IntegraMed America, Inc, (INMD)

Q2 2010 Earnings Call

July 27, 2010; 10:00 am ET

Executives

John Hlywak - Executive Vice President & Chief Financial Officer

Jay Higham - President & Chief Executive Officer

Analyst

Mark Arnold - Piper Jaffray

Brooks O’Neil - Dougherty & Company

Bob Rebitz - BlueLine Partners

Tony Kamin - Eastwood Partners

Dennis Van Zelfden - Brazos Research

Presentation

Operator

Good morning, my name is Mishea [ph] and I will be your conference Operator today. At this time, I would like to welcome everyone to the IntegraMed second quarter 2010 earnings conference call. (Operator Instructions)

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

John Hlywak

Thank you. Good morning and thank you for participating in todays call. This is John Hlywak, Executive Vice President and CFO of IntegraMed. Joining me today is Jay Higham, President and Chief Executive Officer of the company.

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-Q, 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, July 27, 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. Jay.

Jay Higham

Thank you, John, and good morning everyone. Thank you for joining us today. In Q2, IntegraMed achieved top-line growth of 10% across our business, and we were able to drive more of that growth to the bottom-line with operating income or contribution as we refer to it increasing 15%.

As a reminder, this is the first quarter in which we reflect the combination of our former Fertility Centers and Consumer Services Divisions under a newly created division Attain Fertility Centers. This new division is being led by Andrew Mintz, who has a strong track record of successfully managing large physician-based medical groups. Going forward, we will use the term Partner Centers to refer to fertility clinics that benefit from all IntegraMed assets and resources and are managed by the company.

We will use the term affiliate centers to refer to fertility clinics that only offer our Attain idea of program. The combination of the divisions acknowledges the fact that a good portion of our Attain idea of program business is being written at IntegraMed Partner Centers.

We combine the two businesses because separate reporting structures were no longer necessary and in some respects hindered our agility and decision making. By combining the fertility business under the Attain fertility brand, we believe we will be able to generate added synergies, growth and profitability including the opportunity to better leverage our brand with consumers. We also hope this combination will make it easier for investors to focus on our two core areas of specialty fertility and vein care.

For the 2010 second quarter, our new Attain Fertility Centers Division generated an 8% increase from revenues and a 4% increase in contribution. That we saw a slowdown in revenue growth in our Fertility Centers relative to recent quarters, our Attain idea of program had a very strong performance at both partner and affiliate centers more than offsetting some of the pockets of softness in our partner business. We attribute this softness through our partner centers to the lingering effects of the economic slowdown. After perhaps a modest rebound in consumer optimism and spending earlier in the year, consumers will appear to be a little more reserved in their spending in our fertility segment.

The number of high cost idea of treatments remained flat with gross being seen in lower cost intrauterine insemination procedures or IUIs, as well as other fertility treatments and diagnostics. This combined effect driven overall slight increase in partner revenue.

Affiliates and partners offering our Attain idea of program benefited from our marketing initiatives achieving strong growth in patient applications and program enrollments. The marketing initiatives include radio advertising, direct mail, physician referral, education initiatives, Internet advertising, as well as the launch of our new attainfertility.com web portal. These efforts sharply increased the volume of applications up 54% as well as enrollment up 81%.

Revenue from the Attain idea program also benefited from a net increase of new affiliates to 27 reflecting the addition of six new affiliates over the past year, along with the termination of two affiliates that had no meaningful impact on the program.

Just as in Q1 2010, Q2 2010 operating performance in our Attain IVF program was dampened when compared to last year as Q2 ‘09 pregnancy rates were at unsustainably high levels versus more normal levels this year.

Pregnancy is a key milestone in our revenue recognition methodology for the Attain IVF program, so any fluctuation will have a meaningful short-term impact on revenue and profitability. In addition to pregnancy rates, increased investments in G&A to support long-term growth resulted in operating income growth from our Attain IVF program trailing revenue growth.

Despite current demand fluctuations, our 25 years of experience in the field gives us confidence in the long-term demand for fertility treatment and we are developing services to meet current budgets. As consumer economic challenges begin to dissipate, we believe the patient demand will firm up for all forms of fertility treatment.

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