DVCR - Earnings call transcript Q1 2018 | Diversicare Healthcare Services, Inc.

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Operator

Good afternoon and welcome to the Diversicare Healthcare Services 2018 First Quarter Conference Call. Today’s call is being recorded. I would like to remind everyone that in addition to historical information, certain comments made during this conference will be forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and these statements involve risks and uncertainties, may cause actual events, results and/or performance to differ materially from those indicated by such statements.

You are encouraged to review the risk factors and forward-looking statement disclosures the company has provided in its annual report on Form 10-K for the fiscal year ended December 31, 2017 as well as other public filings with the Securities and Exchange Commission.

During today’s call, references maybe made to non-GAAP financial measures. Form review measures financial results to press furnished to reconciliation and in encouraged release those of the under are those measures non-GAAP the our Investors X-K. comparable GAAP the I would and Executive Officer. over Kelly Gill, Chief call like President to turn to

Kelly Gill

earnings Sabrina. our quarter Chief financial who provide Also you, Financial XXXX and Good details you is the the afternoon Officer, for Thank with call. later Diversicare’s me joining thank first call. McKnight, in Jay will

our in activities our of quarter, filings. Before I our encourage we discussion begin to this investors disclosures want a and our review to risk factors SEC

As relating we governmental Medicare noted as the required forms to unresolved practices and investigation we industry, with is the therapy have preadmission in past the evaluation our others by an TennCare reforms before, required subject by program. into practices to the our are our case and

per some developing These that We highest industry and professional also other facing in challenges taken in continue have cost direction. strategic jurisdictions operating in presence our to been a into the of and substantial other bed consideration the our have have liability factors country.

discussion I move results. quarter Now and will year-over-year the of a into

important this accordance the year. our million as over for the accounting and million. this from XX.X% on with quarter. the is considerably revenue GAAP, In best prior provide more slightly up reporting. we to a to figure Total up result net clarify Jay will and QX year-over-year over common do The recognition by for begin, year out on QX over day this clarification financial the in last occupancy through that $XXX,XXX recent points reported transition point changes perspective beginning Under common the of year an up quarter revenue to will net remarks revenue his I before in are we XX quarter. work the prepared $XXX.X per in complicated ASC However, differences day accounting .X% and recognition. related affected in rules equivalent quarter revenue results $XXX.X to million it’s the was million, of per quarter $X.XX revenue a was for comparisons me revenue as to basis in basis XXX, was was XX of $X.X from mix skilled last accounting up

reimbursement Our were essentially weighted rates flat. average

change last to last quarter quarter. tax last $X.X of these context over million. in year-over-year a minutes. a respectively. $X.XX increases few additional increased GAAP, as expense quarter. million quarter Remember compared revenue From common EBITDA that the $X.XX Jay under $XXX,XXX related expenses new will we was controlled. and the year-ago quarter to nice well to however, still due the a points basis and were of in our uptick However, saw a compared quarter revenue were for a up as loss by $X.X was million $X.X were XX for well of revenue as was comments for million we million $X.XX G&A loss his versus million, took of of net income Care reporting, the in of million the were rates. provide controlled a by expenses Reported revenue Managed EBITDA $X.XX Net $X.X percent a non-recurring, plan. very XX.X% quarter-to-quarter. in Operating non-cash Adjusted XX.X% million to perspective tax percent

XX and up rates with contributed Care down slightly occupancy from the up Medicare $X.X rates. points. basis million balance in was rates Our were X.X% reimbursement X.X%. increase, increase Medicaid the an were of rates X%, Park up Managed and Selma, Place Total Alabama center were coming soft only in

last due year. increase EBITDA compared a G&A common year year was in refund as the time XX.X% coming our revenue is Reported to from due comparable. from expenses with dollars. I was were previously percent credit, million, that trend Year-over-year provider on that To flu $XXX,XXX this year. $XXX,XXX $X.XX financial a down $X.XX heavily expenses and for XX.X% to largely increased were million quarters of summarize were mix driven $X down results, Absent as season. provider The million, and operating This was $X.XX tax Operating the was was difference quarter appeal a tax well skilled by equivalent same-store $X.X our absolute versus controlled to year almost by G&A year-over-year XX.X% However, and this million. million. prior XX.X% to successful by from that a last X.X% of the the in $X.X increased X.X% expenses reduced expenses as compared $X.XX expense, With being GAAP EBITDA our that revenue portfolio. in last reduction adjusted basis EBITDA The million operating the referenced. million. is last to

the EBITDA for $XXX,XXX. We tax over prior grew provider the normalizing We’re refund. by EBITDA results year’s

discuss acquisition progress to made expectations. with was we like I’d $X.X the $XXX,XXX. the to Overall, this for Revenue Selma, completed the is center was Place quarter and quarter contribution the million performing the Park center of year contribution from Now our last Alabama. we’ve in facility-level

quarter as Next, program. CMS’ under Star measures want discuss for to our measured I outcomes quality X the

thank from members am this with our X improved results combined I of members. our last from and QM objective has to at now to the our portfolio Living time to Our an overall score Therefore, at of to year team last and the year. gratified team the Star of continues and group. currently peer QM their since our outcomes QM our patients, overall compared time family has to this our X.XX want X.XX recognize the to year I score our for dedicated The X.XX time portfolio QM last lead for-profit we X,XXX X.XX and Diversicare service residents have acquisition. legacy Golden of measures portfolio acquired X.XX over improved X.XX our for

will briefly methodology from CMS to proposed like CMS system. news last late recent reimbursement new report a Part call his Jay A regarding for needs by replaces CMS will payer patient-driven that’s system, and nursing final directly ties X, these provided. from providers, or Before system intention system I to the administrative replace skilled the for implemented that turn is its be October PDPM the PDPM, opposed Part The form rate patient Medicare the proposed the week of I overhaul as reimbursement to of the in model, announced facilities intent system on and reimbursement RUG model This under that the which RCS-I new reduce an as over model, the reimbursement called on CMS, to is the place, current encouraging to previously to innovative centers. comments, consideration. to the reimbursement shared XXXX. services and care expected is on unexpectedly while burden it’s care new the IV the in would the currently security reimbursement in to correlate proposed

studying is and the is comment initial will a while of be one, positive in-depth, it view in it Our PDPM we the public period.

I market to we As Medicare expect for that X.X% industry-wide year, this the of an increase call October. on our last receive shared effective increase basket this

of based calculated and the case will the patient mix past, our acuity. be in been has service, specific on adjustment our As geographies

less rate has adjustment Our national slightly the historically resulting amount. been net than

his Now to I’ll turn the comments. for call Jay over

Jay McKnight

Thank you, Kelly.

disclosures a on change confirmed to related to with X, call, to impact the common an retrospective service as revenue debt now current a quarter’s effective instead year as common this this care relates XXXX. shared presentation methodology as accounting have health in discussed the in methodology the We component on that remember our comparison you with we revenue on QX year updated is minimal January recorded during reduction of a this was XXXX line providers of and the As of expense prior operating of recognition methodology I and year our last used XX-Q. change changes compared Please revenue. modified XX-K The for to approach bottom a the GAAP mostly revenue bad expense. being those

revenue for favorably – the of year’s revenue million which million. $XXX.X last last quarter under the to GAAP, compares $XXX.X reported have been Our was common $XXX.X The million. would quarter

center new in Our million Selma, the quarter. in revenue $X.X contributed of Alabama

of G&A are a a as compared X.X% to first quarter down revenue of revenue X.X%. X.X% under year-over-year Total decreased from operating of common percentage a as included increased a XX.X% $X.X decreased to reflects year-over-year Our the compared from refund. year. Total expense by $XXX,XXX to percentage by expenses year-over-year. revenues revenue of operating first General provider and basis. to GAAP of operating the G&A operating expense – expense last increased $X.X X.X% quarter-on-quarter as or a tax year’s to percentage million XX.X% amount, for revenue Last that in quarter year’s XXXX. X.X% of million to to compared expenses last quarter. decrease $XXX,XXX first administrative Normalizing the

expense with QX liability quarter the consistent for represents roughly of year. of million it’s last X% Our revenue $X.X and professional of

lease the Our for $XX.X $XXX,XXX. first the ago million will year-over-year. quarter of reported or be Again, flat revenue $X.X the adjusting was the expense million million appeal, for quarter in of of to in the year EBITDA up quarter EBITDA X.X% tax $X.X compares of XXXX. non-recurring quarter provider

for was That net some call to results. of remarks. concluding million quarter’s million for now the financial $X.X For concludes attributable of prior review turn per year or to shareholders over our quarter, Adjusted compares to quarter. $XXX,XXX EBITDA loss the $X.XX $X.X Kelly back the the share. I’ll

Kelly Gill

you, Jay. Thank

work As open I Diversicare statement to With healthcare demonstration recognized to by call for also call industry expectation. This always our professionals like concludes is providing a I life will towards Healthcare that, would hard of improve conclude achievement I prepared of mission we this which today. goals to every by stating remarks our questions. our and their be exceeding touch statement, of mission for now to like leader. the all our and our recognize would exceptional

Operator

question from Instructions] first Peter [Operator will And you. the Lux. of our line Thank come

open. Your line is now

Peter Lux

I’d Thanks year, a occupancy reports, spoke down, will all when how year and because it this am stockholders had record Jay, you was on my season have Since census. flu yet I according be coverage, guys. that said in on call. we for other don’t some analyst remember and flu like myself you we taking slow season. behalf any ask to you I conversation, harped was some our and national to reflected I of sure. this questions had guys Hi, last Well, been a

I metric, year’s stressed the Although and and it significant the see season? flu slightly lack bang the there census way up I or year’s. in it of census flu don’t see this season increased was occupancy this for a doesn’t to I in account relative you mean, last that is

Jay McKnight

end the would for licensed on the that data our and our Peter. occupancy the Hi, last beds. XX.X% for good pretty reflects The some available table point, like And the Thanks on release our at quarter on both give question. fourth I beds do quarter of to Yes. XX.X% the XX.X% of a we nursing alluded press beds for year. skilled mix is quarter. in substantial the Kelly nursing at actual occupancy to available the over

a So nice actually, there. we really saw spike

Kelly Gill

to the we Peter, go see say, increases with that do we would on I flu as actually year-over-year. trends industry, flu trends And the for track consistent

Peter Lux

I congratulate into that want you I increases getting system-wide? it translated, in milestone. working? are competition Has the I because translating markets see significant the metrics that’s is also think a because Is to in really it don’t you of really significant occupancy your overall quality

Kelly Gill

acuity, that of sector seeing common right kind we appreciation – but post-acute patient what industry-wide also rates a But improvement are that the seeing helps increase we post-acute dynamic appreciate revenue of can sector occupancy. which per – the the overall have in in is I are an in seeing industry-wide, But support is now. and are the that, is significant the seeing market Well, full headwinds patient we saying drop overall the day. doesn’t with

are essentially the to in And I shrinking holding would be given occupancy industry, a and the consider we own reflection of so our market the performance. our fact headwinds that that at positive

Peter Lux

in and your drop-off spot. do further, see Baby that, their across numbers Boomers the sweet the overall you anything? what as nursing that target What what’s market longer? be live do seem sweet for the board? because trend of occupancy more I longer to to a into and your with increasing Is increase and you coming in mean, seem home account if people stay the changing people in houses the step homes spot that Taking healthcare

Kelly Gill

market, of particularly expansion there new services number home construction expansion Sure. that housing In playing senior today’s certainly are health market, memory a in is into is there space. within that and one the within factors has a those. of of care tremendous But that license assisted been increase and in the also, living

in they significant And a seeing increase particularly are acuity. so

a with account So are they of to patient pressure amount available more higher taking some skilled beds. seeing on are certainly acuity centers. They nursing unmeasured and lot would for that centers the

Peter Lux

you skilled? than have build new But seen

Kelly Gill

No, very little.

Peter Lux

where mostly from, is that one say, Is to really close that’s of your And comes skilled. – should that true? XX% business your your of mix

Kelly Gill

low Well, is hospital come per balance basis, patient skilled are thumb the at nursing which teens basis, are patients, Medicaid. majority from the or directly on of majority from XX% ranges that which center, acute vast for an industry are a the typically funded industryXwide. to rule mix typically by on then the acute the which residents the And skilled the say least in usually – in your

Peter Lux

say, have don’t X Jay exact nature. X would you So, this going the I been know you employed management and on, I to are years, team that

increasing had some bought almost government, about associated some obviously was positive this and exactly debt of talked the related we before? have company you you and basically sales with the been just flat. actual that, growth Now a same-store rate, sole, of actually, to size the have basically leverage and Is sold been also basically doubled but transactions, and the what huge which move amount the

Kelly Gill

It is.

own while to you centers the And same-store acquisitions. are legacy I appreciate to well our the that our were so think recognizing hold in market go-through doing we – seeing be able industry-wide, our centers. on on side I our again are headwinds with the we with we And confident

EBITDA And so the we through earnings the are overall showing at though level. growth, improved

Peter Lux

company? you you think better – be being as bang a the very what considering of Do get quest company, would for company being that company you me little private public off a a seems public public and a being to it perhaps

Kelly Gill

and strategic that’s are we do. Peter, those commenting can a – are that board really and matters the we like company for something public not alternatives on is

Peter Lux

I appreciate Okay. Alright, guys. thanks, it.

Operator

Thank from you. with comes of line Capital. question Patrick Retzer And the the next Retzer

line is open. now Your

Jay McKnight

Patrick. Hello,

Patrick Retzer

gentlemen. Good good afternoon, quarter. Congratulations on a

a light on mentioned job should headwinds wondering occupancy today’s or about thinking thoughts? the have forth. done EBITDA am especially so company, Do year and challenges be growth of are for of so forward and how your two? should of the You we great be call, the the we going growing have slowing you might think you forth next adjusted you or growing what I in down because the how

Kelly Gill

here look I with historical need hopeful Medicare refer mentioned coming I are rate will of and have to just have center Well, year-over-year as the to X.X%. just kind that back just the And get we performance. and really this call our think mentioned the increased, we we rates comments we that in increased around

that that. begins to increase say the and is is don’t population historical discussed there really around XXXX. think best performance the vast to offer guidance that So favorable. continuing somewhere that be – to way the baby at is I beyond on commonly our look other we than boomer It our out really But

is CMS pleased some there. and that new reimbursement looking help getting from So, we industry at the are systems

there to. look So are to forward signs positive

Patrick Retzer

Okay.

acquiring So year in terms don’t to with new facilities regard two, the to anything or over of you add that, have Kelly? next

Kelly Gill

know, calls. number have Patrick, you Thank And a I of these you for on yes, do. you Well, been I know that. what,

you are chase the overheated around have often somewhere many been feel our not going that acquisitions how we XXXX and remind those I can And has since valuations. I – on – now that view our certainly markets to commented really markets discipline so we been the and that like around how and

continue makes and where think we and will opportunities process have very That we us. market has We evaluate for the pursue it served sense us disciplined. to well been

Patrick Retzer

company annually at the is attractive the investment a Okay. that more And and your flow lists price current dividends Has any frustrated, advisers given dividend Street increases self and track your an to for nominal dividend so years. X annual and increasing X% of to pretty number in of get share basis have exposure? those strong forth on which start the Wall the of has history some light and in companies at thought making been cash

Kelly Gill

the have appreciate consistently available we say us just question, that to and I an Well, would all active I opportunities are Patrick. evaluated. board And

Patrick Retzer

work. thanks up quarter for good alright. Okay, Well, good the keep and

Kelly Gill

you, We You bet. joining Thank Patrick. appreciate in. you

Operator

Thank you. of question And Osmium. line John next the will from come Lewis the with

line Your is now open.

John Lewis

Kelly, Good how afternoon, Jay. today? you are

Jay McKnight

from We well, you. Good John. hear to are

John Lewis

maybe some can sheet, I be about quick $XX.X on your covered had a give to question, you it call. I in held-for-sale, just that? and Good have color balance on missed the I assets you million it. you on see

Jay McKnight

got information. have the a a really more sale. that say at lot our that’s in disclosed little we footnote and Yes, it – of It’s There bit gives listed are is that held-for-sale. is for have three bit information really whole There the centers that’s XX-Q. end we the of we being more quarter currently little X more a about footnote qualified is X that than other can not a that

John Lewis

it. Got

Okay, that’s helpful.

If threshold to you you sale XXXX? you deals free could you do or if of and you how in guess, some de-lever make dry you see can’t say – your some are you other terms – where terms this you do – clear I at are potential in looking in deals of you had really active up inclined that more powder,

Kelly Gill

I And that opportunities us able a we think those – way to our acquisition period. achieve just to to XXXX, company. a have Patrick back be the moments have have kind I of now to X-year answer we been allowed of we that refer well evaluating the actively in really doubling processes been back Well, goal few my ago to and all accomplished

And strategic in opportunities. that addition acquisition consistently in the we our to active that, other available market confident would one we alternatives So to think we us. evaluating clearly as in are evaluate are

John Lewis

it. Got

look and and – you tell did clarify clear. this to Thank is forward Okay. guess I you guys I and

So or you starting ‘XX guys get rate ‘XX? will a October of hike potentially X.X%

Kelly Gill

clarify, X.X%. increase of to Well, announced so so just CMS fully an has

are a impossibility. quite not We will hopeful It’s the that. we see XXX% codified. that There is

So information that to that contrary. the have to is in tangible those but don’t I Congress – any lobbying realized, are ensure efforts to to offer there amount place

hear expectation X.X% our now, for will until So that, we that that see otherwise. is we

John Lewis

is could coming very there gut rate but it’s than current know to said you if you methodology you Do have it it scores, you Would have feel be quality scores. preliminary, – On it. have a X% any on I or the of any any be potential new feel? better quality Got quality applies kind your do as hike out do it X% standards? or gut

Kelly Gill

CMS Yes. And to it’s is a perspective, new there. just system in their intention implement reimbursement directly them. to not component quality to new have – from the there a scores, clarify it to But neutral although this budget tied system, be again, reimbursement to value is have – is but

that expect a they by now, industry is been to it rate CMS is that one no necessarily stated wide It’s right net increase. So expecting be budget-neutral.

John Lewis

Got how budget-neutral, that chart’s I Diversicare? impact But the if it. quality and does scores, it’s you it have will but that – how get off

Kelly Gill

reimbursement increased in mathematically we are obviously services our scores Well, that system. people referral but provide new to are we that not proposed to, service if necessarily markets provide the and they the linked in and quality our confidence to sources and this important for garner

John Lewis

Got it.

are any in – you do the in what need And potential in – guess what that and my question maybe value? do hit helpful. and Do confident clock you and payout of shareholder you of guess are increases that need board come that the change increase I aggressive you or if you getting Okay, across comfortable through? seeing capital get share you are where I terms rate a decisions is pulling – to of more terms you to potentially actually the allocation X.X% more does start your dividend spot rate last and do of drive a more repurchases October Where a lever that’s where X level you be? actually

Kelly Gill

positively does usually I need we decision basket Part of to the of investment mentioned other rates terms a or are CMS X.X% on for implement totality to mean just few And make going A – our look I in our we still to which those just ago, an as do the fact X. fiscal reimbursement. year, in we purchasing every confirm start market that October have begin year with evaluation, negatively and organization are we adjusted That CMS that of then. minutes any the they at are the increase as

Jay McKnight

John, I clarify will one thing.

historically increase, that’s Going the basket less back resulting remarks, and to but the expected been to rate the announced prepared prepared re-clarify wanted net market mix on remarks. than specific our acuity, kind based and geography just I is rate Kelly’s basket something X.X% of patient the our market has from

Kelly Gill

Jay. Thanks,

John Lewis

Okay, order Jay. Any of magnitude it? is

Jay McKnight

It’s materially slightly not less. less. It’s

John Lewis

Slightly, sorry I on road. my am am the – I on

slightly said less? You

Jay McKnight

Yes.

John Lewis

it. Got it. Got

Okay.

So I I falls extra the mean that’s margin got all if that is X.X%? mainly an – that how work? line that bottom or almost to almost does is – you mean, incremental that

Kelly Gill

John, there all are time. pressures Well, the obviously, inflationary

the fashion. we So how always on see more to a look, make real-time plays out and world decisions have just

John Lewis

appreciate it. of Okay, luck. Well Best guys. I

talk will soon. We

Kelly Gill

you. Okay, thank

Operator

the conclude any remarks. does Mr. Kelly like I the session closing turn today. to would Gill to This you. back Thank question-and-answer over for call

Kelly Gill

we I want sharing Great, forward you for and just all in quarters. to so We with Diversicare today. thank to interest our joining look once of our in Healthcare you Services again future results much. call you. you your thank appreciate Thank

Operator

gentlemen, and conclude participating conference. in you does Ladies program. your This thank today’s for

disconnect. all have a You great may day. Everyone

Diversicare Healthcare Services (DVCR) 6 May 182018 Q1 Earnings call transcript