Centric Health Corporation (“Centric Health” or “the Company”) (TSX: CHH), one of Canada’s leading healthcare services companies, reported its financial results for the third quarter ended September 30, 2019.
Highlights for the Third Quarter
“Our momentum continued in the third quarter, with strong growth in revenue and beds serviced, and significant growth in Adjusted EBITDA for our core Specialty Pharmacy business,” said David Murphy, President and Chief Executive Officer of Centric Health. “The quarter was also an eventful and successful one as it relates to strengthening our balance sheet, as we announced both the sale of our Surgical and Medical Centres division and a large private placement. With these milestones and our strategic transformation substantially completed, we have significantly improved our ability to capitalize on organic growth and acquisition opportunities in the Canadian institutional pharmacy sector.”
Revenue from Specialty Pharmacy for the third quarter increased 12.4% to $31.4 million compared to the same period in the prior year as a result of continued growth in the average number of beds serviced during the quarter and the impact of revenue initiatives from the 2018 Business Re-Engineering Plan.
Adjusted EBITDA from Specialty Pharmacy increased 204.1% to $4.0 million for the third quarter compared to the same period in the prior year. The increase was due to higher revenue, the impact of the Business Re-Engineering Plan, and operational efficiencies resulting from increased scale as a higher average number of beds were serviced compared to the prior period. The impact of IFRS 16 for the quarter was an increase to Adjusted EBITDA from Specialty Pharmacy of $0.5 million. Adjusted EBITDA margin from Specialty Pharmacy was 12.9% for the quarter (11.3% excluding the impact of IFRS 16).
The Company’s 2019 financial results include the impact of IFRS 16, a substantial change to lease accounting standards, effective January 1, 2019. Centric Health adopted IFRS 16 using the modified retrospective approach and the Company’s comparative information was not restated. As a result, the comparability of the Company's 2019 Adjusted EBITDA to periods prior to January 1, 2019 is impacted.
Corporate office expenses were lower for the quarter by 10.1% at $1.2 million compared to the same period in the prior year, with the variance being primarily due to labour savings realized in the current year.
Adjusted EBITDA from continuing operations was $2.8 million for the third quarter compared to a loss of $42 thousand for the same period in the prior year. The overall impact to Adjusted EBITDA from continuing operations from the adoption of IFRS 16 was an increase of $0.5 million for the quarter.
During the three and nine month periods ended September 30, 2019, the Company disposed of the operating assets of its retail pharmacy operations in Grande Prairie, AB and Medicine Hat, AB. The results of these operations have been included as part of discontinued operations on the consolidated statement of income and comprehensive income. As required under IFRS, the Company classified its former Surgical and Medical Centres segment as assets held for sale and have presented its current and prior year results as discontinued operations. Revenue and Adjusted EBITDA from discontinued operations were $8.9 million and a loss of $0.1 million, for the third quarter, respectively. The impact of the transition to IFRS 16 in discontinued operations was an increase to Adjusted EBITDA of $0.4 million for the quarter.
For further information, please refer to the Company’s complete filings at www.sedar.com.
ABOUT CENTRIC HEALTH
Centric Health's vision is to be the leading provider of pharmacy and other healthcare services to Canadian seniors. The Company is one of Canada's leading, and most trusted providers of comprehensive Specialty Pharmacy services and solutions to seniors. We operate a large national network of pharmacy fulfilment centres that deliver high-volume solutions for the cost-effective supply of chronic medication and other specialty clinical pharmacy services, serving more than 31,000 residents in over 460 seniors communities (long-term care, retirement homes, and assisted living facilities) nationally.
With services that address the growing demand within the Canadian healthcare system, Centric Health's unparalleled national care delivery platform provides significant potential for future expansion and growth.
This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the Company’s business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the Company’s liquidity and capital requirements, government regulation and funding, the highly competitive nature of the Company’s industry, reliance on contracts with key customers and other risk factors described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change.
This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share. These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.
The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (recovery). Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs, changes in the fair value of the contingent consideration liability, impairments, stock based compensation expense, change in fair value of derivative financial instruments and gain on disposal of property and equipment recognized in the statement of income. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDA divided by the weighted outstanding shares on both a basic and diluted basis. The Company believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives. The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA as a key component of the covenant calculations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.