America Service Group Inc. (ASGR) Q1 2010 Earnings Conference Call April 28, 2010 11:00 AM ET Executives Rich Hallworth – President and CEO Mike Taylor – EVP and CFO Jon Walker – SVP, Business Development Analysts Wes Huffman – Avondale Partners Mike Lamb – Wealth Monitors Kevin Campbell – Avondale Partners Presentation Operator
Previous Statements by ASGR
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Our management team has been and will continue to devote substantial efforts this year preparing and submitting proposals responsive to the robust pipeline of new business opportunities. We have new bids pending or in process in excess of $370 million of annual revenue potential, the largest of which are the Maryland DOC and the Greenfield RFP to serve the Arizona DOC.For current clients last week we submitted our proposal to continue to serve Rikers Island in New York City upon the December 31, 2010 expiration of our current contract. This is our only material contract with a contractual expiration in the next 12 months. In addition to this act of proposal pipeline, we are still expecting several more opportunities in the near future. Over the next 12 months we anticipate additional request for proposals with over $300 million in additional annual revenue potential including the Georgia and Mississippi DOCs among others. There is, of course, no guarantee that all of these RFPs will be issued or awarded, nor can we assure that we will bid on each of them. In yesterday's press release we also provided increased earnings guidance for 2010. We are now guiding to adjusted EBITDA of $24.5 million up from our earlier target of $23 million. Our new adjusted EBITDA target represents a 26% increase over our actual 2009 performance. Consistent with past practice this guidance does not include any potential contracts with new customers. We understand that some of you might expect higher earnings potential than our upgraded guidance based upon our recent performance. We are hesitant to annualize our good first quarter. There are unknown but likely costs, which might arise in the last nine months of the year. We believe that our guidance sets realistic expectations for the full 2010 fiscal year. As announced in yesterday’s press release, our Board of Directors has again declared a $0.06 per share dividend for the quarter. On behalf of the management team, we are pleased with the progress we are making to continuously improve this company making us the right choice for state and local governments seeking a partner in the delivery of cost effective quality healthcare services to their incarcerated population.
I now like to ask Mike Taylor, our Executive Vice President and Chief Financial Officer to speak in more detail about financial matters. Following Mike's remarks, Jon Walker, our Senior Vice President in Business Development who is joining us today by phone from the West Coast will also be available for questions. Mike?Mike Taylor Thank you, Rich, good morning everyone. Almost every measure the first quarter produced a very successful start financially to 2010. The contract portfolio continues to produce results above expectations with gross margins on continuing contracts at 9.5% in the quarter. Adjusted EBITDA of $6.8 million in the first quarter was well above our expectations as such we've increased our full year of 2010 expectations for this measure to $24.5 million from $23 million. Net income of $3.2 million in the first quarter of 2010 nearly matched the $3.3 million we produced for all of 2009. We've now increased our guidance for full year net income for 2010 to $10.8 million. Cash flows and accounts receivable management remained strong in the quarter resulting in the company having $41.5 million of cash and no debt at the end of the first quarter. Let’s review some of the financial details related to the first quarter results. Healthcare revenues were $162.5 million in the first quarter, an increase of 30.6% over the prior year quarter. As a reminder, healthcare revenues only included those revenues from healthcare service contracts that continue to operate subsequent to the end of the first quarter of 2010 due to the accounting requirements related to discontinued operations. U.S. GAAP requires us to present expired healthcare service contracts as discontinued operation and collapsed the revenues and direct expenses of those contracts and there's a line item on our income statement that is titled income or loss from discontinued operations net of taxes. Read the rest of this transcript for free on seekingalpha.com