Q1 2022 Apollo Medical Holdings Inc Earnings Call

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Greetings and welcome to the Apollo Medical Holdings first quarter 2022 financial results.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation and that anytime you May press star one to join the question queue and pressure start to remove your question from the queue.

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Please note. This conference is being recorded I'll now turn the conference over to your host Carolyne Sohn of the equity group you may begin.

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

The press release announcing Apollo Medical Holdings, Inc. 's results for the first quarter ended March 31 2022.

I'll, let the investors section of the company's website at Www Dot polymer had gotten.

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 a polymer 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 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 31st 2022.

Gross acquisition strategy ability to deliver sustainable long term value.

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 other variants 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 information about the risks associated with investing in 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.

According the disclaimer language I would also like to refer you to slide two of the conference call presentation for further information.

It does if you're following along with the accompanying supplement theres an overview of the company on slide three.

On today's call the company's co Chief Executive Officer, Brendan Finn will discuss first quarter 2022 highlights and the latest operational developments that could.

We announced this afternoon the appointment of Street, Chief Strategy Officer, and interim Chief Financial Officer, John Boss Show, China will provide a review of our preliminary results for the first quarter ended March 31, 2022, and Brandon will conclude our 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 apologize.

Co Chief Executive Officer, Brandon. Please go ahead Brandon.

Yeah.

Thank you Caroline.

This has been an exciting quarter and I want to start today's call on a personal note.

I'm very proud and thankful for the work that each of our provider partners embarks on deals.

Some of you May know my crank my grandparents are both members of Parliament.

Seen firsthand just how diligently they have received care because they have gone through some recent journey.

And it has been eye opening and touching for me to see our technology powered care delivery model inaction from the point of view of a family member.

Independent positions are the backbone of our nation's health care delivery system, and we are strongly committed to supporting and enabling them.

Our goal here at Apollo is to provide inclusive high quality care for all individuals within our communities today.

Today, we have the privilege of serving Medicare advantage managed Medicaid.

Change commercial and Medicare fee for service population and we look forward to continuing our efforts to advance health equity and all of these population.

Now historically independent practices of black access to centralized care team and integrated delivery services.

Our technology enabled tools, we are changing this paradigm and empowering our partnered position to take on risk and manage both their managed care and fee for service population in a proactive manner with the support of a parliament value based care infrastructure.

We believe that this will enhance quality access to care and decrease overall cost of care.

Now onto the quarter strong organic membership growth and favorable membership mix as well as participation in a value based care model for the Medicare fee for service population served as the catalyst for topline growth. During the first quarter of 2022 is our capitation revenue grew 53% year over year.

We achieved a 50% increase in total revenue reporting $263 $3 million for the three months ended March 31st 2022.

We expect that this will continue to be a trend in the remainder of the year as we see a strong tailwind and interest in our unique model from physicians across the country.

We did incur operating expenses in Q1 in line with increased revenues as well as some lagging effect of the COVID-19 pandemic on our risk pool.

The higher Opex was also due to increased G&A expense related to share based compensation and the hiring of additional key personnel and staff to support our operational growth.

As a result of our ongoing efforts to build out our team we incurred an additional $2 $2 million in salaries wages and benefit expenses as compared to Q1 of 2021.

Despite rapid growth and increased investment in people and in infrastructure, we were able to grow net income attributable to Apollo met by eight 5% to $14 $3 million.

Or a diluted EPS of.

31 cents for the quarter.

Adjusted EBITDA was $38 2 million up 25% from $35 million in the prior year period.

Based on current trends within our business. We are pleased to be raising guidance for the full year of 2022 revenues as well as the bottom end of the ranges for net income EBITDA and adjusted EBITDA. We now anticipate at least 36% growth year over year on the topline to between 1.055 to 1.08.

$5 billion, and adjusted EBITDA of between $136 million and $166 million.

Yeah.

Moving on to our operations.

Last month, we closed on the acquisition of Jade Health care Medical group, which we had previously announced in December 2021.

<unk> health is a primary and specialty care physician group of over 350 providers, primarily serving Medicaid Medicare and commercial members and the San Francisco Bay area.

They are a risk bearing organization, whose doctors are known for their culturally competent linguistically appropriate professional services to members of the local community.

We continue to work closely with JD health leadership and their network of partner providers as we onboard them onto the <unk> platform.

Our tools will enable the providers to put more of their time and focus on serving the patients in the community and less time on the day to day administrative tasks.

This area for operating an independent practice in a value based care setting.

We are very pleased to be strengthening our presence in northern California with the addition of Jade health and look forward to helping the organization grow while enhancing patient experience in the months and years ahead.

Beyond Jade, we have also expanded our provider partner network being managed by Apollo subsidiaries in Northern California, We believe we offer a differentiated product in the marketplace for it.

Physicians and physician groups and we expect to see strong growth going forward in this area.

As we look to the rest of 2022 and into 2020. Three we are excited to continue deepening our presence in our California markets. While also expanding to new regions and New York through a series of acquisitions and partnerships with key provider groups that share our vision of empowering independent physician.

Okay.

As we go to market with a comprehensive suite of value based care technologies with the addition of former health and our Tech stack. We are seeing a strong uptick in organic inbound inquiries from ipas Acos Bce's and other organizations, who are looking to bolster their care and quality and analytics.

And as more physicians look to add remote patient monitoring to their value based care tool kit.

Our business continues to grow active membership.

Wrong strongly 23% in the first quarter and has expanded to serve practices in two new states in Q1 of 2022.

As I mentioned earlier, we have continued to build out our team here at Apollo met particularly in the areas of operations strategy and business development to support our growth efforts.

I am pleased to welcome ton basso as our new Chief strategy Officer.

He's also been appointed interim Chief Financial Officer, Eric stepped down from rural for personal reasons.

John brings 15 years of experience in finance operations strategy and corporate development.

As Chief strategy Officer, John will lead the development and execution of our overall corporate strategy, along with building and supervising our operating teams.

He will be working closely with me and the larger leadership team.

Most recently John served as VP of strategy and corporate development at alignment healthcare prior.

Prior to alignment he was chief financial officer at Altana, our private equity backed behavioral health company.

He also held roles at health care Partners Davita Medical Group company, where he spearheaded strategy and development for the California market as well as the Davita itself, where he led a corporate finance team.

One is intimately familiar with what we are looking to achieve here at Apollo met and we are excited to have him on board.

I would like to thank Eric for his many many contributions to Apollo met these past few years. He played a very important role in helping our company grow to what it is today and we wish him all the best in his future endeavors.

I would like to turn it over to Eric to say a few words.

Thank you Brandon.

Rewarding to see if all of them and develop into the technology powered health care organization that it is today.

When I started there was no engineering team there was no business development team.

We are a very different company today that on a very strong foundation for significant future growth. Thanks to your leadership continued support of our board and the new talent that we've brought onboard in the recent months.

I look forward to continue working at Apollo, Matt in an advisory capacity to ensure a smooth transition and I'm excited to see what is next for the company with that I'll turn it over to John to review our financial results.

Thanks, so much Eric and I want to personally. Thank you for all of your guidance and assistance during this time.

I'm very excited to be part of a parliament and share a passion similar to Brandon.

Around building, the leading technology powered organization for empowering independent physicians to be successful in value based care.

Moving into 2020 to Q1 earnings we began 2022 on a strong note reporting total revenues of $263 3 million in the first quarter of 2022.

50% increase from $176 1 million in the prior year quarter.

This was primarily driven by increased capitation revenue, resulting from organic membership growth in our core ipas and participation in a value based Medicare fee for service model.

As well as increased fee for service revenue, but from the consolidation of some labs.

17.

Capitation revenue increased 53% to $222 1 million during the period.

Accounting for over 84% of total revenue for the quarter ending March 31 2022.

Fee for service revenue was $11 1 million compared to $3 1 million in the prior year quarter.

The consolidation of sunlight and DMG contributed $6 2 million of that during this period.

To support our operational quote.

Net income attributable to Apollo med was $14 $3 million.

Up 8.5% from $13.2 million in the first quarter of 2021.

Earnings per share on a diluted basis, where 31 cents per share compared to 30 cents per share in the prior year period.

We reported EBITDA up $23.7 million in the first quarter of 2022, which.

Which compares to $26 $6 million in the prior year period, adjusted EBITDA was $38.2 million up.

25% from $35 million in the prior year period.

As we've noted in the past we place great emphasis on the adjusted EBITDA figure at this number backs up the impact of recently acquired Ipa's other income and income from equity method investments.

It also backs up the impact of excluded assets, which for Q1 2022 included a one time non-cash unrealized block of 9 million as a result of a decrease in fair value related to the passive investment and a pair partner.

These losses are in the excluded assets buckets that we described in the past and they are slowly for the benefit of our fill yet.

P C and its shareholders.

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 237.9 million in cash and cash equivalents compared to $233 $1 million at the end of 2021.

Are working capital was $284 million compared to $283 $4 million at the end of 2021 and.

An additional stockholder equity increased and sorry, and total stockholder equity increased to $279.5 million as of March 31st 2022 from $460.5 million at December 31st 2021.

Moving further down the balance sheet total desk at the end of the first quarter was $188.6 million were safely in compliance with our debt covenants with a consolidated total.

Total net leverage ratio.

1.04 compared to the maximum permitted 375.

And consolidated interest coverage ratio.

27.03 times compared to the minimum permitted 325.

I'd like to turn it back over to Brandon to discuss our.

Growth strategy and outlook for the remainder of 2022.

Thanks, John .

Argue business pipeline remains robust as we continue to field inbound increase from provider groups and health care organizations nationwide that are interested in the unique platform that we built here in a parliament.

A history of positive clinical outcomes and financial performance as well as ourselves develop technology platform purpose built for independent doctors has helped to feel this interest.

Being selective conducting the necessary diligence and evaluating potential opportunities in California, New York as well as in the southwestern United States.

Focusing on groups that are very committed to serving their communities and to advancing health equity as we enable them to succeed and brisk pace contracts.

As it relates to our current business I noted earlier that we are raising revenue guidance as well as the lower end of the ranges for net income EBITDA and adjusted EBITDA for full year 2022, as a result of the continued organic growth and our core business and favorable membership mix.

Is listed on slide 11 of our supplement we anticipate for the year ending December 31st 2022 revenues of between one point O five $5 billion and one point O eight 5 billion net.

Net income of $38 million to 57 million.

EBITDA of $81 million to 111 million.

And adjusted EBITDA of $136 million to $166 million.

Please keep in mind that the updated guarding does take into account any potential impacts of apc's passive investment and a pay your partner, which Jon noted in his comments earlier for this reason we place greater emphasis on the adjusted EBITDA matrix.

Guidance metrics do not consider any potential acquisitions or any major business transaction, we may complete for the remainder of 2022.

Any material developments arise, we will be sure to update the market and reevaluate guidance as appropriate.

To close it is a very exciting time here to parliament, we see many growth opportunities before us.

As we continue to onboard new providers and provider groups across the country expand our base of customers on our technology platform and continued nurturing strong organic growth and our existing core markets.

The Parliament has committed to empowering provider groups across the country to successfully participate value basically arrangements.

Enabling them to provide quality.

High quality cost effective care to individuals and families and local communities.

Same way our current apartment providers have been doing for my own family.

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

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Now turn the call back over to management Foreclosing 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, California should any of you be in the Los Angeles area.

Also be at the RBC and UBS health care conferences in New York later, this month and I look forward to seeing many many of you there.

Please feel free to reach out to us or our Investor relations firm the equity group with any additional questions you may have.

We look forward to speaking to you all again on our next.

Generally call.

This concludes today's conference and you may disconnect your lines at this time.

Thank you for your participation.

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