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Gentiva Health Services (GTIV)

Q3 2012 Earnings Call

November 01, 2012 9:00 am ET


John Mongelli

Tony Strange - Chairman, Chief Executive Officer and President

Eric R. Slusser - Chief Financial Officer, Executive Vice President and Treasurer


Darren Lehrich - Deutsche Bank AG, Research Division

Brad Mayers

Sheryl R. Skolnick - CRT Capital Group LLC, Research Division

Gregory M. Macosko - Lord, Abbett & Co. LLC

Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division



: Good morning. My name is Paula, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Gentiva Health Services Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 1, 2012. It is now my pleasure to turn the floor over to John Mongelli, Vice President of treasury and Investor Relations. Sir, you may begin your conference.

John Mongelli


Good morning, everyone, and welcome to Gentiva's Third Quarter 2012 Earnings Conference Call. Speaking on the call today are Tony Strange, our Chairman and CEO; and Eric Slusser, our CFO.

We hope that each of you had a chance to review the company's earnings report, which was released this morning. All statements made during this call relating to future results and events are forward-looking statements that are based on our current expectations. Actual results could differ materially from those projected in forward-looking statements because of a number of risks, factors and uncertainties, which are discussed in our annual and quarterly SEC filings and in the cautionary statements contained in our press release and on our website.

Our call today will be consistent with the SEC's Regulation FD. We encourage participants to ask their questions during the call since we have certain limitations on comments that can be made in individual inquiries. Today's call also conforms to Regulation G regarding the reconciliation of GAAP and non-GAAP disclosure. As a result, we will not discuss non-GAAP financial measures on this call, except for those set forth in our press release. You may access a telephone replay of this call later today, through November 8.

A transcript of the call will be posted to our website and will be available for the next 12 months. Following today's prepared remarks, we will open the call to questions. [Operator Instructions] And with that, I'll turn the call over to Gentiva's Chairman and CEO, Tony Strange.

Tony Strange


Thank you, John, and good morning, everyone. Thank you for joining our call for our third quarter 2012. Before we get started, I'd like to recognize the impact of the hurricane this week. There are probably people on this call who have experienced personal losses during the storm, and our thoughts and prayers are with you and your families. The Gentiva family has also been affected. There are a total of 50 offices that have been affected by the storm, but I'm proud to say that while there are 5 that still don't have power today, all of our offices are open and providing care for existing patients and accepting new patients with all employees and all patients accounted for.

I'm always impressed when I see our employees execute on our disaster recovery plans and how efficiently they return to the business of providing care. I'm proud of all of you. Let's turn to our results.

Overall, I'm pleased with our results for the quarter as continued strong home health volume growth and good expense management offset the typical seasonality that we see during the third quarter.

For the third quarter, revenues from continuing operations were $424 million and adjusted EBITDA from continuing operations was $46 million, producing earnings of $0.32 per diluted share. Adjusted EBITDA margins were approximately 11% this quarter, driven by strong contribution margins in both home health and hospice and lower expenses at our corporate level. Given the overall softness in health care volumes across all sectors, I'm pleased that our year-to-date results have positioned us to raise our guidance for the full year 2012.

During the quarter, we also continued to make good progress with our collection efforts, which coupled with our strong operating results, enable us to post strong, free cash flow once again this quarter. Eric will take you through the details of the increasing guidance and the strong cash flow results in just a few minutes.

Today, I'm going to focus my comments on our third quarter results, key activities in Washington D.C., and then I'll wrap up with some thoughts on the industry outlook heading into 2013. Let's jump right into our results.

Looking first at our home health division, revenues from continuing operations for the quarter were $235 million and EBITDA from continuing operations was $32 million or 13.8%. Year-over-year episodic volumes increased by 6%, while admissions grew 5%, excluding the impact of closed or sold locations. This marks the fifth consecutive quarter of at least mid-single-digit admission growth as the sales investments that we've made over the last couple of years have produced solid, consistent results. Given the softness in hospital and physician volumes, I continue to be very pleased with these results. Our home health team continues to execute on its growth plans while demonstrating strict discipline around cost measures.

Margins were impacted during the quarter by higher labor expenses associated with the increased time off for summer vacations, which is typical for Q3, as well as the addition of 32 new sales FTEs as we ramp up for continued growth in 2013.

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