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Team Health Holdings announces Q2 2014 net revenue increase of 16.4%

Highlights:

•             Net Revenue Increased to $675.1 million 16.4% over the Prior Year

•             Net earnings attributable to Team Health Holdings, Inc. ("Net earnings") were $30.2 million $44.1 million after adjustments

•             Diluted net earnings per share of $0.42 Adjusted EPS of $0.61

•             Adjusted EBITDA increased 41.1% to $86.2 million

•             Projected growth in net revenue for full year 2014 increased to 13.0% to 14.0%, which includes potential benefits from healthcare reform projected Adjusted EBITDA margin between 11.0% and 11.5%

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 second quarter of 2014.

"We are pleased with our financial results for the second quarter of 2014.  We generated double digit revenue and earnings growth, expanded our Adjusted EBITDA margin, and continued to generate strong operating cash flows," said TeamHealth Chief Executive Officer, Greg Roth.

"Our strong market position and the successful execution of our strategy resulted in net revenue growth of over 16% for the quarter.  We realized same contract volume growth of 3.2% and continued to see a meaningful decline in the percent of uninsured patients as the newly insured access the healthcare system.  These trends, along with the performance of our revenue cycle and contribution from Medicaid parity supported the organic revenue growth in the quarter. New hospital contracting opportunities, from sales and acquisitions, and increasingly in a number of situations, a combination of both elements, also drove growth in the quarter.

"Moving into the second half of 2014, we believe that we remain well positioned to achieve continued revenue and earnings growth. We are focused on implementing our acquisition strategy, executing on new contract sales, and driving improvements in same contract performance.  As a result of our performance in the first half of 2014, and our expectations about future operating trends and growth opportunities, including the potential benefits from healthcare reform, we have increased our projection for net revenue growth for fiscal year 2014.  We now estimate our annual net revenue growth for 2014 to be between 13.0% and 14.0%, which is an increase from the prior guidance of 11.0% to 12.0%.  We have seen an improvement in our year to date Adjusted EBITDA margin compared to prior years and believe that the 2014 full year margin could range between 11.0% and 11.5% with the potential for additional upside if the current beneficial operating trends in volume and payor mix continue to be realized over the remainder of the year.  Consistent with prior guidance, we anticipate that the benefit from the Medicaid parity program will be in the range of $32 million and $34 million, which is reflected in our revised revenue projections," concluded Mr. Roth.

Lynn Massingale, M.D., Executive Chairman of TeamHealth, added, "We are pleased with our performance in the first half of 2014 and we look forward to driving strong operating and financial performance for the remainder of the year.  Moving forward in a changing healthcare environment, we continue to utilize our national infrastructure and deep 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 number one 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 Second Quarter Results

Net revenue increased 16.4% to $675.1 million from $579.7 million in the second quarter of 2013.  Acquisitions contributed 8.7%, same contract revenue contributed 7.5%, and net sales growth contributed 0.2% of the increase in quarter-over-quarter growth in net revenue.  Within the acquisitions category, new hospital contacting opportunities that were initially developed by our sales and marketing process contributed 2.2% of overall net revenue growth between quarters.     

Same contract revenue increased $43.5 million, or 8.3%, to $568.3 million from $524.8 million in the second quarter of 2013.  An increase of 8.6% in estimated collections on fee for service visits provided a 6.5% increase in same contract revenue growth between quarters while a 3.2% increase in same contract volumes contributed 2.3% to the growth.  Contract and other revenue constrained same contract revenue growth between quarters by 0.5%. Acquisitions contributed $50.6 million of revenue growth and net new contract revenue increased by $1.2 million between quarters.  The benefit from Medicaid parity revenue recognized in the second quarter was $8.5 million, of which $7.0 million is same contract revenue.  Medicaidparity contributed 1.5% to consolidated revenue growth and 1.3% to same contract revenue growth between quarters.

Reported net earnings for the quarter were $30.2 million, or $0.42 diluted net earnings per share, compared to net earnings of $18.4 million, or $0.26 diluted net earnings per share, in the second quarter of 2013.  The financial results for the second quarter of 2014 included $9.3 million of contingent purchase and other acquisition compensation expense ($6.4 million after-tax) and non-cash amortization expense of $11.1 million ($7.5 million after tax).  Excluding these items, net earnings for the second quarter of 2014 would have been $44.1 million and Adjusted EPS would have been $0.61 per share.  Financial results for the second quarter of 2013 included $9.9 million of contingent purchase and other acquisition compensation expense ($6.7 million after-tax), and non-cash amortization expense of $9.5 million ($6.3 million after-tax).  Excluding these items, net earnings for the second quarter of 2013 would have been $31.3 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 to Team Health Holdings, Inc.

Cash flow provided by operations for the quarter was $40.5 million compared to $21.6 million in the second quarter of 2013.  There were $1.2 million of contingent purchase payments made in the second quarter of 2014 and no contingent purchase payments in 2013.  Excluding the impact of the contingent purchase payment in 2014, operating cash flows increased $20.1 million between quarters.

Adjusted EBITDA for the quarter increased 41.1% to $86.2 million from $61.1 million in the second quarter of 2013, and Adjusted EBITDA margin increased to 12.8% 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 June 30, 2014, the Company had cash and cash equivalents of approximately $93.4 million and$250.0 million of available borrowings under its revolving credit facility (without giving effect to $6.7 million of undrawn letters of credit).  The Company's total outstanding debt was $493.4 million as of June 30, 2014.

2014 First Six Months Results

Net revenue in the six months ended June 30, 2014 increased 13.9% to $1.32 billion from $1.16 billion for the same period of 2013.  Acquisitions contributed 8.0%, same contract revenue contributed 4.5%, and net sales growth contributed 1.4% of the increase in year over year growth in net revenue.  Within the acquisitions category, new hospital contracting opportunities that were initially developed by our sales and marketing process contributed 1.4% of overall net revenue growth between years.

Same contract revenue for the six months ended June 30, 2014 increased  $51.9 million, or 5.2%, to $1.05 billion from $995.9 million in the same period a year ago.  Increases in estimated collections on fee for service visits of 8.5% provided a 6.0% increase in same contract revenue growth between periods.  Fee for service volume declined by 0.2% and constrained growth in same contract revenue growth by 0.1%  while contract and other revenue constrained growth 0.7% between periods. Acquisitions contributed $92.9 million of growth between periods and net new contract revenue increased by $16.3 million.  The benefit from Medicaid parity revenue recognized in the six months ended June 30, 2014 was $17.3 million, of which$14.8 million is same contract revenue.  Medicaid parity contributed 1.5% to consolidated revenue growth and 1.5% to same contract revenue growth between years.

Reported net earnings were $54.0 million in the six months ended June 30, 2014, or $0.75 diluted net earnings per share, compared to net earnings of $36.5 million, or $0.52 diluted net earnings per share, in the same period of 2013.  The 2014 first six months financial results included $19.4 million ($13.3 millionafter-tax) of contingent purchase and other acquisition compensation expense and non-cash amortization expense of $22.2 million ($15.1 million after-tax).  Excluding these items, net earnings for the first six months of 2014 would have been $82.4 million and Adjusted EPS would have been $1.15 per share.  Financial results for the same period in 2013 included $20.2 million of contingent purchase and other acquisition compensation expense ($13.2 million after-tax), and non-cash amortization expense of $18.4 million ($12.1 million after-tax).  Excluding these adjustments, net earnings for the same period in 2013 would have been$61.8 million and Adjusted EPS would have been $0.88 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 to Team Health Holdings, Inc.

Cash flow provided by operations for the six months ended June 30, 2014 was $74.6 million compared to$54.9 million in 2013.  There were $1.2 million contingent purchase payments in 2014 and no contingent purchase payments in 2013.  Excluding the impact of the 2014 contingent purchase payments, operating cash flows increased $21.0 million between periods.

Adjusted EBITDA increased 30.2% to $158.0 million from $121.3 million in the six months ended June 30, 2013, and Adjusted EBITDA margin was 12.0% compared to 10.5% for the same period 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.

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