CRHM - Earnings call transcript Q3 2019

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Operator

Welcome to the CRH Medical Third 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]

I would now like to turn the conference over to Richard Bear, Chief Financial Officer. sir. ahead, go Please

Richard Bear

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

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

six definitions notes statements to and about assumptions, please refer ending in business, three our XX-Q months to information, the and important XXXX. For cautionary XXth, forward-looking and cautionary the our for inherent the September risks months

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

our Discussion to and measures XXXX to refer can three September reconciliations the for Analysis reported months GAAP You months XXth, ended Management’s & measures. non-GAAP for of six

section website. These of our documents on the are available SEDAR, EDGAR Investors and

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

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

will hand Dr. that, With over to Ramani. Tushar now I the call

Tushar Ramani

to robust you, that we us quarter. of night acquisitions closed Thank last Thank on growth Richard. CRH’s reported EBITDA yet our We two everyone you another shareholder we on discuss year-over-year from as quarter generated for pipeline. and third joining call the double-digit more also

sustainable GI drive quarter, and the where areas future growth. CRH XXXX, in progress System a focus and pleased And the can we’re position outlined while continues execution would Services, as had last also strong long-term growth; and to with O’Regan on display fundamentals we Ancillary for company in remain I we our continued we Services. continuing Anesthesia three to

organic remains business our both Anesthesia So increasingly growth. well Services positioned inorganic first, and for

with to partners visibility there. that years last several our optimize profit others potential has scale to overall allowed proactively us expanded improve long-term our the payer and over and Our engage

our flexibility our clinical Our sizing strategy. all of financial supported acquisition combined, capabilities,

adding additional of development or increasing our support late-stage resources an we’re business percentage now pending, closing to expanded strategy. deals in are negotiation. that our either help Moreover, have in We pipeline

We accelerate expect deal to activity coming quarters. in the

to size we’re the greatly respect additional treatment, segment. hemorrhoid And view, the excuse O’Regan on second, market confident that historical attention increasingly and our this the warranting System, thereby exceeds with investment – the me, hemorrhoid of

remains we’re in Along an stages. company’s among history for that the senior first further over things, Ancillary And dedicated early support these GI seeking then effort who opportunities This hiring third, a to other working to its will lines, the we’re that time community will in Services of executive segment. from identify us allow the to preside standpoint.

to to hand will it third Richard up I little and Jay the quarter more bit detail. first then a to in review

Jay Kreger

X% revenue During third grew to quarter, the million. Anesthesia $XX

[technical Anesthesia, we Associates second, As Tushar Anesthesia interest XX% during being the in increase the new the the was acquisition, majority the while the difficulty] in completed Colorado transaction. interest Crystal two transactions River of Central the acquisition said, quarter, remaining prior the

shortly. MAC Carolina of Through acquisitions we North expect the interest acquire to still on third end the program does spent million in we over our not include that $XX controlling quarter, development which

to as same have last the transactions expressed about our I that our quarter, continue our I on optimism growth horizon. remain near planned future

year. intent could go with pipeline those or stages early year expected at several full the this In that late deals letter under addition close expectations, to including all to of into remains next are

beyond. the believe will all in many for EBITDA that XXXX particular and bullish makes opportunities growth This our shareholders. more we non-transactional me for are drive Also pipeline of is

to two more adding deal will doubles our execution which team, are and which ensure resources effectively individuals we resources. of opportunities Lastly, these our

for Richard to back it turn now commentary. I’ll his

Richard Bear

million, reported we of compared of XXXX. revenue XXXX, a total increase $XX.X of quarter quarter X% to third the During third

increased has the XXXX. adjusted Total XXXX, months in to has September to compared periods For ending operating same XXXX ended total revenue XX%. shareholders and increased nine three the for nine EBITDA XX% XXth, September months months XXth, the attributable

ended September flow cash distributions $X.X activities the flow less three cash million. months to million. from non-controlling the Free was operations flow For flow cash interest XXth, as from million net months for defined operating net $XX.X and was free was ended $XX.X cash nine

For XXth, the shareholders. nine September of adjusted XX% cash months attributable ended flow EBTIDA free to represents operating

up by $X.X XXth, As which were in October our provides expected a of with revolving and size we September our flexibility, previous lower borrowing us facility facility announced interest facility. JP XXrd, facility, total provides had the million and $XX.X rates cash, the borrowings. than million credit XXXX, we to million On in led of new capacity, greater prior also $XXX but doubling new in Morgan

unused million in We $XXX.X a currently capacity. borrowing have

We by carries basis current a rate at XXX expect which of our facility LIBOR the $XXX,XXX. borrowing level approximately to interest XXX basis to annual points points new current plus reduce expense

I Tushar will questions. now his it turn back and closing for comments to

Tushar Ramani

Thanks, Richard.

color provide balance for the the some to Anesthesia XXXX XXXX. business across I and of like expectations So on would

expect XXXX be per that’s Anesthesia expectation from $XXX. prior down approximately we First, $XXX, case of revenue our to slightly

transactions. preliminary XXXX our a maybe with do revenue projections case Second revenue per expectation not levels, will that, slight We lift. per our XXXX case note, now contemplate additional note that is be consistent M&A our

to has high we case has typical And end also far, on volumes the colonoscopy to year then XXXX the range the grow. and our will based demand third, be that at for gone so expect fourth continues in X quarter X of in organic how our the

that now annual we Just going note, deals cases XXX,XXX as represents forward. the completed a to-date,

with as drive shareholder going as an to And that then guide we augment forward, that to will further continue fourth, non-acquisition EBITDA growth. do capital deal to, historical opportunities investment expect our however we Jay alluded deployment appropriate

ahead So and we up will questions. open go with the call that, for

Operator

you. Thank

Richard go Instructions] first the Genuity. Close We will begin from now with question-and-answer session. Canaccord [Operator Please question ahead. comes Our

Richard Close

who quarter. added focused be there. you exactly? what’s people on will two to Tushar We’ll maybe on? just first, there, thanks. talk background Jay, What about deal start questions, Couple Congratulations bit little team the Great, they of the or a the their can

Jay Kreger

Thanks, traditionally story more have try We and you Richard may we about deal had as the talked an the that been the we non-transactional. or is acquisition working Jay. question, before, on different into evolve know, be team. not two diversify to may historically for we we this Effectively people that models as of

The certainly other specific deal-specific, banking two GI, people and thereof, an Anesthesia, that we’re investment the one more bringing in, in more and while of necessarily background background not but adaptable. of has a management has

one, diversify here next and that on one week coming able The again do that, month. idea is, markets that will this fact, serve they just our team be the believe to and they’re I so to in

XXXX of able the opportunities the we advantage be take believe we’ll pipeline. that to we So all in got

Richard Close

the number Okay, then to like what those to per thoughts next or some a opportunities great. several close from here around XXXX. size couple maybe year us LOI of perspective? early you under or months maybe that at terms guys mentioned give are you in of Can any that And all of transactions and in cases in

Jay Kreger

can mean I throw you. range out for a I

that probably to are a virtue that by think I can different annually represents the XX,XXX of having on we models. go-forward XXX,XXX we – basis, cases

our range. as new much that time created, reasonable a as any do we We with as to handle want can we’ve people we business growth that’s in of the our obviously is can now past. scale the borrowing think line and usually I

Richard Close

for the XX,XXX all to that deals under XXX,XXX that are total so Right, LOI?

Jay Kreger

level, an of those is think more the LOI range. either speaking was are on probably I I under Well annual but in that XX,XXX

Richard Close

referring you you are Tushar, Services there? to then transactions. are the side, And on outside of Okay. about What said specifically M&A something Anesthesia growth opportunities

Tushar Ramani

Yeah, Richard.

providing So through equity we’ve that our increase a associations goal centers lot that the Services we gastroenterologists transactions, and a their their can ways, primarily the of of to do couple M&A to number of is right Anesthesia with Services. have existing that so Anesthesia done in acquiring in at we

what What we those we’ve better. interested gained whitespace that it’s areas program call of novo want actually significant creating traction MAC have fairly to or Services and are GIs one that we de in resource significant the and where identified Anesthesia

type expect do of more we’ll that I transactions going So do forward. those of

Richard Close

or three MACs than we about or over or the last so. we of so we that years that? XXXX I you’ve how should should Is should done in think guess more something think maybe two Okay, expect that two

Tushar Ramani

that. more Yeah, we’ll to look than do

have capital for efficient us. well pilots successful, very been received, extremely it’s Our

So it’s absolutely. yeah

Richard Close

Okay, in thank I’ll the back queue. jump you

Operator

question next is Cooper Our from Doug Securities. ahead. Please with go Beacon

Doug Cooper

want follow-on the I to about prior from just good pipeline. morning. question the Hi,

to Just clarify.

to total program think money. I the LOIs that the accelerate of the reason double M&A So is is given representing to to got cases, pipeline XX,XXX doubling but advance the might in guess any and there you’re infrastructure you’ve the guess. materially I can’t And XX,XXX be that,

Jay Kreger

cases, XX,XXX before, and all that all we stated now accelerate. Doug, currently. coming within just question. Jay. well totaled $XX Richard’s it do that to target be pipeline this million it is closed, LOI will above up, we was under that What’s We I actually the back and will are Those believe the

Next will program, we’ll EBITDA between be the significantly, year, versus that breakdowns development the those we non-transactional across but capital MAC and believe spend from board. how comes our accelerate growth

Doug Cooper

you per down just wanted there Right practice. right stopping this. clarify that issues, could there to there’s pace find I issues I their of these Is or the sort no are is to – integration if plug a slow that any right acquisitions? company of play, and guess I integration anything there’s look real no mean the companies solder and se

Jay Kreger

together. a put we of of investment months deal last groups is lot bring so regardless transaction of on over where XX we these or put that that’s our think I type can that, we No, the infrastructure that what

Doug Cooper

of more to And comfortable the accelerate weren’t the their the which I entire becoming Anesthesia could number presumably offloading guess third-party. also of accepting to the Is a help minorities a that’s the of so done acquisitions? XX% in maybe business you’ve of a pace industry with practice buying past the because outsourcing XXX% essentially GIs

Jay Kreger

validation in it and that your the this buy and made clarify up. Well me portions think that first point our minority interest to I acquisitions more best that over a shareholders’ that our we believe in let that business. those that was best those of And we is, interest

similar those is in as opportunity may we future And have other well. so the and

the I been think acceptance as continue the always and the yes. in to it as of go space direction same it’s high to expect is we GI

Doug Cooper

XX% XXXX? do of anticipate be point Richard, perspective, in ended in EBITDA of of on the any acquisitions. couple one you of a first help total prior would modeling quarter EBITDA XX% in you percentage presumably EBITDA, XXXX quarter was the versus doing further shareholder those a of minority interest? and represented What acquisitions just The you’ve can because perspective. modeling this shareholder remaining in What a from Okay absence XX% what in just maybe

Richard Bear

that Jay? the of what I date Colorado was Central acquisition, think

Jay Kreger

August XXst, I think it was.

Richard Bear

only QX Colorado represents increase – month will so Yeah, go at XXX%. into slightly fourth Central one because so that’s we it as quarter, at

you deals and that quarter and depending little in expect bit that base a to could the will higher So assuming then we third on for remain the in quarter be the business fourth that XXXX. do will change than the

Doug Cooper

think Right, no is number XX% for XXXX I a other so half assuming that acquisitions? decent

Richard Bear

yeah. of higher, Yeah, couple ticks or a

Doug Cooper

gentlemen. Okay. Great, thanks much, very

Operator

[Operator National Instructions] Stephen Our next go question ahead. comes Please Bank Financial. with from Kwai

Stephen Kwai

Hey, Endri guys. in Leno. I’m taking for calling for Thanks my question. just

if from a Just I Ancillary more details initiatives? wondering provide you could a Services' couple so your on me, bit was just

Tushar Ramani

Yeah, Tushar. that for question. this is Thanks

time extend favorable So in market. into, enjoy the and relationship we that extremely last we identified difficulty] GI believe as that’s something that should that an [technical trust the we initiative given

continues help want by support GI other also of can to some be come we actually more we an color make of for to our and sustainable around the open us. investigation often We it have that’s We high partners it. asked and of area so specific than outside for about don’t probably market anything something that that, sure that. I just but with to ways value

Stephen Kwai

through maybe quarters Okay, bit at a market in I mean a your regarding expecting looked you see a you Could the because to more give and everything great. I the I of lot a of like mentioned on details timeline initiatives? you’re potential question similar ago side Thanks products really put that. there you and growth guess when couple like

Tushar Ramani

bullish has been before about in not that of that that a course Yeah, happening a and company that’s the that awareness on maybe of treatment is United the hemorrhoid we States. currently segment prevailing remain the extremely way in large here tailwinds part

that. positioned poised on treatment and we’re be the to condition, to well for capitalize leading market As able well this

help As bring I as a mentioned have segment I inflection continuous of focus our I as from think an began we’re will next leader stages as in we flew, to point year. get set and that XXXX, for into, And don’t as far that our plans but said we that see budgets for time identifying we experienced that, on what develops you. developing

Stephen Kwai

fine. that’s Okay,

developing my you a I just last year-over-year? see If bit great EBITDA do going think margins. on lower How Okay, I’m were those mistaken, forward? just not one margins and

Jay Kreger

around and that’s expect Anesthesia Yeah, quarter’s to so it’s based probably for and seasonality going for XX% QX year positively impact XX%, the about which our EBITDA products into a is actually year on XX% that product think the and end XXXX. both number I line. at We’d solid fourth margins

Stephen Kwai

my Okay, probably questions. that’s all Thanks.

Operator

Our next Miehm Douglas Markets. go Capital question is Please RBC from with ahead.

Douglas Miehm

Hi, good morning.

XX next over Just your more sort already and the and you there. Thanks. could to with it, take with about with government but you really associated commercial this you’re And questions it on months why? I reimbursement a you leave of gave, one I’ll respect group the of of touched outlook that talk any if to what know and months XX terms expect seeing reimbursement. specifically to you changes call in

Tushar Ramani

Yeah, Doug this is Tushar.

trend on current seeing maintaining – down. our good all up in any on and We’re that for rates the my initial of the at case I focus we outlined next really not visibility And or anything identify got we’ve focused material can as company year. are comments, our that

we think are position. pretty So I in good a

Douglas Miehm

Right, so your low opinion? very of we changing saw are few anything years the in like ago odds

Tushar Ramani

Yeah, as or years horizon as we nothing regarding that settled GI revaluation back is another of on services there at far CMS the few issue. know the

Douglas Miehm

you. Thank great. Okay,

Operator

ahead. Martin Our next Burton. go with question David is Bloom Please from

David Martin

follow-on to good morning. wanted of there. question kind Doug’s I Hi,

any So the have reimbursement stabilized than sequentially that cut this but dropped in a hasn’t per reimbursement couple years of case yet cut. it most and your ago, in quarter the you fact revenue the it since quarter had

I less revenue out-of-network be but your base network, should know So grows, have think. you coming would that the impact as into I in

and anything when happen think unusual you quarter per revenue do this case So going did stabilize? that is was the to

Tushar Ramani

what prior model much didn’t that been didn’t acquisitions think if I happened level more have it’s so It’s And CRH’s what anticipated. of had not the remember, happen. We we has you average that the rate up non-contracted a be bit carry new that would of brought little acquisitions our would blended actually and they heavier, would come rate. higher very in, case which

have that rate acquisition base didn’t of add case we our Since level rates. our more on, trended towards prevailing

$XXXs confident projecting this up – about As far as going in exactly somewhere forward, and fairly we we’ll we’re that’s up Doug year as that. be, where I indicated, to end the we’re XXXX end where

David Martin

Is QX that on $XXX or $XXX for year? the

Jay Kreger

year. the On

Tushar Ramani

The year.

Richard Bear

so commercial, QX Remember, we were David QX, in QX have cases has a on strong per our XX% XX% federal. Historically case. impact very positive revenue at commercial, our mix in which a XX% payor XX% of federal,

David Martin

Okay.

your where in your case was As think far what figuring across out reimbursement the you do network just base a now, as if everyone your network, as, be? revenue XXX% would per

Tushar Ramani

so for projected Yeah, that, $XXXs I yeah. or the we we think next that’s what expect, year,

David Martin

mean I network? in all that’s XXX% a

Tushar Ramani

we’re Effectively, yes. modeling way that’s the it,

David Martin

Okay.

you. Okay, thank

Operator

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

Tushar Ramani

administrative saying is I by to privilege the the of you. joining. and to we thanks them the at another for great staff prospects CRH you my Thank out at company. quarter exciting for the of want just by team the I real that, Thank done for hardworking all work clinical the future have but company speaking and here have go finish here for

Operator

today’s conference concludes call. This

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

CRH Medical (CRHM) 8 Nov 192019 Q3 Earnings call transcript