AAC Holdings, Inc. Reports First Quarter 2019 Results

• Q4 2018 and Q1 2019 Cost Savings Initiatives Expected to Result in Over $30 Million of Annualized Cost Savings and Leading to a 20% Decrease in Operating Costs Sequentially
• Secured Additional Liquidity with $30 Million Incremental Term Loan in March 2019

BRENTWOOD, Tenn., May 9, 2019 /PRNewswire/ -- AAC Holdings, Inc. (NYSE: AAC) (“the Company” or “AAC”) announced financial results for the first quarter and year ended March 31, 2019.

First Quarter 2019 Operational and Financial Highlights:
(All comparisons are to the comparable prior-year period, unless otherwise noted)

• Total inpatient census improved by 26% at March 31, 2019 compared to December 31, 2018
• New admissions increased 24% to 4,641
• Outpatient visits increased 31% to 39,717
• Total revenue was $55.4 million
• Implemented over $30 million in expected annualized expense reductions that are benefiting 2019 operating margins, leading to over a 20% sequential decrease in operating costs in the First Quarter compared to the Fourth Quarter 2018
• Closed a $30 million incremental term loan with existing lenders to provide additional liquidity

“Despite the challenges we faced last year, we’ve started this year with positive momentum and I’m confident that we will see continued improvement throughout the remainder 2019,” said Michael Cartwright, AAC Chairman & Chief Executive Officer. “Inpatient census has begun to improve in early 2019 with inpatient census up by over 25% at March 2019 compared to December 2018. The initiatives in sales and marketing have begun to show results as we continue to enhance our community and online outreach resources to better help those who need our help.”

“We also improved liquidity and reduce operating expenses during the first quarter of 2019,” Cartwright said. “We closed the $30 million incremental term loan that provided additional liquidity in March 2019 and continue to be focused on cost reduction initiatives. The expense savings initiatives implemented in late 2018 and in the first quarter of 2019 that are expected to total over $30 million in annualized savings are now being realized and had a positive impact on the first quarter of 2019.”

“Finally, I am excited to announce that we will be sharing our long-term strategic vision for the future on a call on Monday, May 13^th,” Cartwright continued. “Today’s call will focus on the first quarter of 2019, but on the call next week on Monday, I will layout my vision for the Company over the course of the next decade to be best in class clinical care, on-line content and science and technology – all while unlocking value for our shareholders.”

Cost Savings Initiatives

The Company enacted a series of cost savings initiatives during the fourth quarter of 2018 and into the first quarter of 2019 which are expected to result in over $30 million of annualized cost savings. These initiatives have included reductions in the Company’s corporate expenses, consolidation of its Las Vegas market, consolidation of the its southern California market, the sale of the Company’s New Orleans operations, and the consolidation of its lab operations.

Incremental Term Loan and Amendment of Existing Credit Facility

In March 2019, the Company closed a $30 million incremental term loan with its existing lenders. In addition, the Company amended its existing secured credit facility to, among other items, provide increased flexibility with respect to certain financial covenants.

Evaluation of Strategic Alternatives in AAC’s Real Estate Portfolio

The Company has commenced a process to generate additional value from its real estate portfolio consisting of treatment centers located across the United States. Management’s goal is to leverage the portfolio to create additional liquidity, lower its cost of capital and enhance shareholder value. Real estate strategic alternatives could include further sale leasebacks of individual facilities or larger portions of the Company’s real estate portfolio.

First Quarter 2019 Financial Results

On a sequential basis revenue decreased by 3.6% in the first quarter of 2019 compared to the fourth quarter of 2018 primarily due to lower average daily census for the quarter. Our inpatient census at March 31, 2019 increased by approximately 26% when compared to December 31, 2018. However, our total average daily census for the first quarter of 2019 compared to the fourth quarter of 2018 decreased by approximately 4.9% due to a lower starting point of census in the first quarter of 2019. Operating expenses on a sequential basis decreased by approximately 22.9% to $69.5 million for the first quarter of 2019 compared to $90.2 for the fourth quarter of 2018. This was primarily due to the benefit from the cost savings initiatives enacted during the fourth quarter for 2018 and into the first quarter of 2019 which are expected to result in over $30 million of annualized cost savings.

AAC breaks down its revenues between client related revenue and non-client related revenue. Client related revenue includes: (1) inpatient treatment facility services and related professional services; (2) outpatient facility services, related professional services and sober living services; and (3) client related diagnostic services, which includes point of care drug testing and client related diagnostic laboratory services. Non-client related revenue includes marketing and diagnostic services provided to third parties as well as addiction services provided to individuals in the criminal justice system.

Total revenue was $55.4 million compared with $81.2 million in the same period in the prior year.

Inpatient treatment facility revenue decreased 32.9% to $44.9 million compared with $66.9 million in the same period in the prior year.

Outpatient and sober living facility revenue decreased 27.9% to $6.5 million compared with $8.9 million in the same period in the prior year.

Client related diagnostic services revenue decreased 23.6% to $2.1 million compared with $2.8 million in the same period in the prior year.

Non-client related revenue decreased 26.4% to $1.9 million compared with $2.6 million in the same period in the prior year.

Net loss attributable to AAC Holdings, Inc. common stockholders was ($22.0) million, or $(0.90) per diluted common share, compared with net income attributable to AAC Holdings, Inc. common stockholders of $1.1 million, or $0.04 per diluted common share, in the prior-year period.

Adjusted EBITDA decreased to $(6.5) million compared with $17.9 million in the prior year. Adjusted EBITDA, is a non-GAAP financial measure. Tables reconciling these non-GAAP measures to the most directly comparable GAAP measures are included at the end of this release.

Balance Sheet and Cash Flows

As of March 31, 2019, AAC Holdings’ balance sheet reflected cash and cash equivalents of $17.9 million, net property and equipment of $163.0 million and total debt of $342.0 million (current and long-term portions). In March 2019, we closed on a $30 million incremental term loan that provides the company with additional liquidity.

Cash flows used in operations totaled $9.6 million and maintenance capital expenditures totaled $0.7 million for the first quarter of 2019.

Earnings Conference Call
The Company will host a conference call and live audio webcast on Thursday, May 9, 2019, at 9:00 a.m. CT to further discuss these results. The number to call for this interactive teleconference is 1-877-224-7960. A replay of the conference call will be available through May 23, 2019, by dialing 877-344-7529 and entering the replay access code, 10131526.

The live audio webcast of the Company’s quarterly conference call will also be available online in the Investor Relations section of the Company’s website at ir.americanaddictioncenters.org.

About American Addiction Centers

American Addiction Centers is a leading provider of inpatient and outpatient substance abuse treatment services. We treat clients who are struggling with drug addiction, alcohol addiction and co-occurring mental/behavioral health issues. We currently operate substance abuse treatment facilities located throughout the United States. These facilities are focused on delivering effective clinical care and treatment solutions. For more information, please find us at AmericanAddictionCenters.org or follow us on Twitter.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are made only as of the date of this release. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements may include information concerning AAC Holdings, Inc.'s (collectively with its subsidiaries; “AAC Holdings” or the “Company”) possible or assumed future results of operations, including descriptions of the Company’s revenue, profitability, outlook and overall business strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements. These risks, uncertainties and other factors include, without limitation: (i) the Company’s inability to effectively operate its facilities; (ii) the Company’s reliance on its sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates by certain third-party payors for inpatient and outpatient services and point-of-care and definitive lab testing; (iv) the Company’s failure to successfully achieve growth through acquisitions and de novo projects; (v) risks associated with estimates of the value of accounts receivable or deterioration in collectability of accounts receivable; (vi) a failure to achieve anticipated financial results from contemplated and prior acquisitions; (vii) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (viii) the Company’s failure to achieve anticipated financial results from contemplated and prior acquisitions; (ix) a disruption in the Company’s ability to perform diagnostic laboratory services; (x) maintaining compliance with applicable regulatory authorities, licensure and permits to operate the Company’s facilities and laboratories; (xi) a disruption in the Company’s business and reputational and economic risks associated with the civil securities claims brought by shareholders or claims by various parties; (xii) inability to meet the covenants in the Company’s loan documents or lack of borrowing capacity; and (xiii) general economic conditions, as well as other risks discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and other filings with the Securities and Exchange Commission. As a result of these factors, we cannot assure you that the forward-looking statements in this release will prove to be accurate. Investors should not place undue reliance upon forward-looking statements.

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SOURCE American Addiction Centers

Company Codes: NYSE:AAC