AAC Holdings, Inc. (NYSE:AAC) Q2 2019 Earnings Conference Call Transcript

Aug 30, 2019 • 09:00 am ET

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AAC Holdings, Inc. (NYSE:AAC) Q2 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Today's first question comes from John Ransom of Raymond James. Please go ahead.

Analyst
John Ransom

Good morning. If you hit your $20 million-ish back half EBITDA, what does that imply for free cash flow?

Executive
Andrew McWilliams

That's a good question. So, if you think about the free cash flow, I'm really expecting cash uses in -- to be pretty neutral from an AR and AP standpoint. And then, if you really think, if you go and take a hard look at what the adjustments were to get to adjusted EBITDA, those aren't really expected to reoccur, such that really the -- that back half EBITDA is really expected to convert mostly into cash. So, if you take that kind of -- I'd call it $12 million or so, you back out maintenance CapEx of about $1 million or so and then back out cash for interest and principal payments, you'll see that that's a pretty neutral even cash flow. At the end of the day, it will come in right at even.

Analyst
John Ransom

So, what's the -- just the cash interest expense in the back half of the year? What are you thinking about this?

Executive
Andrew McWilliams

It runs about -- it's about $8 million a quarter.

Analyst
John Ransom

Okay. Got you. And then secondly, I know you got a lot of moving parts and a lot of things to think about, but do you have a ballpark estimate of when you might get to some resolution with your covenant issue?

Executive
Michael Cartwright

We're working on it every day, John. I mean, I think our banks have been extremely supportive. They see the trajectory that we're making. I think we see the trajectory we're making. There's both sides of it. Part of it hinges on us unlocking some of the value to real estate, which we've been actively working on. We're looking at all proposals. And so, we certainly want to get this resolved as soon as possible.

Analyst
John Ransom

Okay. But, no firm date yet. And Andrew, last question for me is, let's say you were to get $100 million sold, how should we think about the trade-off between rent expense and interest expense in that transaction? In other words, what will be the delta? Assuming you're not going to do this. You're going to lower -- you're going to get something other than the interest rates you're paying, but any idea yet on sort of cap rates being thought about? And I know you're also thinking about selling Ringwood which wouldn't come with a lease to it as well, but how should we think about the improvement in the -- below the line, if you can get this done?

Executive
Andrew McWilliams

Big picture, definitely will reduce the cost to capital John. The $30 million debt we have is pretty high interest loan and then it drops from there so, I think it's hard to predict exactly what it'll be. But I'm happy to do an offline conversation with you and go -- walk