TeamHealth Holdings, Inc. (TMH)
Q2 2010 Earnings Call Transcript
August 11, 2010 10:00 am ET
Tracy Young – VP, Communications
Greg Roth – President and CEO
David Jones – CFO
Lynn Massingale – Executive Chairman
Joanna Gajuk – Bank of America
Adam Feinstein – Barclays Capital
Robert Mains – Morgan Keegan
Kevin Ellich – RBC Capital Markets
Andreas Dirnagl – Stephens Inc.
Dawn Brock – Kaufman Bros
Kevin Campbell – Avondale Partners
Good morning and welcome to TeamHealth’s fiscal second quarter 2010 earnings conference call. Today’s call is being recorded. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions)
At this time, I would like to turn the conference over to Tracy Young, Vice President of Communications at TeamHealth. Please go ahead.
Thank you and 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 TeamHealth 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 2009 Form 10-K and the second quarter 2010 Form 10-Q as filed 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 Web site, at
, and in our Form 10-Q.
I will now 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 TeamHealth’s second 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’ll start with a discussion of the drivers of our second quarter results. David will review our financial performance. I will then provide comments on our outlook for the remainder of 2010 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. Our number one priority is caring for the patients of our client hospitals.
Highlights of our second quarter results include – net revenue less provision for uncollectibles grew 3.7%. Net earnings increased 18% to $18.6 million or $0.29 per share on a fully diluted basis.
Excluding the impact of a non-cash impairment charge, net earnings were $20.2 million or $0.31 per share on a fully diluted basis. Adjusted EBITDA increased 15% to $46.9 million and adjusted EBITDA margin increased 120 basis points to 12.5%.
We are pleased with our second quarter results which were highlighted by our strong quality of earnings. It generated top line growth led by our M&A platform and demonstrated the financial flexibility of our business model and effectively managing our cost structure to drive growth in earnings, EBITDA and EBITDA margin.
As we anticipated, acquisitions were the largest contributor to revenue growth. The four acquisitions that closed in 2009 and the two that closed in the first quarter of this year have been fully integrated and continue to deliver solid contributions to revenues, earnings and cash flow.
We believe our acquisition strategy will continue to play an enhanced role in growth for the remainder of 2010 and we continue to be an active participant in the M&A marketplace. To this point, yesterday we announced the acquisition of Morningstar Emergency Physicians, an Oklahoma City-based ED group, with approximately 500,000 annual patient visits.
Morningstar is a high quality physician group with an outstanding reputation and we are excited about the opportunity to partner with them in this market. This acquisition significantly expands our operational footprint in Oklahoma and Kansas and provides an additional regional platform for future growth.
Our acquisition strategy continues to focus on finding well managed operation that can be easily and rapidly integrated to our organization and are immediately accretive to earnings.
We continue to see a great deal of interest that has generated strong M&A pipeline and the current environment continues to yield some attractive growth opportunities from both acquisitions and new contract sales.
We are also pleased with our growth in same contract revenue. Due to the strong patient volumes driven by the flue and H1N1 2009, we are facing challenging year-over-year same contracts volume comparison. Despite the tough comparison, we delivered overall same contract revenue growth that was driven by both, fee-for-service volume and rate increases.
While growth in estimated collections per visit was a larger contributor to our same contract revenue increase, we did realize a modest increase in same contracts volume between quarters.
Also, as anticipated, overall net new contracts were impacted by decline in military staffing business. While this business did experience a quarterly percentage decline, that was higher than our full year estimate for the business, we continue to project approximate 3.5% decline revenue from this business which is consistent with our original 2010 expectations.
This view in support by the recent positive development related to a significant contract scheduled to be online at the beginning of the year that was delayed until July. The delay was due to our working through the incumbent protest process which happens from time-to-time in military staffing business.