Q3 2021 Apollo Medical Holdings Inc Earnings Call

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Please note this conference is being recorded.

At this time I'll turn the conference over to Caroline <unk> with Investor Relations Caroline you may begin.

Thank you operator, and Hello, everyone. Thank you for joining us.

The press release announcing our Polo Medical Holdings, Inc. 's results for the third quarter ended September 32021 is available at the investors section of the company's website at Www Dot Apollo Med dot net to.

To provide some additional background on its results. The company has made a supplemental deck available on its website.

A replay of this broadcast will also be made available at Apollo website. 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 of 1995.

These forward looking statements can be identified by terms such as anticipate believe expect future plan outlook and will and include among other things statements regarding the company's guidance for the year ending December 31, 2021 continued growth acquisition strategy ability to deliver sustainable long term value ability.

The ability to respond to the changing environment operational focus strategic growth plans and merger integration efforts as well as the impact of the 2020 novel Coronavirus or COVID-19 pandemic.

And the Delta variant on the company's business operations and financial results.

As shown as a company Brendan and sled key efforts in creating and executing a Paul matched new growth model navigating the COVID-19, global pandemic and transforming <unk> into the technology powered health care company that it is today.

As Chief Technology Officer, Brendan built our team of engineers and data scientists from the ground up over the last two and a half years, leading the development of a potent <unk> proprietary technology platform.

Platform serves as a operating system for value based care has allowed the company to scale effectively across local health care delivery systems greatly reducing operating expenses and leading to notable financial performance improvements.

More importantly, this platform is helping us drive improved clinical outcomes and patient satisfaction by streamlining care and utilization management workflows.

The profile also algorithmically surfaces actionable data and insights so that our providers can take on and succeed in value based care arrangements.

As Chief operating Officer, Brendan has spearhead our poems core corporate strategy business development operations and engineering efforts for over a year now and he will continue to lead those efforts.

Co CEO.

We will continue to serve as executive chairman of the board working closely with our board of directors and executive management team.

<unk> has been evolving.

<unk>, becoming a technology powered integrated health care delivery company for the last two years as this leadership transition marks a major milestone in our continued efforts to provide patients with best in class value based care.

Having witnessed the incredible results fueled by Brandon's passion and drive to board of directors and I are confident that Brendan is the right person to lead our polo met into its next chapter.

It is truly an incredibly exciting time in our company and we look forward to continuing our success have rapid growth and the brand is new this year.

That I would like to turn it over to Brendan who will go over highlights for the third quarter and year to date 2021, as well as recent operational developments Brendan.

Thank you Dr.

I'm so glad to have this opportunity to speak with you all on my first earnings call as <unk> CEO.

It's been an exciting few years of building tirelessly growing rapidly and serving our providers and patients proudly youre out of Parliament.

I'm incredibly optimistic about our company's future and our ability to execute on our mission of transforming the way health care is delivered in our country.

I pledge to not only continue and even amplified.

Steadfast commitment to health care equity and position of empowerment as we continue on this journey.

Also aligned all stakeholders to continue driving sustainable long term value for our shareholders.

And of course, I very much look forward to continuing to work closely with Dr. Thomas Lam My co CEO and the rest of our talented and passionate team youre in a parliament.

Apollo that isn't a truly unique position to bring about and lead this change in health care delivery for several reasons.

The first a differentiating advantage for our Parliament has a long history of physician leadership, and our dedication to physician empowerment and partnership.

And two other geographies across the country.

Finally, these three unique elements snowball into our final competitive advantage of strong financial position with consistent profitability that we will use to invest in the future growth and deliver sustained shareholder return.

The record third quarter earnings that we are reporting today as well as our confidence and raising full year guidance are evidence of this.

We once again achieved solid growth on the top line and more than doubled our bottom line.

This quarter represents the highest quarterly revenue net income attributable to a parliament shareholders and earnings per share that we have delivered thus far in our company's history.

And I am proud to say that these results were driven by growth across nearly all of our businesses, particularly in a risk or settlements and incentives.

Based on the positive trends that we're seeing our continued organic growth contributions from my technology platform and phenomenal results in the first nine months of the year. We are once again, raising our guidance for full year of 2021.

We know anticipate at least 9% growth year over year on the top line to between $751.5 million and $758.5 million and at least 89% growth year over year and net income attributable to a parliament to between $71.5 million and 73.5 million.

<unk>.

We also anticipate diluted EPS for the year to be between one dollar and 58 cents and one dollar and 62 cents.

Which would represent at least 56% earnings growth year over year.

I will go over the full set of updated guidance later on in the call during our discussion of outlook and growth strategy.

During the third quarter of 2021, we continue to see solid organic membership growth in our existing ipas during the period, which drove the increase in computation revenue.

We nearly double the risk pool, an incentive revenues year over year as a result of decreased utilization at our partner hospitals as well as an increase in the shared savings settlement my participation in an AC O four.

Poor performance a year of 2020.

Fee for service revenues also saw a year over year increase in the third quarter as a result of increased utilization at our surgery and heart centers. Following their reopening of this year and $2 million of contributions from some labs. Following the closing of that transaction during the period.

Street is partnering with us and several of our affiliated ipas and a collaboration to provide high quality affordable and culturally competent care to local communities.

Our partnership through which our affiliate network of contracted physicians will be offered to consumers through the covered California program will stand both southern and Northern California.

Anthem has been appear partner borrowers for some time and we look forward to continuing this partnership and finding similar ways to expand upon it in the years to come.

Finally, I know we've referenced are impressive performance for the 2019 year on several occasions and I am thrilled to report that we have once again delivered phenomenal results.

Our ACO generated $57.7 million in gross savings and the 20th 20 performance here.

Which ranked the highest out of all 37 analogous acos for that performance here.

Gross savings is defined as the total benchmark expenditures minus total aligned beneficiary expenditures and we achieved the highest result in that measure by a margin of over $18 million.

Or 48% more and grow savings than the next best analogous Acos results.

We are incredibly pleased by this performance, which had a notable impact on our financial results for Q3.

Contributing $21.8 million to our top line and $13.1 million to our bottom line.

Keep in mind that our ACO serves approximately 29000 aligned beneficiaries out of the over 1.1 million members that we manage.

All of these accomplishments I've covered so far are thanks to the amazing people throughout our organization from the doctors nurses and other frontline providers to our administrative staff all of whom benefit for utilizing our tech powered health care platform.

Are leading performance validates the parliament superior clinical care coordination and our expertise and transitioning providers from traditional fee for service model too badly based care arrangements. This is why doctors going to Parliament and this is why they stay with us.

In summary, I am incredibly excited by the strength of our platform and the many opportunities. We have ahead of us and we will continue to invest in our people and our technology as we execute on those opportunities and take a parliament to the next level.

101.

Our earnings per share on a diluted basis were <unk> 74 per share up 64% from the 45 cents per share in the prior year period.

We reported EBITDA of negative $3 million in the third quarter of 2021, which compares to a positive $42 $6 million in the prior year period.

Adjusted EBITDA was $74 $5 million, which.

Which is a 40% increase from the $53 $4 million in the prior year period.

We placed greater emphasis on the adjusted EBITDA figures.

Which are calculated consistently quarter over quarter as it is a more meaningful representation of the company's performance and consistent with how management views the results.

Adjusted EBITDA backed out the impact of recently acquired Ipas other income.

And income from equity method investments.

It also backed out the impact of excluded asset.

Four.

Q3, 2021 included a noncash unrealized loss of $63 million as a result of a decrease in fair value related to the passive investment and a payer partner.

We ended the third quarter with $204 $8 million in cash and cash equivalents.

Compared to $193 $5 million at the end of 2020.

Our working capital increased to $310 5 million.

From $223 $6 million at the end of 2020.

And total stockholders' equity increased to 440.

Point $3 million at September 30th 2021.

From $330 9 million at December 31, 2020.

Moving further down the balance sheet total debt at the end of the third quarter was $182 $8 million.

We're also safely and in compliance with our debt covenants with total consolidated net leverage ratio of one point O six times.

Compared to the maximum permitted 375 times.

And consolidated interest coverage ratio of 25.55 time compared to the minimum permitted three to five times.

I'd now like to turn it back over to Brandon for a discussion of our growth strategy and outlook for the remainder of 2021 Brandon.

Thanks, Eric.

$2 5 million net income of 81 million to $83 5 billion net income attributable to Apollo met at $71 5 million to $73 5 million diluted EPS of $1 58 to $1 62.

EBITDA of 139 million to $143 million and adjusted EBITDA of $168 5 million to $175 million.

Please keep in mind that the updated net income and EBITDA guidance do not take into account any potential impacts of apc's passive investment and a publicly traded payer partner, which Eric noted earlier in his comments.

For this reason, we placed greater emphasis on the net income attributable to Apollo <unk> shareholders and adjusted EBITDA metrics.

These guidance metrics also do not consider any potential acquisitions or other major business transactions. We may complete in the remainder of 2021.

As any material developments arise, we will be sure to update the markets and reevaluate guidance as appropriate.

I'll also take a brief moment here to mention that we will be at the virtual credit Suisse Global Health Care Conference next week, and we look forward to speaking with investors during that event.

To close 2021 has been a very productive year, so far for Apollo.

With our physician centric model our expertise in value based care and taking risks successfully our technology and engineering expertise and our strong financial position as tailwind I'm excited and energized by the opportunities we see before us to truly make a difference on health care delivery nationwide.

We look forward to closing out the year on a strong note.

With that operator, let's open it up for Q&A.

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