Q4 2021 Apollo Medical Holdings Inc Earnings Call
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Greetings welcome to the Apollo Medical Holdings fourth quarter and year end 2021 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. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, 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 your host Carolyne Sohn you may begin.
Thank you operator, Hello, everyone. Thank you for joining us.
The press release announcing Apollo Medical Holdings, Inc. 's results for the fourth quarter and year ended December 31, 2021 is available at the investors section of the company's website at Www Dot Apollo Mad dog.
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 I apologize 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 119 95. These forward looking things can be identified by terms such as anticipate believe expect future plan outlook and well.
And include among other things statements regarding the company's guidance for the year ending December 31 2022.
Continued growth acquisition strategy ability to deliver sustainable long term value.
<unk> response to the changing environment operational focus strategic growth plans and merger integration efforts as well as the impact of the 2020 novel Coronavirus pandemic on the company's business operations and financial results.
Although the company believes that the expectations reflected in its forward looking statements 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 <unk>.
Information about the risks associated with investing in our Parliament has 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 in market conditions or otherwise, except as required by law.
Regarding the disclaimer language I would also like to refer you to slide two of the 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 todays call the Companys co Chief Executive Officer, Brendan spend will discuss fourth quarter and year end 2021 highlight and the latest operational developments Chief Financial Officer, Eric Chen who will follow with a review of Apollo bench results for the year ended December 31 2021.
And then we'll conclude the remarks with an update on the company's outlook and long term growth strategy before opening the floor for questions.
With that I'll turn the call over to Appellants co Chief Executive Officer, Brian <unk>. Please go ahead granted.
Thank you Caroline.
Good afternoon, everyone and thank you for joining us to discuss <unk> fourth quarter and year end 2021 results.
I'm excited to discuss another milestone year for our company in 2021.
During which we made great strides across the business continued to enable thousands of physicians and health care providers through our technology powered platform.
And set the stage for significant growth in 2022.
We continue to execute on our mission of making it seamless for all health care providers from primary care specialists to hospitals from independent practices to staff model clinics.
Adrian and excel at delivering value based care to all populations, especially those which are traditionally underserved.
And we're proud of the work we have done to enable all health care providers with the flexibility to deliver high quality care in a way that is tailored to each local community.
Reflecting on 2021 the company achieved total revenues of $773 9 million, an increase of 13% from $687 2 million in 2020.
We nearly doubled net income attributable to Apollo med, which came in at $73 9 million for 2021.
<unk> to $37 9 million in the prior year.
Diluted EPS for the year was $1 63 per share.
For the year ended December 31, 2021, which was up 61% from $1 one per share for 2020.
I'll quickly note that these results exceeded our own projections for each of these metrics once again delivering record numbers for the company.
This was primarily driven by organic growth in our existing consolidated ipas increased risk pool settlement and incentives revenue and our continued.
Superior performance and ACO model for the performance here of 2020.
Like some of our peers, we benefited from tailwind due to decreased decreased utilization during the pandemic, which we do expect to normalize back to pre COVID-19 levels in 2022.
However, we believe the gains we have made through the use of our technology platform will continue to create efficiencies and improve patient experience access to care and staff productivity dampening the impact of normalized utilization levels.
To support our growth plans for 2022 and beyond we have made several strategic appointments in recent months we.
We have hired key personnel and strategy operations business development and more to help us bring greater focus to these areas as we aim to grow aggressively over the next few years.
It wasn't until a couple of months ago. For example that we made our first business development team higher which will enable us to allocate more resources to identifying and evaluating business development opportunities.
Our entire management team is fully on board to invest heavily in our current team members and to expand our clinical operations and administrative teams as we move into new regions and continue to recruit mission driven individuals to create the nation's leading value based care platform.
As a result of this we do expect our operating expenses to increase in the near term as part of this org wide investment, but we are confident that this will strengthen our culture capabilities and ability to scale rapidly in 2022 and beyond.
To that point I'm excited to announce that we recently appointed <unk> as chief growth officer of a parliament.
Alan brings over 15 years of finance and operations experience within the health care industry to this newly created role and will be responsible for driving physician recruitment strategy and revenue growth for our parliament.
He most recently served as vice President of operations at Optum, where he led managed care operations IPA strategy and network development for Southern California.
Prior to Optum.
As health care leadership roles, such as the VP of M&A and integration as well as international new market development for Davita.
We are excited to welcome Alan to our leadership team and I'm looking forward to working very closely with them to drive growth onto the Apollo platform.
In addition, we strange we strengthened our board of directors with the addition of two new Board members.
<unk> died and Jay Lorraine its Scott.
He brings over 25 years of experience in the tech industry as a founder executive venture capitalist and board member and the technology and digital health industry.
We believe that her expertise will be valuable as we continue to grow our technology platform and AI capabilities, while executing on our growth strategy.
Lorraine brings decades of leadership and experience within the Los Angeles Health care industry. She currently serves as Chief Executive Officer of Royal Family Health Center nonprofit network of community health centers, serving greater in northeast Los Angeles area since 1981.
She helped grow Arroyo Vista from a small storefront clinic to a health care delivery network for health centers, and a mobile medical clinic, serving the health care needs of medically underserved families within its local communities as a federally qualified health center.
And the other operating news over the course of 2021, we entered into a few strategic partnerships and made several small tuck in acquisitions that enhance the Apollo med health care delivery network either by growing the number of members under capitation arrangements, whereby bringing ancillary services such as lab in diagnostics work in <unk>.
Work for our contract to physicians and for our members.
In December 2021, we announced that our affiliate entered into a definitive agreement to acquire 100% of the fully diluted capitalization of Jade healthcare Medical group, a primary and specialty care physicians group of over 350 providers, serving Medicaid Medicare and commercial members in the San Francisco Bay area.
Jade health as a risk bearing organization that has successfully provided cultural culturally competent linguistically appropriate professional services the members and its local communities since 2016.
<unk> will add approximately 13000 members primarily located in the city and county of San Francisco, and San Mateo County to a polymer membership under cap dated arrangements.
We are working to onboard gatehouse and its providers onto our technology and operations platform by the close of the transaction, which is expected to take place by the end of the second quarter of this year.
Following the acquisition of access primary care Medical group in 2021, Jade Health will continue to strengthen <unk> presence in northern California.
Just last month, we also closed on the acquisition of Aurora health provider of AI, driven solutions that enables physician groups transitioned to succeed in the delivery of value based care.
We are very excited to have made significant progress in integrating <unk> technology platform and to that of a parliament.
As a reminder, ormat is real time clinical AI platform takes data from multiple sources and utilizes advanced risk stratification model to identify patients where various clinical programs, including RPM remote patient monitoring.
It'll help support chronic disease management and more.
Its clinical platform is also deeply integrated with its proprietary RPM ecosystem, which consists of smart health devices and a suite of technology tools to help manage patients health.
Prior to the acquisition or my health served over 4000 align Medicare beneficiaries.
The CMS innovation model and over 2500 patients in California, Nevada, Arizona, and Texas through its remote patient monitoring platform.
Cited to share that shortly after joining Apollo mid or I'm, a health has seen a significant increase in demand for its products and today serves over 40000 Medicare fee for service patients on its analytics platform and over 2700 active members RPM platform, which is growing at approximately 10% month over month.
We continue to see Ormat is a key growth lever within our Medicare fee for service business in this coming year and beyond driven by its ability to further augment our existing technology boost organic growth deliver a deeper more actionable insights to enable our providers succeed at value based care and all of the MMA program.
Lastly, we have seen an acceleration of organic growth over the last few months and core new regions.
Our team has been working extremely hard to ensure that our patients receive the highest quality care and we're seeing the widespread within our core markets as we saw more than 9% growth during the latest annual enrollment period in those regions.
In conjunction we continue to integrate our management platform with our recently acquired businesses for which we are seeing early indications of success through the normalization of margins towards what we see in our core markets.
Additionally, due to our strong track record in managed care and success participating in some of my programs. We've received a lot of inbound interest from provider groups and health care organizations in new regions looking to join the call mid platform.
Citing our robust suite of tech enabled solutions as a key differentiator among other value based care platforms.
Within the last few months, we've already added over 200 providers and 4500 members in new regions and have a strong pipeline of groups in late stage discussions eager to join the platform.
With that I'll turn it over to Eric <unk>, our CFO to review our financial results.
Thank you Brandon.
We reported record total revenue of $773 $9 million for 2021, an increase of 13%.
From $687 $2 million in 2020.
Our top line growth was primarily driven by the following.
One increased application revenue from organic membership growth at ACP and Alpha care Medical group as.
As well as higher average application rates at APC during the year.
Number two increased risk pool settlement and incentives revenue drill.
Driven by increased incentive payments received from our payer partners.
As well as reduced utilization at Apollo <unk> partner hospitals during COVID-19 pandemic. Please keep in mind that these revenues from Apollo <unk> partner hospitals reflects a 15 to 18 month lag.
And lastly, an increase in the shared savings settlement earn from Apollo med participation in an ACO related to performance year 2020.
And number three are.
Our increase in fee for service revenue as a result of more patient visits with the reopening of the following surgery and heart centers.
And the Companys consolidation of some clinical laboratory and diagnostic medical group, which contributed an additional $7 million during the year.
Capitation revenue of $593 $2 million represented 77% of our total revenue in 2021.
We ended 2021 with our membership at approximately $1 2 million managed lives.
Taking a closer look at our membership approximately half of our members were fully capitate it through our consolidated IPA.
Total opex increased to $675 $7 million in 2021, an increase of 11%.
From $606 $7 million.
This increase was primarily due to the increased cost of services from higher medical claim <unk>.
Application and other health services expenses.
Due to the greater utilization throughout the year.
As well as increased G&A expense related to increased share based compensation.
Higher bonuses paid to certain positions driven by the increase in shared savings earned related to the settlement of the 2020 ACL performance year.
And costs incurred for the debt refinancing.
These were partially offset by a reduction in G&A expenses due to our technology platform.
Net income attributable to Apollo med increased to a record $73 $9 million.
Up 95% from $37 $9 million for 2020.
Earnings per share on a diluted basis.
Our $1 63 per share compared to $8 <unk> per share for the prior year.
Yeah.
We reported EBITDA.
Of $99 1 million compared to $203 5 million for the year ended December 31, 2020 <unk>.
Adjusted EBITDA increased 34% to $174 $2 million for the year ended December 31 2021.
From $129 9 million for the year ended December 31 2020.
We placed greater emphasis on the adjusted EBITDA figures as these numbers back out the impact of recently acquired IPA.
Provider bonus payments and other income.
And income from equity method investments.
It also backs out the impact of excluded asset, which for 2021 included a onetime noncash unrealized loss of $10 $7 million as a result of a decrease in fair value related to a passive investment and a payer partner as well as unrealized losses on investments.
These losses are in the excluded asset bucket that we have described in the past as they are solely for the benefit of our affiliate APC and its shareholders.
Turning over to the balance sheet, we remain well capitalized and well positioned to execute on our growth initiatives we.
We ended the fourth quarter with $233 1 million in cash and cash equivalents.
Compared to $193 5 million.
At the end of 2020.
Our working capital increased to $283 4 million.
From $223 6 million at the end of 2020.
And and total stockholders' equity increased to 400.
$65 million at December 31, 2020 from.
From $330 9 million at December 31, 2020.
Moving further down the balance sheet total debt at the end of the fourth quarter was $182 9 million.
We are safely in compliance with our debt covenant with.
Our consolidated total net leverage ratio.
At 1.16 times compared to the maximum permitted 375 times.
And our consolidated interest coverage ratio of 20, 544 times compared to the minimum permitted three to five times.
As Brandon mentioned earlier the impact of Covid provided some temporary tailwind that had a positive impact on our results in 2021 way.
We anticipate these tailwind will subside as we have returned to pre COVID-19 utilization levels in 2022.
We are seeing a return to more normal visit patterns for routine non COVID-19 related care.
Impacting our medical claims cost in patient visits to the hospital for non emergency procedures affecting our risk both settlements with our hospital partners.
With respect to the omicron surge in early 2022, and the overall employment macro environment.
Similar to many employers across the country.
We have also experienced higher employee related costs as we expand our team to support our continued growth as.
As well as retain our existing team members.
We believe we will be able to manage these additional cost effectively as we grow our business.
I would now like to turn it back over to Brandon for a discussion of our growth strategy and outlook for 2022 branded.
Thanks, Eric.
We believe that a polymer as well as well.
<unk> to execute on our growth strategy, particularly given the recent appointments to our leadership operations and business development teams.
We are very excited about the additional talent that has joined our company and remain optimistic about our prospects as we continue to work through a robust pipeline of potential targets in new regions.
As shown on slide 11 of our supplement we are also excited to be providing total revenue guidance projections for 2022 of between $1.0 billion to $3 billion.
And $1.08 billion.
Which would translate into between 33% and 39% year over year growth on the top line.
This revenue growth is being driven by strong organic growth in core markets expansion into new markets and participation in our <unk> innovation model.
The company is providing projections for total revenue only at this time due to uncertainties related to its participation in the previously mentioned model ongoing investments in our staff to support future growth.
Certain investments that dependent on unpredictable macroeconomic factors.
Please also note that these guidance metrics do not consider any potential acquisitions or any other major business transactions that we may complete in 2022.
As any material developments arise, we will be sure to update the markets reevaluate guidance as appropriate.
I also want to briefly mentioned FID, we are excited about and support.
The new ACO reach program.
Vision represented by the reach model of high quality affordable care with a focus on health equity access and community health align exactly with our guiding principles and our core values here at Apollo.
I'll also mention that I will be attending the Barclays Global Healthcare conference in Miami next month, and I look forward to seeing some of you there.
To close 2021 was another milestone year for our Parliament.
We believe that we are differentiated by our physician centric model, our expertise and value based care and taking risk successfully and our technology and engineering expertise.
We truly understand that there is no one size fits all methodology, when we engage with doctors who operate their own practices.
We want to work with doctors, who want to participate in value based arrangements and possess the mindset.
Criers.
We believe that our platform offers providers in a practical and flexible way of engaging in risk bearing arrangements successfully.
Our goal is to provide individuals and families and all local communities with quality cost effective health care and that by empowering doctors to successfully engaged in value based care, we can make that change happen.
The results we've achieved thus far are the best Testament, we believe to what we can achieve in further parts of the country as we expand.
Thank you, everyone and with that operator, let's open it up for Q&A.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question is from Sarah James with Barclays. Please proceed with your question.
Thank you.
Hum.
Hoping you guys can unpack a little bit how you get to the 30% to 45% long term growth.
So that implies about 20% on an M&A and 10 to 25 on <unk>.
Organic so would be helpful.
You had any context around the product mix of that.
And then on the M&A side, how are you.
You think about your pipeline development.
Hi, Sir thanks for calling in today we.
I appreciate you joining.
Yes happy to talk about the.
$30 to 45% number, which I believe you're referencing from our latest investor presentation.
As you mentioned, that's a mix of both organic growth as well as M&A on the organic on the organic side of things, where as I mentioned in our earnings call. We're seeing really strong growth growth in our core markets. After AEP. We're excited to say that a lot of our members have chosen to join.
<unk> plans and and and align with doctors that are currently in our affiliated ipas.
And that led to really strong organic growth in our existing markets. We're also we're also seeing great.
<unk> as we expand into new markets as I mentioned.
And the earnings call. We recently signed on another couple of hundred providers, a couple of thousand senior members and have a lot of items in the pipeline organically as well.
We believe that all these efforts combined can.
Conservatively reach those numbers that we talked about in the investor presentation.
As for M&A.
With the hire of Allen and our existing corporate development team.
We believe we still have a strong pipeline of exciting opportunities.
And we expect some of those to be announced in the first half of this year hopefully that helps answer your questions here.
Guys. Thank you.
And to follow up on the M&A I was looking at slide 32.
The map going from $1 million to $2 million.
The wording on that seems to imply that there.
Maybe catheter needed. So I just wanted to make sure I understood is that membership growth on the capital side MSL or are unclear.
Great.
Yes happy to clarify.
The growth from 1% to 2 million in our slide deck.
It does not specify the breakdown between.
To fully capitalize in membership growth versus let's say managed services.
<unk>.
We've.
We're currently unable to kind of provide the breakdown at this time, but as soon as we have further information we will let you use.
You and other investors now.
And then on.
On the <unk>.
Brian I know you guys can't.
Talk about.
How that's going so far but I'm wondering if you can talk about any.
Accounting aspects of it so with the Nextgen ACO that theres, a lag and when you get paid out to the benchmark aspect.
And just wondering if the BCE program with work the same with you guys or if there would be a year where.
If you were in the D C and you would get paid from that program and then the.
The double up from the wagon Nextgen ACO.
Great. That's a great. That's a great question as you know the next Gen ACO program.
<unk> had ended at Sunset at the end of 2021.
And as you as you stated there is a.
A lag in terms of when that impact is realized in our accounting.
Due to the eight to 12 months to 18 month lag on the shared savings settlement for the next Gen ACO.
Therefore, as you noted the 2021 performance here shared savings will be most likely realized sometime this year in 2022.
As for the TCE or.
As it's now called the ACO realizing equity access in community health reach model.
You also correctly noted that were unfortunately able to confirm unable sorry to confirm our participation in reach.
Which is the successor to the <unk> model.
However, if we were to participate.
We would be realizing.
Part of the benchmark as topline revenue if not if not all.
Okay.
And then last question here is on this.
The unrealized loss.
$38 5 million.
In the quarter on previous investments just any color that you can give us on what asset that was done.
And kind of detail would be helpful.
Yes, I hate their at their 10 here. Thanks for the question.
In terms of that investment it was the shares that that are excluded asset bucket.
APC had taken.
From a payer partner and so.
At the end of the day those those are not impacting the bottom line net income attributable to Apollo med shareholders and it just reflects that.
The change in the market value of those shares.
Okay.
I think I believe then that the identity of the Payor partner is disclosed what has been disclosed in the past.
Okay. Okay.
Thank you guys appreciate it.
Thanks, so much sir.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Our next question is from Kyle Belzer with Colliers. Please proceed with your question.
Great. Thank you Hi, Brian and Eric Congratulations on the great results and thanks for all the updates.
<unk>.
With the newly formed BD team in place can you talk a little bit more about how you're sourcing new M&A opportunities and how youre prioritizing them as it relates to geography, and clinical specialties et cetera.
Hey, Kyle Thanks for joining the call.
Good to hear from you.
Yes, absolutely happy to talk about that.
So for the new BD and growth team led by Alan.
We have an existing pipeline.
Both inbound interest as well as.
<unk> group.
<unk> that align very well with our mission and with the demographics that we currently serve.
We will be executing on some of the inbound opportunities as well as our current pipeline and Alan is building a team of other BD folks to create new opportunities as well as for how we're prioritizing.
We're prioritizing acquisitions in new regions.
Then using those as springboard for us to continue growing in those new regions organically.
Hopefully that helps.
Got it yeah, it does and and.
You've mentioned.
And it's still in the presentation the goal of getting to the 2 million patients for coordinating care of I think Eric said the numbers at $1 2 million now and sorry, if I missed this but can you talk a little bit about timing and how you anticipate.
Getting to that that goal this year.
Sure Yeah. So.
Before that membership number.
I'd like to point out that or clarify that that includes both managed lives.
Our lives under management as well as consolidated IPA fully capitalized lives that.
The mix as I mentioned to Sara.
We're not we're not sure of exactly at the moment.
We will disclose more details as it comes along that being said.
Given the.
The number of the $2 million a lot of that will be an M&A. Some of it will be and continued organic growth in our core earnings.
In existing markets.
As for timing, we think that it will probably be.
In the first half of this year, but.
With the markets as they are.
Where we're being vigilant.
Just kind of what the opportunities, which opportunities wed like to taken which ones, we wouldn't and so we'll continue to be prudent and ensure that we're maximizing shareholder value.
Okay.
Gotcha.
Appreciate that and then lastly, so regarding Obama health acquisition, you mentioned AI and RPM capabilities I'm just curious.
It's all about focusing on services that relate to the new CMS reimbursement codes for remote therapeutic monitoring those closely.
Close to kind of allow for patient self reported outcomes, just kind of curious how they're thinking about that.
Yeah.
Hey, Kyle yes, some of the some of the codes. There. They are working on do you include the RPM and our TM reimbursement codes.
If you want more detail on I'm happy to connect with you as well and that the other part of their offering is primarily around serving analytics to Medicare.
Medicare fee for service beneficiaries were aligned with a <unk> innovation model.
And that's about 40000 client Medicare.
Fee for service beneficiary number that I referenced in the earnings call. So it's kind of a.
Two pronged approach both them, helping providers with analytics on those fee for service population and also helping them with RPM.
Chronic care management, and so on and so forth.
Got it okay that makes sense I appreciate it that's it for me thanks for all the updates.
Yes, absolutely catch up soon thanks Kyle.
We have reached the end of the question and answer session and I will now turn the call over to Brendan <unk> for closing remarks.
Thank you all for your time today, we are always open to a dialogue with investors and welcome visitors to our offices in Alhambra should any of you be in the Los Angeles area.
Please feel free to reach out to us or our Investor relations firm the equity group with any additional questions.
We look forward to speaking to you all again on our next quarterly call.
<unk>.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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