AAC Holdings, Inc. (NYSE:AAC) Q3 2019 Earnings Conference Call - Final Transcript

Nov 12, 2019 • 10:00 am ET

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AAC Holdings, Inc. (NYSE:AAC) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Andrew W. McWilliams

payer mix.

Average daily inpatient census remained materially consistent at 791 in the third quarter of 2019 compared to 802 in the second quarter of 2019. Average daily inpatient revenue in the second quarter of 2019 decreased to $704 per day from $790 per day in the second quarter of 2019. Of the $86 per day decline in the average daily revenue, approximately 20% or $16 of that decrease related to additional reserves recorded in the third quarter of 2019 related to the closed facilities and other change in estimates that I noted a few moments ago. The remainder of the decrease in average daily inpatient revenue was due to unfavorable payer mix. However, it is worth noting that on a year-over-year basis, our average daily inpatient revenue remained materially consistent with the third quarter of 2018.

The $4.1 million decrease in diagnostic services revenue was directly related to additional reserves recorded in the second quarter of 2019 that were more onetime in nature and did not reoccur to the same level in the current quarter. Overall, our volume for diagnostic services revenue remained materially consistent on a sequential basis.

The cost savings initiatives that we have discussed on prior calls related to consolidation of beds and facilities, combined with improvements in our corporate SG&A, have resulted in a reduction of operating expenses of $23 million or 12%, down to $61.1 million in the third quarter from $69.1 million in the second quarter of 2019. On a year-over-year basis, operating expenses have reduced by $23 million or 28% compared to the third quarter of 2018.

These improvements in operating expenses had a positive impact on adjusted EBITDA. On a sequential basis, adjusted EBITDA went from a loss of $12 million in the fourth quarter of 2018 to a loss of $7 million in the first quarter of 2019 to positive adjusted EBITDA of $3 million in the second quarter of 2019 and into positive adjusted EBITDA of $6 million in the third quarter of 2019. This represents an $18 million or 150% improvement in quarterly adjusted EBITDA since the fourth quarter of 2018. Overall, as Michael mentioned earlier on this call, while we still have a lot of work to do, I'm pleased with the sequential momentum that we've had so far in 2019.

We continue to remain focused on improving both the top line revenue and our operating expenses to ensure that we are delivering high-quality care as efficient as possible. In addition, we remain committed to improving the balance sheet and reducing our cost of capital through the strategic alternatives that Michael discussed earlier.

Turning to our 2019 guidance, our full year guidance has revenue in the range of $230 million to $240 million, and adjusted EBITDA in the range of $6 million to $8 million.

I will now turn the call over to Michael for a few closing remarks.

Operator
Operator

[Operator Closing Remarks]