Investor Relations

Press Release

AAC Holdings, Inc. Reports First Quarter 2019 Results

Q4 2018 and Q1 2019 Cost Savings Initiatives Expected to Result in Over $30 Million of Annualized Cost Savings and Leading to a 20% Decrease in Operating Costs Sequentially

Secured Additional Liquidity with $30 Million Incremental Term Loan in March 2019

Company Release - 5/9/2019 6:07 AM ET

BRENTWOOD, Tenn., May 9, 2019 /PRNewswire/ -- AAC Holdings, Inc. (NYSE: AAC) ("the Company" or "AAC") announced financial results for the first quarter and year ended March 31, 2019.

First Quarter 2019 Operational and Financial Highlights:
(All comparisons are to the comparable prior-year period, unless otherwise noted)

  • Total inpatient census improved by 26% at March 31, 2019 compared to December 31, 2018
  • New admissions increased 24% to 4,641
  • Outpatient visits increased 31% to 39,717
  • Total revenue was $55.4 million
  • Implemented over $30 million in expected annualized expense reductions that are benefiting 2019 operating margins, leading to over a 20% sequential decrease in operating costs in the First Quarter compared to the Fourth Quarter 2018
  • Closed a $30 million incremental term loan with existing lenders to provide additional liquidity

"Despite the challenges we faced last year, we've started this year with positive momentum and I'm confident that we will see continued improvement throughout the remainder 2019," said Michael Cartwright, AAC Chairman & Chief Executive Officer. "Inpatient census has begun to improve in early 2019 with inpatient census up by over 25% at March 2019 compared to December 2018. The initiatives in sales and marketing have begun to show results as we continue to enhance our community and online outreach resources to better help those who need our help."

"We also improved liquidity and reduce operating expenses during the first quarter of 2019," Cartwright said. "We closed the $30 million incremental term loan that provided additional liquidity in March 2019 and continue to be focused on cost reduction initiatives. The expense savings initiatives implemented in late 2018 and in the first quarter of 2019 that are expected to total over $30 million in annualized savings are now being realized and had a positive impact on the first quarter of 2019."

"Finally, I am excited to announce that we will be sharing our long-term strategic vision for the future on a call on Monday, May 13th," Cartwright continued. "Today's call will focus on the first quarter of 2019, but on the call next week on Monday, I will layout my vision for the Company over the course of the next decade to be best in class clinical care, on-line content and science and technology – all while unlocking value for our shareholders."

Cost Savings Initiatives

The Company enacted a series of cost savings initiatives during the fourth quarter of 2018 and into the first quarter of 2019 which are expected to result in over $30 million of annualized cost savings. These initiatives have included reductions in the Company's corporate expenses, consolidation of its Las Vegas market, consolidation of the its southern California market, the sale of the Company's New Orleans operations, and the consolidation of its lab operations.

Incremental Term Loan and Amendment of Existing Credit Facility

In March 2019, the Company closed a $30 million incremental term loan with its existing lenders. In addition, the Company amended its existing secured credit facility to, among other items, provide increased flexibility with respect to certain financial covenants.

Evaluation of Strategic Alternatives in AAC's Real Estate Portfolio

The Company has commenced a process to generate additional value from its real estate portfolio consisting of treatment centers located across the United States. Management's goal is to leverage the portfolio to create additional liquidity, lower its cost of capital and enhance shareholder value. Real estate strategic alternatives could include further sale leasebacks of individual facilities or larger portions of the Company's real estate portfolio.

First Quarter 2019 Financial Results

On a sequential basis revenue decreased by 3.6% in the first quarter of 2019 compared to the fourth quarter of 2018 primarily due to lower average daily census for the quarter. Our inpatient census at March 31, 2019 increased by approximately 26% when compared to December 31, 2018. However, our total average daily census for the first quarter of 2019 compared to the fourth quarter of 2018 decreased by approximately 4.9% due to a lower starting point of census in the first quarter of 2019. Operating expenses on a sequential basis decreased by approximately 22.9% to $69.5 million for the first quarter of 2019 compared to $90.2 for the fourth quarter of 2018. This was primarily due to the benefit from the cost savings initiatives enacted during the fourth quarter for 2018 and into the first quarter of 2019 which are expected to result in over $30 million of annualized cost savings.

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 was $55.4 million compared with $81.2 million in the same period in the prior year.



Three Months Ended March 31,










2019



2018



Increase/
(Decrease)


% Change

Inpatient treatment facility services


$

44,889



$

66,874



$

(21,985)



(32.9)

Outpatient facility and sober living services



6,454




8,946




(2,492)



(27.9)

Client related diagnostic services



2,146




2,810




(664)



(23.6)

Total client related revenue



53,489




78,630




(25,141)



(32.0)

Non-client related revenue



1,881




2,557




(676)



(26.4)

Total revenues


$

55,370



$

81,187



$

(25,817)



(31.8)

 

Inpatient treatment facility revenue decreased 32.9% to $44.9 million compared with $66.9 million in the same period in the prior year.

Outpatient and sober living facility revenue decreased 27.9% to $6.5 million compared with $8.9 million in the same period in the prior year.

Client related diagnostic services revenue decreased 23.6% to $2.1 million compared with $2.8 million in the same period in the prior year.

Non-client related revenue decreased 26.4% to $1.9 million compared with $2.6 million in the same period in the prior year.

Net loss attributable to AAC Holdings, Inc. common stockholders was ($22.0) million, or $(0.90) per diluted common share, compared with net income attributable to AAC Holdings, Inc. common stockholders of $1.1 million, or $0.04 per diluted common share, in the prior-year period.

Adjusted EBITDA decreased to $(6.5) million compared with $17.9 million in the prior year. Adjusted EBITDA, is a non-GAAP financial measure. 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, 2019, AAC Holdings' balance sheet reflected cash and cash equivalents of $17.9 million, net property and equipment of $163.0 million and total debt of $342.0 million (current and long-term portions). In March 2019, we closed on a $30 million incremental term loan that provides the company with additional liquidity.

Cash flows used in operations totaled $9.6 million and maintenance capital expenditures totaled $0.7 million for the first quarter of 2019.

Earnings Conference Call
The Company will host a conference call and live audio webcast on Thursday, May 9, 2019, at 9:00 a.m. CT to further discuss these results. The number to call for this interactive teleconference is 1-877-224-7960. A replay of the conference call will be available through May 23, 2019, by dialing 877-344-7529 and entering the replay access code, 10131526.

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) the Company's inability to effectively operate its facilities; (ii) the Company's reliance on its 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 point-of-care and definitive lab testing; (iv) the Company's failure to successfully achieve growth through acquisitions and de novo projects; (v) risks associated with estimates of the value of accounts receivable or deterioration in collectability of accounts receivable; (vi) a failure to achieve anticipated financial results from contemplated and prior acquisitions; (vii) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (viii) the Company's failure to achieve anticipated financial results from contemplated and prior acquisitions; (ix) a disruption in the Company's ability to perform diagnostic laboratory services; (x) maintaining compliance with applicable regulatory authorities, licensure and permits to operate the Company's facilities and laboratories; (xi) a disruption in the Company's business and reputational and economic risks associated with the civil securities claims brought by shareholders or claims by various parties; (xii) inability to meet the covenants in the Company's loan documents or lack of borrowing capacity; and (xiii) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 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 share data)









Three Months Ended


March 31, 2019



March 31, 2018

Revenues







Client related revenue

$

53,489



$

78,630

Non-client related revenue


1,881




2,557

Total revenues


55,370




81,187








Operating expenses







Salaries, wages and benefits


40,553




40,084

Client related services


6,041




7,747

Advertising and marketing


3,295




2,599

Professional fees


4,122




3,650

Other operating expenses


11,363




10,588

Rentals and leases


2,000




2,116

Litigation settlement


(1,238)




2,791

Depreciation and amortization


4,344




5,464

Gain on sale


(1,010)




Acquisition-related expenses





305

Total operating expenses


69,470




75,344

(Loss) income from operations


(14,100)




5,843

Interest expense, net


10,260




6,709

Other (benefit) expense, net


(211)




9

Loss before income tax benefit


(24,149)




(875)

Income tax benefit


(33)




(38)

Net loss


(24,116)




(837)

Less: net loss attributable to noncontrolling interest


2,097




1,893

Net (loss) income attributable to AAC Holdings, Inc.

      common stockholders

$

(22,019)



$

1,056








Basic (loss) earnings per common share

$

(0.90)



$

0.04

Diluted (loss) earnings per common share

$

(0.90)



$

0.04

Weighted-average common shares outstanding:







Basic


24,495,163




23,744,208

Diluted


24,495,163




23,781,604


 


AAC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in thousands)










March 31


December 31



2019


2018

Assets







Current assets







Cash and cash equivalents


$

17,869


$

5,409

Accounts receivable, net of allowances



45,684



47,860

Prepaid expenses and other current assets



2,518



10,695

Total current assets



66,071



63,964

Property and equipment, net



163,045



166,921

Right-of-use assets, net



30,243



Goodwill



198,952



198,952

Intangible assets, net



10,834



12,063

Other assets



11,079



10,377

Total assets


$

480,224


$

452,277








Liabilities and Stockholders' Equity







Current liabilities







Accounts payable


$

17,167


$

13,507

Accrued and other current liabilities



28,669



30,544

Accrued litigation



4,827



8,000

Current portion of lease liability



5,645



Current portion of long-term debt



332,925



309,394

Total current liabilities



389,233



361,445

Deferred tax liabilities



1,137



1,227

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



9,039



9,764

Lease liability, net of current portion



29,681



Financing lease obligation, net of current portion



24,384



24,421

Other long-term liabilities



8,229



13,147

Total liabilities



461,703



410,004








Stockholders' equity



42,758



64,413

Noncontrolling interest



(24,237)



(22,140)

Total stockholders' equity including noncontrolling interest



18,521



42,273

Total liabilities and stockholders' equity


$

480,224


$

452,277

 

AAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(Dollars in thousands)









Three Months Ended


March 31, 2019



March 31, 2018

Cash flows used in operating activities:







Net loss

$

(24,116)



$

(837)

Adjustments to reconcile net loss to net cash used in
operating activities:







Depreciation and amortization


4,344




5,464

Equity compensation


364




798

Loss on disposal of property and equipment


145




34

Amortization of debt issuance costs


1,243




637

Deferred income taxes


(90)




436

Changes in operating assets and liabilities:







Accounts receivable


2,176




(3,843)

Prepaid expenses and other assets


7,808




1,485

Accounts payable


3,660




(4,739)

Accrued and other current liabilities


4,250




4,141

Accrued litigation


(3,173)




(22,300)

Other long-term liabilities


(6,194)




(275)

Net cash used in operating activities


(9,583)




(18,999)

Cash flows used in investing activities:







Purchase of property and equipment


(913)




(7,305)

Acquisition of subsidiaries





(65,185)

Sale of subsidiary


887




Net cash used in investing activities


(26)




(72,490)

Cash flows provided by financing activities:







Payments on 2017 Credit Facility


(1,924)




(1,724)

Proceeds from 2019 Priming Facility, net of deferred financing costs


24,284




Proceeds from 2017 Credit Facility, net of deferred financing costs


250




94,432

Payments on finance leases and other


(291)




(221)

Payments on AdCare Note


(250)




Payment of employee taxes for net share settlement





(475)

Net cash provided by financing activities


22,069




92,012

Net change in cash and cash equivalents


12,460




523

Cash and cash equivalents, beginning of period


5,409




13,818

Cash and cash equivalents, end of period

$

17,869



$

14,341


 

AAC HOLDINGS, INC.

OPERATING METRICS

Unaudited









Three Months Ended


March 31, 2019



March 31, 2018

Operating Metrics:







New admissions1


4,641




3,739

Average daily inpatient census2


740




773

Average daily sober living census3


213




254

Total average daily census


953




1,027

Average episode length (days)4


19




25

Average daily inpatient revenue5

$

674



$

961

Revenue per admission6

$

11,525



$

21,030

Outpatient visits7


39,717




30,313

Revenue per outpatient visit8

$

162



$

295

Client related diagnostic services9


4%




4%

Inpatient bed count at end of period10


996




1,112

Effective inpatient bed count at end of period11


992




1,108

Average effective inpatient bed utilization12


75%




78%








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 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 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 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 (Income) Attributable to AAC Holdings, Inc. Common Stockholders











Three Months Ended



March 31, 2019



March 31, 2018

Net (loss) income attributable to AAC Holdings, Inc. common
stockholders


$

(22,019)



$

1,056

Non-GAAP Adjustments1:








Interest expense



10,260




6,709

Depreciation and amortization



4,344




5,464

Income tax benefit



(33)




(38)

Net loss attributable to noncontrolling interest



(2,097)




(1,893)

Stock-based compensation



364




798

Litigation settlement, regulatory and
California matter related expense



(988)




3,202

Acquisition-related expense



28




429

De novo start-up and other expense






428

Transaction costs



1,517




Recruitment and retention expense



375




Employee severance expense



1,098




911

Facility closure operating losses and expense



647




792

Adjusted EBITDA


$

(6,504)



$

17,858

 

1 Adjusted EBITDA, adjusted net (loss) 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 has chosen to present these Non‐GAAP Disclosures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating operations absent the effect of certain items that we do not consider indicative of our ongoing core operating performance or are non-cash items. Certain of these items may recur in the future. 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 (loss) income 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, certain regulatory and California matter related expenses, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, recruitment and retention expense, employee severance expense and facility closure operating losses and expense.


 

AAC HOLDINGS, INC.

SUPPLEMENTAL RECONCILIATION OF NON-GAAP DISCLOSURES

Unaudited

(Dollars in thousands, except share data)

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











Three Months Ended



March 31, 2019



March 31, 2018

Net (loss) income attributable to AAC Holdings, Inc. common
stockholders


$

(22,019)



$

1,056

Non-GAAP Adjustments:








Litigation settlement, regulatory and

California matter related expense



(988)




3,202

Acquisition-related expense



28




429

De novo start-up and other expense






428

Transaction costs



1,517




Recruitment and retention expense



375




Employee severance expense



1,098




911

Facility closure operating losses and expense



647




792

Income tax effect of non-GAAP adjustments



(4)




(2,399)

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


$

(19,346)



$

4,419

Weighted-average common shares outstanding - diluted



24,495,163




23,781,604

GAAP diluted (loss) income per common share


$

(0.90)



$

0.04

Adjusted (loss) earnings per diluted common share


$

(0.79)



$

0.19

 

Management defines adjusted net (loss) income attributable to AAC Holdings, Inc. common stockholders as net (loss) income attributable to AAC Holdings, Inc. common stockholders adjusted for litigation settlement, certain regulatory and California matter related expenses, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, recruitment and retention expense, 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 American Addiction Centers