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Apollo Medical Holdings, Inc. Reports Second Quarter Ended June 30, 2020 Results

ALHAMBRA, Calif., August 7, 2020 /PRNewswire/ -- Apollo Medical Holdings, Inc. ("ApolloMed," and together with its subsidiaries and affiliated entities, the "Company") (NASDAQ: AMEH), an integrated population health management company, announced today its consolidated financial results for the second quarter ended June 30, 2020.
“We built upon the strong momentum we generated from early in the year and carried it into the second quarter, culminating in strong growth in revenue and net income attributable to the company. Our focus on fighting the pandemic remained at the forefront of our efforts in the quarter, during which we expanded our testing capacity and maintained focus on sustaining our essential business operations that empower our affiliated providers to care for patients and to help quell COVID-19 in our communities,” stated Kenneth Sim, M.D., Executive Chairman and Co-Chief Executive Officer of ApolloMed.
Dr. Sim continued, “The further investments we’ve made in our advanced technologies and software will shape the future of our organization, while preserving the cutting-edge nature of our solution and ensuring the scalability required to support our growing membership base. As we close out a strong first half of 2020, we are well positioned to capitalize on ever changing industry dynamics and we are confident in our ability to deliver on our full year guidance.”

Financial Highlights for the Second Quarter Ended June 30, 2020:
Total revenue of $165.2 million for the quarter ended June 30, 2020, an increase of 27% as compared to $130.1 million for the quarter ended June 30, 2019, primarily due to our acquisitions of Alpha Care Medical Group on May 31, 2019 and Accountable Health Care IPA on August 30, 2019, which companies contributed revenue of approximately, $32.5 million and $12.5 million, respectively, for the quarter ended June 30, 2020.
Capitation revenue, net, of $140.9 million for the quarter ended June 30, 2020, an increase of 37% compared to $103.2 million for the quarter ended June 30, 2019. Capitation revenue represented 85% of our total revenue for the quarter ended June 30, 2020.
Risk pool settlements and incentives revenue of $12.0 million for the quarter ended June 30, 2020, an increase of 7%, as compared to $11.2 million for the quarter ended June 30, 2019.
Net income of $81.0 million for the quarter ended June 30, 2020 as compared to net income of $10.7 million for the quarter ended June 30, 2019 driven primarily by the gain on the sale by Universal Care Acquisition Partners, LLC's ("UCAP") of its 48.9% investment in Universal Care, Inc. ("UCI") to Bright Health Company of California ("Bright"). UCAP is a 100% owned subsidiary of ApolloMed's affiliate, Allied Physicians of California IPA ("APC") and its 48.9% investment in UCI is an excluded asset that remains solely for the benefit of APC and its shareholders. As such, the gain on sale did not affect the net income and adjusted EBITDA attributable to ApolloMed.
Net income attributable to Apollo Medical Holdings, Inc. of $7.0 million for the quarter ended June 30, 2020, as compared to net income attributable to Apollo Medical Holdings, Inc. of $3.5 million for the quarter ended June 30, 2019. The increase from the prior year was primarily due to preferred dividends ApolloMed received from APC.



Guidance:
The Company's stable, subscription-based revenue model allows it to maintain its previously disclosed 2020 guidance for total revenue, net income, EBITDA and adjusted EBITDA. Net income and EBITDA include the impact of the gain of approximately $99.6 million related to the sale of UCAP's 48.9% investment in UCI to Bright, which closed on April 30, 2020. As UCI was an excluded asset and remained solely for the benefit of APC and its shareholders, the gain on sale did not affect the net income and adjusted EBITDA attributable to ApolloMed.
The Company's guidance for the year ending December 31, 2020, is as follows:
Maintain total revenue of between $665.0 million and $675.0 million,
Maintain net income of between $100.0 million and $110.0 million,
Maintain EBITDA of between $155.0 million and $167.0 million, and
Maintain adjusted EBITDA of between $75.0 million and $90.0 million.
Refer to the "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. Refer to our discussion of "Forward-Looking Statements" within this press release for additional information.

For more details on ApolloMed's financial results for the quarter ended June 30, 2020, please refer to ApolloMed's Quarterly Report on Form 10-Q to be filed with the U.S. Securities Exchange Commission (“SEC), which is accessible at www.sec.gov.




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, 302,732 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 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 integrated population health management company, which, together with its subsidiaries, including a Next Generation Accountable Care Organization ("NGACO"), and its affiliated independent practice associations ("IPAs") and management services organizations ("MSOs"), is working to provide coordinated, outcomes-based, high-quality medical care for patients, particularly senior patients and patients with multiple chronic conditions, in a cost-effective manner.  ApolloMed focuses on addressing the healthcare needs of its patients by leveraging its integrated health management and healthcare delivery platform that includes NMM (MSO), Apollo Medical Management, Inc. (MSO), ApolloMed Hospitalists, a Medical Corporation, (hospitalists), APA ACO, Inc. (NGACO), Allied Physicians of California IPA (IPA), Alpha Care Medical Group, Inc. (IPA), Accountable Health Care IPA (IPA) and Apollo Care Connect, Inc. (Digital Population Health Management Platform).  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, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, such as statements about the Company's guidance for the year ending December 31, 2020, continued growth, 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 2019 Novel Coronavirus (COVID-19) pandemic on the Company's business, operations, and financial results. 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, for the year ended December 31, 2019, filed with the SEC and any subsequent quarterly reports on Form 10-Q.

FOR MORE INFORMATION, PLEASE CONTACT:
Asher Dewhurst
(443) 213-0500
asher.dewhurst@westwicke.com




APOLLO MEDICAL HOLDINGS, INC.
 CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
 
 
 
 
 
 
June 30,
 
December 31,
 
 
2020
 
2019
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
152,441

 
$
103,189

Restricted cash
 

 
75

Investment in marketable securities
 
117,656

 
116,539

Receivables, net
 
17,588

 
11,004

Receivables, net – related parties
 
59,328

 
48,136

Other receivables
 
15,919

 
16,885

Prepaid expenses and other current assets
 
11,188

 
10,315

Loans receivable
 
6,425

 
6,425

Loans receivable – related parties
 

 
16,500

 
 
 
 
 
Total current assets
 
380,545

 
329,068

 
 
 
 
 
Noncurrent assets
 
 
 
 
Restricted cash
 
746

 
746

Land, property and equipment, net
 
11,485

 
12,130

Intangible assets, net
 
94,790

 
103,012

Goodwill
 
239,053

 
238,505

Investments in other entities – equity method
 
26,817

 
28,427

Investments in privately held entities
 
37,075

 
896

Operating lease right-of-use assets
 
20,219

 
14,248

Other assets
 
22,487

 
1,681

 
 
 
 
 
Total noncurrent assets
 
452,672

 
399,645

 
 
 
 
 
Total assets
 
$
833,217

 
$
728,713

Liabilities, Mezzanine Equity and Shareholders' Equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable and accrued expenses
 
$
24,788

 
$
27,279

Fiduciary accounts payable
 
1,853

 
2,027

Medical liabilities
 
70,273

 
58,725

Income taxes payable
 
42,210

 
4,529

Dividend payable
 
431

 
271

Finance lease liabilities
 
102

 
102

Operating lease liabilities
 
3,350

 
2,990

Current portion of long-term debt
 
9,500

 
9,500




 
 
 
 
 
Total current liabilities
 
152,507

 
105,423

 
 
 
 
 
Noncurrent liabilities
 
 
 
 
Deferred tax liability
 
13,654

 
18,269

Finance lease liabilities, net of current portion
 
355

 
416

Operating lease liabilities, net of current portion
 
17,418

 
11,373

Long-term debt, net of current portion and deferred financing costs
 
230,455

 
232,172

 
 
 
 
 
Total noncurrent liabilities
 
261,882

 
262,230

 
 
 
 
 
Total liabilities
 
414,389

 
367,653

 
 
 
 
 
Mezzanine equity
 
 
 
 
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation
 
210,980

 
168,725

 
 
 
 
 
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, 36,309,513 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, at June 30, 2020, and December 31, 2019, respectively
 
36

 
36

Additional paid-in capital
 
163,986

 
159,608

Retained earnings
 
43,001

 
31,905

 
 
207,023

 
191,549

 
 
 
 
 
Noncontrolling interest
 
825

 
786

 
 
 
 
 
Total stockholders' equity
 
207,848

 
192,335

 
 
 
 
 
Total liabilities, mezzanine equity and stockholders' equity
 
$
833,217

 
$
728,713




APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
 June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
Capitation, net
 
$
140,949

 
$
103,224

 
$
281,370

 
$
174,740

Risk pool settlements and incentives
 
12,003

 
11,191

 
23,239

 
21,285

Management fee income
 
8,690

 
10,353

 
17,505

 
19,349

Fee-for-service, net
 
2,270

 
3,878

 
5,697

 
7,959

Other income
 
1,257

 
1,404

 
2,463

 
2,473

 
 
 
 
 
 
 
 
 
Total revenue
 
165,169

 
130,050

 
330,274

 
225,806

 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
Cost of services
 
136,079

 
101,363

 
280,283

 
184,795

General and administrative expenses
 
11,556

 
11,818

 
23,390

 
22,081

Depreciation and amortization
 
4,628

 
4,455

 
9,330

 
8,872

Provision for doubtful accounts
 

 
(2,314
)
 

 
(1,363
)
 
 
 
 
 
 
 
 
 
Total expenses
 
152,263

 
115,322

 
313,003

 
214,385

 
 
 
 
 
 
 
 
 
Income from operations
 
12,906

 
14,728

 
17,271

 
11,421

 
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
 
Income (loss) from equity method investments
 
834

 
(42
)
 
2,888

 
(892
)
Gain on sale of equity method investment
 
99,647

 

 
99,647

 

Interest expense
 
(2,673
)
 
(311
)
 
(5,541
)
 
(522
)
Interest income
 
863

 
474

 
1,792

 
797

Other income
 
1,282

 
24

 
1,384

 
211

 
 
 
 
 
 
 
 
 
Total other income (expense), net
 
99,953

 
145

 
100,170

 
(406
)
 
 
 
 
 
 
 
 
 
Income before provision for income taxes
 
112,859

 
14,873

 
117,441

 
11,015

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
31,858

 
4,209

 
33,453

 
2,801

 
 
 
 
 
 
 
 
 
Net income
 
81,001

 
10,664

 
83,988

 
8,214

 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interest
 
73,957

 
7,119

 
72,892

 
4,529

 
 
 
 
 
 
 
 
 



Net income attributable to Apollo Medical Holdings, Inc.
 
$
7,044

 
$
3,545

 
$
11,096

 
$
3,685

 
 
 
 
 
 
 
 
 
Earnings per share – basic
 
$
0.20

 
$
0.10

 
$
0.31

 
$
0.11

 
 
 
 
 
 
 
 
 
Earnings per share – diluted
 
$
0.19

 
$
0.09

 
$
0.30

 
$
0.10

APOLLO MEDICAL HOLDINGS, INC.
SUPPLEMENTAL INFORMATION
 
 
 
 
 
 
Capitated Membership (in thousands)
 
 
 
 
 
 
June 30, 2020
 
December 31, 2019
 
December 31, 2018
 
 
 
 
 
 
     MSO
519

 
421

 
665

     IPA
541

 
530

 
265

     ACO
29

 
29

 
30

 
 
 
 
 
 
Total lives under management
1,089

 
980

 
960


Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Net income
 
$
81,001

 
$
10,664

 
$
83,988

 
$
8,214

     Depreciation and amortization
 
4,628

 
4,455

 
9,330

 
8,872

     Provision for income taxes
 
31,858

 
4,209

 
33,453

 
2,801

     Interest expense
 
2,673

 
311

 
5,541

 
522

     Interest income
 
(863
)
 
(474
)
 
(1,792
)
 
(797
)
EBITDA
 
119,297

 
19,165

 
130,520

 
19,612

 
 
 
 
 
 
 
 
 
     (Income) loss from equity method investments
 
(834
)
 
42

 
(2,888
)
 
892

     Gain on sale of equity method investment
 
(99,647
)
 

 
(99,647
)
 

     Other income
 
(1,282
)
 
(24
)
 
(1,384
)
 
(211
)
     Provider bonus payments
 
2,000

 

 
2,000

 
10,000

     Provision for doubtful accounts
 

 
(2,314
)
 

 
(1,363
)
     Net loss adjustment for recently acquired IPAs
 
4,070

 

 
8,833

 

Adjusted EBITDA
 
$
23,604

 
$
16,869

 
$
37,434

 
$
28,930




Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands)
 
 
Year Ending
 
 
December 31, 2020
 
 
 
 
 
Low
 
High
 Net income (1)
 
$
100,000

 
$
110,000

     Depreciation and amortization
 
18,000

 
20,000

     Provision for income taxes
 
30,000

 
31,000

     Interest expense
 
8,000

 
9,000

     Interest income
 
(1,000
)
 
(3,000
)
EBITDA (1)
 
155,000

 
167,000

 
 
 
 
 
     Income from equity method investments (2)
 
(95,000
)
 
(94,000
)
     Net loss adjustment for recently acquired IPAs
 
15,000

 
17,000

Adjusted EBITDA
 
$75,000
 
$90,000
(1) Net income and EBITDA includes the gain on sale of UCAP's 48.9% investment in UCI to Bright, which closed on April 30, 2020. UCAP is a 100% owned subsidiary of APC and its 48.9% investment in UCI is an excluded asset that remains solely for the benefit of APC and its shareholders. As such, the gain on sale did not affect the net income and adjusted EBITDA attributable to ApolloMed.
(2) Income from equity method investments is mainly attributed to the sale of UCAP's 48.9% investment in UCI to Bright, which closed on April 30, 2020. UCAP is a 100% owned subsidiary of APC and its 48.9% investment in UCI is an excluded asset that remains solely for the benefit of APC and its shareholders. As such, the gain on sale did not affect the net income and adjusted EBITDA attributable to ApolloMed.



Use of Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures earnings before interest, taxes, depreciation and amortization ("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 (loss). 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 from equity method investments and other income earned that are not related to the Company's normal operations. Adjusted EBITDA also excludes the effect on EBITDA of certain IPAs we recently acquired.
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 and 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. 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.