Fourth Quarter 2013 Financial Results Conference Call ... · Segment Results – Surgical & Medical...
Transcript of Fourth Quarter 2013 Financial Results Conference Call ... · Segment Results – Surgical & Medical...
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Fourth Quarter 2013 Financial Results Conference Call & Webcast
April 1, 2014
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Forward Looking Information & Disclosure
Certain of the statements contained in this presentation are "forward-looking information“ within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue”, or similar expressions suggesting future outcomes or events. You are cautioned not to place undue reliance on such forward-looking information. Forward-looking information is based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking information contained in this presentation. No assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur or, if any of them do so, what benefits Centric Health will derive therefrom and neither Centric Health nor any other person assumes responsibility for the accuracy and completeness of any forward-looking information. Other than as specifically required by applicable laws, Centric Health assumes no obligation and expressly disclaims any obligation to update or alter the forward-looking information whether as a result of new information, future events or otherwise.
www.centrichealth.ca TSX:CHH
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David Cutler President & CEO
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Agenda
4
1. Operational Review
2. Financial Review
3. Outlook
4. Questions
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Steady Progress on Strategic Priorities
5
Strengthen Senior Management Team
1 2 3 Develop New
Revenue Streams
Improve Balance Sheet
• Daniel Gagnon, CFO • Chris Dennis, COO • Jim Black, CIO
4
• Multiple Surgical Centre initiatives • Acquisition of 75% of SWLC • Growth in Bundled Services
Drive Integration • Improved communications • New systems • Centralization of services
• $200M “high yield” offering • Amended, restated $50M credit facility • Greater financial flexibility
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Recent Challenges
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Changes to seniors’ physiotherapy funding in Ontario
Perceived conflict of interest
• Took decisive action • Agreement to sell Home Care • Pursuing sale of Seniors Wellness • Lower ADP related referrals in Q4
in Retail/HME
$7.8M non-recurring, non-cash inventory adjustment
Senior Wellness
Seniors Wellness
Senior Wellness
Seniors Wellness/Retail &
HME
Senior Wellness
Retail & HME
• Estimated annual impact on Adjusted EBITDA of $6.5M
• Moved immediately to reduce cost structure, add new revenue streams
• Accelerated major systems implementation, including perpetual inventory system
• Expected to be in place for ~50% of inventory value this year
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Revenue $109.8M Adjusted EBITDA $ 6.2M $ 8.1M EBITDA margin 5.6% 7.4% Cash Flow from Ops $ 8.6M
Q4-13 Financial Results
7
• 7th consecutive quarter of positive cash flow from ops • Total cash flow from ops for 2013 of $20.2M
Excluding Non-Cash, Non-Recurring Inventory Adjustment
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Daniel Gagnon Chief Financial Officer
Financial Review
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Q4/13 Revenue
9
110.9 109.8
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Q4 2012 Q4 2013
(in Millions, C$) • Same-store revenue growth in the Physiotherapy Clinic business and Pharmacy and Assessments segments of 6%
• Offset by decreases in Seniors Wellness due to Ontario seniors’ physio funding changes and the impact of fewer ADP referrals in Retail & HME
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Q4/13 Adjusted EBITDA
10
(in Millions, C$)
9.6
6.2
1.9*
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q4 2012 Q4 2013
Margin 8.6% 5.6% * Non-cash, non-recurring inventory adjustment
• $1.9M non-cash, non-recurring inventory adjustment (Retail & HME)
• Adjusted EBITDA of $8.1m and adjusted EBITDA margin of 7.4% excluding inventory adjustment
8.1
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2013 Full Year Results
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436.7 455.9
0.0
100.0
200.0
300.0
400.0
500.0
2012 2013
(in Millions, C$) (in Millions, C$)
42.8
33.6
7.8*
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2012 2013
Margin 9.8% 7.4%
Revenue Adjusted EBITDA
* Non-cash, non-recurring inventory adjustment
41.4
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Segment Results - Physiotherapy
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
Segment Results - Pharmacy
13
1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
Segment Results – Retail & HME
14
1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
Segment Results – Assessments
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1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
Segment Results – Surgical & Medical Centres
16
1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Q4 2013 Q4 2012
Division Revenue
$M
Adjusted EBITDA
$M
Margin
%
Revenue
$M
Adjusted EBITDA
$M
Margin
%
Physiotherapy 37.6 3.2 8.5 43.8 6.0 13.6
Pharmacy 28.1 3.6 12.9 23.7 2.3 9.9
Retail & Home Medical Equipment 26.7 (1.0) (3.9) 26.8 1.3 4.9
Assessments 9.4 2.3 24.2 8.8 1.7 19.8
Surgical & Medical Centres 7.9 0.5 6.2 7.8 0.6 7.4
Corporate1 - (2.4) - - (2.4) -
TOTAL 109.8 6.2 5.6% 110.9 9.6 8.6%
Segment Results – Corporate
17
1 – Certain corporate costs allocated to operating segments based on extent of corporate management’s involvement during the reporting period
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Favourable debt maturity profile No required principal repayments until mid-2015
Debt Profile (December 31, 2013)
18
23.0
10.9
15.0 27.5
200.0
5.0
0
40
80
120
160
200
240
2013 2014 2015 2016 2017 2018
Revolver ($50M Capacity) 6.0% Conv. Note* 5.5% Conv. Note* 6.75% Conv. Note* Second Lien Senior Note Related Party Loan
* Convertible to equity at the Company’s discretion
(in Millions, C$)
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Cash Flow from Operations
19
(in Millions, C$)
15.3
20.2
0.0
5.0
10.0
15.0
20.0
25.0
2012 2013
+32%
• Q4/13 cash flow from ops of $8.6M
• 2013 cash flow from ops includes $5.4M related to transaction and restructuring costs
• 2013 free cash flow improved marginally from 2012
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Financial Outlook
20
• 2014 Budget: • Impact of Ontario seniors’ physio funding changes and ADP
conflict on Seniors Wellness and Retail/HME • Offset by contribution of planned growth and operational
improvement activities • Potential additional upside
• Based on 2014 budget, cash flow management initiatives and alternative financing arrangements currently under consideration, expect to be in compliance with new financial covenants for Credit Facility for each quarter
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David Cutler President & CEO
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Focus on Core Strengths & Best Opportunities
22
• Fluid regulatory environment • Focus on best opportunities • Limit distractions and risk • Continue to optimize the
platform for: • Higher margins • Limited regulatory risk • Long-term potential
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Physiotherapy Clinic Network
23
105 Owned Clinics
• Solid year-over-year growth • 2013 Revenue up 28% • 2013 Adjusted EBITDA up 48%
• Low risk due to legislative change • ~90% of 2013 revenue from private payers
• One of the largest networks in a fragmented market
• Build and grow business with corporate insurers and employers
• Longer-term synergies with Surgical segment >1.1M
Patient Visits Annually
7 Provinces
#2 nationally based on number of clinics
36 Additional Clinics
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Pharmacy
24
~200 LTC Facilities With
• Solid year-over-year revenue growth • Adjusted EBITDA back to historical
levels • Supported by favourable demographic
trends • Opportunity to expand geographically • Leverage expertise and infrastructure
for the corporate health market
>16,000 Residents
18 Pharmacies
Servicing
36 Methadone
Treatment Centres
#3 in Ontario based on beds serviced
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Surgical and Medical Centres
25
8 Centres
24 Operating Rooms
• Multiple initiatives to drive utilization across the network
• Excellent opportunity as: • More procedures are de-listed by
government • Governments increasingly seeking to
partner with independent sector to reduce costs
• Private pay component increasing faster than government pay component
65 Beds
>230 Surgeons
#1 nationally based on operating rooms
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Assessments
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>30 Preferred Provider
Agreements
3,750 Assessors Including
600 Physicians
• A strong contributor to the business • Year-over-year growth in Revenue and
Adjusted EBITDA • National network is a competitive
advantage • Leading position is a platform for
growth
one of the largest national networks
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Retail and Home Medical Equipment
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24 Motion Specialties Stores
6 Corporate-Owned MEDIchair Stores
• Strong revenue growth • 2013 revenue up 16% year-over-year
despite Q4 impact of conflict of interest
• New leadership in place • Chris Dennis appointed President • Implemented multiple cost savings
initiatives, new organizational structure • Supply chain consultant • New segment COO to support franchisees
• Expect return to mid-single digit Adjusted EBITDA margins in 2014 with additional mid- to long-term upside
54 MEDIchair Franchise Stores
7 Provinces
#1 nationally based on locations
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2014 Priorities
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• Expand Bundled Services offering
• Launch of Corporate Health Plan initiative
• Move forward Surgical Centre initiatives
• Continued pursuit of margin expansion
• Evaluate strategic opportunities
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Questions
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Fourth Quarter 2013 Financial Results Conference Call & Webcast
April 1, 2014