Team Health Holdings announces Q1 2014 results
• Consistent with prior guidance, 2014 net revenue growth is projected to be between 11% and 12%, inclusive of Medicaid parity, but excluding other potential benefits from healthcare reform
Team Health Holdings, Inc. ("TeamHealth" or the "Company") (NYSE: TMH), one of the largest providers of outsourced physician staffing solutions for hospitals in the United States, today announced results for its first quarter of 2014.
"We are pleased with our financial performance for the first quarter of 2014 as we generated double digit revenue and earnings growth, while expanding our Adjusted EBITDA margin over the prior year," said TeamHealth Chief Executive Officer, Greg Roth.
"Similar to other healthcare providers, we saw the continuation of soft utilization trends further impacted by challenging weather conditions in several of our markets during the quarter. Despite the current operating environment, all three of our primary growth drivers contributed to an increase in net revenue of over 11% and we realized improvements in our operating margins. We continued to benefit from the Medicaid parity program and we anticipate additional opportunities from the expansion of coverage that began this quarter, primarily from an improving payor mix and support for volume growth as the newly insured begin to access the healthcare system. While we realized some modest improvements in our payor mix in the quarter, we believe it will take additional time to fully discern the impact of healthcare reform on our 2014 financial results. As we look ahead into the remainder of 2014, we believe that we remain well positioned to achieve continued revenue and earnings growth in 2014. We are implementing our acquisition strategy, executing on new contract sales, driving improvements in same contract performance, and delivering strong operating cash flows. We continue to project full year 2014 annual net revenue growth of between 11% and 12%. Our first quarter performance exceeded our annual Adjusted EBITDA margin target of 10.5% as a result of the continued focus on revenue cycle performance, including Medicaid parity, and cost efficient operations. Over the remainder of the year, we will look to drive continued revenue growth and operating efficiencies that could provide some modest upside to our annual margin target. As we have gained additional insight into the Medicaid parity program, we now anticipate the 2014 revenue benefit will be in the range of $32 million and $34 million. Consistent with our previous commentary, except for Medicaid parity revenue, our current guidance does not include other benefits that we may see from healthcare reform in 2014," concluded Mr. Roth.
Lynn Massingale, M.D., Executive Chairman of TeamHealth, added, "We are pleased with our start to 2014 and we look forward to delivering strong operating and financial performance for the remainder of the year. Moving forward, we continue to utilize our national infrastructure and strong physician leadership to drive operational improvements across our growing network of high quality affiliated providers, while making investments in patient safety, risk management, operational efficiency and customer satisfaction. Our priority is to deliver the highest quality of patient care and our proprietary information technology systems and infrastructure investments enable us to accomplish these goals."
2014 First Quarter Results
Net revenue increased 11.4% to $641.7 million from $575.9 million in the first quarter of 2013. Acquisitions contributed 7.2%, same contract revenue contributed 2.6% and net sales growth contributed 1.6%, of the increase in quarter-over-quarter growth in net revenue.
Same contract revenue increased $14.9 million, or 2.9%, to $526.6 million from $511.7 million in the first quarter of 2013. An increase of 9.1% in estimated collections on fee for service visits provided a 6.2% increase in same contract revenue growth between quarters while a 3.1% decrease in same contract volumes constrained growth by 2.2%. Contract and other revenue constrained same contract revenue growth between quarters by 1.1%. Acquisitions contributed $41.2 million of revenue growth, and net new contract revenue increased by $9.6 million between quarters. The benefit fromMedicaid parity revenue recognized in the first quarter was $8.8 million, of which $8.1 million is same contract revenue. Medicaid parity contributed 1.5% to consolidated revenue growth and 1.6% to same contract revenue growth between quarters.
Reported net earnings for the quarter were $23.8 million, or $0.33 diluted net earnings per share, compared to net earnings of $18.2 million, or $0.26 diluted net earnings per share, in the first quarter of 2013. The financial results for the first quarter of 2014 included $10.1 million of contingent purchase and other acquisition compensation expense ($7.0 million after-tax) and non-cash amortization expense of $11.1 million ($7.5 million after tax). Excluding these items, net earnings for the first quarter of 2014 would have been $38.3 million and Adjusted EPS would have been $0.54 per share. The results in the first quarter of 2014 include a $1.8 million ($1.1 million after tax) net gain on the sale and disposal of assets, including the sale of certain assets related to our clinic operations. Financial results for the first quarter of 2013 included $10.3 million of contingent purchase and other acquisition compensation expense ($6.5 million after-tax), and non-cash amortization expense of $8.9 million ($5.9 million after-tax). Excluding these items, net earnings for the first quarter of 2013 would have been $30.5 million and Adjusted EPS would have been $0.44 per share. See "Non-GAAP Financial Measures Reconciliations" and "Adjusted Earnings Per Share" below for the definition of Adjusted EPS and its reconciliation to net earnings and diluted earnings per share attributable toTeam Health Holdings, Inc.
Cash flow provided by operations for the quarter was $34.2 million compared to $33.3 million in the first quarter of 2013. There were $0.1 million of contingent purchase payments made in the first quarter of 2014 and no contingent purchase payments in 2013. Excluding the impact of these items, operating cash flow in 2014 reflected an increase of $0.9 million between quarters.
Adjusted EBITDA for the quarter increased 19.2% to $71.8 million from $60.2 million in the first quarter of 2013, and Adjusted EBITDA margin increased to 11.2% compared to 10.5% for the same quarter in 2013. See "Non-GAAP Financial Measures Reconciliations" and "Adjusted EBITDA" below for the definitions of Adjusted EBITDA Margin and Adjusted EBITDA and its reconciliation to net earnings attributable to Team Health Holdings, Inc.
As of March 31, 2014, the Company had cash and cash equivalents of approximately $56.6 millionand $250.0 million of available borrowings under its revolving credit facility (without giving effect to$6.1 million of undrawn letters of credit). The Company's total outstanding debt was $497.5 million as of March 31, 2014.