the virtuous cycle, we've created through the palm and care management and delivery platform and and the value of improved clinical outcomes that result from that platform.
We look forward to serving more members of local communities across the nation and the months to come.
With that operator, let's open it up for Q&A.
Okay.
And at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is and the question queue.
You May press Star can you followed by the number two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Once again to ask a question press Star one we'll pause for a moment to pull for questions. Thank you.
Our first question comes from Jean Manheimer with Colliers Securities. Please state your question.
Thanks, Good afternoon, congrats on the good quarter here. My first question just relates to that risk pool. Our revenue you know the numbers were obviously favorable as you called out due to utilization trends that worked in your favor due to COVID-19.
And that's expected to normalize can you give us a sense of your timing on when we kind of returned on more normal utilization.
Yeah, Hey, gene and How're you doing it for Ericsson here so.
Thanks for the question and and that's also why we provided the guidance for the second quarter, you'll see that our revenue for the second quarter is is guiding to a midpoint that's lower than the first quarter and a lot of that is just due to the bump and the the.
And the risk pool that we recognize that this quarter.
Basically as you know.
Sure and risk pool, and and there was a reduction and the utilization at the hospitals, which which dropped down to more revenue from us coming from that risk pool settlement, but we expect that to normalize back to the pre COVID-19 levels and me.
And the second quarter, there and so that's why that's why you see the guidance for the second quarter.
Okay very helpful to have that thanks, Eric.
And my follow up would be you know in terms of your and your goal to expand to 2 million lives from from the $1, One where you where you sat at the end of the quarter were about obviously 35 per cent of the way through 2021 and I. Just you know it sounds like Youre still comfortable with your target and just trying to get a feel.
And for whether they use a day.
And this M&A would be back end loaded to the back half for.
Incremental and would they be hey gene yeah.
Yeah, sorry, I must have lost you at the end of the question there.
But yeah.
Yeah.
Okay. Thank you were and what I was getting at is just the.
How how it might look your comfort level with hitting those 2 million lives and would it be backend loaded or could we see sort of incremental.
Deal flow between now and year end to get there.
Right I think there will be it will be incremental certainly it will probably hit you know not necessarily and the first or second quarter and.
But we do still feel comfortable with the projection that we gave at the beginning of the year the marketplace as I mentioned is very active and.
But but again the pipeline remains.
Very healthy and we think that will we'll be able to close on some of these these deals and the near future and we will be certain to update investor community when that when that happens.
Fair enough I appreciate that comment and then my other question relates to.
The direct contracting model with with Medicare, where you've touched on that and the past and terms of line of Pollo med may be participating in that and that innovation model is there any any granularity you can provide on.
On your progress there. Thank you.
Yes of course, thanks gene.
And you know we've been excited about the D C and geographic DCE models.
It is now public information that applications for the D. C model have closed them.
And at least for the global and professional tracks and that the G. O D. C. E model has been postponed for one year as the New administration works out.
On its plans for the future of the D C model.
And because we chose to participate and the.
Very profitable at least historically and G. ACO Nextgen ACO this year and because organizations cannot participate and both N G ACO track and D. C U E.
Apollo Unfortunately was not.
And the D. C application pool. However, we are exploring strategic options to collaborate with disease and we believe that we have a path forward to participate in the D. C program. Even in 2022. In addition, given our provider network and strength of the provider network and growth into D. C region.
Geographic DZ regions rather.
We see ourselves is strongly positioned to participate and the G. O D. C model when it is we continued and.
By the current administration and so we're still fairly optimistic about our opportunities and the D. C model, whether it's the global professional for Geo tracks.
Great. Thank you for that and to a friend and appreciate it and.
Absolutely.
Thank you and there are no further questions at this time I'll turn the floor back to management for closing remarks.
Yeah.
Excellent well. Thank you all for your time today.
We really appreciate it and we look forward to speaking to you all again on our next quarterly call. The company will also be presenting at a couple of virtual investor conferences later in this month and we also hope to speak to some of you then.
Please feel free to reach out to us or our Investor relations firm the equity group with any additional questions.
Thank you. Thank you.
Thank you well thank you.
This concludes today's call all parties may disconnect have a great evening.