Team Health Holdings, Inc. (TMH)
Q1 2010 Earnings Call
May 12, 2010 10:00 am ET
Tracy Young – Vice President Communications
Greg Roth – President, Chief Executive Officer
David Jones – Chief Financial Officer
Joanna for Kevin Fishbeck – BofA/Merrill Lynch
Brian for Adam Feinstein – Barclays Capital
Gary Taylor – Citigroup
Shelley Gnall – Goldman Sachs
Robert Mains – Morgan Keegan
Andreas Dirnagl – Stephens Inc.
Ralph Giacobbe – Credit Suisse
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Welcome to the Team Health fiscal first quarter 2010 earnings conference call. Today’s call is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Tracy Young, Vice President of Communications at Team Health.
Good morning everyone. Before we begin, let me remind everyone that in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements including remarks about future expectations, anticipation, beliefs, estimates, plans and prospects.
Such statements are subject to risks, uncertainties and other factors that may cause the actual performance of Team Health to be materially different from the performance indicated or implied by such statements. Such risks and other factors are set forth in the company’s filings with the Securities and Exchange Commission.
A reconciliation of adjusted EBITDA to net earnings calculated under GAAP can be found in our earnings release which is posted on our website at
and in our Form 10Q.
I will turn over the call to our President and Chief Executive Officer, Greg Roth.
Thank you, Tracy, and good morning everyone. I’d like to welcome you to Team Health’s first quarter 2010 earnings call. In addition to Tracy, I’m joined by Dr. Lynn Massingale, our Executive Chairman and David Jones, our Chief Financial Officer.
I will start with a discussion of the drivers of our first quarter results and our growth strategy. David will review our financial performance. I will then provide some concluding remarks before we open up the call for Q&A.
First, I’d like to thank our physicians, other clinicians and administrative employees for their hard work and dedication during the quarter. Job one at Team Health is caring for the patients of our client hospitals.
Financial highlights of our first quarter of 2010 include, net revenue less provision for uncollectibles grew 4.3% to $365 million. Net earnings were $16.3 million or $0.25 per share after adjustment for debt redemption related costs and a favorable prior year professional liability loss reserve adjustment.
Adjusted EBITDA excluding the prior year professional liability adjustment was $38.6 million and adjusted EBITDA margin was 10.6%. Our first quarter results reflected strong growth from our recent acquisition activities but were constrained by declines in same contract fee for service patient volume.
As we stated previously, the relative contribution of our three primary revenue sources, same contract, net new contracts and acquisitions, experienced some volatility on a quarter over quarter basis, and the most recent quarter was a good example of that reality.
Acquisitions were the largest contributor to revenue growth. The completion of our IPO has enabled us to be much a more active participant in the M&A marketplace. Four acquisitions that we closed in 2009, particularly in anesthetics made a solid contribution to revenue and earnings.
Some additional color on anesthetics; the integration is going well and is on track. Anesthetics, like all acquisitions was immediately accretive to earnings and is achieving its financial objectives. Anesthetics has provided a solid new platform for growth where we are leveraging our existing infrastructure to scale this business and be responsive to accelerating demand in the market.
We are expecting contributions from our two most recent 2010 acquisitions to positively drive results in the second quarter and the balance of the year. All of these have been well-managed operations and easily and rapidly integrated to our organization.
Same contract revenue growth was below our historical trends for the quarter. The first quarter was a challenging period for this business due to softness in patient volume which experienced overall decline. Historically, our first quarter has been a strong volume quarter. We previously discussed volumes returning to more normalized levels following the record numbers of 2009.
However, in Q1 2010, we encountered a benign flu season, low relative H1N1 volume as well as weather related issues, which impacted EV visits significantly across many parts of our nationwide hospital network.
Net new contract growth excluding the military operations made a positive contribution to overall revenue growth between quarters. As expected, overall net new contracts were impacted by a decline in our military staffing business which was in line with what we discussed on our fourth quarter conference call.
As we experienced softer patient volumes at the beginning of the quarter, we accelerated our performance in areas of our operating plan. Specifically, we focused on revenue cycle performance, special service expense, as well as general and administrative costs.
In addition, we continue to make significant investments in professional staff recruiting, client services, patient safety initiatives, revenue cycle processes, professional liability cost management and information technology resources to support our growth strategy.
We believe this focus and these investments will favorably impact our financial performance for the remainder of the year by improving our average collection per patient and maintaining our operating margin line with the potential for soft same contract volume growth.