AAC - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the American Addiction Centers First Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Andrew McWilliams, Chief Financial Officer. ahead. go Please

Andrew McWilliams

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

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

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

Michael Cartwright

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

We your open up it questions. will to then

highlights, However, news. with to some before recent discuss share wanted our very I I operational you exciting

as and was beginning for technology, my been science, the company best people, disease of the in addiction the best the day. the going behavioral provide with real those over public, best care on the provide able testing have the other from order for to able information information the estate have seeking of a in views best develop that month discussing Since and going each portfolio invest million and invest of to science in years, issues. best we've content struggling clearly been I best for best and Since content vision in in that today the able websites As that we've the industry industry. public, incredible every as and team XXXX, Since going those well in treating the in absolute to of with fall we've people the been diagnostic addiction the best to disease over public resources the invest to information addiction. XX a is and generate been

have going the able today the testing U.S. X,XXX of with X Our the across go been in truly and in best beyond edge industry estate beds the portfolio we in basic in diagnostic are industry have estate real invest compliance Since testing. to cutting capabilities owned states public, far real and over

vision my for with excited you XX, I time vision vision the May It be on a expand original our decade. it's coming all lay for company. that and bold plan the the that strategic very now to will out upon this is However, afternoon a next new I'm for announce company. greatly Monday will exciting to sharing

Moving on operational a to for highlights the few quarter.

have included us momentum sales several is early executed and last in and giving been As positive we we discussed which in marketing, which organizational on have our enhancements XXXX. we call, leadership improvements, initiatives --

as XXXX, our we Vegas consolidation lab XX, Louisiana, These March operation measures saving at expenses. XX% last we over to including reductions our in expenses. implement XXXX. in call, improved cost-cutting and the series corresponding Also census discussed initiatives, a to of on California our of XX, inpatient Our Townsend sale compared included took actions our Las Southern and markets, the corporate of our consolidation corporate of December operation

and of Our greater will in XXXX. even our approximately $XX result quarter cost saving initiatives These operating a annualized impacted remainder first the of on savings impact million cost savings. expected positively have margins will

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

our estate are our alternatives evaluating We strategic real also we portfolio. that for announced

treatment consists real could generate compelling that additional value. significant provide facilities set a that Our of attractive estate of assets

shareholder Andrew momentum lot is of to so I call specific goal to enhance pleased experiencing to the balance May overall, and are we to more XX. work to am to financial we with hope a value. the still the sheet improve discuss have leverage have year. do, Our I the details Though results. share over We will the now to on turn this far portfolio

Andrew McWilliams

Thank you, Michael.

primarily for 'XX. of average with first with for million with daily revenue the treatment sober quarter For million $XX the facility sequential average first On compared 'XX. $X revenue 'XX revenue revenue in first lower million was basis, $X of 'XX client-related due a $XX of million facility And $X diagnostic census the compared XXXX, services total revenue first was in the living in quarter from first quarter. of the to fourth quarter of million 'XX. X% compared quarter the with first in for Outpatient quarter for quarter million was 'XX quarter quarter the decreased by first of the of -- million of quarter million $XX $XX $X the 'XX first was of and compared XXXX. the Inpatient

I'm savings slightly and the census primarily to fourth the lower the which fourth of the census due than the starting higher While of in was and XX% the On of the inpatient 'XX loss $X.X quarter the quarter basis, lower a to represents for the quarter of work average beginning momentum of at benefit property our balance implemented end $XXX census million XXXX quarter do million. to XX% our by census 'XX, net Overall, on equivalents the quarter $XX a while inpatient on first into million, census in by the was improving as daily 'XX. of of average XX%. point XXXX, over expense quarter basis. a beginning first admissions total sequential million was reflected of early that cash for debt an the we still Michael the the from of on XX% decreasing realized sequential quarter first first million earlier basis quarter. million mentioned with operating and with equipment sheet improvement of adjusted on XXXX cash Holdings' fourth from with quarter due the at to $XX.X the went pleased a XX, lot from and than EBITDA 'XX of AAC March in sequential have This a expenses at $X.X the the over quarter, in over daily of the admissions, call, $XXX we initiatives or the for of

liquidity. loan $XX million existing As totaled on we Cash with a used our facility closed term incremental quarter compared $XX of provided operations over concludes million the that with a prepared in call flows operator X, the million year with lenders turn the period. the in $XX for prior now reminder, operations used for questions. flows remarks. our I'll This cash the to March in additional company

Operator

[Operator our Blair. Instructions]. And first William comes Ryan from Daniels question of

Nicholas Spiekhout

going this off, start This kind year, the guidance, improvement guess is some Or With lumpiness like it in ramp the cadence mostly it. Nick looks we're like bit quarter-over-quarter? Spiekhout in general there? just consistent need kind for to to more to like ramp were revenue a Is quarter-to-quarter. throughout it year, we Ryan. looks I little a of modeling is quarter of for it maintained there

Michael Cartwright

the The update. dramatically we really Yes. really dropped algorithm that I what the you've QX to we I what December. at with happened to and in Google point got mean did. census volume in QX And pretty call lowest when really lost think got look

January absolute you're at starting out in So the point. lowest

you flowing we're hard we the momentum would said and to the and the X But look and on right feeling that times and lot are making. in we're of still better throughout fact multiple year. assume work about that we've that together good there's the QX that So QX trajectory, X a do. and there We're could QX trajectory

Nicholas Spiekhout

Or of evaluation now? your to that's which more have Great. Is different And in of of kind kind I Do be kind little you year? a of are taken guess, far of just most feel I going guess, as you that? color on that you, care alternatives, by going the that over something Like you? inning I where like are as guess there. of bit next strategic then

Michael Cartwright

lots HCA's I companies payments. down about you two in of different issue Because, there's be most out for companies paying them to as That's not the for look, they things a the insurance distress don't entire then normally Like they lot there we strategic are rationally vision you they send to company attacking one have need think of we Then won. you know letting a should the the go. and charts, that They're lawsuit the the because if is providers of slowing going and the one, insurance operations the acting There's back. I They're the where of the company not timely. industry them talking they're industry. charts. in saw variety you in we're that send now reasons. send do. companies know of we think there. Number

X%. this to here this areas they opioid this industry there's going of have people is dealing the each. been But the XX-, drugs, our different a I'm for death folks and I jumped years epidemic Dr. -- addiction with doing that doing space other lot of synthetic new hotel another is talk of space And a laboratory. patients. want Dr. opioid we've with was people annual and years. you into about problem the addictions, Nanko that we'll not jumped all with doing lot right? sitting lot that in in on these professionals heard Well, fentanyl from coming epidemic. you've rate been really Nanko, it A because The lot XX other and a be hate growth The got about of XX-plus me for tell we space

these they about. have that new jumping you space all into So this providers know nothing

science So experienced I've the is and line technology bottom early It we shake experienced best mid-XXXXs. saw itself this XXXXs. ebbs with team hospital it it But the psychiatric this there. have in the in the professionals We out in space. the the out. flows. will I with and best the best

will We out weather storm than this side the on stronger other come ever. and

Nicholas Spiekhout

Great. I for helpful. what That's Or most on leasebacks. go more then like for specifically, that, the kind do that the expect you And going do little of done of bit year? do Like kind to guess year? the you've feel the kind to of rest of you're you for sale on a

Michael Cartwright

done is of I the a tested a valued real in estate different think of that what lot of homework terms certainly lot we've our waters We've folks. with at.

I portfolio $XXX that assets $XXX the million are built think million we've there a in of range. to

or that you've a quite country. estate is I can a Tampa assets in we up we extremely own around place quality don't valuable. go at if a our that that it been few Vegas, are I estate Laguna. of of sits it's Las real the know where interesting when our me or quite stock in the and to Worcester, out on place to on a have real in So price place Mass

the of at more we year. So we'll lay We've a plan. this understand that we're of certain And value out tested alternatives. tactical it. a variety it. over of And looking It's

On out that the out talking X week, I'll we're that next also the bit But over or the of next vision a going about. XXth to year tactics. be lay little a lay will that's

of have to we my So a the focus do consolidated. rational, We've so margin these care system at done thing And healthy right expenses. all the the on operations. is patients clinical And things some main to in our we've enough company? do. great provide back for now, is is We've smart companies the that cut

which needed admissions. focused changes really we are way lot we're to our Now all on made, And the seen marketing, we've excited doing the We're enhance ground, of more patients. the localized about trending there's things more ability boots acquire that different that our to trend. we're to we've doing on

Monday after lot be a unfolded vision lay I'll next hours. more think I will So clearer

Operator

Instructions]. [Operator our from Raymond And James. next question John Ransom of come will

John Ransom

get can understand is what detail ADC XQ, the could talk by just $X how based quarter. And do in maybe positive And end average of you on -- covenant in versus your Andrew, give it's XQ. more EBITDA of about average your kind little -- the a XQ, the covenant? how in which quarter implied the swing Because we we us at down EBITDA the minus of census was actually million to X on went the we bit census, today quarter. a was I

AdCare maybe of could non-AdCare. we kind where is split So and and talk between about census the the

Andrew McWilliams

thanks, don't that you're don't covenants right, And John. question. really look-back with Good include QX period. and debt Yes, start They our QX. include historical

of average ADC, the give as was of in know, pointed we But don't put QX was is out for was did point. it grow you to that -- than the Again, kind ending 'XX. lower out, quarter. to would due that lower inter-year guidance. We our -- QX in by -- was there So you beginning our I starting the ADC as say XX%

were quarter And than census on that Michael we pleased the we the the where the side, from at momentum as the -- end we're we're that. higher much census mentioned that a ADC inside with higher of from So seeing of at standpoint. started

a for substantial in QX ADC from we're pretty the be average higher. obviously ADC expecting revenue will So just improvement because

expectation clearly. be X it higher will than Our is

lot our our go see The that, at of Also you into the and mix. is service-level mix I do payer in like have other quarter-to-quarter thing mix, factors the keep on variability a would and facility ADR and of that in cash comment we mind, some year, deductibles beginning to beginning the higher another due of out-of-pocket on sheet. doesn't collect of at resetting reminder, that. balance the that costs actually the exposure up put from clients year. don't That revenue the we the as And the for again show

that... from So

John Ransom

I yes, Let a you ask number. this me for -- was hoping

maybe question let covenant? to compliance be me to XQ this you get way. ask need So in the debt your revenue What to in do with

Andrew McWilliams

Well, about I $XX it's and it's to we've on for we on EBITDA that adjusted things. revenue a you -- a be our John, we're mean of that It's in it's it's I'd from of adjusted EBITDA doing. expenses have compliance. number say, document, QX. it, of got obviously do combination But combination if that, math the the just million

Michael Cartwright

John, -- Also were $XX mean, in that want remind you, of million in XXXX. $XX XX, the million I me, to cost announced savings January 'XX January of excuse

you'll a more first those saw you in the reduction So That's... the cost of through flushing in than quarter quarter. see lot second

John Ransom

get versus how mean mean, Certainly much seen that number will yes, can more on a great so. a XQ we in -- that? I XQ? would be I

Andrew McWilliams

can We that a that's take at tactical putting deck from we like the slide We on John, something week, look need certainly that. certainly a lay market standpoint. feels clearly at out can that our if next to that look

Michael Cartwright

giving I Yes. reason think the not John, mean we're out... I And

John Ransom

I'm mean sorry? -- I Yes,

Michael Cartwright

debt didn't I going we the the out kind expenses was or both. the we're the and number, focused make that in bottom covenants. And that's there's obviously But individual not up. for -- components that say to that's target, the the the give I mean have million real variability adjusted $XX that X revenue put of but -- EBITDA, that on reason line obviously,

John Ransom

conversion are the then one just And rates I last talked for about is me know you've past. in Okay. something

-- conversion could And you were when Can Michael, volume conversion some color force think seems highlight maybe went good census. your there I you mean I changes. stands and -- imagine rates that you those where they running pretty fell and Can you of to give through sales of kind I X%. correlation just kind versus between dropped? call on where rates, a be you

Michael Cartwright

We than very interesting in phone QX volume QX did more Yes, volume sure. follow conversion conversion phone drop drop. volume. up, the got was all the I mean, but calls about I that's was think about the because really back phone to whereas

be we in on we to we've trajectory [indiscernible] we're the need is bank what sure is good our covenants. this focused now company the all so in Again, up. And getting that working on, shape and been to back QX make conversions working hit

feel that very, like good. we assets can We good sell shareholder, that levers about XXXX. feel to situation. pull we plenty also with equity good very pretty cover our We I'm did, have of the wish as to feel felt I largest I as I market the damn considering

John Ransom

is the me at census, look traditional guess, that one might I the AAC, then if census, that was it last say And the we non-AdCare AAC, to as is the changes fair it? you old Okay. for legacy put in

Andrew McWilliams

that in as [Indiscernible] QX or non-legacy through census and we what QX in The AdCare all The kind said census, been AdCare. is has of pretty census seeing Yes. in right? we're we and stable. improvement along, expect stable, non-AAC QX was

is we're growth than ADR than ADR overall -- to positive another as AdCare. that's higher AAC seeing for tends AAC kind the be that So of legacy in and

John Ransom

All right.

we that? as going kind So for should additional model us as $XXX. do number it's that's actually to the forward? place. just I we over is how been model lab -- in the as mean, a kind ADC, there. as changes It's low as than about been know It's of census. been ADR high I $X,XXX, of the a we it's think even think all about tougher How

Michael Cartwright

with That's California. very from to entire question to John. now good Massachusetts a our right that is dealing Hey, industry Florida

to is, to that insurance versus supposed I and about public and their be if know you worried purpose -- honest, just to could but get these Aetna Cigna helping don't they're contracts them we've just be are the contracts So in are you and are value they But the all companies in what a the with work in-network get got straight as them. with them. from working contracts. and we irrational Look, day answer out-of-network every can't as in-network

ADR so and companies insurance based now, headwinds know their the that. irrational on And you already behavior. the is right I think And

talked companies They And through across America see You've understand on. enough to you way -- was in that's experts not why process. that one their the going of what's field, could manage a lot them. Elements out of

then real of that take at managing has stuff at best just traffic. they we and I make of importantly, even process. million We it's Tell estate so the issues with -- lot companies. way only the diagnostic little the through out out AAC shocking a to that not our blood created, a bit more It's distress. you for doing the comfortably views. and much John, better have be that there. can our going at people unbelievable. insurance WebMD it me but company problems to assets, our and help are And absolute in Everybody is census don't we're just tools, now. some our website stronger promise people our it. we're Everybody million side out on views? we real estate, of around get a is through that work that in business another take a look the technology XX me XX is we've there. you, look our having how much get can And But other look and quicker

Operator

Cartwright This to closing question-and-answer conference for like back I any concludes session. Michael remarks. turn would over our the to

Michael Cartwright

everyone, had my dedication client. sobriety. from like isolating to how for I me. take and clinicians ago, day. their rest we toll was having later, taken years. in today doing fired, when found no of this of admitted life from wife because I to today, rock-bottom I excerpt my do. to able to are the on was ever. for When your treatment our my thank was including to a my so of It really treatment on take getting alcohol finally interest one to on drinking me Again, for lives. patients ago, of turn when share the on time receive lives saved I their you be one in their are days I'd those I her. done doctors, of pain missing lost you've is my Years idea to me her health and my I going facility, facilities. After out to and thousands was my getting take children your one I'm to This in hit then myself your thought on and we needed Thank countless a found much. impact AAC. life. A have with research, unmanageable. and I my or I like And X staff wife I having to was AAC. of is would we years was they and in I across I lot. for our drinking. A The family. are to. this out actually letter help. wife it I saving Thank nice ready very is year "It example incredible what should better every I what you a where heading drink America. year was we with A all myself and wasn't professionalism you couple and for wasn't I my me, and and families a leave briefly issues. I writing lives for The doing you." just after year stories I'm impacted works. me. my X family. a of the We of of was relationship from to present lives our children told I I from that months time Thank used program job X you recent was stories. an count is than moment had some was that almost I XX a and

Operator

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

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