BioScrip Management Discusses Q2 2012 Results - Earnings Call Transcript

BioScrip (BIOS)

Q2 2012 Earnings Call

August 09, 2012 9:00 am ET

Executives

Lisa Wilson

Richard M. Smith - Chief Executive Officer, President, Chief Operating Officer and Director

Hai V. Tran - Chief Financial Officer, Senior Vice President and Treasurer

Analysts

Brooks G. O'Neil - Dougherty & Company LLC, Research Division

Michael John Petusky - Noble Financial Group, Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the BioScrip Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, August 9, 2012.

I would now like to turn the conference over to Lisa Wilson, Investor Relations with BioScrip. Please go ahead

Lisa Wilson

Good morning, and thank you for joining us today. By now you should have received a copy of our press release issued yesterday after the close of market. If you've not received it, you may access it through the Investor Relations section at our website. Rick Smith, President and Chief Executive Officer and Hai Tran, Chief Financial Officer, will host this morning's call.

The call may be accessed through our website at bioscrip.com. A replay will be available shortly after the call's completion. Interested parties can access the replay by dialing (800) 633-8284 in the U.S. and (402) 977-9140 internationally and entering access code 21600696. An audio webcast will also be available for 30 days following the call under the Investor Relations section of the BioScrip website at bioscrip.com.

Before we get started, I would like to remind everyone that any forward-looking statements made during the call are protected under the Safe Harbor of the Private Securities Litigation and Reform Act. Such forward-looking statements are based upon current expectations, and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of important factors and risks, which are identified in our press release and our annual and quarterly reports filed with the SEC. These forward-looking statements are based on information available to BioScrip today, and the company assumes no obligation to update statements as circumstance change.

During this presentation we will refer to non-GAAP financial measures such as EBITDA and adjusted EBITDA. A reconciliation of such measures to the most comparable GAAP financial measure is contained in our press release issued after the close of market yesterday, which can be found at our website at bioscrip.com.

And now I would like to turn the call over to Rick Smith. Rick?

Richard M. Smith

Thank you, Lisa. Good morning, everyone. Thank you for joining today's call. The second quarter marked a critical turning point at BioScrip. With the divestiture of the Pharmacy Services asset completed, we turned our full attention to growing our Infusion platform while stabilizing our Home Health and PBM businesses.

We delivered strong revenue growth in our Infusion business, created significant momentum in our targeted therapies and completed the acquisition of InfuScience, further re-enforcing our foundation in this key segment.

For the second quarter total revenue increased 18.5% year-over-year to $155.9 million. The main driver was Infusion revenue, which was, again, exceptionally strong mainly due to volume gains at $111 million, up 23.5%.

Home Health revenue declined, as expected, and PBM revenue increased, benefiting from the addition of a new managed care contract added in late 2011. Gross profit for the quarter was $53 million or 34% of revenue compared to $51.8 million or 39.4% in the prior year.

Hai will discuss the financial details shortly.

I'm very pleased with where the business is trending, our overall performance in the quarter and our continued success in executing upon the goals we set out to achieve in our strategic plan. The strength of our managed care relationships continue to build. Our access to patient lives is growing, and we have action plans in place to optimize and accelerate growth in building the Infusion platform. Our overarching goal remains the same: to serve our customers and patients; build upon core strengths in targeted therapeutic categories; and drive improvements in margins, profitability and cash flow generation. We are building momentum and now targeting an annualized Q4 revenue run rate of $620 million to $650 million and tracking toward targeted annualized adjusted EBITDA of $62 million to $65 million. Hai will expand more in his comments, but note that these targets do not include our recent acquisition of InfuScience.

As we discussed in detail on our Q1 call, we expected to have disruption in certain areas of the financial results from continuing operations due to the Pharmacy Services asset sale and the elimination of unnecessary costs related to facility consolidation and overhead costs through the third quarter.

During the quarter, our team was hard at work, striving to optimize and accelerate infusion growth. We have begun to eliminate duplicate corporate and field positions, as we previously communicated with our plan post divestiture. Additionally, site optimization has begun, as we are in the process of merging duplicate infusion facilities. We expect to complete this action by the end of Q3 and project we will incur some restructuring charges associated with these closures.

All of these efforts are in the rebuilding process, eliminating unnecessary costs and maximizing profitability. In addition to organic growth, we've been working on market expansion plans through opportunistic acquisitions. As noted in our press release, we acquired InfuScience, a provider of alternate site infusion, pharmacy services with 5 locations. This acquisition and their approach are consistent with our stated strategy: to expand our infusion footprint nationally while providing clinical excellence through our high-touch service model. Our acquisition pipeline remains robust, and we have 6 de novo pharmacies in initial stages. We are focused on our expansion plans, and we'll keep you apprised of our progress.

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