AAC Holdings, Inc. Reports Second Quarter 2019 Results
AAC Holdings, Inc. Reports Second Quarter 2019 Results |
| [30-August-2019] |
BRENTWOOD, Tenn., Aug. 30, 2019 /PRNewswire/ -- AAC Holdings, Inc. (NYSE: AAC) ("the Company" or "AAC") announced financial results for the second quarter and six months ended June 30, 2019, as well as updated 2019 guidance. Second Quarter 2019 Operational and Financial Highlights:
"Despite the challenges we faced last year, we continue to see positive momentum in 2019 and believe that we will see continued improvement throughout the remainder of 2019," said Michael Cartwright, AAC Chairman & Chief Executive Officer. "Inpatient census has been improving throughout 2019 and is up by 38% at June 2019 compared to December 2018. The initiatives in sales and marketing continue to show positive results as we continue to enhance our community and online outreach to those who need our help." "The expense savings initiatives implemented in late 2018 and in the first quarter of 2019 are having a positive impact. Operating expenses have decreased by 18% or $15 million, for the second quarter of 2019 compared to the second quarter of 2018," Cartwright said. Cartwright added, "We are considering initial proposals from third party investment firms as a result of the strategic transaction process being led by Cantor Fitzgerald & Co. and as we continue to show sequential improvement in our operating results we are excited optimistic about the investment interest in our Company and are engaged in talks with numerous well-regarded financing sources." Cost Savings Initiatives The Company enacted a series of cost savings initiatives beginning during the fourth quarter of 2018 and continuing into 2019. These initiatives have included reductions in the Company's corporate expenses, consolidation of its Las Vegas market, consolidation of the its southern California market, the sale of the Company's New Orleans operations, and the consolidation of its lab operations. Operating expenses decreased by 18% or $15.1 million for the second quarter of 2019 compared to the second quarter of 2018. Second Quarter 2019 Financial Results On a sequential basis total revenues increased by 13% in the second quarter of 2019 compared to the first quarter of 2019 due to improved average daily inpatient census and improved average daily inpatient revenue. Average daily inpatient census improved by approximately 8% and average daily inpatient revenue improved by 17%. Operating expenses on a sequential basis decreased by approximately 4% to $69.1 million for the second quarter of 2019 compared to the first quarter of 2019 (excluding the litigation settlement and the gain on sale recognized in the first quarter of 2019). This was primarily due to the benefit from the cost savings initiatives enacted during the fourth quarter for 2018 and into 2019. Operating expenses on a year-over-year basis improved 18% or $15.1 million. AAC breaks down its revenues between client related revenue and non-client related revenue. Client related revenue includes: (1) inpatient treatment facility services and related professional services; (2) outpatient facility services, related professional services and sober living services; and (3) client related diagnostic services, which includes point of care drug testing and client related diagnostic laboratory services. Non-client related revenue includes marketing and diagnostic services provided to third parties as well as addiction services provided to individuals in the criminal justice system. Total revenues were $62.7 million for the second quarter of 2019 compared with $55.4 million for the first quarter of 2019.
Inpatient treatment facility services revenue increased 28.5% to $57.7 million for the three months ended, June 30, 2019, compared with $44.9 million for the three months ended, March 31, 2019. Outpatient facility and sober living services revenue decreased 16.2% to $5.4 million for the three months ended, June 30, 2019, compared with $6.5 million for the three months ended, March 31, 2019. Client related diagnostic services revenue decreased 216.6% to $(2.5) million for the three months ended, June 30, 2019, compared with $2.1 million for the three months ended, March 31, 2019. Non-client related revenue increased 13.2% to $2.1 million for the three months ended, June 30, 2019, compared with $1.9 million for the three months ended, March 31, 2019. Net loss attributable to AAC Holdings, Inc. common stockholders was $(16.4) million, or $(0.66) per diluted common share for the three months ended, June 30, 2019, compared with net loss attributable to AAC Holdings, Inc. common stockholders of $(22.0) million, or $(0.90) per diluted common share for the three months ended March 31, 2019. Adjusted EBITDA increased to $2.9 million for the three months ended, June 30, 2019, compared with $(6.5) million for the three months ended, March 31, 2019. Adjusted EBITDA, is a non-GAAP financial measure. Tables reconciling these non-GAAP measures to the most directly comparable GAAP measures are included at the end of this release. Balance Sheet and Cash Flows As of June 30, 2019, AAC Holdings' balance sheet reflected cash and cash equivalents of $2.6 million, accounts receivable of $48.7 million, net property and equipment of $160.7 million and total debt of $341.9 million (current and long-term portions). Cash flows used in operations totaled $13.5 million for the second quarter of 2019 compared to $9.6 million for the first quarter of 2019. Days sales outstanding were 71 days for the second quarter of 2019 compared to 74 days for the first quarter of 2019. Credit Facilities The Company is continuing discussions with lenders under its senior credit facilities to address events of defaults that have occurred relating to the Company's compliance with certain covenants and obligations thereunder including minimum liquidity, leverage ratio and certain interest payment defaults. Management is pursuing one or more amendments to the senior credit facilities, forbearance agreements or both, which would address the Company's current liquidity and compliance covenants. Evaluation of Strategic Alternatives in AAC's Real Estate Portfolio The Company has commenced a process to generate additional value from its assets, including its real estate portfolio consisting of treatment centers located across the United States. Management's goal is to leverage the portfolio to create additional liquidity, lower its cost of capital and enhance shareholder value. Real estate strategic alternatives could include further sale leasebacks of individual facilities or larger portions of the Company's real estate portfolio.
The Company expects diluted weighted-average common shares outstanding of approximately 25.0 million for the year. The outlook above does not include the impact of any future acquisitions, transaction-related costs, litigation settlement or expenses related to legal defenses. With respect to the "2019 Outlook" above, reconciliation of adjusted EBITDA and adjusted earnings per diluted common share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including de novo start-up and other expense and acquisition-related expenses. We expect these adjustments may have a potentially significant impact on future GAAP financial results. Earnings Conference Call The Company has provided an earnings release supplement that provides certain operating and financial results and information regarding its 2019 annual outlook that is available online in the Investor Relations section of the Company's website at ir.americanaddictioncenters.org. The Company will host a conference call and live audio webcast on Friday, August 30, 2019, at 8:00 a.m. CT to further discuss these results. The number to call for this interactive teleconference is 1-877-224-7960. A replay of the conference call will be available through September 13, 2019, by dialing 877-344-7529 and entering the replay access code, 10134661. The live audio webcast of the Company's quarterly conference call will also be available online in the Investor Relations section of the Company's website at ir.americanaddictioncenters.org. About American Addiction Centers American Addiction Centers is a leading provider of inpatient and outpatient substance abuse treatment services. We treat clients who are struggling with drug addiction, alcohol addiction and co-occurring mental/behavioral health issues. We currently operate substance abuse treatment facilities located throughout the United States. These facilities are focused on delivering effective clinical care and treatment solutions. For more information, please find us at AmericanAddictionCenters.org or follow us on Twitter. Forward Looking Statements This release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are made only as of the date of this release. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "potential," "predicts," "projects," "should," "will," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements may include information concerning AAC Holdings, Inc.'s (collectively with its subsidiaries; "AAC Holdings" or the "Company") possible or assumed future results of operations, including descriptions of the Company's revenue, profitability, outlook and overall business strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements. These risks, uncertainties and other factors include, without limitation: (i) the Company's inability to effectively operate its facilities; (ii) the Company's reliance on its sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates by certain third-party payors for inpatient and outpatient services and point-of-care and definitive lab testing; (iv) the Company's failure to successfully achieve growth through acquisitions and de novo projects; (v) risks associated with estimates of the value of accounts receivable or deterioration in collectability of accounts receivable; (vi) a failure to achieve anticipated financial results from contemplated and prior acquisitions; (vii) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (viii) the Company's failure to achieve anticipated financial results from contemplated and prior acquisitions; (ix) a disruption in the Company's ability to perform diagnostic laboratory services; (x) maintaining compliance with applicable regulatory authorities, licensure and permits to operate the Company's facilities and laboratories; (xi) a disruption in the Company's business and reputational and economic risks associated with the civil securities claims brought by shareholders or claims by various parties; (xii) inability to meet the covenants in the Company's loan documents or lack of borrowing capacity, including the Company's inability to enter into forbearance agreements and amendments with its lenders with respect to certain events of default; (xiii) inability to successfully raise capital to meet the Company's liquidity needs; and (xiv) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission. As a result of these factors, we cannot assure you that the forward-looking statements in this release will prove to be accurate. Investors should not place undue reliance upon forward-looking statements. The Company is in the process of finalizing its Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, including the process of reviewing the financial statements contained therein. Results reported in this earnings release could change as a result of this process.
SOURCE AAC Holdings, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: NYSE:AAC | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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