AAC Holdings, Inc. Reports First Quarter 2019 Results

AAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(Dollars in thousands, except share data)

Three Months Ended

March 31, 2019

March 31, 2018

Revenues

Client related revenue

$

53,489

$

78,630

Non-client related revenue

1,881

2,557

Total revenues

55,370

81,187

Operating expenses

Salaries, wages and benefits

40,553

40,084

Client related services

6,041

7,747

Advertising and marketing

3,295

2,599

Professional fees

4,122

3,650

Other operating expenses

11,363

10,588

Rentals and leases

2,000

2,116

Litigation settlement

(1,238)

2,791

Depreciation and amortization

4,344

5,464

Gain on sale

(1,010)

—

Acquisition-related expenses

—

305

Total operating expenses

69,470

75,344

(Loss) income from operations

(14,100)

5,843

Interest expense, net

10,260

6,709

Other (benefit) expense, net

(211)

9

Loss before income tax benefit

(24,149)

(875)

Income tax benefit

(33)

(38)

Net loss

(24,116)

(837)

Less: net loss attributable to noncontrolling interest

2,097

1,893

Net (loss) income attributable to AAC Holdings, Inc.

      common stockholders

$

(22,019)

$

1,056

Basic (loss) earnings per common share

$

(0.90)

$

0.04

Diluted (loss) earnings per common share

$

(0.90)

$

0.04

Weighted-average common shares outstanding:

Basic

24,495,163

23,744,208

Diluted

24,495,163

23,781,604

AAC HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in thousands)

March 31

December 31

2019

2018

Assets

Current assets

Cash and cash equivalents

$

17,869

$

5,409

Accounts receivable, net of allowances

45,684

47,860

Prepaid expenses and other current assets

2,518

10,695

Total current assets

66,071

63,964

Property and equipment, net

163,045

166,921

Right-of-use assets, net

30,243

—

Goodwill

198,952

198,952

Intangible assets, net

10,834

12,063

Other assets

11,079

10,377

Total assets

$

480,224

$

452,277

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

17,167

$

13,507

Accrued and other current liabilities

28,669

30,544

Accrued litigation

4,827

8,000

Current portion of lease liability

5,645

—

Current portion of long-term debt

332,925

309,394

Total current liabilities

389,233

361,445

Deferred tax liabilities

1,137

1,227

Long-term debt, net of current portion and debt issuance costs

9,039

9,764

Lease liability, net of current portion

29,681

—

Financing lease obligation, net of current portion

24,384

24,421

Other long-term liabilities

8,229

13,147

Total liabilities

461,703

410,004

Stockholders' equity

42,758

64,413

Noncontrolling interest

(24,237)

(22,140)

Total stockholders' equity including noncontrolling interest

18,521

42,273

Total liabilities and stockholders' equity

$

480,224

$

452,277

AAC HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

(Dollars in thousands)

Three Months Ended

March 31, 2019

March 31, 2018

Cash flows used in operating activities:

Net loss

$

(24,116)

$

(837)

Adjustments to reconcile net loss to net cash used in
operating activities:

Depreciation and amortization

4,344

5,464

Equity compensation

364

798

Loss on disposal of property and equipment

145

34

Amortization of debt issuance costs

1,243

637

Deferred income taxes

(90)

436

Changes in operating assets and liabilities:

Accounts receivable

2,176

(3,843)

Prepaid expenses and other assets

7,808

1,485

Accounts payable

3,660

(4,739)

Accrued and other current liabilities

4,250

4,141

Accrued litigation

(3,173)

(22,300)

Other long-term liabilities

(6,194)

(275)

Net cash used in operating activities

(9,583)

(18,999)

Cash flows used in investing activities:

Purchase of property and equipment

(913)

(7,305)

Acquisition of subsidiaries

—

(65,185)

Sale of subsidiary

887

—

Net cash used in investing activities

(26)

(72,490)

Cash flows provided by financing activities:

Payments on 2017 Credit Facility

(1,924)

(1,724)

Proceeds from 2019 Priming Facility, net of deferred financing costs

24,284

—

Proceeds from 2017 Credit Facility, net of deferred financing costs

250

94,432

Payments on finance leases and other

(291)

(221)

Payments on AdCare Note

(250)

—

Payment of employee taxes for net share settlement

—

(475)

Net cash provided by financing activities

22,069

92,012

Net change in cash and cash equivalents

12,460

523

Cash and cash equivalents, beginning of period

5,409

13,818

Cash and cash equivalents, end of period

$

17,869

$

14,341

AAC HOLDINGS, INC.

OPERATING METRICS

Unaudited

Three Months Ended

March 31, 2019

March 31, 2018

Operating Metrics:

New admissions¹

4,641

3,739

Average daily inpatient census²

740

773

Average daily sober living census³

213

254

Total average daily census

953

1,027

Average episode length (days)⁴

19

25

Average daily inpatient revenue⁵

$

674

$

961

Revenue per admission⁶

$

11,525

$

21,030

Outpatient visits⁷

39,717

30,313

Revenue per outpatient visit⁸

$

162

$

295

Client related diagnostic services⁹

4%

4%

Inpatient bed count at end of period¹⁰

996

1,112

Effective inpatient bed count at end of period¹¹

992

1,108

Average effective inpatient bed utilization¹²

75%

78%

¹  Represents total client admissions at our inpatient facilities for the periods presented.
²  Represents average daily client census at all of our inpatient facilities.
³  Represents average daily client census at our sober living facilities.
⁴  Average episode length is the consecutive number of days from admission to discharge that a client stays at an AAC inpatient facility and, when applicable, an AAC sober living facility.
⁵  Average daily inpatient revenue is calculated as total revenues from all of our inpatient facilities during the period, divided by the product of the number of days in the period multiplied by average daily inpatient census.
⁶  Revenue per admission is calculated by dividing total client related revenue by new admissions.
⁷  Represents the total number of outpatient visits at our standalone outpatient centers during the periods presented.
⁸  Revenue per outpatient visit is calculated as total revenues from all of our standalone outpatient facilities divided by the number of outpatient visits during the period. 
⁹  Client related diagnostic services revenue, as a percentage of client related revenue, includes point-of-care and client related diagnostic laboratory services.
¹⁰  Inpatient bed count at end of period includes all beds at inpatient facilities.
¹¹  Effective bed count at end of period represents the number of beds for which our facilities are staffed based on planned census. 
¹²  Average effective inpatient bed utilization represents average daily inpatient census divided by the average effective inpatient bed count during the applicable period.

AAC HOLDINGS, INC.

SUPPLEMENTAL RECONCILIATION OF NON-GAAP DISCLOSURES

Unaudited

(Dollars in thousands)

Reconciliation of Adjusted EBITDA to Net Loss (Income) Attributable to AAC Holdings, Inc. Common Stockholders

Three Months Ended

March 31, 2019

March 31, 2018

Net (loss) income attributable to AAC Holdings, Inc. common
stockholders

$

(22,019)

$

1,056

Non-GAAP Adjustments¹:

Interest expense

10,260

6,709

Depreciation and amortization

4,344

5,464

Income tax benefit

(33)

(38)

Net loss attributable to noncontrolling interest

(2,097)

(1,893)

Stock-based compensation

364

798

Litigation settlement, regulatory and
California matter related expense

(988)

3,202

Acquisition-related expense

28

429

De novo start-up and other expense

—

428

Transaction costs

1,517

—

Recruitment and retention expense

375

—

Employee severance expense

1,098

911

Facility closure operating losses and expense

647

792

Adjusted EBITDA

$

(6,504)

$

17,858

1 Adjusted EBITDA, adjusted net (loss) income attributable to AAC Holdings, Inc. common stockholders and adjusted diluted earnings per common share (herein collectively referred to as "Non-GAAP Disclosures") are "non-GAAP financial measures" as defined under the rules and regulations promulgated by the U.S. Securities and Exchange Commission, each of which are defined below. Management has chosen to present these Non‐GAAP Disclosures to investors to enable additional analyses of past, present and future operating performance and as a supplemental means of evaluating operations absent the effect of certain items that we do not consider indicative of our ongoing core operating performance or are non-cash items. Certain of these items may recur in the future. Management believes the Non-GAAP Disclosures provide investors with additional meaningful financial information that should be considered when assessing our underlying business performance and trends. We believe the Non-GAAP Disclosures also enhance investors' ability to compare period-to-period financial results. The Non-GAAP Disclosures should not be considered as measures of financial performance under U.S. generally accepted accounting principles ("GAAP"). The items excluded from the Non-GAAP Disclosures are significant components in understanding and assessing our financial performance and should not be considered as an alternative to net income or other financial statement items presented in the condensed consolidated financial statements. Because the Non-GAAP Disclosures are not measures determined in accordance with GAAP, the Non-GAAP Disclosures may not be comparable to other similarly titled measures of other companies. 

Management defines adjusted EBITDA as net (loss) income attributable to AAC Holdings, Inc. common stockholders adjusted for interest expense, depreciation and amortization expense, income tax benefit, net loss attributable to noncontrolling interest, stock-based compensation and related tax reimbursements, litigation settlement, certain regulatory and California matter related expenses, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, recruitment and retention expense, employee severance expense and facility closure operating losses and expense.

AAC HOLDINGS, INC.

SUPPLEMENTAL RECONCILIATION OF NON-GAAP DISCLOSURES

Unaudited

(Dollars in thousands, except share data)

Reconciliation of Adjusted Net (Loss) Income Attributable to AAC Holdings, Inc. Common Stockholders to Net (Loss) Income Attributable to AAC Holdings, Inc. Common Stockholders

Three Months Ended

March 31, 2019

March 31, 2018

Net (loss) income attributable to AAC Holdings, Inc. common
stockholders

$

(22,019)

$

1,056

Non-GAAP Adjustments:

Litigation settlement, regulatory and

California matter related expense

(988)

3,202

Acquisition-related expense

28

429

De novo start-up and other expense

—

428

Transaction costs

1,517

—

Recruitment and retention expense

375

—

Employee severance expense

1,098

911

Facility closure operating losses and expense

647

792

Income tax effect of non-GAAP adjustments

(4)

(2,399)

Adjusted net (loss) income attributable to AAC Holdings, Inc.
common stockholders

$

(19,346)

$

4,419

Weighted-average common shares outstanding - diluted

24,495,163

23,781,604

GAAP diluted (loss) income per common share

$

(0.90)

$

0.04

Adjusted (loss) earnings per diluted common share

$

(0.79)

$

0.19

Management defines adjusted net (loss) income attributable to AAC Holdings, Inc. common stockholders as net (loss) income attributable to AAC Holdings, Inc. common stockholders adjusted for litigation settlement, certain regulatory and California matter related expenses, acquisition-related expense (which includes professional services for accounting, legal, valuation services and licensing expenses), de novo start-up and other expenses, recruitment and retention expense, employee severance expense, facility closure operating losses and expense and the income tax effect of the non-GAAP adjustments at the then applicable effective tax rate.

Adjusted diluted earnings per common share represents diluted earnings per common share calculated using adjusted net income attributable to AAC Holdings, Inc. common stockholders as opposed to net income attributable to AAC Holdings, Inc. common stockholders.