AAC - Earnings call transcript Q4 2018

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Operator

Good day, and welcome to the American Addiction Centers' Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrew McWilliams, Chief Financial Officer. Please go ahead.

Andrew McWilliams

Good morning, and welcome to our earnings conference call for the full year and the fourth quarter of 2018. Financial AAC Chief McWilliams, Andrew Officer Holdings. of I'm measure financial used reconciliation our in the comparable that extent to call, website is morning's non-GAAP any financial directly Investor most a To by today's following GAAP Relations measure you'll news to release. the according the calculated to measure link on of this find regarding performance of This Private Securities the XXXX. the meaning XXXX, statements conference including of call annual may contain forward-looking AAC's among others Reform for statements Act expected within Litigation

For be during similar not and believes, this limiting this call statements of words any statements statements. expects purpose, made be expressions Without that are historical deemed statements. the plans, are facts forward-looking intended foregoing, may to the anticipates, forward-looking to identify

that the earnings these consequently, affected and forth materially cautioned and others set Exchange be may Company's the results important XXXX may release, the AAC's in among fourth hereby filings the by in statements quarter Commission and are with Securities operations discussed The Chairman from factors the You actual Officer, differ publicly forward-looking like new Cartwright. I turn no now future as to whether over events undertakes statements. Executive result information, a would Company the forward-looking statements, update or any to to and otherwise. obligation Chief call our results in Michael of and

Michael Cartwright

results. before financial and the our call everyone. you, be Andrew, On highlights walk morning, recent good through operational turning Thank discussing over Andrew, today's call, our I'll to to

We will then open questions. to up your

census, to In the caused saw declines the that XXXX, I of and back our admission end the a near-term quickly we of address and results half acted think series headwinds starting everybody is weakness. impacted weakness which in response August that we aware at faced revenue. the we XXXX of to impacted in for

sales corporate measures savings which These in series actions and Southern organizational and expenses. of We and improvements. implement Las marketing, leadership we operations to expenses. cost our our consolidation initiatives, then accounts and initiatives of and including took included Louisiana, consolidation California reductions enhancements Vegas in several our a executed First, operations sale corporate markets, the included corresponding lab in the our of of

saving operating will in result million savings XXXX will benefit cost approximately of annualized margins. that cost Our initiatives $XX

improve took we with flexibility, $XX March and to incremental steps that us liquidity in our term recently liquidity moving Finally, a closing loan XXXX. into additional million provided early

that we've strategic announced also alternatives portfolio. an estate have of real We for evaluation begun our

census improving financial in progress the fourth pleased of with making our and XXXX by we I in call the at now compared begun the to the still took the that of Our real could improve estate generate XXXX, move facilities and portfolio I'm backs our confident estate balance shareholder in generate are in XXXX. is first larger inpatient we to to goal a momentum with early leverage sale to Overall, of XXXX our positive over set we're process, could have in estate These portfolio. XX% XX, lease portions sheet XXXX. March the Andrew XX, our will of real further of quarter the to do, consist XXXX of individual turn work still provide quarter XXXX. compelling into actions value. And significant and that include of treatment December lot discuss real attractive to the Though value. I plan as alternatives we strategic momentum a our am to additional results. portfolio Though we facilities or have enhance

Andrew McWilliams

Thank you, Michael.

results results, financial expected moving to our into expand that changes on dive forward. impact I I want possibly to Michael are discussed several our Before that

covenants, provide incremental loan increased we also most credit and early financial closed senior amended senior on notably March, with $XX our our we to leverage an to ratio. our in lenders, million As existing facility term Michael flexibility secured related noted,

We were in of quickly and also will the XXXX results. I'd also completed how in XXXX note like first the annualized of first savings changes a inside in to quarter $XX that a we million savings. of savings series These that report implemented fully result cost cost of initiatives quarter late cost impact of XXXX. couple

not is First, historically on earnings affected This associated XXX, did as in and impact of reduction the per and on as Under a adopted to cash ASC same our an quarter by which amount. reported second, changes XXXX, presentation FASB revenue Topic third provision change We doubtful the X, now recognition expense, income, accounts, revenues XXX. impact fourth reported operating with first, share. change results. net direct expenses an revenue. reduced January or was have It this this operating for and our flow

necessary. Finally, with for as of adjustments provision to as XX-K tax These in receivable, report, our income filed and estimates in accounts Monday annual adjustments as we interim noted auditors related previously were in statements consultation our earnings in the and doubtful morning's and determined on to certain related accounts the this of annual our release, effects. issued Form that revenue well financial

did XXXX, financial operating report These Our on financial for payment that additional the these March to net commercial XXXX XXXX previously refer payment XXXX XXXX a receivable. I'll made and restated statements and the outstanding adjustments of from balance annual estimate we for regarding the properly XXXX recollect to to continue Also, relate were XX, September that receivables, accounts corrections. company in remains the of flows. XXXX, the XXXX, XXXX collections had these pursue XX, our the now quarter XXXX of cash no ended unaudited June we in the estimate collectability not accounts third insurance received relating adjustments to for we estimate results. turn partial specifically a and where during change as partial we impact accounts issued to statements to financial and our and and XX, and quarters annual

XX% March the $XXX.X $X.X basis. compared AdCare on year accounting For X, $XXX.X prior X, to comparable the and prior that's to AdCare partially of the a on declines primarily million by the revenue revenue facility increased in million Michael with $XXX on to related the prior revenue increased sober $XX the $X.XX in back XXXX, revenue discussed year living a year, the on accounting XX% to year-over-year was census comparable million XXXX, primarily was revenue basis. facility was adjusted comparable And total down compared adjusted increase the to XXXX. The million, basis. to net while accounting stockholders and million sober common during XX% available to million EBITDA acquisition earlier. in in common decreased diluted half outpatient in $XX.X as a share. Client-related increase revenue $XX $XXX on offset per facility or acquisition Outpatient to The with AAC a increased year million living to admissions diagnostic X% on March Inpatient of million million of related treatment decreased $XX and compared services basis. in loss

existing net equipment possibly Cash reduced with closed As cash prior and and loan mentioned, AAC’s million the $XX the with the operations used Michael a total annualized sheet of $XX in results. we increase $XXX.X expenses that and million to $XX with million debt cash year. totaled that savings on million incremental compared of for measures in expense million liquidity. March cost additional lenders term of we year in balance provided reflect $XXX.X by our of the million. On provided company operations and million, flows flows our property will XXXX impact corporate have $XX cash equivalents $X.X to leading taken efficiencies X,

XXXX. accounting EBITDA on was loss of operating the for fourth results quarter For comparable fourth basis. and the of compared revenue accounting in of for negative XXXX, for of compared total $XX with adjusted $XX share basis. the in decreased diagnostic to and sober the on the on fourth $X.XX a was to census was half quarter primary services revenue of million decreased $X the of XXXX The per million fourth in Adjusted of XX% with quarter fourth caused to Inpatient treatment living of the the and diluted million XXXX driver was quarter quarter by back compared in of And in XXXX revenue in million XX% the in compared XXXX a of million $X fourth $XX loss comparable comparable a XXXX of revenue quarter quarter in quarter the decrease in XXXX revenue million quarter XXXX. $X quarter the admissions fourth $XX facility XXXX. $XX.X the decrease XX% with accounting client-related Outpatient million with a of decreased facility million the basis. fourth $XXX,XXX fourth the

Turning the now to our outlook of XXXX. year for

million revenues expect of the We in million. range be $XXX $XXX to to

living inpatient $XXX of revenue assume million. revenue million $XX $XX $XX $XX million revenue million $XXX and to million, and facility revenue treatment projections $XX to million sober of Our facility million of services client-related to diagnostic $XX non-client-related and of outpatient approximately million approximately to

We the year. outstanding $XX $XX expect for adjusted EBITDA shares million This average diluted the of million assumes XX to to of in be range million. weighted common

seeing We we in which our census, momentum the and guidance. in early us are with of gives in admissions are annual XXXX confidence pleased terms

XXXX, cost be the prepared a and quarter where the concludes operator, the the for realize didn’t soft remarks started Given of this fact to the up quarter but benefits morning’s of from to in to line savings call second XXXX now your our turn quarter, while fourth improving call. the over the building will quarter. questions. significantly open will the the that significant first first momentum This who initiatives, XXXX like we into of quarter full I’d

Operator

Thank you.

will [Operator go Daniels We ahead. Ryan first Blair. Instructions] Please question-and-answer come Our the now begin question will from of William session.

Unidentified Analyst

in questions. is guys. Thanks for for This out taking Nick, Hey, speak Ryan. my

there? here that success Just guys more in you talk some marketing you What started doing start sales in and you’ve started? like little XXXX. a can the and to go initiatives about guys It to looks early see are you off, bit

just color those provide if So kind can some of on you initiatives.

Michael Cartwright

now algorithm system. folks are Google and update now really think, aware Yes, that everybody is the did I mean, an entire just aware I most disrupted or

is look, a are a understand. I lot focused focused companies local so federal local, I The well, as government. – think be they that insurance seem which lot on to on the more more

localized around a ideas of So to probably the way marketing a would better go. lot be

So our and we patients we’ve we’ve up the at that changed strategies strategies. implore to just know let looked some of facilities about

quarter. but happy localized certainly, I’m and I later, first more details a bottom business think, a Internet, by strategies going changing change tactics, bit some to in the little admission little those go the and to were seeing from we line with pleased So very, bit And is away we’re into the improvement development. of significant very the

on our now which we’re year a Andrew helps. certainly pleased the need in tough brilliant capital to ability with better think execute door, trajectory plan. I bring a really execute a job rest gives plan. that of hope to the to in the I the environment, We which game But us game our that did we’re very

Unidentified Analyst

then Yes, ahead, and Thank go – you. yes, sorry.

Michael Cartwright

did, entire done a a phenomenal things There’s one industry thing series Marketing headwinds strategy just our the facing. of a think we Ebbett, Stephen we on with not that Chief we job, it’s long-term developing the that of that a and Officer, came strategy did. is whole is more winning that board

Unidentified Analyst

of And Great, going then kind on that. thanks.

that's bit Can have looks we over forward advertising $X.X deal million around we're double of what more to quarter ad your to kind change, type that was spending with a little case we're algorithm consider year. was So it this kind this spend be because to of little on the going to thing? having going right of it a last going like

Michael Cartwright

that about to strategy. programs, way up Look, the you know end XX I'm our you if that's programs. quality business the have advertising so ways if to let spending over your strategy, development, the it. you know know there's the spend in over sure of don't built them of let at relationships change been industry, we more last that people I lots years the time less not have to you right change your look on that may

have I think is diagnostic highly of is centers, unique one what to I'm operates. we way field if we and how treatment you most now facilities, staff in we come educated a use the have truly techniques to that of our proud out state-of-the-art

you as and us and very pleased know and I and that's folks built very, what am and time to will programs, team I we've doing the spend get that the So much spend time to have our think that a job out might not clinical with such on with come take phenomenal our to advertising.

Unidentified Analyst

Okay. Great.

a an of kind the of of as continued fourth start bit to of opposed that's little quarter trend? a kind So is more outlier

Michael Cartwright

it. way look that's a at good I to think

Unidentified Analyst

great. Thanks back now. jump Okay, queue right All in I'll right, guys. the

Michael Cartwright

you. Thank

Operator

from James. [Operator Raymond Instructions] Cooper come of ahead. Andrew Our next question will Please go

Andrew Cooper

for the Thanks question.

And any Just what's side some bit there inpatient and you more guidance, changes, give terms as to the any terms would that a if on color some could is big pricing in get in growth driven a and what per terms are at be kind there the in a kind of color the census XQ of couple of inpatient obviously revenue stable when we of – XXXX, for at but in expectations point here? on metrics – we're expectations more of or hoping of well, helpful? little in visit look the

Andrew McWilliams

Yes.

if built QX. in a you you'll full bridge are revenues for a quickly I'll if average flat there outpatient in at our And initiatives. the year-over-year year revenue of back and basis, seeing decrease AdCare, our building about from I'm in are the assumptions, guidance your relatively whether specific we that going our But daily of a the to for second savings if on think a you over, about visit, think talk look about that we're – model. kind basis most those revenue is revenue that a and year-over-year per that the and gave, on into you per coming year-over-year a see of EBITDA that that or assumptions be really adjusted or benefit you normalize of then that to day just question year-over-year on really minute stable to rate is As kind admission, cost per then circle XXXX

look a per does declining mind was hence specifically your day. you that that off drive increasing admissions rate when across as coming basis, your census generally while down acuity we've QX, about, increase and it keep admissions will admissions of were on low Now at level talked low, speaking in levels acuity your system

QX I year-over-year So and did per QX levels, day impacted I improvements out by as slightly coming run because you the the of offset had we per low rate and think, of and off a occupancy a could QX down at rate day. which last look but it wouldn't rate census really coming acuity year,

Andrew Cooper

sort that on fell around in the facilities you And thinking if helpful. That's is could portfolio, around Okay. the be own find would and a to – I then kind the would view, And any the for? of own we leasing? terms of timing real or buyer, term think, swoop longer estate versus looking need the but or potential assume what any be there actions I preference one of to you should desire thinking how

Michael Cartwright

facilities, think environment. treated be, up, an being really of outpatient, knows our they're in I estate. me it residential, love one when it wherever I real they everybody knows come that fix a that design, doing truly like make great that that the customers to sure into I may

is own should a into So Addiction estate, it at really like the way our it's models that I but we own transaction do I worth price, may our our do multiple future. go at currently the and a real of portfolio and I always is time capital at the look there its looking more and Centers estate than so how stock believe real going cost estate to – it looking be may American financing good to much down. transaction out real There

a conversation. I think it's the in little early

in the a better operation. the stable the quarter, so in sure operations year. faced sure making headwinds I we has that cylinders company on second we months much focus have all XXXX, the and of of point this quarter back have third We we of and think company six our been that make first, on

with process, do on those overall think our of help we in value. shareholder And think so a capital. would thoughts cost might at stages could I still our And the looking but different options. of transaction investigation it. I assets, good the have realizing That's Look, a to that lead better early we're we're assets reduce that that we

Andrew Cooper

anything helpful. queue if to I’ll follow-up That’s jump the else. in back Thanks.

Operator

question go Research. come Barrington of next Petusky Please ahead. Our will Mike from

Mike Petusky

just question. sort Thanks you're terms guys that emphasizing morning. said want Good more of to for the the you I on Internet localized in marketing a and ask de-emphasizing focus. of

utilize you you I'm potential primary Thanks. I'm just that your X, services, to are – the So are a if X really guys I I X, could way area going living table can you local the And client? where guys bring for message what your to might I hear asking ways guess the in services? about just are what a

Michael Cartwright

know said your if you don't know said. Internet, ways I totally our I if don't there's obviously, I'd in marketing We, what find for I of misunderstood services. and team. de-emphasize I have the question and the maybe changed to customers understand leaderships sales just I lots

a that things quarter and they're get Chief and time us, over I'm I'm related to I the customers is fact more a I'm that fourth that wrong going us. and from Marketing and I we come coming doubt lots spend are finding right the to us the to approach. had to they have to think that Officer occupied on not on the XX% XX% like I can money hoping We've advertising And feel trajectory. in we first quarter. improvement the continue because the that we're find oversees on there's at of telephone, strategies customers but now and out We to look happy all really lay acquire how tactics.

Mike Petusky

All right. Okay. Thanks.

Michael Cartwright

Sure.

Operator

like remarks. conference back over to our question-and-answer this this At Ladies for Michael any time, and to will the Cartwright closing I'd session. turn gentlemen, conclude

Michael Cartwright

know and I I on a the your Thank to were time we you. appreciate getting out information much. you getting and little this patience. late information very

saving to our say and thank and working you basis front good to for thing It's months been staff just the off, my a shareholders people company the day. our struggling team. to been I entire our have tails special on Thank very the We entire a of most that team, addiction. management of team, six want a very importantly, best you Board line are daily a challenging clinical for daily on management basis. have and with Directors very, our do a lives

Operator

The thank attending for conference you now has today's presentation. We concluded.

now lines. disconnect may your You

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