Investor Relations

Press Release

AAC Holdings, Inc. Reports First Quarter 2018 Results

Early stages of AdCare integration proving successful

Quarter in-line with Company expectations ahead of back half 2018 growth targets

Company Release - 5/2/2018 4:07 PM ET

BRENTWOOD, Tenn., May 2, 2018 /PRNewswire/ -- AAC Holdings, Inc. (NYSE: AAC) today announced financial results for the first quarter ended March 31, 2018 and reiterates its previously issued full year 2018 guidance.

First Quarter 2018 Operational and Financial Highlights:
(All comparisons are to the comparable prior-year period, unless otherwise noted)

  • Total revenue increased 18% to $78.5 million on a comparable accounting basis (increased 7% as reported)
  • Average daily inpatient revenue (ADR) increased 46% to $933
  • Total average daily census (ADC) increased to 1,027 compared with 956
  • Outpatient visits increased 83% to 30,313
  • Net loss attributable to AAC Holdings, Inc. common stockholders was $0.2 million, or $(0.01) per diluted common share
  • Adjusted EBITDA increased 20% to $15.1 million (see non-GAAP reconciliation herein)
  • Adjusted earnings per diluted common share was $0.13 (see non-GAAP reconciliation herein)

"We are off to a solid start in 2018," said Michael Cartwright, Chairman and Chief Executive Officer of AAC Holdings, Inc. "A highlight for us this quarter was the closing of our acquisition of AdCare on March 1, and the integration since then has been going well. We also continue to be disciplined in improving our operational efficiencies, and I'm happy to see DSOs continuing to trend down to less than 100 days."

Adoption of New Revenue Recognition Standard

In May 2014, the FASB issued Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" (ASC Topic 606), a replacement of Revenue Recognition ASC Topic 605. The Company adopted ASC Topic 606 on January 1, 2018 using the modified retrospective approach. Under ASC Topic 606, the provision for doubtful accounts, which historically was reported as an operating expense, is now reported as a direct reduction to revenue effective January 1, 2018. This change in presentation reduced revenues and operating expenses by the same amount and did not have an effect on net income or earnings per share. As the Company adopted ASC Topic 606 using the modified retrospective approach, prior year periods were not recast and as such, revenues as reported are not comparable to the current year presentation. For purposes of this release, we have applied our adoption of ASC Topic 606 to the prior year period. We believe this allows for an accurate comparison of prior period revenue. Where we have used language such as "less the provision for doubtful accounts," this indicates a comparison of periods that reflects our adoption of ASC Topic 606.

AdCare Acquisition

On March 1, 2018, AAC acquired AdCare, Inc. and its subsidiaries ("AdCare"). AdCare offers treatment for drug and alcohol addiction and includes, among other things, a 114-bed hospital and 5 outpatient centers in Massachusetts, as well as a 59-bed residential inpatient treatment center and 2 outpatient centers in Rhode Island. AdCare was purchased for total consideration of $85.0 million, subject to adjustments.

First Quarter 2018 Financial Results

AAC breaks down its revenues between client related revenue and non-client related revenue. Client related revenue includes: (1) inpatient treatment facility services and related professional services; (2) outpatient facility services, related professional services and sober living services; and (3) client related diagnostic services, which includes point of care drug testing and client related diagnostic laboratory services. Non-client related revenue includes marketing and diagnostic services provided to third parties as well as addiction services provided to individuals in the criminal justice system.

Total revenue on a comparable accounting basis (i.e., less the provision for doubtful accounts) increased 18% to $78.5 million compared with $66.5 million in the same period in the prior year. Total revenue as reported increased 7%.  

Inpatient treatment facility revenue, less the provision for doubtful accounts, increased 40% to $64.9 million compared with $46.3 million in the same period in the prior year. Average daily inpatient revenue increased 46% to $933 compared with $640 in the same period in the prior year.

Outpatient and sober living facility revenue, less the provision for doubtful accounts, increased 60% to $8.4 million compared with $5.3 million in the same period in the prior year. Average revenue per outpatient visit (ARV) decreased 13% to $278 compared with $318 in the same period in the prior year.

Client related diagnostic services revenue, less the provision for doubtful accounts, decreased 80% to $2.6 million compared with $13.0 million in the same period in the prior year. The decrease in client related diagnostic services is a result of previously anticipated lower reimbursements combined with a shift in the mix of client related diagnostic services from higher reimbursed tests to lower reimbursed tests.

Non-client related revenue, less the provision for doubtful accounts, increased 40% to $2.6 million compared with $1.8 million in the same period in the prior year.

Net loss attributable to AAC Holdings, Inc. common stockholders was $0.2 million, or $(0.01) per diluted common share, compared with $0.6 million, or $(0.03) per diluted common share, in the prior-year period.

Adjusted EBITDA increased 20% to $15.1 million compared with $12.7 million for the same period in the prior year. Adjusted net income attributable to AAC Holdings, Inc. common stockholders was $3.2 million, or $0.13 per diluted common share, for both the current and prior year period. Adjusted EBITDA, adjusted net income attributable to AAC Holdings, Inc. common stockholders and adjusted earnings per diluted common share are non-GAAP financial measures. Tables reconciling these non-GAAP measures to the most directly comparable GAAP measures are included at the end of this release.

Balance Sheet and Cash Flows

As of March 31, 2018, AAC Holdings' balance sheet reflected cash and cash equivalents of $14.3 million, net property and equipment of $169.7 million and total debt of $303.8 million, net of debt issuance costs of $9.4 million.

Cash flows used in operations totaled $19.0 million for the first quarter of 2018 and included a $25.0 million payment related to the settlement of the Tennessee class action litigation matter. Capital expenditures in the first quarter of 2018 totaled $7.3 million.

2018 Outlook

AAC maintains its previously issued guidance, which includes AdCare from the March 1, 2018 acquisition date, as follows:



Full Year 2018 Guidance



(in millions, except per share data)

Total Revenues


$325 - $340

Inpatient treatment facility revenue


$262 - $266

Outpatient and sober living facility revenue


$40 - $46

Client related diagnostic services revenue


$12 - $15

Non-client related revenue


$11 - $13




Adjusted EBITDA


$68 - $72

Adjusted Earnings per Diluted Common Share


$0.75 - $0.80

The Company expects an annual effective tax rate of 24% to 26% and diluted weighted-average common shares outstanding of approximately 24.5 million for the year.

This outlook above does not include the impact of any future acquisitions, transaction-related costs, litigation settlement or expenses related to legal defenses.

With respect to the "2018 Outlook" above, reconciliation of adjusted EBITDA and adjusted earnings per diluted common share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including de novo start-up and other expense and acquisition-related expenses. We expect these adjustments may have a potentially significant impact on future GAAP financial results.

Earnings Conference Call

The Company will host a conference call and live audio webcast on Thursday, May 3, 2018, at 10:00 a.m. CT to further discuss these results. The number to call for this interactive teleconference is 412-542-4144. A replay of the conference call will be available through May 10, 2018, by dialing 412-317-0088 and entering the replay access code, 10119636. The live audio webcast of the Company's quarterly conference call will also be available online in the Investor Relations section of the Company's website at ir.americanaddictioncenters.org.

About American Addiction Centers

American Addiction Centers is a leading provider of inpatient and outpatient substance abuse treatment services. We treat clients who are struggling with drug addiction, alcohol addiction and co-occurring mental/behavioral health issues. We currently operate substance abuse treatment facilities located throughout the United States. These facilities are focused on delivering effective clinical care and treatment solutions. For more information, please find us at AmericanAddictionCenters.org or follow us on Twitter.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws.  These forward-looking statements are made only as of the date of this release.  In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "potential," "predicts," "projects," "should," "will," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words.  Forward-looking statements may include information concerning AAC Holdings, Inc.'s (collectively with its subsidiaries; "AAC Holdings" or the "Company") possible or assumed future results of operations, including descriptions of the Company's revenue, profitability, outlook and overall business strategy.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements.  These risks, uncertainties and other factors include, without limitation: (i) our inability to effectively operate our facilities or laboratories; (ii) our reliance on our sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates by certain third-party payors for inpatient and outpatient services and diagnostic services; (iv) our failure to successfully achieve growth through acquisitions and de novo projects; (v) our failure to achieve anticipated financial results from contemplated and prior acquisitions; (vi) maintaining compliance with applicable regulatory authorities, licensure and permits to operate our facilities and laboratories; (vii) a disruption in our business and reputational and economic risks associated with the civil securities claims brought by shareholders or claims by various parties; (viii) inability to meet the covenants in our loan documents; (ix) our inability to effectively integrate acquired facilities; and (x) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission.  As a result of these factors, we cannot assure you that the forward-looking statements in this release will prove to be accurate.  Investors should not place undue reliance upon forward-looking statements.

 

AAC HOLDINGS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


Unaudited


(Dollars in thousands, except per share data)











Three Months Ended



March 31, 2018



March 31, 2017


Revenues








Client related revenue

$

75,923



$

71,219


Non-client related revenue


2,550




1,820


Total revenues


78,473




73,039










Operating expenses








Salaries, wages and benefits


40,084




36,772


Client related services


7,747




6,378


Provision for doubtful accounts





6,587


Advertising and marketing


2,599




3,775


Professional fees


3,650




2,642


Other operating expenses


10,588




8,789


Rentals and leases


2,116




1,885


Litigation settlement


2,791






Depreciation and amortization


5,464




5,469


Acquisition-related expenses


305




183


Total operating expenses


75,344




72,480


Income from operations


3,129




559


Interest expense, net


6,709




2,734


Other expense, net


9




34


Loss before income tax benefit


(3,589)




(2,209)


Income tax benefit


(1,494)




(565)


Net loss


(2,095)




(1,644)


Less: net loss attributable to noncontrolling interest


1,893




1,041


Net loss attributable to AAC Holdings, Inc.

      common stockholders

$

(202)



$

(603)










Basic loss per common share

$

(0.01)



$

(0.03)


Diluted loss per common share

$

(0.01)



$

(0.03)


Weighted-average common shares outstanding:








Basic


23,744,208




23,163,626


Diluted


23,744,208




23,163,626



 


AAC HOLDINGS, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


Unaudited


(Dollars in thousands)













March 31,



December 31,




2018



2017


Assets









Current assets









Cash and cash equivalents


$

14,341



$

13,818


Accounts receivable, net of allowances



99,581




94,096


Prepaid expenses and other current assets



3,354




4,022


Total current assets



117,276




111,936


Property and equipment, net



169,744




152,548


Goodwill



197,184




134,396


Intangible assets, net



13,712




8,829


Deferred tax assets, net



9,030




8,010


Other assets



12,468




12,556


Total assets


$

519,414



$

428,275











Liabilities and Stockholders' Equity









Current liabilities









Accounts payable


$

3,338



$

4,579


Accrued and other current liabilities



34,039




27,661


Accrued litigation



1,000




23,607


Current portion of long-term debt



7,319




4,722


Total current liabilities



45,696




60,569


Long-term debt, net of current portion and debt issuance costs



296,443




196,451


Financing lease obligation, net of current portion



24,515




24,541


Other long-term liabilities



12,277




10,546


Total liabilities



378,931




292,107











Stockholders' equity



157,202




150,994


Noncontrolling interest



(16,719)




(14,826)


Total stockholders' equity including noncontrolling interest



140,483




136,168


Total liabilities and stockholders' equity


$

519,414



$

428,275


 

AAC HOLDINGS, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Unaudited


(Dollars in thousands)











Three Months Ended



March 31, 2018



March 31, 2017


Cash flows (used in) provided by operating activities:








Net loss

$

(2,095)



$

(1,644)


Adjustments to reconcile net loss to net cash (used in) provided by operating activities:








Provision for doubtful accounts





6,587


Depreciation and amortization


5,464




5,469


Equity compensation


798




2,137


Loss on disposal of property and equipment


34





Amortization of debt issuance costs


637




173


Deferred income taxes


(1,020)




(718)


Changes in operating assets and liabilities:








Accounts receivable


(1,129)




(13,397)


Prepaid expenses and other assets


1,485




406


Accounts payable


(4,739)




4,556


Accrued liabilities


4,141




759


Accrued litigation


(22,300)





Other long-term liabilities


(275)




28


Net cash (used in) provided by operating activities


(18,999)




4,356


Cash flows used in investing activities:








Purchase of property and equipment


(7,305)




(10,687)


Acquisition of subsidiaries


(65,185)





Net cash used in investing activities


(72,490)




(10,687)


Cash flows provided by financing activities:








Payments on 2015 Credit Facility and Deerfield Facility





(2,344)


Proceeds from 2015 Credit Facility and Deerfield Facility,

net of deferred financing costs





11,679


Payments on 2017 Credit Facility


(1,724)





Proceeds from 2017 Credit Facility, net of deferred financing costs


94,432





Payments on capital leases and other


(221)




(193)


Payment of employee taxes for net share settlement


(475)




(895)


Net cash provided by financing activities


92,012




8,247


Net change in cash and cash equivalents


523




1,916


Cash and cash equivalents, beginning of period


13,818




3,964


Cash and cash equivalents, end of period

$

14,341



$

5,880



 

AAC HOLDINGS, INC.


OPERATING METRICS


Unaudited











Three Months Ended



March 31, 2018



March 31, 2017


Operating Metrics:








New admissions1


3,739




3,216


Average daily inpatient census2


773




802


Average daily sober living census3


254




154


Total average daily census


1,027




956


Average episode length (days)4


25




27


Average daily inpatient revenue5

$

933



$

640


Revenue per admission6

$

20,306



$

20,097


Outpatient visits7


30,313




16,550


Revenue per outpatient visit8

$

278



$

318


Client related diagnostic services9


4

%



23

%

Inpatient bed count at end of period10


1,112




1,128


Effective inpatient bed count at end of period11


1,108




1,063


Average effective inpatient bed utilization12


78

%



75

%

 

1  Represents total client admissions at our inpatient facilities for the periods presented.

2  Represents average daily client census at all of our inpatient facilities.

3  Represents average daily client census at our sober living facilities.

4  Average episode length is the consecutive number of days from admission to discharge that a client stays at an AAC inpatient facility and, when applicable, an AAC sober living facility.

5  Average daily inpatient revenue is calculated as total revenues from all of our inpatient facilities less provision for doubtful accounts during the period, divided by the product of the number of days in the period multiplied by average daily inpatient census.

Revenue per admission is calculated by dividing total client related revenue, after the provision for doubtful accounts, by new admissions.

7 Represents the total number of outpatient visits at our standalone outpatient centers during the periods presented.

8  Revenue per outpatient visit is calculated as total revenues from all of our standalone outpatient facilities, after the provision for doubtful accounts, divided by the number of outpatient visits during the period.

9  Client related diagnostic services revenue, as a percentage of client related revenue, includes point-of-care and client related diagnostic laboratory services.

10  Inpatient bed count at end of period includes all beds at inpatient facilities.

11  Effective bed count at end of period represents the number of beds for which our facilities are staffed based on planned census. 

12  Average effective inpatient bed utilization represents average daily inpatient census divided by the average effective inpatient bed count during the applicable period.

 

AAC HOLDINGS, INC.


SUPPLEMENTAL RECONCILIATION OF NON-GAAP DISCLOSURES


Unaudited


(Dollars in thousands)


Reconciliation of Adjusted EBITDA to Net Loss Attributable to AAC Holdings, Inc. Common Stockholders











Three Months Ended



March 31, 2018



March 31, 2017


Net loss attributable to AAC Holdings, Inc. common stockholders

$

(202)



$

(603)


Non-GAAP Adjustments:








Interest expense


6,709




2,734


Depreciation and amortization


5,464




5,469


Income tax benefit


(1,494)




(565)


Net loss attributable to noncontrolling interest


(1,893)




(1,041)


Stock-based compensation and related tax reimbursements


798




2,137


Litigation settlement and California matter related expense


3,202




159


Acquisition-related expense


429




272


De novo start-up and other expense


428




3,354


Employee severance expense


911




743


Facility closure operating losses and expense


792





Adjusted EBITDA

$

15,144



$

12,659


 

Adjusted EBITDA, adjusted net income attributable to AAC Holdings, Inc. common stockholders and adjusted diluted earnings per common share (herein collectively referred to as "Non-GAAP Disclosures") are "non-GAAP financial measures" as defined under the rules and regulations promulgated by the U.S. Securities and Exchange Commission, each of which are defined below. Management believes the Non-GAAP Disclosures provide investors with additional meaningful financial information that should be considered when assessing our underlying business performance and trends. We believe the Non-GAAP Disclosures also enhance investors' ability to compare period-to-period financial results. The Non-GAAP Disclosures should not be considered as measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). The items excluded from the Non-GAAP Disclosures are significant components in understanding and assessing our financial performance and should not be considered as an alternative to net income or other financial statement items presented in the condensed consolidated financial statements. Because the Non-GAAP Disclosures are not measures determined in accordance with GAAP, the Non-GAAP Disclosures may not be comparable to other similarly titled measures of other companies. 

Management defines adjusted EBITDA as net income (loss) attributable to AAC Holdings, Inc. common stockholders adjusted for interest expense, depreciation and amortization expense, income tax benefit, net loss attributable to noncontrolling interest, stock-based compensation and related tax reimbursements, litigation settlement and California matter related expense, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, employee severance expense and facility closure operating losses and expense.

 


 

AAC HOLDINGS, INC.


SUPPLEMENTAL RECONCILIATION OF NON-GAAP DISCLOSURES


Unaudited


(Dollars in thousands, except per share data)


Reconciliation of Adjusted Net Income Attributable to AAC Holdings, Inc. Common Stockholders to Net Loss Attributable to AAC Holdings, Inc. Common Stockholders











Three Months Ended



March 31, 2018



March 31, 2017


Net loss attributable to AAC Holdings, Inc. common stockholders

$

(202)



$

(603)


Non-GAAP Adjustments:








Litigation settlement and California matter related expense


3,202




159


Acquisition-related expense


429




272


De novo start-up and other expense


428




3,354


Employee severance expense


911




743


Facility closure operating losses and expense


792





Income tax effect of non-GAAP adjustments


(2,399)




(1,158)


Adjusted net income attributable to AAC Holdings, Inc. common stockholders

$

3,161



$

2,767


Weighted-average common shares outstanding - diluted


23,744,208




23,163,626


GAAP diluted loss per common share

$

(0.01)



$

(0.03)


Adjusted earnings per diluted common share

$

0.13



$

0.12


 

Management defines adjusted net income attributable to AAC Holdings, Inc. common stockholders as net income (loss) attributable to AAC Holdings, Inc. common stockholders adjusted for litigation settlement and California matter related expense, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, employee severance expense, facility closure operating losses and expense and the income tax effect of the non-GAAP adjustments at the then applicable effective tax rate.

Adjusted diluted earnings per common share represents diluted earnings per common share calculated using adjusted net income attributable to AAC Holdings, Inc. common stockholders as opposed to net income attributable to AAC Holdings, Inc. common stockholders.

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SOURCE AAC Holdings, Inc.