AAC - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the American Addiction Centers' Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] We ask that you please limit yourself to two questions.

You may re-queue if necessary. event recorded. today’s note, also is being Please I to Andrew like to conference over turn the McWilliams, would now Chief Financial Officer. sir. ahead, go Please

Andrew McWilliams

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

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

forward-looking update any discussed forward-looking statements. information, the publicly in The new events with others whether and You affected by among operations release, earnings results result or no may are statements in Commission set in and Securities materially may be forth second otherwise. cautioned results obligation undertakes the AAC's factors important actual hereby future quarter as XXXX Exchange the that filings of and the to from differ company company's these the a and statements, consequently

turn we of earnings call Michael was on earnings over Officer, our this along our call, and the would to our Investors Chairman to the the be will of the that section Executive referring posted I like with release Chief website Cartwright. morning, now Relations release. supplement portions to For

Michael Cartwright

Thank you, everyone. Andrew, morning, and good

XXst is tomorrow of community meant prevention start case Each Day. of events in International the overdoses. to of earnings to know those across about Overdose use our hosting August I’d discussion, awareness listening like be the the families Narcan overdose Awareness including raise we Before that will opioid treatment, and country

kind time discussing results. a opioid to but seek engagement, highlights, overdoses our many this operational are we when always at through rise the and so to a community on Andrew especially recent of call in today’s America. call over our across As be I'll the company financial before turning impacting On walk towns

have to then up will that still do, We of lot year. questions. pleased the with we it making overall, work open I'm we’ve Though a extremely progress to your this been sequential

we’ve in discussing we’ve our been executed in which sales calls, enhancements positive leadership momentum several XXXX. and and on previous giving marketing is us As organizational initiatives which improvements, included

XX, improved our XX, took versus Townsend These a XX% Southern in of QX. corresponding consolidation operation census QX inpatient in and we expenses. markets, of Las December operation included our consolidation Our cost cutting we to Vegas to the and XXXX calls, Also, And lab initiatives. series at of XX% in corporate Louisiana, our compared California our actions was XXXX. discussed inpatient of sale our occupancy our June previous in on implement measures as XX% a reduction

have initiatives year-over-year a saving cost expenses $XX our basis. Our reduction on resulted operating approximately million quarterly in in

positive reduction second million of impact remainder operating impacted in half $X cost of our expenses the operating expenses, have to in a of over expect we the continuing on positively We’re focus reductions further XXXX. savings the quarter to second course of XXXX. operating and continue and we they results, These expect on will further a

this a sheet. related alternatives strategic our to to earlier announced process we launched our previously As balance year, evaluate

initial the in year. balance sheet proposals company about investment the strategic excited level discussions are improve multiple firms. to to the evaluating We and with interest in value of our committed numerous and remain initiatives the we to the engaged currently enhance of We all and end third-party by are stakeholders

existing by the our end utilize at the reduce to to million is year to senior by cost capital. $XXX debt assets least our of order in goal of Our reduce the

will results. favorable stakeholders. engaged our we call in over Finally, will active covenant progress to we confident now remain I that near-term. that financial turn our reaching in to on our agreement agreement obligations will making an with on agreement and the to discussions credit lenders all I'm are is our the Andrew discuss that reach resolve

Andrew McWilliams

Michael. you, Thank

the $XX improved total XX% came average daily revenue revenue For inpatient in total improvements from for of second year. the the revenue average and result a $XXX was quarter XX% Partially improvement daily in to decrease of quarter in quarter XXX this of year. both and in revenue treatment first daily in increase improved from facility the first year. quarter Average inpatient in million the inpatient to revenue related daily from second the client revenue. in quarter X% XXX our this services Average This of $XX a to inpatient this million $XXX second as the census offsetting XXXX, census XXXX of quarter revenue. primarily of improved from first diagnostic

million improvements was in diagnostic year-over-year million beds initiatives calls reduction and sequential impact On against in quarter of related basis. improvements million a prior XX cost in X.X XXXX the do, XXXX fourth we a impacted SG&A of basis XX had During in our sequential second in Michael services operating XX%, improvement to of XXXX since as of expenses a first in with in with the EBITDA adjusted from in work adjusted loss additional resulted revenue EBITDA. XXXX. consolidation adjusted the lot I'm facilities loss of pleased related on quarterly so This while X since that XXXX. our on in recorded quarter and savings far XX million negatively million momentum positive on corporate XX we the and a EBITDA, by a to Overall, the XXXX. quarter discussed EBITDA a quarter have quarter earlier fourth of went a second of fourth a million almost the the or expenses of to of have positive combined The accounts quarter still mentioned the to call, receivable. The operating on or of improvement a client adjusted reserves XXX% represents revenue of

assumes minutes has our XXX adjusted XX the Slide X rate There's the to XXXX XX second implies coming EBITDA, EBITDA of XXX actual and XXXX. XXXX of that account for is million adjusted million. half of we in and expected this in million census to daily this to was increase of second supplement the guidance, in second of XX X a XXXX. about adjusted to of improvement expenses earlier basis average million the In which bridging half the million guidance XXXX, million to guidance XXX revenue second of Taking range The of off of and the revenue an spend X half wanted range QX detailed a into of to to in the EBITDA on million XXX our EBITDA few XX adjusted XXXX quarter million of referenced earnings is X our additional EBITDA census million XX adjusted half XXXX. half release million, of improvement Turning X% in half from the of call. XXXX. in million XXXX full-year of first a results come run X second through which second which on on I is million, the

on through experienced X% we census. of referenced July X increase Slide earnings release average a the in As daily supplement, already XXXX, have

of revenues come from client $X in the We million related services. increased expect form another to diagnostic

earlier diagnostic million accounts for call, reserves on we recorded mentioned QX in I through $X additional services, As XXXX. related which the client receivable outstanding totaled

reoccur and point already the the in experienced not $XX in reductions the out, $X second for is expense of July our The we've component get now reductions are XXXX that second spend XXXX. expense half remainder expenses decreases rationalization over in of reductions also the million. combination I'll results the XXXX, As in remarks. to of the and bridge second QX XXXX this the salaries, XXXX. to half operating from operator concludes from wages this vendor an through I This turn final benefits. of These from million comes of improvement gives operating operating of in EBITDA insight in call questions. adjusted would to the over and half, $X to incremental totaling additional a million of of expected us prepared

Operator

Thank you.

John first Ransom the and answer We [Operator question ahead. comes go will James. begin question Raymond Please from of Instructions]. now Today's session.

John Ransom

morning. Good

half back does flow? million-ish for $XX If imply you hit cash your what that EBITDA, free

Andrew McWilliams

question. That’s a good

at the is the mostly EBITDA such really convert reoccur, back really that from hard I'm really about standpoint. So, the expecting you that to AR in to to really a cash pretty to you flow, expected what if EBITDA, uses you neutral if take and -- those were to go And adjustments an if then, look get really think, adjusted into half think aren't -- and AP cash expected free be cash.

neutral you'll for $XX principal million out So, flow. cash even then if that's of CapEx I'd you At see back in end or at of take a million and out come kind so, so or cash right call it it $X the pretty of even. that -- that will and about you maintenance the payments, back day, interest

John Ransom

about So, the in of are the you thinking what's half back expense year? the cash interest What this?

Andrew McWilliams

quarter. runs It a about $X -- million about it's

John Ransom

secondly, get when lot estimate know your issue? to lot some resolution think but and covenant Got do things you I then of you. moving have you a ballpark a a you with Okay. of parts And might about, to got of

Michael Cartwright

the we're We're our every mean, day, I that it I been working think They see banks trajectory extremely John. on supportive. have making.

see we both all looking Part of value the it on. us There's sides think We're actively real we've been the of it. which on hinges some to working estate, we're of at making. proposals. unlocking I trajectory

certainly we soon resolved this so, to want And possible. as get as

John Ransom

let's firm between what the be and words, last $XXX In delta? that Okay. expense me yet. date to sold, you're million this. other Andrew, for is, to should Assuming will think in But, were transaction? going the no trade-off how about interest you get not And expense say do we question rent

below to get I selling should than paying, you're line, wouldn't something going which lease -- get a -- know as lower any of about come how but Ringwood sort about the the other to well, done? thought to about? the you're going if on rates but the this thinking think being with rates in interest improvement it can idea you we cap you're yet also You're And

Andrew McWilliams

drops it the But will walk to But then reduce do I'm do or multiple capital predict think have is happy to and it capital an from to high it. The so, it'll we cost John. definitely I management debt there the will hard through an down what conversation loan certainly picture, scenarios. interest exactly million be. you to with to Big makes bring cost it’s $XX for pretty sense wouldn't and with offline exercise

Michael Cartwright

I about solution be as well. to very it’s the improvement think cost as taking John, making to escalators were we obviously And that, be on, account on got capital. we to Escalators, it’s capital. into thought we’d be focused got long-term focused to very also sure we’re cost that properly of a

Operator

question next William Blair. Daniels Ryan And from ahead. Please your go of today comes

Nick Spiekhout

for is Spiekhout Hey Ryan. in Nick this guys,

within planning guess you’re finishing that? the through of then is that on targeting QX, something alternative, Going I'm kind on more kind mostly year so I of strategic for QX so for the that and

Michael Cartwright

our and transaction Correct, year. gets And the continue we certainly discussions and great we’ve trajectory since end and get the been of had conducting plan better. summer, on as a at they better to early we’ve conversations it before

Nick Spiekhout

like going Okay, going made have chunk. down bit a for bit here? of a little of state kind to come that little on reach wages are bit, a looks or that up a we cost we expect with then kind the perfect. initiatives, professional Should steady And fee been kind of just coming down salary cool, and it of of kind salary to

Michael Cartwright

really-really and we a care. probably year we worked salary, getting efficient really a we’re wages this and definitely We've of appreciate hard cutting, benefits, where more I they how terms are. our done lot deliver in think of from stable staff,

reduce I stabilized but very other smarter our and we can there. really to see a spend at looking think spend. as And that just ways vendor company It’s so, overall we’re

Andrew McWilliams

June inside XXth when And keep of the some quarter would towards the mind so QX, well. saw in reduction but from the momentum versus headed QX think that’s about you QX, trajectory expect you there, as to more of April that I XXth

Nick Spiekhout

type little kind as of you're uptick a you've you. professional bit than that Got kind thing? the fees, reduced putting does headcount And of more explain there, quarter-over-quarter of

Andrew McWilliams

wouldn't I way. quite that it No, think about

important it’s add that a from that had occurred going backs quarter. of of there nonrecurring events adjusted that the take a component. certain naturally add think some I the to There’s look those bring in we that are at were to backs fees professional lot -- down that inside

Nick Spiekhout

then guess, thanks. of your successes improving, I last you’ve bit your And since marketing that talk I can just quarter? great is initiatives? color little kind if Okay, on census seen I wins about any guess you a there or know

Michael Cartwright

traffic just really management Stephen and to just think addition has Ebbett our web and of assets. been web smart team. He’s our all I SEO an understanding incredible incredibly at different

update we year, Google was that well. to challenge business want did understand algorithm and we that the our think I last So sure make when

team that. job a Stephen think and I on his phenomenal has done

wanted our a doing lot that have more the with utilize the business partnering with the effectively facilities marketing development across we States to facilities. also more about team really and great localized start We United

starting starting see. to mojo get center, conversion up. then used back And lot call get to to back we're referrals our see our and we're more ratios So than we local a our

So in sales on marketing very front. that. good and feel about all the right things are direction We heading the

Operator

And answer the remarks. question-and ladies this I'd conference any Cartwright over and back Michael concludes for gentlemen like session. turn closing to our

Michael Cartwright

this being running all revenue then challenging of this of our CEO was do every into a to out last And come drug year, doctors, about when the the I on actually go in management to hear day back more why year, you Directors, and change why couldn't been counselor, clinicians, supportive like all do And year energizes how of you do I me. problems. an from It very-very Thank with company. people XXth listening the time, very do, the my trajectory hard me in much. stories half day. how icon company treatment have back it get we probably the became Reflecting ask patients, this? I excitement people facilities one very say, time starting people and say, appreciate patients I'm to spend we of addiction has reminds Xst Board of to to out the I and helping an And company and July your working And I losing without what I a XX% treatment of it of why drug today. you have supportive this with every team, with a trying the sustain I alcohol and and lead the trying treat about environment. the Especially drug me challenging nurses, that. and and year

you I About letter And from ours, you a stories I a reach this. read optimistic to close And countless My different year-ago, I himself like wanted to getting to because husband today to you. first of year want what out a the you for to person. a receive wanted about his my we future He us, family. treated and to we're because back of his thank came so, held just was patient husband, sobriety.

he to things families But for be mental hope. husband for take work to family. and husband of lose have his husband it do basic us, knew a facing have do addiction an with the we. her like life garbage work conversation, dad is able and I our battle. I a but committed the was you important sounds like wife and hopeful and would were dinner that back. struggling people families wanted For The illness, small, out, just a but my able are changing. This son so help AAC just uphill we again, so My is and so often all with remember who was us, we to The is family. continues,

this about and single on thousands tough such on it's I single having shareholder, difference, of people make do one single you America. know of AAC know impact been lives It's help But that we're that of what stockholder, you year. example and amazing to I the we every All is we that. as and think a really month what hope year. how daily across a families just to do a many every if day, do. basis, you every get Again, we

staff And that out you, really we XXXX. have into we're having to back on trajectory and good great Hope just thank there XXXX a you on working a And the all hard want promise plan company. a make the so to of great I are us right half I day.

Operator

concluded. sir. thank has Thank you today's conference Today's you, all attending presentation. We now for

and may wonderful now lines have a disconnect You day. your

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