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Genesis Healthcare, Inc. (GEN)
Q4 2018 Earnings Conference Call
March 18, 2019 8:30 AM
Lori Mayer - Vice President, Investor Relations
George Hager - Chief Executive Officer and Director
Tom DiVittortio - Chief Financial Officer and Senior Vice President
Conference Call Participants
Chad Vanacore - Stifel
Joanna Gajuk - Bank of America
A J Rice - Credit Suisse
Previous Statements by GEN
» Genesis Healthcare, Inc. (GEN) CEO George Hager on Q3 2018 Results - Earnings Call Transcript
» Genesis Healthcare, Inc. (GEN) CEO George Hager on Q2 2018 Results - Earnings Call Transcript
» Genesis Healthcare's (GEN) CEO George Hager on Q1 2018 Results - Earnings Call Transcript
Good morning and thank you for joining us today. We issued our earnings press release earlier this morning. This announcement is available on the Investor Relations section of our website at genesishcc.com. A replay of this call will also be available on our website for one year. Before we begin, I would like to quickly review a few housekeeping matters.
First, any forward-looking statements made today are based on management’s current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today’s call.
Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities law, Genesis Healthcare and its affiliates do not undertake to publicly update or revise any forward-looking statements or changes that arise as a result from new information, future events, and changing circumstances or for any other reason.
In addition, any operation we mentioned today is operated by a separate independent operating subsidiary that has its own management, employees, and assets. References to the consolidated company and its assets and activities, as well as the use of the terms we, us, our and similar verbiage are not meant to imply that Genesis Healthcare has direct operating assets, employees or revenue or that any of the various operations are operated by the same entity.
Our discussion today and the information in our earnings release and in our public filings include references to EBITDA and adjusted EBITDA, which are non-GAAP financial measures. We believe that the presentation of non-GAAP financial measures provides useful information to investors regarding our results because these financial measures are useful for trending, analyzing and benchmarking the performance and value of our business, but such non-GAAP financial measures should not be relied upon at the exclusion of GAAP financial measures. Please refer to the company's reasons for non-GAAP financial disclosures and its GAAP to non-GAAP reconciliations contained in today's earnings release.
And with that, I'll turn the call over to George Hager, CEO of Genesis Healthcare.
Thank you, Lori. Good morning and thank you for joining us today. I would like to make a few brief comments regarding our performance for 2018. I would then turn the call over to Tom DiVittortio, Genesis's Chief Financial Officer for more details on our numbers and other updates.
Over the past several years, the post-acute care industry has gone through revolutionary change with increased focus on value, cost efficiencies, outcomes, care coordination and patient centered care. These were monumental changes. And with each of these changes, Genesis had to redefine many aspects of our business. I am very pleased to report that Genesis has successfully reacted to the constantly changing post-acute landscape.
I am most proud of how our frontline care givers and our supporting management team has reacted to these challenging times. Through their efforts, we achieved significant improvement in virtually every significant patient outcome metric. Including hospital readmissions and our five star ratings. Additionally, through a combination of well executed strategic portfolio of management transactions, significant restructuring of many of our landlord relationships, as well as improving business fundamentals we also achieved positive census and organic EBITDAR growth that we haven't seen in several years. I would like to highlight a number of important milestones we reached while we repositioned the company in 2018. In the second quarter of 2018 following our financial restructuring, we saw absolute year-over-year growth in adjusted EBITDAR less cash lease payments for the first time since the fourth quarter of 2015. In the third quarter of 2018 and in no way impacted by negotiated rent reductions adjusted EBITDAR on a same-store basis grew over the prior year quarter by 2.6%. We had not seen same store organic year-over-year growth at adjusted EBITDAR since 2015.
And now in the fourth quarter of 2018, despite having 46 fewer facilities compared to the fourth quarter 2017, adjusted EBITDAR grew 40 basis points on an absolute basis and 6.5% on a same store basis. Last and perhaps most encouraging, we saw a 30 basis point increase in same store occupancy this quarter over the same quarter last year, marking the first period of year-over-year occupancy growth since 2014. I would also like to share that through last week, we are continuing to see improving year-over-year same store occupancy metrics.
It appears we may have reached an inflection point and we expect to see marginally improving census levels throughout 2019. On the topic of portfolio optimization, I'd like to discuss the modifications we made to our portfolio in 2018 in a little more detail. Over the past year, we have been primarily focused on optimizing our portfolio with particular focus on exiting those markets where we do not have the local market density or meaningful acute-care payer relationships to compete. During the year, we divested, exited or closed the operations of 55 facilities and completely exited the state of Texas.