CRHM - Earnings call transcript Q1 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the CRH Medical First Quarter 2019 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]. to over like CFO. Richard now would turn to conference Bear, I go sir. Please ahead,

Richard Bear

operator, everyone. the Thank by good and you, morning, CEO, Anesthesia, Kreger. Tushar CRH our I'm Dr. Ramani; of and President Jay new today joined

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

XX-Q cautionary business, for and the notes to our please For for to ended information in month the important risk March the forward-looking our assumptions, ended -- XX, statements about definitions cautionary refer and the quarter inherent XXXX.

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

can You These available Section on XXXX our XX, for website. analysis and reconciliations on of SEDAR, of our EDGAR documents for are and to discussion the measures. the refer non-GAAP Investor months GAAP March to X ended measures management's reported

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

reporting dollar in dollar currency advised introduce be functional is Dr. and our please With new dollars. U.S. referenced U.S. in to figures I'd CEO, that, that welcome Finally, Ramani. like and all that today our Tushar and are

Tushar Ramani

that solutions business various on service for anesthesiology leader centers. me With and specifically, and Thank national been of that I'm Good Anesthetix, and customer provider morning now focus have as professionals, this anesthesiologist empathy to development, opportunity appointed I our stakeholders a introduce surgery my role Corporation. background, and Richard. in to myself you'll address of CRH of the clinical bring everyone pleased Medical to strong company. fully CEO co-founder a and a accountability, genuine for you, this all. I've former find represent a hospitals I'm allowing to comprehensive a More

And enjoy And quality and to to in I've of humbled service motivated CRH, reliability care company. skilled dedication, care be led several revenue maximum management's I've to of reputation we're shareholders I'm leverage full lead and firm some business. anesthesia, aspects administrators. some reputation and and companies, what enormous wellearned our ahead professionals on opportunity seen without, our to improvement in to well, and team to our highly cycle where all continuous eager staffing and management health I'm including care now anesthesia to that thanks deliver of a alike. health for now share high their value an in market and us other and we for a As customers the commitment a industry I and to the customer Board's developed

to rapidly strive relied patients services our useful look invest integrity footprint as Best offerings shareholders. best to sought is cherished and finances services more that relationship our to will and its we be their of valuable and to accountability believe well that of on. a core manage this grow -- continue CRH unique valuable capital of have as earned in and and its expand trustworthy its and all, knowing specialized critical be I that continue more people, personal anchors so and our supplier and interest and positioned patients, of even our the the in more our and customers We GI market. community CRH are gastroenterologists to culture, partner the have even will to we'll our after and always CRH in to we a with

review Jay continue and shows $X.X operational its expand will XXXX million. revenue steady to shareholder This QX quarter pleased now results. our Richard our that and EBITDA of coupled financial to continues now digit in with hand growth off results. and regarding grow to deliver Now, to validate model its current to our CRH with very and I on model, adjusted it deliver strategies. detail. the first potential its positioned We're is the double acquisition then first well to offerings, strong

Jay Kreger

you, Thank Tushar.

ended first The substantial gains XXXX on an of operating adjusted quarter year-over-year revenues with for shareholder EBITDA. total

XX% growth acquisitions the that grew was our announced same from over to revenue quarter. throughout along XXXX. the XXXX first of due This XXXX period mainly anesthesia we year in the nearly earlier that acquisition was Our with completed

drive forward We last does all in continued the of was O'Regan expansion are to our our this specifically, team our active annually, on our and anesthesia reiterate, year. and and having our our provides that our the community of GI program XXX,XXX continue including footprint their myself capitalize pipeline. over which optimized We opportunities, and that with to year these team development and anesthesia and include reputation development and currently our with all value business more discussions now remain serving resources, CRH To initiated strong, acquisition is The business, to Carolina and patients realize country. XX relationships continue ASCs We'll help the the to North not confident community MAC development look the anesthesia to groups will beyond. pipeline businesses. O'Regan GI the help utilizing GI within

industry-leading from premium competitive a our gained on team are ongoing be operation Meanwhile, the satisfaction. safety provider sets continues ancillary assists our a and which patient anesthesia our national integration process other our advantage our streamline recruitment continues to and that performance providers partners. us second to to efforts financial CRH has network, reputation none. focus Our and ensure now and puts across apart

our year. on year-end results, discussed acquisitions mentioned call our we we when $XX spend I As to this expect on last million

flourish. position O'Regan our GI for We anesthesia growth. choice catalysts existing We our to this will now rely will of as back Richard as our will only I partner that it commentary. continue believe both for the anesthesia partners customers his and turn physician on to

Richard Bear

beginning I'd GAAP. are start basis, Jay. on being XXXX accordance to with financial XX, Thank our reminding by retrospective that like and in a you, everyone December U.S. reports prepared

the a as with such practices interest current accounting hold we the practice This we which means which statements, of financial consolidated our subsidiaries which those include that anesthesia or report financial in standards. we is controlling keeping hold interest. in statements also in majority own We

quarter first of million. reported the revenue $XX.X Anesthesia increase total XXXX. $XX.X compared million, revenue the grew of grew an of -- first XX.X% XX% XX.X% During to quarter to we it XXXX,

XX% of quarter During segment. attributable provided the for Adjusted EBITDA same first was represents segment operating to during in quarter million XX,XXX shareholders of same million. XXXX, services $XX.X was $X.X XX%. $X.X period the Sales period operating to the XXXX. were Operating adjusted The for $X.X EBITDA was the to compared quarter XX% for margin our million for product the the Total compared XXXX. we EBITDA increase margin first quarter the to anesthesia patients, XX% the and O'Regan system which was EBITDA in first operating million. for a

flow X defined the March free cash as XX, net $XX.X less and noncontrolling months operating XXXX, million million. distributions activities was cash For net $X.X and interest, flow, ended activities flow cash from from operating was

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

growth. on rate Our credit to give be financed it our now plus through generated facility, we interest future had back million to available to points. continued XXX $XXX $XX with basis end, has acquisitions internally Tushar. an At I credit facility quarter fund million currently along LIBOR cash which of flows our

Tushar Ramani

CRH. Richard. excited we'll I optimistic how questions. here I of be you, I and am am to how the to I think open it Thank Again, that future with would about for just like And say just that,

Operator

Thank you.

session. now Please will [Operator question go We first the Securities. question-and-answer of TD from ahead. The comes begin Instructions] Lennox Gibbs

Lennox Gibbs

morning. you. Good Thank

yourself Can you Ramani. Dr. for in the is value? business question most greatest you're being CRH's to which of areas speak think you first see my which you So likely specifically and about hands-on more bring in

Tushar Ramani

Sure, the Lennox. Thanks for question.

I my physician thing CRH sensibility. greatest the to think I is bring

extend key a as, our with them, peer-to-peer and entree anesthesiology our relationships as should customer developing of as providers gastroenterologists, us we as bonds to allows so us hopefully as relationship. a well strengthen market, better level And allow those well seek

Lennox Gibbs

Perhaps priorities? what the Okay. we your your same look of question that If period? different are priorities balance way. the through X X a top top XXXX, for are in What

Tushar Ramani

will set will leverage level priorities I all spent that this we have relationships Well, and developing. can time our we the understand to that use next to opportunity the -- to accelerators have first exactly And be we be to our in core again, business. think of identify

Lennox Gibbs

then in the expect And experiencing headwinds to respect CRNA practices? with to established costs. secondly us migration to in contract XXXX? just can much Okay. growth, think you was you're how the organic you mention give cost And there a to MD&A I speak of sense as you also the in

Richard Bear

couple Richard. those. it's of will I attack Lennox, a

continues $X growth growth in XXXX was to organic organic attributable range. that to to X% X% in QX compared million. to QX Revenue close be So to

So continues. organic growth

our reduce cost overall to continued case. per We

a for down is still of dollars is XXXX. the to And But terms for per same $XXX per we revenue in period the I case by case in compared QX per range That's case think expecting that positively cost XXXX. per revenue of when -- true-ups. are case, reported some impacted accrual case been couple revenue in $XXX. the

Lennox Gibbs

What And regions expected know X% experiencing labor then said specifically CRNA I expect sort there? contract again, you your you hit. And XXXX do of costs, for which a in are inflation for'XX? you the migration,

Jay Kreger

address CRNA Lennox, cost. the this I'll is Jay.

cost through but You offset nature, account. that organic increase. into we that utilization And I have as increase in taken we mentioned we've it's think that -- regional we growth,

to it From not And contract at Richard... be. let standpoint, point, expect a don't so material I'll it's this

Richard Bear

through contract look extent large have going a the that gone XXXX probably of from you you to I look XXXX, and if at standpoint the at part Yes, to of some XXXX, -- -- contracted a those non-contracted from mean, they're to.

changes be new but primarily in activity, contract will in offset of we'll see non-contracted the come XXXX. XXXX acquisitions be by So that the will that

numbers that that really the numbers for we -- $XXX seasonally case, the believe is payer the XXXX, that So for levels QX we -- adjusted which we've XXXX mix. per adjusted commercial will reported QX

that so steady XXXX. through remain will And

Lennox Gibbs

much. very Thanks

Richard Bear

Mike. Thanks

Operator

question Noel Please of next Atkinson Clarus comes Securities. ahead. from go The

Noel Atkinson

the questions. taking for Thanks

any First the seasonality more volume, out positive some you sort was the smoothing from strong last in off, of to pretty we Are QX. move thought the seeing QX? sort historical agreements of year benefits procedure it of in in-network actually

Jay Kreger

Noel, impact The case it's volume on Jay. volume. no in-network has -- network patient or

Noel Atkinson

Okay. minority terms EBITDA, of was thing? multiple? of Could in about Arapahoe sort interest more you that sale, the the What a there the for acquisition tell us bit motivation little

Richard Bear

that XXX% proactively willing valued decision transaction, done we're made actually with Obviously, was certain changes. of on ownership original consistent interest a transaction up for be for yet XX% who how CMS we the code the to year, and Absolutely. by to valuation sell partners to had additional adjusted we very solicit The bullish we the Last CRH. business. might the including

Noel Atkinson

as in Are to folks Okay. acquisition for of sort change any at last outlook And rate activity your years? the of then looking you similar have do still XXXX? few acquisition a you

Richard Bear

On year to our is guidance end this growing, mentioned also call, have which will pipeline remains lead that beyond. we acquisitions. We've future and $XX number of that million, for give the -- for actually and XXXX year in transactions we development

Noel Atkinson

$XX the Do -- you purchase see part minority as million? that a of interest that

Richard Bear

Yes.

Noel Atkinson

Okay. Thanks so much.

Operator

Gonsalves, Securities. comes is who with Tania next The from Cormark ahead. go question Please

Tania Gonsalves

Good morning, gentlemen.

just on firstly, the So collection.

And trending We've been QX QX? collections is from this just to this systems properly for relate a now. we start noted Does to levels in QX? is those expect their You while can having in new in these beginning all seasonally with the waiting payers backlog now higher, volumes updated normalize Or significant the I for know high DSOs downward April. to year codes?

Richard Bear

of of somebody was Tania currently a April of month less you because primary comes for a claims April expect strong for in are code Yes, into that some a is they we and when Thank the we the backlog and than of days a to and There the rebilling changes, diagnostic the continue. screening Yes. interpretation that outstanding very monthly in then question. reported turns those. outstanding collections

Our to our maximize collections. goal is

outstanding will But So out going decrease being those XXXX. ensure we as claims we close at days through long days work decrease maximum just want to our expect the said, to see to compared days we're that not as least XXXX the collectability. claims outstanding. see -- to to We to possible

Tania Gonsalves

been results, of the noted period. though you this though, earlier following referenced XXX,XXX were M&A acquisition ACA to I then I the if extra wondering between jumped QX was of saw the performance XXX,XXX maybe, across -- believe. those no that procedural relates just even annual of Has was the... And GAA there that we considering that GAA earnout. that And or reported When procedures year, big else you reevaluation something it that to it blended volume I'm of XXXX

Richard Bear

was It overall.

had ACA not final January press X, out that did we December out when we numbers. have We closed release not -- on So when went year-end yet.

able XXX,XXX XXX,XXX. volume annual went true-up what And So the the with why case to from we're it that's is. final numbers, year-end to

Tania Gonsalves

you. Got

him Okay. And there to their a we used haven't Dr. are transferable grow time he -- because then any some runs any I'm that a of I have to that because quite spend lastly for strategies if or couple Ramani. topics yet. just questions there specific CRH for at which similar wondering there's spoken business, you you are think? TeamHealth, did revenue

Tushar Ramani

think -- I the thank Tania, Well, I question you. firstly, appreciate and

well. think one, primarily of non-acute services single TeamHealth the as it's And one. is turnover care business specialty, this setting, I the rapid right. distinct this from sort primarily strategy focus, actually in outpatient different anesthesia In is a

that ventures, a drive product partners our partnerships we're joint relationships those and cases, sales established helps that as as developing well. well as and and acquisitions outright some services strategy developed, have medical GI in Here from

X So plan. the types acquisition work the a here commonalities I there that different have businesses. we more organic don't much. at as that of to an of And greater displacement The then we that sales again, TeamHealth, are It's guess was professionals degree just with. strategy,

Tania Gonsalves

a And wants, have stock what giving this yet, this might is are at thoughts you perhaps if about Okay. a idea the private on market well, you but spend are some CRH you private? wondering proper as maybe to it I'm then what did your equity open not not taking platform firm. lastly time

Tushar Ramani

in managing a well venue a this I'm as as Tania, quite venue. both private comfortable company public

to have the the on for whatever might and best we I shareholders be. what's depending do -- think circumstances

Tania Gonsalves

for all you. me. That's Thank Okay.

Operator

The next Richard with is Genuity. question Canaccord who comes from sir. go ahead, Close, Please

Richard Close

Thanks Welcome, for Ramani. Dr. the question.

and portends growth in -- various future past maybe question companies I'm the or So you how little strategies obviously, the background CRH. very received that just impressed positions around a a bit. your and and your interested curious in for for But for history,

really mentioned you detail expansion your expanding breath services of thoughts You provide Can the much terms of but company? maybe in of didn't into of breath the there. services, the go at

Tushar Ramani

the I answer appreciate be I time to will would you. I your thank query that question. Richard, there. in say able

landscape let right the to arms that themselves. say we're that assessing now things what I'm looks think and now, present plans But to just continue maximize around I my that me like. opportunities are getting our for the

Richard Close

Okay.

your what level curious. some before? you just wait Maybe going and attracted a opportunity terms discovering forward? wait know Did more thought to of the believed -- hear in process was most we'll So to of the CRH? what there. I'm attractive How come to in you company? higher question. you What was And them did you terms

Tushar Ramani

Sure.

years always therapeutic of of say I margins to of number in it's aware been profession. adjacency tool. First, that that are attractive sort has ways. just built-in ultimately a a its to that, in as increasingly type plan tool because my as business CRH the with will business business I've space original then increasingly And of accelerators that yes, many you allow I've of And admired are for this segment particular and of business a screening being because available colonoscopies develop the valued important an well so and our the

to just service that was it that attractive where looked we X opportunity drop me. such pretty spaces, probably have recently, as me to bucket market business significant billion just some that the has $X in most are $X represents for I essentially a the good Then was So that it still which for a attractive each already billion well. specifically lines when at fact development

Richard Close

be Okay. I Jay might for guess here. my next question

million up spend So in XXXX. acquisition for Jay, thrown $XX the you've

would in here to the other I to transactions hit we we timing up what of transaction think earlier need target? remaining You just in rest you -- think it year? order we're -- XX% Do on year. at should about Do you Arapahoe of to that and ratchet mean, I in as the look the how May. be you the here mean, the already the did need

Jay Kreger

A Richard. question. fair Thanks,

back transactions, second the If quarters. the majority taken and them our have in third historically you look of at place

get you'll which third being it I'm all this up, and it I second been back we're if mean has ratchet maximize count to the by quarter not I one And the sure but sure be spent. can case there the closed year. with you dollars opportunities the I assure are make is you hands-on-deck quarter that that go were think to what they I third While we to again over, realize to out especially year the this strongest, all think find the

Richard Close

all $XX terms hasn't level confidence being at since that able million to call? your the in But changed of last spend

Jay Kreger

it confident quite am changed. I not has

Richard Close

Okay, bit what's over can you guess this the was earlier. I question. there? on valuation background Just change go But the in little great. final a earnout my hit And that? on the Richard,

Richard Bear

the end period GAA The earnout it's where so to is up in days XX, $X.X $X.XX which XX/XX. it increased at of that, through XX million payout. obvious for of million was revalued we finance to I which and May the estimates And XX rose GAA said, estimates -- historical reconciliation that XX, for the to -- will early adjust a period it's April the the seller that it's of the At performance period, earnout which at, to Yes. through in measurement increase million, finalize relative end and at each the measurement from -- our where QX $X.X financial provide like after statements. charges that expect at our XXXX, look measurement the our being QX, resulted analysis. is and May and that beating May -- expected

Richard Close

That There to XX age. guess it getting higher colonoscopies guys at impact old Okay. respect get it And years not. recommend terms of seen the I earlier in -- practices a think change Have you an demand? final was recommendation I your or to one to what I that with any was do one. in was have

Jay Kreger

Yes, have opposed was not seen out this Gastroenterologists. Richard, to than brought point, we At that any that awareness driving American recommendation. other don't or think I Society as by expect... Cancer material from We College the the of change uptick some

Richard Close

Congratulations you. Thank again.

Operator

Bloom who go from ahead, Martin, question Burton. with comes next sir. is The David Please

David Martin

Dr. I morning. question be my as first Good for well. will guess Ramani

of a a previously. are You contacts ASC GI you that do you maybe the didn't peer-to-peer. now better I'm to CRH positioned provide lot in entree, mentioned wondering more universe right have

Tushar Ramani

of in a contacts, I are our significant that there there's achieved I'm sure introductions that make overlap a what readily but can we've amount before. probably handful than more

David Martin

Okay.

Or On than front, towards ownership Is to I'm seems wondering the more the just previous more done Is X ownership? M&A that the choice? wondering that that seemed blip? some ones your choice? the seller's be M&As it Are be happening. -- last of you is a the XXX% XXX% leaning it of have to why in years. I'm

Jay Kreger

Hi, it can Yes. Jay. been that has the say David, I it's XXX% choice. physician's

and noted reasons. all we've think sell they that are different before that sell amounts for the reasons different I physicians for

maybe practice the Some of and their where maybe practices profile of because of just that the on based located. are

to think so XXXX -- anesthesia CMS was it I their some risk noted strategy sell. business, the a some and in doctors change look we've made -- before, as mitigation coding at

of that to and last that ongoing I think trend. -- that not the I And sell believe it's so don't an X X were transactions know on have do they what is XXX%. an the I why accounted pipeline, for may based I -- ongoing think more of wanted

and I -- hit it's think it's just miss.

David Martin

increasing? been? it seeing -- as for it's prices Are the in same always increasing is pretty Okay. the space much assets, you Or competition trends

Jay Kreger

have Same X effective of to been, to as these always X. it's multiples continue we where

get deals rich the from too walk away them. when we fact, like that, In

David Martin

and Amongst new them any build last clinics question. And open current Okay. clients, planning are of this year? your to

Jay Kreger

we look comes really number new clinics that can it's when practice many at directions. have new So added different opened. from or more But centers the the how many opened. growth, by to they driven doctors, of rooms not come from doctors organic comes from It being being and

Richard Bear

that previously, to be X% some -- included there David, as in be we But spoke X% would already provided. on, that but in would that organic we would that be coming that guidance

David Martin

Got it okay. Thanks.

Operator

comes question sir. with is who next The Endri Bank. from Leno, go National ahead, Please

Endri Leno

couple my taking guys morning. Thanks Hi good me. A question. for for

the wanted little just to I First, touch bit a debt. on

I the facility? You do had going repayment on expect you bit mean, relatively large And little and of we how target a wondering can or in see credit be I your the a a ratio? payment quarter debt optimal was what that would debt forward?

Richard Bear

of people we we against revolver. of like use million terms so the credit have their because revolver revolver in credit. $XXX put use million we as have line you at We So million the personal on term, $XX the facility, cash, re-borrow just it payment, $XX debt When we any excess it time. recall, can

pay cash manage to that forwards balances on enough get we it's because our really days your trying just X% we're difficult in capital, to these sure have you banks So make to to savings.

we'd interest So off our expense books. knock rather off

terms comfortable debt-to-EBITDA, terms in mean In I where X we're of we're of today. sub

-- if of the the With margin expect a accretive, could acquisitions up, doing, that it would a we'd then chunk of but acquisitions that have to quarter, in retrace that EBITDA. benefit profiles we did because creep slowly of types strong we given we're

facility concerned to I'm the our about not of grow. current structure So limiting debt ability the

Endri Leno

And you. having service to -- Thank little bit bit on perhaps mean, segments I $X I they a can -- and billion Ramani. product next the X potential. they segment? you Dr. question little And to in opportunities for mean acquisitions to we've have that billion segment. a Great. $X see it. the you what both we if Got do, but the growth seen can what alluded CRH and talk the And

Tushar Ramani

I can, Endri.

very in have hemorrhoid have And on $X of the represents very, size estimates we standard billion treatment obviously of hemorrhoid we for for was the have treatment gold state There Specifically, very, yet about I current expense treatment. that, treatment. the been that recent the I when side. referring a market talked share small upwards of

educate the gain market to us market. an share represents that think of I our and opportunity to enormous continue that for So

Operator

back question-and-answer I over would turn the like to concludes to conference the now any for closing This Ramani Tushar remarks. session.

Tushar Ramani

I'll Thank I'm again, you. all, these of advantage Thank you not of with for opportunities it's forward discussions attending. here front again, we to more detail in I if the to future. more in have that clear, and in Well, you take of look say us having just the really excited

Operator

today's conference concludes call. This

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

CRH Medical (CRHM) 5 May 192019 Q1 Earnings call transcript