IntegraMed America CEO Discusses Q3 2010 Results - Earnings Call Transcript

IntegraMed America, Inc, (

INMD

)

Q3 2010 Earnings Call

November 3, 2010 10:00 am ET

Executives

John Hlywak - EVP and CFO

Jay Higham - President and CEO

Analysts

Mark Arnold - Piper Jaffray

Brooks O’Neil - Dougherty & Company

Presentation

Operator

At this time, I would like to welcome everyone to IntegraMed America Third Quarter 2010 Earnings Conference Call. (Operator Instructions)

Thank you. I would now like to turn the conference over to your host, Mr. John Hlywak, CFO. Sir, you may begin your conference.

John Hlywak

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Thank you. Good morning everyone and thank you for joining in IntegraMed’s third quarter earnings call. This is John Hlywak, Executive Vice President and CFO of IntegraMed. I am joined today by Jay Higham, President and Chief Executive Officer of the company.

Before we begin, I would like to caution that comments made during this conference call may contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of IntegraMed.

I encourage you to review the company's filings with the Securities and Exchange Commission, including without limitation, the company's Form 10-Ks and Form 10-Qs, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

The content of this conference call contains time-sensitive information that is accurate only as of today, November 3, 2010. IntegraMed undertakes no obligation to revise or update any statements to reflect events or circumstances recurring after the date of this call.

I will now turn the call over to Jay, President and Chief Executive Officer. Jay?

Jay Higham

Thank you, John, and good morning everyone. We appreciate your joining us today. Our third quarter results extended a trend of healthy top-line growth across both our fertility and vein clinic segments. But as anticipated our bottom line performance, reflected the impact of our investments in new vein clinics startups in some as well as some one-time operational issues.

With regards to the fertility centers divisions, revenues increased by 12% and contribution increased by 15%. Though we experienced a modest decline in new patient visits, we did achieve an uptick in in-vitro fertilization or IVF cycles and intrauterine insemination or IUI cycles, indicating that the core of the business continues to grow in spite of lingering, economic softness.

Overall, we’re seeing ongoing growth in some markets such as California and the mid-Atlantic region as well as encouraging growth prospects in strategic markets such as Arizona and Washington State.

However, there are certain markets where we are seeing a more cautious consumer such as Florida and South Carolina. On the whole, our geographic diversification has helped to shelter our performance from particular market challenges.

As we just quickly mentioned that we recently hired a physician who will start in January as we’ve begin to replace the four physicians who departed our Northeast partner center and they were making good progress in finding replacements for the remaining positions.

In terms of expanding this business, we continue to pursue opportunities to purchase additional fertility center contracts and have approximately $30 million in cash plus $35 million in available borrowings under our credit facility to put to such use.

Though our lead generation for deals has been slowed and frankly disappointing, the reception we have from several parties during our recent attendance at the annual meeting of reproductive physicians last months along with other developments enhanced our sense of optimism for the potential for transactions in coming quarters.

We remained firmly committed to the sector and believe we offer a unique opportunity for fertility center owners to benefit our scale, patient acquisition engine and efficient business model that drives improved operating performance and earning opportunity.

The challenging market environment where many group are struggling to find new avenues of growth provide a good backdrop for physicians considering what we have to offer.

We have also begun to review the potential to expand our fertility business into international markets. Such markets seem to offer faster growth rates and the burgeoning of the middle-class demographic with needs and means to pursue fertility treatment, While our overwhelming focus is on continued growth in the US, we’ve seen initial merit that we saw we could share the five process with investors at this time.

Beyond such opportunities we continue to seek in-market mergers where we can cost effectively Boston practice to another leading physician group or in a market to an existing center and we also work to support the expansion of existing centers by helping them recruit new physicians or to fund their facility expansion.

With regard to our Attain IVF centers we continue to see the positive impact of both our marketing and branding efforts from earlier in the year, as well as the introduction of new services within the Attain IVF financing program. The benefit of these efforts and our expanding Attain IVF program footprint have generated very positive trends in both applications and enrollments.

So far in 2010 we have added three new affiliates, netted loss of one that had it not been successful incorporating this product in to their business at the level we expected.

Turning to our vein clinic segment, we continue to be very pleased with the progress of this business in terms of revenue growth contribution before a startup cost and infrastructure investments and as well as its overall long-term growth potential.

Vein clinics revenue in first leg start metrics achieved modest improvements year-over-year. However, inquires and new consultations declined 2% and 3% respectively. These expected declines are principally due to our decision to no longer offer free consultations, a practice we had utilized in past years but which no longer seemed productive for the business.

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