Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Diversicare Healthcare Services, Inc. | ex991-fy17q4earningsrelease.htm |
| 8-K - 8-K 2017 Q4 EARNINGS RELEASE - Diversicare Healthcare Services, Inc. | a8k-fy17q4earningsrelease.htm |
Nasdaq: DVCR
Investor Update
As of December 31, 2017
Nasdaq: DVCR
Forward-looking statements made in this presentation involve a number of risks and uncertainties, but not limited
to:
as well as other risk factors detailed in the Company's Securities and Exchange Commission filings. The Company
has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31,
2017, as well as in other filings with the Securities and Exchange Commission, which readers are encouraged to
review for further disclosure of other factors that could cause actual results to differ materially from those
indicated in the forward-looking statements.
Forward-Looking Statements
2
the outcome of proceedings alleging violations of state or Federal
False Claims Acts
our ability to increase patients served at our renovated centers
our ability to successfully integrate the operations of our new
nursing centers in Alabama and Mississippi, as well as successfully
operate all of our centers
laws and regulations governing quality of care or other laws and
regulations applicable to our business including laws governing
reimbursement from government payers
changes in governmental reimbursement changes in occupancy rates in our centers
the impact of the recently adopted federal health care reform or
any future healthcare reform
changes in anticipated revenue and cost growth and the anticipated
results of operations
any increases in the cost of borrowing under our credit
agreements
our ability to comply with covenants contained in those credit
agreements
our ability to renew real estate investment trust leases under
reasonable terms
the accuracy of our estimate of our anticipated professional liability
expense
the outcome of professional liability lawsuits and claims our ability to control ultimate professional liability costs
the costs of investing in our business initiatives and development Our ability to control costs
the impact of future licensing surveys the effect of changes in accounting policies
changing economic and competitive conditions changes to our valuation of deferred tax assets
Nasdaq: DVCR
Non-GAAP Information
This presentation contains certain non-GAAP financial measures, including, EBITDA, Adjusted EBITDA
and Adjusted EBITDAR. EBITDA is a non-GAAP financial measure which consists of net (loss) income
before interest, income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP
financial measure, is EBITDA adjusted to add back non-recurring items such as (i) acquisition related
costs, (ii) lease termination costs and (iii) gain on the sale of an unconsolidated affiliate. Adjusted
EBITDAR is Adjusted EBITDA adjusted to add back lease expense. Our presentation of EBITDA, Adjusted
EBITDA and Adjusted EBITDAR should not be construed as an implication that our future results will be
unaffected by unusual or non-recurring items. The presentation of the non-GAAP financial information
is not intended to be considered in isolation or as a substitute for any measure prepared in accordance
with GAAP. Because non-GAAP financial measures presented in this presentation are not measurements
determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP
financial measures, as presented, may not be comparable to other similarly titled measures presented
by other companies.
Diversicare believes that these non-GAAP financial measures facilitate making period-to-period
comparisons and are meaningful indications of its operating performance. We have also presented
Adjusted EBITDA in this presentation because we believe it is useful to provide investors and other users
of our financial statements this performance measure to align with how management assesses our
results of operations.
A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is
included in the attached Appendix A to this presentation.
3
Nasdaq: DVCR
Leading Skilled Nursing Provider
Compelling Demographic Trends
Management’s Strategic Vision Yielding Results
Improving Patient Quality Measures, Census And Skilled Mix
Demonstrated Ability To Grow And Enhance Portfolio
Positively Trending Financial Results
Investment Highlights
4
Nasdaq: DVCR
• Joined Diversicare in 2012
• 20+ years of experience in
the LTC industry
• Previous senior leadership
positions at:
‒ Golden Living
• Licensed Physical Therapist
• Licensed Nursing Home
Administrator
Executive Leadership
• Joined Diversicare in 2012
• 10+ Years of senior finance
positions in the healthcare
industry
• Previous senior leadership
positions at:
‒ NuscriptRX
‒ Take Care Health
Systems
‒ I-TRAX, Inc. (CHD
Meridian)
• Joined Diversicare in 2010
• 25 Years+ of experience in
the LTC industry
• Previous senior leadership
positions at:
‒ Beverly
‒ Living Centers of
America
‒ Skilled Healthcare
• SNF – Rehab - Hospice
Jay McKnight
Chief Financial Officer
Kelly Gill
CEO, President & Director
Leslie Campbell
Chief Operating Officer
5
Nasdaq: DVCR
NE
CO
OK
LA
FL
(1)
IA
IL
KS (6)
OH
(5)IN
(1)
MO
(3)
AR
KY (13)
TN (5)
PA
MS
(9)
AL
(20)
SC
NC
GA
VA
WV
TX (13)
6
Diversicare at a Glance
FY16 Revenue $426M – FY17 Revenue $575M; 34.9% Growth
Currently – 76 SNFs, 1 ALF – 8,456 Licensed Skilled Nursing
Beds – 10 States
Headquartered in Brentwood, TN
Nasdaq: DVCR
7
Company Profile
Public Company since 1994
NASDAQ Listed Company Symbol: DVCR
Added to Russell Microcap Index in 2014
52 week range $8.40 – $12.25
Historically paid $0.22 annual dividend
Headquartered in Brentwood, TN
Nasdaq: DVCR
8
Long Term Care Industry Overview
• Compelling Demographic Trends
• High Quality Clinical Outcomes
• Relative Low Cost of Care
• Risks to the Industry and the Company
Nasdaq: DVCR
9
Compelling Industry Demographics
Risi
n
g
Deman
d
St
able
Su
p
pl
y
Sources: AHCA, CMS OSCAR Data and US Census Bureau, US Administration on Aging
15,000
15,500
16,000
16,500
17,000
2000 2002 2004 2006 2008 2010 2012 2014 2016
Number of Skilled Nursing Facilities
0
20
40
60
80
100
1990 2000 2010 2020E 2030E 2040E 2050E 2060E
Age 65+ Population (in millions)
Nasdaq: DVCR
10
• Long term care spending continues to increase
‒ Medicare and Medicaid expenditures for SNFs expected to grow 65% from
2015 to 2025
‒ Annual spending on older adults is expected to increase 250% by 2040
Sources: Medpac and US HHS Department
Compelling Industry Demographics
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Medicare and Medicaid SNF Spending
(in billions)
Medicare Medicaid
Nasdaq: DVCR
11
Relative Cost Per Case of Treatment
Across Post-Acute Care Providers
Sources: Medpac and US HHS Department
$0
$20
$40
$60
$80
$100
$120
Stroke Hip Fracture Joint
Replacement
Respiratory w/
Vent
Tracheotomy w/
Vent
$9 $9 $11 $6 $10
$34 $34
$18 $17
$26
$31 $31
$45
$67
$115
SNF IRF LTAC
SNFs are recognized as high quality, low cost provider of
institutional post-acute care
Nasdaq: DVCR
Risks to the Industry and the Company
A number of risks may impact the Industry in general and the Company in particular, including
litigation risks and Government reimbursement/regulation risks.
Litigation Risks include:
• The provision of health care services results in numerous professional liability claims. As of
December 31, 2017, the Company had 72 professional liability lawsuits pending against it,
many of which are substantially self-insured; thus, the Company has significant potential
professional liability exposure.
• The Industry is subject to extensive regulatory scrutiny and lawsuits alleging violations of the
False Claims Act. The Company is currently defending an investigation relating to its therapy
services arising from a false claims lawsuit and an investigation related to the completion of
preadmission evaluation forms required by the Tennessee Medicaid Program.
• The Company is the subject of a purported class action lawsuit against one of its former
Arkansas facilities seeking damages for alleged chronic understaffing.
12
Nasdaq: DVCR
Risks to the Industry and the Company
Government Reimbursement Risks include:
• In recent years, there have been initiatives on the federal and state levels for comprehensive
reforms affecting the availability, payment and reimbursement of healthcare services in the
United States. The Industry is subject to ongoing health care reform which is likely to
continue to affect the provision of healthcare services and may require changes in the way
the Company conducts its business.
• The Industry, as well as the Company, is primarily dependent upon reimbursement from
third-party payors, including the Medicare and Medicaid programs. Significant reductions in
the reimbursements provided by these programs and other changes have been proposed
that would, if implemented, negatively impact the Company’s net revenues, net income and
cash flows.
• The health care industry is subject to numerous laws and regulations of federal, state and
local governments. These laws and regulations include, but are not necessarily limited to,
matters such as licensure, accreditation, government health care program participation
requirements, protection of patient health information, reimbursement for patient services,
quality of patient care and Medicare and Medicaid fraud and abuse. The Company must
comply with these increased regulations in order to qualify for reimbursement under
Medicare and Medicaid Programs.
13
Nasdaq: DVCR
14
Company Overview
• Mature Company
• Provides a full spectrum of post-acute
healthcare services
• Robust operating platform capable of
significant growth expansion
Nasdaq: DVCR
Investments made in internal improvements and scalability
position Diversicare for external growth
Launched Q3 2010 Today
Expanded
Focus Now On
Portfolio
Growth
Retooling: Areas of Focus
Platform
Development
Operational
Improvement
Facility
Renovations
Key Strategic Accomplishments
15
Nasdaq: DVCR
Implement an Electronic Medical Record (EMR)
Solution
Centralization of Key Processes
People – Processes – Resources
Completed – Company repositioned for rapid growth
Platform Development and Operational
Improvements
16
Nasdaq: DVCR
17
Key Results and Outcomes
• Improved Quality Measures
• Improved patient mix and reimbursement rates
• Improved operating and G&A leverage
• Demonstrated growth through acquisitions
Nasdaq: DVCR
Results for All Centers: 5 Star Quality
Measures Relative to For-Profit Peer Group
18
3.95
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Overall QM Rating
DVCR Industry For-Profit Not-For-Profit
Diversicare is an industry leader in 5 Star
Quality Measures outcomes.
Nasdaq: DVCR
A – Resulting from a 2% decrease in rates as a result of sequestration beginning April 1, 2013.
Results: Rate Increases Driven By Higher Acuity
• Medicare rate growth driven by acuity
• 17.7% Increase from FY10 Q3 to FY17 Q4
• 4.2% CAGR
19
$380
$430
$480
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
$388
$457
Medicare Rate Per Day
Medicare Rate Per Day RUGS IV Final Rule Impact
A
Nasdaq: DVCR
• Medicaid rates driven by acuity
• 20.1% Increase from FY10 Q3 to FY17 Q4
• 4.7% CAGR
Results: Rate Increases Driven By Higher Acuity
20
$145
$150
$155
$160
$165
$170
$175
$180
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
$148
$178
Medicaid Rate Per Day
Medicaid Rate Per Day
Nasdaq: DVCR
Results: Growth in Operated Facilities
• Our ability to integrate facilities onto our platform is proven by our growth and early accretion of new facilities.
• We acquired 22 facilities in the fourth quarter of 2016.
• On July 1, 2017, we acquired a facility located in Selma, Alabama.
21
45
30
40
50
60
70
80
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
2017
Q1
2017
Q2
2017
Q3
2017
Q4
76
Nasdaq: DVCR
Acquisitions are Accretive to earnings within a quarter of
acquisitions date – the exceptions being development
opportunities like new construction, major renovations, etc.
Demonstrated Platform Scalability by successful integration
of new facilities
New Facility Integration, including EMR, implemented
during the first quarter of operations at new facilities
Results: Impact Of New Centers
22
Nasdaq: DVCR
Results: Revenue Impact of Acquisitions
23
* For the purposes of this chart, the “same-store group” represents all centers operated by the Company prior to January 1, 2015.
$-
$20
$40
$60
$80
$100
$120
$140
$160
Q1 ’14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
Quarterly Revenue
Same-store group* 2015 Acquisitions (3) 2016 Acquisitions (22) 2017 Acquisitions (1)
Nasdaq: DVCR
*Same-Store group represents all nursing centers acquired by the Company prior to January 1, 2016.
Results: New Centers and Same-Store
24
Nasdaq: DVCR
Results: Revenue Growth and Operating Leverage
• Continued Company-wide cost reduction efforts in place
o Diligent vendor management and product selection criteria
o Centralized purchasing functions drive consistency through all facilities
o Revenue and operating expenses increased in the fourth quarter due to
the acquisition of 22 new centers
25
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
$30.0
$50.0
$70.0
$90.0
$110.0
$130.0
$150.0
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
Revenue and Facility-Level Operating Profit
Revenue Operating Profit (%)
Nasdaq: DVCR
• Continued G&A reduction efforts in place
o Right-sized overhead structure for new portfolio
o Centralized core functions to leverage skilled teams
• Savings from G&A reductions funded strategic investments
Results: G&A Leverage
26
A –G&A expenses increased in the third quarter of 2016 due to preparation for our acquisition activity of 22
centers in the fourth quarter.
A
5.6%
5.0%
6.0%
7.0%
8.0%
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
G&A Expense as a % of Revenue
Nasdaq: DVCR
27
Current Areas of Focus
• Continuous quality improvement
• Enhancing existing portfolio
• Growth through accretive acquisitions
Nasdaq: DVCR
Continuous improvement of Quality Measures
Continue to drive volume of patients served
Improve skilled mix / provide high-acuity services
Ongoing renovations of existing facilities
Continue to Enhance Existing Portfolio
28
Nasdaq: DVCR
Achieved goal of doubling the size of the Company in 3 years
Target: 5-10 new facilities per year
Active acquisition pipeline
Expanded operating infrastructure = Scalability
Structure flexibility = Several sources of financial capacity
Portfolio Growth
29
Nasdaq: DVCR
• Full Ownership Of Assets
• Participate In Value Appreciation
• Enhance Facility Ownership
Fee-Simple
Acquisitions
• Minimal Capital Required
• Leverage Turnaround Capabilities
• Leverage Strong REIT Relationships
Assumption of
Long-Term
Operating
Leases
2010 Today
20% 24%
80% 76%
Flexible Structure Broadens Pipeline
30
Acquisition Types
Nasdaq: DVCR
31
Summary
• Improved operational and financial results
• Attractive investment dynamics
• Repositioned for the future
Nasdaq: DVCR
Key Financial and Operating Statistics
32
Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016
Average Daily Census 6,740 6,854 6,749 6,770 6,402
Total Average Daily Census –
Medicare & Managed Care
988 994 1,053 1,065 938
Skilled Mix % 14.7% 14.5% 15.6% 15.7% 14.6%
Occupancy (Available Beds) 83.3% 84.7% 83.5% 85.5% 85.9%
Medicare Rate Per Day $457.02 $455.95 $453.02 $451.26 $458.47
Medicaid Rate Per Day $178.29 $176.26 $173.92 $173.75 $173.05
Revenue (Millions) $144.4 $146.4 $142.6 $141.5 $135.0
Facility Level Operating Profit $28.2 $28.3 $29.4 $30.8 $28.5
G&A % of Revenue 5.6% 5.5% 5.8% 6.3% 6.8%
Net Income (Loss) $(5.9) $(0.6) $0.4 $1.3 $1.4
Adjusted EBITDAR $17.4 $17.6 $18.6 $19.3 $18.4
Adjusted EBITDA $3.7 $3.9 $4.8 $5.5 $6.0
Nasdaq: DVCR
Leading Skilled Nursing Provider
Compelling Demographic Trends
Management’s Strategic Vision Yielding Results
Improving Patient Quality Measures, Census And Skilled Mix
Demonstrated Ability To Grow And Enhance Portfolio
Positively Trending Financial Results
Investment Highlights
33
Nasdaq: DVCR
Appendix A: Reconciliation of Net Income to Adjusted
EBITDA and Adjusted EBITDAR
34
(a) Represents non-recurring costs associated with acquisition-related transactions.
(b) Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in
September 2017.
(c) Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017.
(d) Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017.
(e) Represents non-recurring gain on the sale of an unconsolidated affiliate sold in November 2016.