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Alliance Imaging Inc. (AIQ)
Q4 2007 Earnings Call
February 21, 2008, 8:30 am ET
Eli Glovinsky - Executive Vice President, General Counsel, and Secretary
Paul Viviano - Chairman of the Board and Chief Executive Officer
Howard Aihara - Executive Vice President and Chief Financial Officer
Darren Lehrich - Deutsche Bank
Whit Mayo - Stephens Incorporated
Mark Arnold - Piper Jaffray
Ann Haynes - Leerink Swann
Michael Scarangella - Merrill Lynch
Kyle Smith - Jefferies & Co
(Brian Chandler - Workpoint Capital)
(Myal Hyponetho) - Credit Suisse
Eli Glovinsky - Executive Vice President, General Counsel, and Secretary
Previous Statements by AIQ
» Alliance HealthCare Services, Inc. Q4 2008 Earnings Call Transcript
» Alliance Imaging, Inc. Q2 2008 Earnings Call Transcript
» Alliance Imaging Inc. Q1 2008 Earnings Call Transcript
This conference call contains forward-looking statements which are based on the Company's current expectations, forecasts and assumptions. Forward-looking statements involve risks and uncertainties which could cause actual outcomes and results to differ materially from the Company's expectations, forecasts and assumptions.
These risks and uncertainties include factors affecting the Company's ability to stabilize its core MRI business and grow revenue and profits from PET/CT, fixed site imaging centers and radiation therapy, the Company's leverage including fluctuations and interest rates, the Company's ability to obtain financing, the effect of operating and financial restrictions on the Company's debt instruments, the accuracy of the Company's estimates regarding capital requirements, the effective intense levels of competition in the Company's industry, changes in the healthcare regulatory and reimbursement environment, the Company's ability to keep pace with technological development within the industry, the Company's ability to integrate acquisitions, the effects of natural disasters, and other risks and uncertainties including both enumerated and described in the company's filings with the Securities and Exchange Commission, which are available on the SEC web site at www.sec.co. The company disclaims any intention or obligation to update or revise any forward-looking statements whether is a result of new information, future events, or otherwise.
Financial and other statistical information presented on this conference call in the company's 2008 guidance release along with the information required by the SEC's Regulation G may be accessed through the financial releases button in the Investor Relations section of the company's web site located at www.allianceimaging.com.
The company is offering a live webcast of today's call, which can be accessed on the company's web site. Please visit our web site for replay information.
I will now turn the conference over to Paul Viviano, Chairman of the Board and Chief Executive Officer of Alliance Imaging. Please go ahead, Paul.
Paul Vivino - Chairman of the Board and Chief Executive Officer
Thank you, Eli. I would like to welcome you to Alliance Imaging's fourth quarter and full year 2007 earnings call. With me today is Howard Aihara, our Executive Vice President and Chief Financial Officer.
On today's call I will first briefly review our 2007 results and achievements followed by an update of the trends in the Healthcare Services Industry and the specifics associated with the diagnostic imaging sector. I will then provide an overview of our companywide initiatives and Howard will follow with the details of our fourth quarter and full year 2007 financial performance. We will open up the call for a question-and-answer session after our prepared remarks.
Yesterday, Alliance announced full year 2007 revenue of $444.9 million and adjusted EBITDA of $165.6 million, both of which are above the company's guidance ranges. These performance indicators reflect many achievements for Alliance in 2007 which was the year of great transition.
Our most notable achievements include, proactively managing the impact of the DRA and HOPPS reimbursement rate reduction, which impacted our revenue by $14 million while still maintaining our relatively high operating margins. Continue organic volume growth in our PET/CT business, diligently working to maintain our mobile MRI operating margins, generating strong operating cash flow totaling approximately $118 million in 2007, opening 16 fixed-site imaging centers and two radiation therapy cancer centers, adapting seamlessly to the change in major shareholder ownership in April 2007, successfully completing two significant acquisitions in the fourth quarter, and closing a $150 million bond offering increasing our capacity intended for future acquisitions.
Combined, these factors allowed us to exceed expectations in 2007 and our company is well positioned for continued success and revenue and adjusted EBITDA growth in 2008. I would also like to reaffirm our full year 2008 guidance ranges.
For full year 2008, Alliance expects revenue to range from $472 to $484 million. Adjusted EBITDA for full year 2008 is expected to range from $172 to $182 million. Year-over-year volume growth in Healthcare Services continues to be relatively soft. A recent report which cracks volume data for approximately 500 acute care hospitals reported that for the month of December same store admission growth totaled approximately negative 1% year-over-year. The average Same-Store hospital admission growth rate for the fourth quarter was less than 1% year-over-year.
For the third quarter of 2007, same store adjusted admissions averaged positive 2% year-over-year. Both inpatient admissions and adjusted admissions, which include hospital outpatient services have experienced very modest to flat growth during full year 2007.
On an anecdotal basis, our hospital partners and customers are also reporting very modest to flat annual volume growth. From our perspective, the market conditions that dictate this flat to modest same store acute hospital admission growth rate will remain in place.
For full year 2008, we expect the hospital and adjusted admissions will continue at this very low rate of growth. I highlighted industrywide statics, because low volume growth in the acute care hospital sector directly impacts the company's performance. Alliance generates approximately 90% of revenue from wholesale relationships overwhelmingly with acute care hospitals. Thus as hospital volume growth has been negatively impacted our scan volume has also been adversely affected.
At the cost of diagnostic imaging rising, commercial insurers have increased their rate of retention, a radiology benefit managers which continues to be a contributing factor to modest volume growth. Private payers continue to implement initiatives which negatively impact volumes by placing undue hardship on patient and nurse providing service in order to cut costs.