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Genesis Healthcare, Inc. (GEN)
Q1 2019 Earnings Conference Call
May 10, 2019 8:30 AM ET
Lori Mayer - Vice President of Investor Relations
George Hager - Chief Executive Officer
Tom DiVittorio - Chief Financial Officer
Conference Call Participants
Chad Vanacore - Stifel
A.J. Rice - Credit Suisse
Previous Statements by GEN
» Genesis Healthcare, Inc. (GEN) CEO George Hager on Q4 2018 Results - Earnings Call Transcript
» 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
I would now like to turn the conference over to Lori Mayer, Vice President of Investor Relations. Ma'am, please go ahead.
Good morning and thank you for joining us today. We issued our earnings press release last evening. This announcement is available in 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, changing circumstances or for any other reason.
In addition, any operation we mention today is operated by a separate independent operating subsidiary that is -- 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 adjusted EBITDAR, EBITDA, adjusted EBITDA, which are non-GAAP financial measures. We believe 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 positive operating performance and our successful transactional activity during the first quarter. I will then turn the call over to Tom DiVittorio, Genesis’ Chief Financial Officer, for more details on our results and other updates.
First, I am pleased we were able to build on our recent momentum, with another strong quarter of improving operating trends, earnings growth and the successful execution of our portfolio optimization strategy. Beginning in the back half of 2018, we reported favorable trends with respect to many of the key performance indicators that drive our business; favorable trends that we have not seen since the 2014-2015 timeframe.
Our first quarter 2019 results continued these positive trends, showing same-store occupancy growth for the second consecutive quarter and same-store EBITDAR growth for the third consecutive quarter.
I would like to highlight very strong same-store EBITDAR growth of 6.5% this quarter versus the prior year quarter. These improving results reflect a more stable census and reimbursement environment, effective cost management, improvement in our therapy and staffing businesses, and the impact of continued portfolio of management activities.
Even though we have not highlighted our ancillary divisions in the past, our rehab division GRS and our staffing division career staff, these divisions also showed very strong performance in the quarter. Combined, our ancillary divisions produced EBITDAR growth of 17% from $25.3 million versus $21.6 million in the prior year quarter. I am very optimistic about these two divisions going forward.
I'd like to move on to our very successful portfolio optimization activities completed thus far in 2019. As you know, we have been keenly focused on improving the quality of our portfolio over the last two years. We have paid particular retention to exiting markets where we do not have the local market density or meaningful acute care and payer relations -- relationships to effectively compete.
During this quarter, we divested, exited or closed the operations of 10 facilities with annual net revenue of $98 million. Subsequent to this quarter end, we have further deliver the balance sheet by selling five owned facilities located in California. And we expect to close on the sale of three additional California owned facilities in the coming months.
Also subsequent to the quarter end, Genesis divested two underperforming leased facilities. In aggregate, these 10 facilities generated approximate annual net revenue of $97 million. These divestiture activities reflect our continued efforts to exit non-core markets and to further delever our balance sheet.