Apollo Medical : Transcript Q2 2023

TRANSCRIPT

2023 Second Quarter Financial Results

Conference Call Transcript

August 7, 2023

Speakers:

• Carolyne Sohn, The Equity Group
• Brandon Sim, Co-Chief Executive Officer, ApolloMed
• Chan Basho, Chief Strategy Officer and Chief Financial Officer, ApolloMed

Operator:	Hello and welcome to the Apollo Medical Holdings' second quarter 2023
	financial results conference call and webcast. {operator instructions} It's
	now my pleasure to turn the conference over to Carolyne Sohn, Vice
	President of Investor Relations. Carolyne, please go ahead.
Carolyne Sohn:	Thank you, operator, and hello, everyone. Thank you for joining us.
	The press release announcing Apollo Medical Holdings, Inc.'s results for
	the second quarter ended June 30, 2023, is available at the Investors
	section of the Company's website at www.apollomed.net. 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 ApolloMed's 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, 2023, continued growth,
	ability to decrease cost of care while improving quality and outcomes,
	ability to deliver sustainable revenue and EBITDA growth as well as long-
	term value, ability to respond to the changing environment, ability to
	offset anticipated losses in the Care Enablement segment, ability to
	successfully implement operational streamlining, and successful
	implementation of strategic growth plans, acquisition strategy, and merger
	integration efforts.
	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

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	those expectations will prove to be correct. Information about the risks
	associated with investing in ApolloMed is included in its filings with the
	Securities and Exchange Commission, which we encourage you to review
	before making an investment decision.
Carolyne Sohn:	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 2 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 3.
	On today's call, the Company's Co-Chief Executive Officer Brandon Sim
	will discuss second quarter 2023 highlights and the latest operational
	developments. Chief Financial Officer Chan Basho will follow with a
	review of ApolloMed's results for the second quarter and six months
	ended June 30, 2023. Brandon will 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 ApolloMed's Co-Chief Executive Officer
	Brandon Sim. Please go ahead, Brandon.
Brandon Sim:	Thank you, Carolyne.
	We were pleased to deliver another strong quarter, achieving 29% growth
	on the top line and 44% growth in adjusted EBITDA compared to the
	same quarter in 2022. Revenue growth was primarily driven by strong
	organic membership growth and a more favorable payer mix in our Care
	Partners business. We continued to execute on our three key operational
	goals: one, growing our membership in core and new geographies; two,
	empowering our Care Delivery and Care Partners providers to successfully
	move along the glide path towards value-based care, and three, enabling
	our providers to deliver excellent patient outcomes in order to manage
	that risk effectively.
	On the first goal, growing our membership in core and new geographies,
	we continue to see strong growth as a result of the strength and quality of
	our Care Partners business as well as the technology, operational, and care
	management support we bring to bear in our Care Enablement business.
	Our core business in California continues to demonstrate robust growth,
	both organically in our partnered groups as well as in new partnerships
	signed. We recently formed a long-term partnership with a primary care
	group in California with a network of over 50 providers, joining our newly

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	signed class of partners in 2023. We expect to onboard this group onto
	our Care Enablement platform by September 1st of this year.
Brandon Sim:	We also want to highlight what we believe is our ability to replicate our
	success in Southern California in other markets. As previously
	communicated, our playbook for empowering providers in a new market
	includes: first, entering a market in partnership with a high-quality anchor
	group for our risk-bearing Care Partners business; second, investing in
	local operational and care management teams to ensure successful
	onboarding onto our Care Enablement platform for these providers, and
	finally, partnering with additional groups in the market who would benefit
	from joining our platform. This flywheel accelerates as we reach critical
	mass in each market, and we believe that the enablement platform we've
	built and proven to generate great patient outcomes and profitability in
	Southern California will allow us to demonstrate this progression rapidly in
	each new market we enter.
	In Texas, for example, we entered with the acquisition of Valley Oaks
	Medical Group last October. As we build out our local market leadership in
	Texas, we're pleased to share that Jaime Melkonoff, a healthcare
	executive with over 20 years of experience in the industry, has joined us
	as President of ApolloCare Enablement of Texas and Senior Vice President
	of Business Development. Jaime is expected to play a key role in
	expanding our Care Partners network across the country and further
	building out our Care Enablement platform's capabilities, empowering
	providers to advance along the value-based care glide path responsibly in
	Texas. We are thrilled to welcome Jaime to our leadership team and look
	forward to her contributions to our expansion efforts.
	Next, we continue to partner with groups across the region to empower
	their providers to provide high-quality,value-based care. Firstly, we
	recently announced the acquisition of certain assets related to Texas
	Independent Providers, or TIP. Through its network of 120 primary care
	providers, TIP is expected to be an anchor for our high-quality Care
	Partners segment in Houston, and we expect to onboard TIP's providers
	onto our Care Enablement platform by the end of 2023. We are pleased
	that we will continue to benefit from the leadership of TIP's President Dr.
	Carlos Palacios, who will join ApolloMed as Chief Medical Officer for
	Texas to spearhead clinical initiatives for local providers, and TIP
	Executive Director Vincent Roth who will join us as Group Vice President
	of Operations for Texas and lead the continued growth and development
	of our Texas network.
	We also announced a partnership with IntraCare to advance value-based
	care in Dallas/Fort Worth, El Paso, Austin and Oklahoma City. Through a
	network of over 425 primary care providers, IntraCare manages the care
	of over 40,000 members. And through this partnership, IntraCare's
	providers are expected to join our Care Partners business in these regions

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	and be onboarded onto our Care Enablement platform by the end of the
	year. We are thrilled by the continued strong momentum we've been
	seeing in terms of the excitement around our Care Partners and Care
	Enablement offerings in both California, Texas, and beyond.
Brandon Sim:	Our next strategic pillar is in empowering our Care Delivery and Care
	Partners providers to successfully move along the glide path towards
	value-based care. In California, we shared during our previous quarterly
	call in May that we had closed on the acquisition of For Your Benefit, or
	FYB, and received regulatory approval for the change in control of FYB's
	full-service Restricted Knox-Keene licensed health plan. We are working
	closely with the Department of Managed Healthcare to expand the RKK
	to other counties within California and to add more members within
	existing counties, and we believe that the process is on track relative to
	our expectations.
	Finally, the most important strategic pillar is ensuring that we are
	successfully empowering our providers to deliver excellent patient
	outcomes, thereby managing that risk effectively. We continue to closely
	monitor utilization trends and did not see an increase in utilization in Q2
	compared to Q1. Based on prior authorization data however, we do see a
	slight uptick in utilization for Q3 but do not believe this will significantly
	impact our overall performance or guidance for 2023.
	With regards to Medicaid redetermination, a bulk of our Medicaid
	members in value-based arrangements reside in California, which began
	disenrollments in July. We have not yet seen a significant impact on either
	our membership or mix, but we continue to monitor and assist in the
	redetermination process for our members to ensure they have access to
	care.
	With these recent developments and our solid financial performance
	through the first half of 2023, we are pleased to be reiterating our
	previously provided guidance for full-year 2023. We continue to grow
	membership in our core California markets and in our new Nevada and
	Texas geographies through organic growth, new partnerships, and
	inorganic activities. We continue to responsibly accelerate providers
	towards a value-based, aligned future. And we continue to make ongoing
	strategic investments in our business, our teams, and our technology,
	which we believe are necessary to support growth in the years to come.
	With that, I'll turn it over to Chan to review our financial results.
Chan Basho:	Thank you, Brandon.
	We continued to deliver strong results, reporting total revenue of $348.2
	million in the second quarter of 2023, a 29% increase from $269.7 million

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	in the prior-year quarter. This was primarily driven by increased revenue
	from our Care Partners segment.
Chan Basho:	Quickly reviewing results in each of our business segments for the second
	quarter versus the prior-year quarter, our Care Partners segment reported
	revenue of $325.2 million, an increase of 32% compared to the second
	quarter of 2022, primarily driven by organic membership growth in our
	consolidated risk-bearing entities and a more favorable payer mix.
	Segment operating income increased 250% to $27.8 million for the period.
	This was primarily driven by a larger mid-year MA risk adjustment
	payment this period and the retrospective trend adjustment related to the
	CMS DCE program in the prior-year period.
	Moving to our Care Enablement segment, revenue increased 18% to
	$35.0 million in the second quarter of 2023. Segment operating income
	was $7.6 million for the period, compared to $7.3 million in the prior-year
	period. We continue to make investments in infrastructure, technology,
	and people to support our operational growth in new geographies and
	capabilities surrounding our RKK. We expect these investments to result
	in additional revenue and margin expansion over time as we onboard
	incremental clients.
	Membership under management within our Care Enablement segment
	was approximately 1.3 million managed lives at the end of the second
	quarter ended June 30, 2023. Approximately 650,000, or half of these
	members, were also within our Care Partners business.
	Finally, our Care Delivery segment revenue increased 14% to $26.7 million
	during the period. This was primarily driven by increased volume in patient
	visits at our primary, multi-specialty, and ancillary delivery entities.
	Segment operating income was $0.6 million for the period, compared to
	$3.4 million in the prior-year period. The decrease was a result of our
	ongoing investments in expanding our care delivery footprint in Nevada
	and Texas. As you may recall, in the past we highlighted our commitment
	to invest up to an incremental $10 million in 2023 to scale new
	geographies across all lines of business. Due to this reason, we view the
	results in this segment as in-line to better than guidance we provided last
	quarter.
	In aggregate, income from operations, including corporate expenditures,
	was $27.0 million, an increase of 75.7% from $15.4 million in the prior-
	year period. Adjusted EBITDA was $35.8 million, up 44% from $24.9
	million in the prior-year period.
	Net income attributable to ApolloMed was $13.2 million, an increase of
	10% from $12.0 million in the second quarter of 2022. Earnings per share
	on a diluted basis were $0.28, up 8% from $0.26 in the prior-year period.

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