Greetings and welcome to Apollo Medical Holdings’ first quarter 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. I will now turn the conference over to our host, Carolyne Sohn of The Equity Group. Thank you, 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, 2021, is available at the Investors section of the Company’s website at www.apollomed.net. You may also email us at [email protected] if you’d like a copy. 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.

Good afternoon to all of you and thank you for joining us to discuss ApolloMed’s first quarter 2021 results. 2021 got off to a strong start as we reported solid growth on the top line and significantly greater growth on the bottom line, primarily as a result of organic membership growth in our existing IPAs driving capitation revenue and increased risk pool settlements and incentives revenue. The bottom line also benefitted from a decrease of $2.4 million in general and administrative expenses related to third-party consulting and professional costs, a direct result of the implementation and ongoing use of our own technology platform. For the first quarter of 2021, we reported $176.1 million in total revenue, which is a 7% increase from $165.1 million in the prior-year period, and net income attributable to ApolloMed of $13.2 million, which compares to $4.1 million in the prior-year period. We reported EBITDA of $26.6 million in the first quarter of 2021, which is a 137% increase from $11.2 million in the prior-year period, and Adjusted EBITDA of $29.2 million, which is a 111% increase from $13.8 million in the prior-year period. We place greater emphasis on the Adjusted EBITDA figures as these numbers back out the impact of recently acquired IPAs, other income, and income from equity method investments. We anticipate the trend of decreased claims due to the continued effects of COVID-19 will normalize as time goes on with more and more folks continuing to vaccinate against COVID-19 and the country maintains its steady path toward recovery, and we have accounted for this in our guidance for the second quarter of 2021, which Brandon will expand upon shortly. We continue working closely with the team at CAIPA MSO, in which we announced a strategic investment and alliance in January 2021. With this partnership, ApolloMed will be bringing its proprietary technologies to benefit CAIPA physicians. And the strategic alliance will provide ApolloMed with a low-risk entry foothold into the state of New York with the possibility of expanding the relationship down the line. We anticipate closing this transaction by the end of the 2021 second quarter. With that, I will turn it over to Brandon for an update on our operations and developments in our proprietary technology solutions. Brandon?

Thank you, Dr. Sim. We continue to innovate when it comes to our technology platform. As I mentioned on our last call, ApolloMed has invested heavily in the development of our fully integrated, proprietary software platform, including solutions for tech-enabled care coordination, population health and risk management, revenue cycle management, and more. The ApolloMed platform creates a powerful virtuous cycle which results in better patient care, measurable improvement in clinical outcomes, and reduced total cost of care.

Thank you, Brandon. We achieved strong results in the first quarter of 2021, reporting total revenue of $176.1 million, a 7% increase from $165.1 million in the prior-year quarter. As Dr. Sim mentioned earlier, this was driven by two things: (i) an additional $4.3 million in capitation revenue primarily as a result of organic membership growth at Allied Pacific IPA and Alpha Care Medical Group and (ii) a $6.8 million increase in risk pool settlements and incentives revenue driven by reduced utilization of our hospital partners due to the suspension of non-emergency medical procedures as a result of the COVID-19 pandemic.

Thanks, Eric. We remain committed to our previously stated goal of growing our member population to approximately 2 million lives by the end of 2021, which will be primarily driven by M&A. The marketplace is very active these days, but we are seeing a healthy set of opportunities before us and we’re confident that we will be able to find like-minded physicians and physician groups we can onboard into a risk-bearing model through ApolloMed’s platform.

Our first question comes from Gene Mannheimer with Colliers Securities. Please state your question.

Thanks. Good afternoon, congrats on a good quarter here. My first question just relates to that risk pool revenue. The numbers were obviously favorable as you called out, due to utilization trends that worked in your favor due to COVID, but that’s expected to normalize. Can you give us a sense of your timing on when we kind of return to more normal utilization?

Yeah, hey Gene. How are you doing? It’s Eric Chin here. Thanks for the question. That’s also why we provided the guidance for the second quarter. You’ll see that our revenue for the second quarter is guiding to a midpoint that’s lower than the first quarter, and a lot of that is just due to the bump in the risk pool that we recognized this quarter. Basically, as you know, it’s a share of a risk pool and there was a reduction in the utilization at the hospitals, which dropped down to more revenue from us coming from that risk pool settlement. But we expect that to normalize in the second quarter, so that’s why you see the guidance for the second quarter.

OK, very helpful to have that. Thanks, Eric. And my follow-up would be, in terms of your goal to expand to 2 million lives from the 1.1 where you sat at the end of the quarter, we’re about obviously 35% of the way through 2021. Sounds like you’re still comfortable with your target, just trying to get a feel for whether this M&A would be back end loaded to the back half or incremental and would they be—

Hey, Gene. Sorry I must have lost you at the end of the question there.

Yeah. Well, what I was getting at was just how your comfort level might look with hitting those 2 million lives, and would it be back end loaded or would we see sort of incremental deal flow between now and year end to get there?

Right. I think it will be incremental certainly. It will probably hit not necessarily in the first or second quarter but we do still feel comfortable with the projection that we gave at the beginning of the year. The marketplace, as I mentioned, is very active. But again the pipeline remains very healthy, and we think that we’ll be able to close some of these deals in the near future and we’ll be certain to update the investor community when that happens.

Fair enough. Appreciate that comment. And then my other question relates to the direct contracting model with Medicare. You’ve touched on that in the past in terms of when ApolloMed may be participating in that innovation model. Is there any granularity you can provide on your progress there? Thank you.

Yeah, of course. Thanks, Gene. As you know we’ve been excited about this DCE and geographic DCE model. It is now public information that applications for the DCE model have closed at least for the global and professional tracks and that the geo DCE model has been postponed for one year as the new administration works out its plans for the future of the DCE model. Because we chose to participate in the very profitable at least historically Next-Gen ACO this year, and because organizations cannot participate in both the Next-Gen ACO track and DCE, ApolloMed unfortunately was not in the DCE application pool. However, we are exploring strategic options to collaborate with DCEs, and we believe that we have a path forward to participate in the DCE program even in 2022. In addition, given our provider network and strength of our provider networking growth into geographic DCE regions, we see ourselves as strongly positioned to participate in the geo DCE model when it is recontinued by the current administration. So we are still fairly optimistic about our opportunities in the DCE model whether it’s the global, professional or geo track.

Great. Thank you for that, Brandon. Appreciate it.

Absolutely.

Thank you. There are no further questions at this time, so I will turn the floor back to management for closing remarks.

Excellent. Thank you all for your time today. We really appreciate it, and we look forward to speaking to you all again on our next quarterly call. The Company will also be presenting at a couple of virtual investor conferences later in this month, and we hope to speak to some of you then. Please feel free to reach out to us or our investor relations firm The Equity Group with any additional questions. Thank you.

Thank you. Thank you, all.

Thank you. This concludes today’s call. All parties may disconnect. Have a great evening.