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

Aug 30, 2019 • 09:00 am ET


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


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Michael Cartwright

81% in Q2 versus 69% in Q4. Also, as we discussed on our previous calls, we took measures to implement a series of cost cutting initiatives. These actions included a consolidation of our Las Vegas and Southern California markets, the sale of our Townsend operation in Louisiana, consolidation of our lab operation and corresponding reduction in our corporate expenses.

Our cost saving initiatives have resulted in approximately $15 million quarterly reduction in our operating expenses on a year-over-year basis. We're continuing to focus on further reductions in operating expenses, and we expect a further reduction in operating expenses of $4 million over the course of the second half of 2019. These cost savings positively impacted our second quarter operating results, and we expect they will continue to have a positive impact on the remainder of 2019. As previously announced earlier this year, we launched a process to evaluate our strategic alternatives related to our balance sheet. We are excited about the level of interest in the company and we are currently evaluating numerous initial proposals and engaged in discussions with multiple third-party investment firms.

We remain committed to our strategic initiatives to improve the balance sheet and enhance value to all stakeholders by the end of the year. Our goal is to utilize our existing assets to reduce our senior debt by at least $100 million by the end of the year in order to reduce the cost of capital.

Finally, we remain engaged in active discussions with our lenders on our credit agreement and are making progress on reaching agreement that will resolve our covenant obligations in the near-term. I'm confident that we will reach an agreement that is favorable to all stakeholders.

I will now turn the call over to Andrew to discuss our financial results.

Andrew McWilliams

Thank you, Michael. For the second quarter of 2019, total revenue improved 15% to $63 million from $55 million in the first quarter of this year. This improvement in total revenue primarily came from our inpatient treatment facility revenue as a result of improvements in both average daily census and average daily revenue. Average daily inpatient census improved 8% to 802 for the second quarter of 2019 from 740 in the first quarter of this year. Average daily inpatient revenue in the second quarter improved 17% to $790 from $674 in the first quarter of this year. Partially offsetting the increase in inpatient revenue was a decrease in client related diagnostic services revenue.

During the second quarter client related diagnostic services revenue was negatively impacted by additional reserves recorded against our accounts receivable. The cost savings initiatives that we discussed on prior calls related to consolidation of beds and facilities combined with improvements in our corporate SG&A have resulted in a reduction in operating expenses of almost $12 million or 15%, since the fourth quarter of 2018 and a $15 million improvement on a year-over-year basis.

The improvements in revenue and operating expenses had a positive impact on adjusted EBITDA. On a