IntegraMed America, Inc. Q1 2010 Earnings Call Transcript

IntegraMed America, Inc. Q1 2010 Earnings Call Transcript
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IntegraMed America, Inc. (INMD)

Q1 2010 Earnings Call Transcript

April 27, 2010 10:00 am ET

Executives

John Hlywak – EVP and CFO

Analysts

Mark Arnold

Brooks O’Neil

Presentation

Operator

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Good morning, my name is Alisha and I will be your conference operator today. At this time I would like to welcome everyone to the IntegraMed first quarter 2010 conference call. (Operator Instructions).

Thank you. Mr. Hlywak, you may begin your conference.

John Hlywak

Thank you.

Good morning. This is John Hlywak, Executive Vice President and CFO of IntegraMed. Thank you for participating in today's call. Due to an unexpected family emergency Jay Higham, IntegraMed’s President and CEO will not be able to participate on today’s call.

In Jay’s absence I will provide both the corporate and financial overviews of IntegraMed’s performance. After that we will open the call for questions. Jay will return to the office next week and will be able – be available to those of you who have any follow up questions.

Before we begin, I'd 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-K 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, April 27, 2010. IntegraMed undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With those announcements out of the way let me turn to the topic of this call.

Overall, IntegraMed achieved great topline growth across all of our businesses has leveraged through 9% over Q109 to $57 million. The net income increased 22% to $1.1 million compared to last year as we were better able to leverage the revenue growth to the bottom line. Despite an 18% increase in diluted shares as a result of $2.8 million share offering in mid-February, our Q1 2010 EPS rose a $0.01 to $0.11 over the prior year quarter.

Operating income or contributions as we refer to it rose by 8% to $5.3 million or 9.3% of revenues. On an EBITDA basis, and which we calculate EBITDA by subtracting SG&A costs from our operating income and then adding to depreciation and amortization with deferred tax provision and deferred compensation, that EBITDA increased $1.4 million on trailing 12-month basis to 17.4 million. EBITDA for the first quarter of 2010 was 4.2 million.

G&A expenses increased about 2% from Q1 of last year mainly due to judicious headcount additions. G&A as a percentage of operating income decreased to 60% from 64% in Q109. Net interest expense declined 7% in Q1 2010 due to lower interest rates, a slight reduction of our outstanding debt balance and increased cash balances. Days sales outstanding for the consolidated company includes a 36.5 days in Q1 of 2010 from 39.9 in a year ago. This reflects our continued effort in this area.

Coming to the balance sheet, IntegraMed transformed its balance sheet during the first quarter through the successful sale of 2.8 million of our common stock yielding net proceeds of almost $19 million. This will adjust in addition to the existing strength of our balance sheet puts us in a great position to pursue a range of fertility industry contract acquisitions and new marketing initiatives as well as the build out of new vein clinic centers. Our cash position increased by $18 million through 46.6 million compared to year end 2009. The increase comes obviously comes from the share offering as well as sustained improvements in cash flow from operations as well as cash outflows related to fixed asset acquisitions and debt repayment.

Now we are going to move to our three business segments, beginning with the fertility centers. Our fertility center segment continues to perform well generating 16% increase in contribution and a 5% increase in revenues. The performance drivers in this business were similar to those during the previous quarters including the benefit of our successful sales and marketing programs as well as the initial contributions from three fertility contracts that we acquired in the late Q4 2009.

With the regard to the key metrics for the segment both inquiries as well as new patient visits remain relatively flat in terms of another IVF cycles we experienced a 6% decline compared to last year. As highlighted in this morning’s press release, a loss of a payer contract in the Chicago market around this time last year makes year-over-year patient volume comparison difficult. That contract that we lost accounted for approximately 300 in-patients, and 300 IVF cycles in Q1 2009. Factoring in that headwind our performance shows the underlying growth and resilience of this segment.

The fertility center segments performance is also tampered by climate and weather in January and February throughout the middle May and to a lesser degree in Midwest and northeast regions. We continue our purpose of preserving as much as of our topline success as possible utilizing well developed operational metrics and controls that enable us to expand contribution margins by 16% from the year ago period. We believe we have the potential to obtain additional leverage as we grow our fertility center operations across US.

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