Returns to Historical Operating Margins in Specialty Pharmacy
TORONTO, May 7, 2019 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), one of Canada's leading healthcare services companies, today reported its financial results for the first quarter of 2019.
"Our first quarter results were stronger than expected and are a testament to our team, our strategy, and the successful completion of our Business Re-Engineering Plan," said David Murphy, President and Chief Executive Officer. "During the quarter, we added approximately 1,500 beds under care, boosting our overall number of beds serviced to more than 31,000 nationally. With the continued growth in beds serviced, plus the full impact of our Business Re-Engineering Plan, we have now fully offset the substantial regulatory changes that impacted our business in the second quarter of last year."
Highlights for the First Quarter of 2019
- Specialty Pharmacy achieved a return to the same Adjusted EBITDA1 of $3.4M that was achieved in Q1 2018, prior to the regulatory changes that took place in Q2 2018;
- Adjusted EBITDA margin in Specialty Pharmacy was 9.9% prior to, and 11.2% after the impact of the adoption of IFRS 16, for the first quarter of 2019. Excluding the impact of IFRS 16, Specialty Pharmacy Adjusted EBITDA margins in Q2 2019 are anticipated to increase to double-digits and remain at that level thereafter;
- Specialty Pharmacy delivered a second consecutive quarter of sequential profit growth in Q1 2019, with Adjusted EBITDA increasing by 60.3% and 139.6% from $2.1M in Q4 2018 and $1.4M in Q3 2018, respectively;
- Average beds serviced increased by more than 600 compared to Q4 2018, with total current beds serviced exceeding 31,000;
- Further advanced deleveraging plan and new seniors focused strategic direction by completing a $12M private placement of convertible preferred shares to Ewing Morris & Co. Investment Partners Ltd. and the divestiture of the Company's retail pharmacy in Medicine Hat, AB on February 14, 2019 for proceeds of $2.3M;
- Continued execution of seniors medical cannabis strategy, with deliveries to residents commencing during Q1 2019. In addition, the Company collaborated with Apollo Cannabis Clinics to assist with virtual assessments of potential medical cannabis candidates in homes serviced by the Company; and
- Completed transition to IFRS 16 Leases, a substantial change in the lease accounting standards that resulted in an increase of $0.5M to consolidated Adjusted EBITDA from continuing operations.
Highlights Subsequent to Quarter-End
- Entered into definitive agreement to divest the Company's retail pharmacy location in Grande Prairie, AB, for a total purchase price of $2M plus the value of inventory at closing.
Selected Financial Information
(All amounts in the chart below are in thousands except per share and percentage data)
For the three month periods ended
Revenue from continuing operations
Loss from continuing operations
Income (loss) from continuing operations before interest expense and income taxes
EBITDA1 from continuing operations
Adjusted EBITDA1 from continuing operations
Per share - Basic2 and Diluted2
Adjusted EBITDA1 Margin from continuing operations
Per share - Basic2 and Diluted2
Adjusted EBITDA1 Margin
Per share - Basic2 and Diluted2
Cash flow provided by (used in) operations
Weighted Average Shares Outstanding (Basic and Diluted)3
Shares Outstanding, March 313
See "Non-IFRS Measures" below.
Basic and diluted earnings per share is based on the profit or loss attributable to shareholders of Centric Health Corporation.
Excludes escrowed shares and restricted shares.
The Company's results for the three month period ended March 31, 2019 included the impact of its transition to IFRS 16 Leases, a substantial change to the lease accounting standards, effective January 1, 2019. The Company adopted IFRS 16 using the modified retrospective approach, and as a result, the Company's comparative information was not restated. As a result, the comparability of the Company's 2019 Adjusted EBITDA to periods prior to January 1, 2019 is impacted. The overall impact to Adjusted EBITDA from continuing operations from the Company's adoption of IFRS 16 for three month period ended March 31, 2019 was an increase of $0.5 million.
Revenue from continuing operations decreased 6.7% to $30.7 million for the three month period ended March 31, 2019 compared to the same period in the prior year. The revenue decline was due to the impact of the regulatory changes that did not come into effect until the second quarter of the prior year. The revenue impact of these regulatory changes was partially offset by the increase in the average number of beds serviced in the first quarter of 2019 compared to the same period in the prior year, as well as the impact of revenue initiatives from the Business Re-Engineering Plan.
Consolidated Adjusted EBITDA from continuing operations decreased 10.7% to $2.0 million for the three month period ended March 31, 2019 compared to the same period in the prior year. Specialty Pharmacy Adjusted EBITDA was $3.4 million for the first quarter of 2019. Specialty Pharmacy Adjusted EBITDA increased by 60.3% compared to the fourth quarter of 2018 primarily due to the impact of the Business Re-Engineering Plan initiatives completed during the second half of 2018 and beds from new contract wins that were onboarded throughout the fourth quarter of 2018 and first quarter of 2019, as well as the impact of the transition to IFRS 16.
On February 14, 2019, the Company disposed of the operating assets of one of its retail pharmacy operations in Medicine Hat, AB. In addition, as required under IFRS, the Company classified its former Surgical and Medical Centres segment as assets held for sale at December 31, 2018. The current and prior year results of these businesses have been presented as discontinued operations within the consolidated statement of income and comprehensive income. Revenue and Adjusted EBITDA from discontinued operations were $9.5 million and $1.2 million, for the three month period ended March 31, 2019, respectively. The impact of the transition to IFRS 16 in discontinued operations was an increase to Adjusted EBITDA of $0.4 million.
Centric Health will host a conference call, including a slide presentation, to discuss its first quarter financial results on Wednesday, May 8, 2019 at 8:30 a.m. (ET).
Telephone Dial-In Access Information
To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. Those participating in the conference call by telephone can view the slide presentation by accessing the online webcast (see instructions below) and choosing the Non-Streaming Audio option.
Webcast Access Information
A live webcast of the conference call, including the slide presentation, will be available on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html). Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. To view the webcast presentation with slides, please choose either the Real Streaming Audio or Windows Streaming Audio option.
Archive Access Information
The conference call will be archived for replay by telephone until Wednesday, May 15, 2019 at midnight. To access the archived conference call, dial 416-849-0833 or 1-855-859-2056 and enter the reservation number 2486099.
The webcast with slide presentation will be archived for 90 days on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html).
For further information, please refer to the Company's complete filings at www.sedar.com.
ABOUT CENTRIC HEALTH
Centric Health's vision is to be the leading provider of pharmacy and other healthcare services to Canadian seniors. The Company is one of Canada's leading, and most trusted providers of comprehensive Specialty Pharmacy services and solutions to seniors. We operate a large national network of pharmacy fulfilment centres that deliver high-volume solutions for the cost-effective supply of chronic medication and other specialty clinical pharmacy services, serving more than 31,000 residents in over 450 seniors communities (long-term care, retirement homes, and assisted living facilities) nationally.
With services that address the growing demand within the Canadian healthcare system, Centric Health's unparalleled national care delivery platform provides significant potential for future expansion and growth.
This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the Company's business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events, including statements around 2019 performance, bed growth and Adjusted EBITDA margins. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the Company's liquidity and capital requirements, government regulation and funding, the highly competitive nature of the Company's industry, reliance on contracts with key customers and other risk factors described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change.
This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share. These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.
The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (recovery). Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs, changes in the fair value of the contingent consideration liability, impairments, stock based compensation expense, change in fair value of derivative financial instruments and gain on disposal of property and equipment recognized in the statement of income. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDA divided by the weighted outstanding shares on both a basic and diluted basis. The Company believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives. The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA as a key component of the covenant calculations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.
SOURCE Centric Health Corporation
For further information: David Murphy, President and Chief Executive Officer, Centric Health Corporation, 416-927-8400; Andrew Mok, Interim Chief Financial Officer, Centric Health Corporation, 416-927-8400