CRHM - Earnings call transcript Q2 2018

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Operator

This is the conference operator. Welcome to the CRH Medical Second Quarter 2018 Results Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Ms. Relations. Investor Director Cordero, Kettina Please go Ms. ahead, Cordero.

Kettina Cordero

Thank by our operator, and of Kreger. and CFO, good today joined President Jay Anesthesia, I'm everyone. CRH CEO, Bear; morning, Richard you, Edward our Wright;

would we hear applicable will forward-looking securities like Before constitute I to everyone statements today meaning that the within remind statements laws. you certain of start,

our the important definitions and to and and to inherent risks please ended assumptions, XXXX, cautionary refer information June for our Form. For and factors our cautionary recent the financial six months in the notes the Information Annual quarter section statements about report most business, XX, forward-looking in risk

will During we discuss this measures our as call, indicators performance. of non-IFRS

ended to can reconciliations our to IFRS of non-IFRS on for management's reported refer measures six of section investors the and These our on You SEDAR months website. available XX, documents June the are measures. analysis XXXX, and for disclosure quarter and

refer addition, please that the we use In GI note to gastroenterology. to abbreviation

be please dollar today dollars. and U.S. advised is figures in are currency Finally, all reporting dollar and the referenced U.S. that our functional

with you Edward leave I'll Now, Wright.

Edward Wright

anesthesia Lake you, Anesthesia, marks anesthesia I’d successful announced strong as acquired on the Thank and of We professional MAP monitored of execution by Last result in of week, approximately providing service surgical now cases transaction first to operational discussing our the initial we XXX,XXX of proof XXth servicing second successful centers for in our March Kettina. GI anesthesia program. anesthesia and exclusive concept acquired Sound start practice we interest quarter majority annually. agreements CRH for patient the XX our in for anesthesia and states anesthesia which latest recently achievement acquisition of objectives GI our for or of CRH XXXX. program the Washington, ambulatory practices. a December marks since of in our Like integration Gastroenterology. XXXX, agreement, like a announced developed the Yesterday, earnings anesthesia we program, ten have XXXX This revenue acquisitions. part with the Puget Washington

the work been adopted anesthesia acquisition benefit in have customers. date been acquisitions acquisitions GIs of we've majority our have previously enhance teams pipeline, result track a who cultivated our that existing anesthesia from our we CRH on to to are $XX with strong the together approximately growth O’Regan system. relationships of achieve have goals. As million and stated O’Regan invested continue Year-to-date the To our to

be which flows to million internally provides At flow and interest basis XXXX, credit on funds cash XX, points. our This LIBOR executing rate cash plus with $XXX our growth facility. credit financed our our on Our through free generated approximately combined $XX.X XXX ample acquisitions to million June available had our continue facility, continue us has we an of strategy.

over worth released reimbursements. we I to as contain is fee his it XXXX that to last mention changes expected the it And mentioning Finally, GI not does Richard will now by physician CMS any further for commentary. anesthesia that week with turn of proposed schedule

Richard Bear

in reminding financial consolidated to subsidiaries include we is This practices IFRS, our which anesthesia financial a statements, as keeping which the accordance Thank that everyone interest. with we accounting Reporting standards. practice I hold statements as with also hold that of which the majority in such interest, known in the Financial start controlling we current we or own like by you, International report Edward. that means Standards, in those

statements of no expenses. revenue information. Please of other three net for restatement forms In effect restated The addition XXXX, any of X, income. January has unaudited impact we please refer that year and financial interim a adopted the company IFRS as income result note to more on XX operating or prior our

the second revenue the quarter Average total of quarter per year-over-year XX% $XX.X XXXX, was in million. second the $XX.X case Anesthesia During revenue reported revenue of lower grew quarter to for $XXX, primarily CMS million. we second into X% effect of than is to to final the decrease by The The that the payers of XXXX. went schedule the of impact fee XXXX. execution entities. anesthesia commercial offset due January of acquired newly contract impact X, approximately

decreased which second $X.X XXXX. to for serviced the extent lesser quarter of quarter products. practice attributable compared operating emphasis shareholders second XX,XXX the EBITDA sales of the Total same Sales to million, period system the was $X.X $X.X The of of of total for in is During competitive $X.X XX% the product due more sales second million. the XXXX, and the is XX% representing decrease same quarter changed we were in patient operating changes Adjusted introduction revenue. EBITDA of a in in of million, than practices O’Regan was our million to previously period result XXXX. to adjusted cases, during

$X.X we working of million in had cash, million XXXX, in As XX, $XX.X capital. June

In credit Jay leave addition, with I for had million we available our you to With update. future his fund on that, will growth. $XX.X facility

Jay Kreger

Thank you Richard.

in the $X.X million We early continue state our which anaesthesia, front. to We Western to of was Ohio in in Ohio. first May be majority interest spent acquisition the busy acquire practice on a

The care, in best of cycle to establish knowledge been facets anaesthesia adopt become efficient million. million, first able to program the we've a Lake Lake practices our one. and management, March XXXX standard-of-care $XX.X ambulatory applying progressively the these spent Edward acquisition, surgical as $X four revenue all week centers at our spent at to practice State. in a and implementing By two Washington total as our quality mentioned high owners $XX.X investment where year from practice all day to addition, under operate. in our complete We majority Sound patient and acquisitions in our Puget in that we brings Washington Washington for In sedation practice established partners MAC management anaesthesia last sound million in these we

remainder excited of are over We our year. business continue the growing the anaesthesia

what growth [ph] March covers a Our becomes was now footprint. into national states ten anaesthesia quickly

We the advantage take growth country, across expect as of further opportunities. we new

effectively class acquired along businesses. the with and investment to to these ability operations continue focus integrate on We efficiently providing

Our platform anaesthesia GI as the evolve partner-of-choice. continues to

Team new Our and day with our Business Development for grow XXXX, pipeline each further opportunities uncover work O’Regan our Team acquisition order in continuing the is closely to beyond. to rest and of

you and to in continuing place to year of Our resources I’ll I financial Edward back remarks. remainder so operational now and with are support look to for the acquisitions his the forward closing come. leave these

Edward Wright

ask And questions. your that with to questions. the So, operator happy going to open we're take up for I'm it to

Operator

Gibbs go Please The ahead. [Operator Securities. Instructions] with from first question Lennox TD is

Lennox Gibbs

first your forward – to out trends your might you make-up the considering of acquisition in mix pipeline going am we expect into I addition deal and about previously of been thinking ideal in valuation, of the terms building with metrics size, what market ophthalmology there some I'm might engage of know, locations transactions that some I talk the in, have like question. you therapeutic

Jay Kreger

this is Lennox So, question. Jay. Thank the for you

expect short-term I think size encountered the the that certainly can same, of pipeline. we’ve seeing what deal of the you are in the more we of in are representative

year. this into For next and year the rest of

Lennox Gibbs

MAC transactions Any comment MAC development, specifically that development. would include on

Jay Kreger

the only very So, of completed program. to developing on Lake excited process have then Washington I all transacting first think the anesthesia not we're program but of the

of program would transactions place within And, of XX to would so a you continue from the a prime time option the we development months, for know the any those that candidate groups that included could not take an but to As it that program. year talk next conclude those. after be

Lennox Gibbs

the fluctuation reflecting and a drag here you that. more presumably can that the quarter-to-quarter sequential can than in is the decline sense you perhaps similar to wondering explain the anesthesia margin in operating secondly, give And what typical I'm a margins, as caused us but or exactly decline whether if

Edward Wright

it trend this margins the is from to go were as as CMS come to it in contract, and the is, driving change operating acquired What’s to prior non-contacted going we primarily year, in contracted. is changes from if

we again what the release a margin CMS year, put that and believe last again that think to change we And, contracted. as non-contracted of So, press out going well I have as to you're margins we seeing still reflection profile. we moving some here is believe back the

Lennox Gibbs

the to referring sequential QX trend QX I'm XXXX. but Right, over

don't think reimbursement. So that's I

Jay Kreger

be by – we're contracted dramatically to moving it’s to again as again constantly through from non-contacted we like sounds to continue new a acquisitions. we're to related offset change won’t that I it Well – space because a number XXXX. going expect

Lennox Gibbs

Richy. Thanks very much,

Operator

ahead. The is go next question from with Richard Genuity. Canaccord Please Close

Richard Close

Great, thanks questions. for the

high On to continuing level provide the programs terms of the to basis in program that terms gauge a groups. talk of annual an on metrics MAC trying the active could MAC to you other program than could number is there Like just have like rather just be? anything us potential you how can any in

Jay Kreger

opportunities that’s geographic program the adopted moving States programs, anesthesia function MAC the couple the those regions markets of or that things. sedation prime as be deep deep talk We I were So a a that as the Richard, United think, up a about open vacancy. sedation And standard-of-care. they a of as in watching think I they with to certain And to are adoption target closely. but candidate those go in a can of

a a looking group. third-party make already maybe region decide larger that adopted sedation by group change But already. smaller the A looking from they're the in is that now. that and times of group deep have market where a it be the make change that lot right to help? if that groups by standard-of-care to the or is Does side region will change groups groups because other The it’s do

Richard Close

to a point could where it there. but little seeing is new Jay anything that on bubble state, there you acquisitions, was and in and states Yes, new Maybe at though discussions about front? on respect then maybe more comment up a bit geography, sounded Ohio with be M&A, that additional as can you're your to potential obviously talk there

Jay Kreger

if all as XX given opportunistic we’ve our O’Regan have we to five-point Well, are with talk states, to opportunities. acquisition said, our customers anyone been in that always you Sure. will anywhere. the over we've And

at continue that that states and that would why I ten least that's we to beyond will expand feel almost in. in I say So the discussions everywhere preliminary we're were we

Richard Close

Okay.

Jay Kreger

state a There’s or region focus not a that though we on. specific

Richard Close

just Okay. next understand out trying the at significance far either whether some in could with are the to along here that any currently size, with, outsized having the significantly deals year? to your there And there or or point of of preliminary be anything comments gauge respect size I there And over typical you're conversations marketplace deals.

Jay Kreger

eminent at time. Nothing this

Richard Close

thank Alright, you. Okay.

Operator

Burton is David with Bloom Co. question next The from Martin &

Your sir. line is open

Unidentified Analyst

full is Hi, cuts to Antonia its have that January. supposed for I to the this were in hello on and a just question related Dave. got one line impact CMS the related

third in So in adjusted private those are down haven’t there still and of the we quarter? or have all numbers, fourth yet XQ those who then baked can and some cuts payors expect

Jay Kreger

that everything the we've believe been date on Based well system. announced all incorporated the we've private by payor CMS have systems the cuts fully that as seen to into as federal

seen we've what what see. we’ll continue to is So

Unidentified Analyst

thank Okay you.

Jay Kreger

You’re welcome.

Operator

Ammar from is question Shah with next Financial. National The Bank

Your line is open.

Ammar Shah

Hey guys on taking congrats the for my questions and quarter. thanks

Jay Kreger

Thank you.

Ammar Shah

the could something with be the mentioned know So was just margin front, costs. again product be wondering next you in product as particularly hoping something segment or but support should few I I if quarters. that time ongoing just is the that on would touch that viewed higher one you

Jay Kreger

a practices our look the launching they the retraining, make that previous kind these we would candidates where reeducating, in of lighting believe investments done we increase training way from practices, we’re at the increase fire the continue are and that to we usage past have because I hammering initiatives have in to this to product of seen lot are growth. so

So or you point minus XXXX see or the the in QX. would margins be plus XX% two, that I QX that expect for and QX a would approximately margins

Ammar Shah

it from Okay, that’s me. Thanks.

Operator

The with Please is from Canaccord question Close Richard go ahead. Genuity. next

Richard Close

look maybe thanks. of half wondering could around on of was back and of terms sales in or anything in to related same the volume, facility we procedure Great, give you year volumes thoughts perspective I on some trends, us just the thoughts that? as if into same-store

Edward Wright

cases. XX,XXX I a good three question, ending, we months that’s for Richard. the Yes, did mean

look that, of did through we that deals of the if Western So made up that all of at was what you in two Ohio. XXX% QX, up months

the have get So we’re will we up so from when quarter, going seasonality in are get to going go three Washington of plus perspective. headcounts Anesthesia, a we to months Western Ohio, play Lake third

acquisition to between about mean, QX seasonality the Talking stated than the low and a of said single-digits and so the expect I to our think add growth of growth, XX% headcounts basis. base before as consistent. is the kind team we’ve in on which continue organic organic patient of we’ve do QX work just we And great normalized up remains then cases. less I We’d go QX.

Richard Close

in think reclassified commercial with then you and the the And respect or? Okay. metrics guys federal documents on provided. to anything you Have I

Richard Bear

mean in to There reclassification an one notice is the entity is was it over small entity up all our side, it some historical the of which that over better came a we related to was numbers a until we done that minor of of and had Community there was of small, came federal the January just billing properties, classification there’s the to Anesthesia the a our side. more making when which sure bit And I a the and little change that noted. page, XXXX Anesthesia. consistent properties a bottom other X, by with had in view Community between commercial

Richard Close

on came payment question CMS the I new out. my Okay. is that final rules guess,

receive there's think I Jay, respect as there there you whether if of terms for could And wondering in just where I how – with of provide your the in terms people negative it's care was in changes And ambulatory hospital procedures, maybe? standalone that setting or forward going impacts some to a guys to reimbursement. that of stuff the positive maybe potentially and you I thoughts compares business clinics. on outpatient guess

Jay Kreger

surgery invested setting, in I anesthesia because changes hospitals don't outpatient normally invested impacted. think their ambulatory just a their their where the goes that a reimbursement physicians goes the few patient think center. where And go. the if were I doctors patient than in in was

don’t it think impact has I on at all. volumes an So

Richard Close

Okay.

on drive it could paid and businesses, shift with private better maybe hey, new because maybe to And could that GI that now and side be anesthesia previously, practice and and practices Now potentially into volumes. themselves of up to align hospitals terms begin out that go services of hospitals there's get something they salaries or they it's GIs set ultimately in well. where like maybe reimbursement maybe as maybe more something decide, lower that

Jay Kreger

think you’re about… talking I

Richard Close

my reaching I Am this…

Jay Kreger

Certainly monumental I have Yes, think time they’d be suggesting would history and back purchased proof of you're away what gone by happen. independent, because to think talking it that if GI have, nothing need the to work. concern no it about when shift about is you're of historically kind care they we is I but is didn’t not hospitals years many any soon. future been many, of ever that

Richard Close

Great, Okay. thanks.

Operator

question-and-answer Thank CRH for the in call. you session. Medical’s conference concludes This participating

day. You participating you may disconnect your lines. Thank for and have a pleasant

CRH Medical (CRHM) 4 Aug 182018 Q2 Earnings call transcript