American Dental Partners, Inc. (
Q3 2010 Earnings Call Transcript
October 26, 2010 9:00 am ET
Greg Serrao – Chairman, President and CEO
Breht Feigh – EVP, CFO and Treasurer
Jeff Johnson – Robert W. Baird
Mitra Ramgopal – Sidoti
Brooks O’Neil – Dougherty & Company
Robert Grote – Bares Capital Management
Travis Devitt – Teton Capital
Previous Statements by ADPI
» American Dental Partners, Inc. Q2 2010 Earnings Call Transcript
» American Dental Partners, Inc. Q1 2010 Earnings Call Transcript
» American Dental Partners, Inc. Q3 2008 Earnings Call Transcript
» American Dental Partners, Inc. Q2 2008 Earnings Call Transcript
Welcome to the American Dental Report third quarter 2010 financial results conference call. My name is Sandra and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. I will now turn the call over to Mr. Greg Serrao. Mr. Serrao, you may begin.
Thank you. Good morning and thanks for joining us. I’m joined by Breht Feigh, the company’s Chief Financial Officer and Mark Vargo, the company’s Chief Accounting Officer.
Before we begin this morning, during today’s call for the first time, we will be using PowerPoint slides for our discussion. The slides can be obtained now from the Investors section of our website at www.amdpi.com. Please note that the slides are investor controlled. A replay of the slide webcast will be available on the website approximately two hours after the call through 6 p.m. Eastern Standard Daylight Time, Tuesday, November 2, 2010.
I’d like to begin this conference call by reading a brief but important disclaimer. During the course of this conference call, we may make forward-looking statements regarding the future financial performance or business trends of American Dental Partners or other future events affecting the company within the meaning of the Private Securities Litigation Reform Act of 1995.
The words believe, expect, anticipate, project, intend and similar expressions among others, identify forward-looking statements. We caution you that such statements are only predictions and that actual results might differ materially from those projected in the forward-looking statements.
Certain factors that might cause such a difference include among others, the company’s risks associated with overall or regional economic conditions, dependence upon affiliated practices, contracts the affiliated practices have with third-party payors, dependence upon service agreements, the impact of any termination or potential termination of such agreements, government regulation of the dental industry and the company’s acquisition and affiliation strategy.
For a detailed discussion of the factors that could cause such a difference and other risk factors and uncertainties that could materially affect the company’s business and financial results, please refer to our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.
In our call today, we will discuss certain financial measures that are not in accordance with generally accepted accounting principles. Please see our press release, which is available on our website, www.amdpi.com for a presentation of the most comparable GAAP measures and a reconciliation of these non-GAAP measures.
Right now, I will discuss financial and operational highlights and then take questions from participants after our prepared remarks. Before turning the call over to Breht for the financial review, I’d like to mention a few highlights contained on slide three this quarter.
Net revenue increased 5% for the quarter, earnings from operations increased to 8% and net earnings increased 35%. The economy continues to challenge our affiliated dental groups as I will discuss more later. We completed two end-market acquisitions during the quarter, one for Forward Dental and the other for Western New York Dental Group.
We continue to expand Texas’ Tooth Doctor for Kids, completing one additional to noble during the quarter. And finally, we initiated share repurchases during the quarter which were authorized by our Board of Directors in June.
I’ll now turn the call over to Breht to discuss our financial results for the quarter.
Thank you, Greg. This morning, we will be reviewing our third quarter financial results. I’d like to begin by referring to the slide entitled patient revenue of affiliated practices. Patient revenue increased 7.8% to $111.3 million in the quarter driven largely by the Christie Dental and Cincinnati Dental platform affiliations.
Same market patient revenue by contrast declined 1.6% over prior year. In calculating same market patient revenue growth, we exclude the contribution of new platform affiliations completed in either period of comparison. As a result, we are comparing like-for-like platform affiliates.
Excluding end-market practice acquisitions, same market growth declined 2.1% and excluding facilities that required capital investment, including both the de novo and expanded facilities, same practice growth declined 3.2%. If you look to the right, there is a graph for the trialing five quarters of performance for similar results through the current quarter.
The components of same market growth for the quarter were 2.1% fewer provider hours, a 2.5% improvement in productivity per hour offset by a 2% decline in effectivity. The directional trend of these components has been the same for the past five quarters. And this was another quarter in which productivity per hour increased less than the blended full increase of our affiliated dental practices, thus indicating a drop in real productivity per hour.
Revenue with affiliate practices during the quarter was 14% fee for service and indemnity plans, 75% PPO and dental referral plans, 6% managed care plans including patient co-pays and 5% Medicaid and CHIPS programs.
I would now like to discuss a year-over-year comparison of our third quarter financial results on slide five. I will focus our discussion on the non-GAAP columns. Net revenue increased 5% to $71.1 million. The increase is primarily the result of the revenue contribution from Christie Dental and Cincinnati Dental.