Sunday, August 10, 2014

Qualifying EDBITA


Gentiva CFO Eric Slusser offered in the Q2 earnings call:

For 2014, we now expect full year net revenues to be in the range of $1.96 billion to $2.0 billion. Additionally, we have raised the lower end of our full year 2014 adjusted EBITDA guidance to $183 million to $195 million and our adjusted income attributable to Gentiva shareholders to $0.95 to $1.15 on a diluted per share basis. This outlook includes the full year impact of the Harden acquisition and the final 2014 Medicare Home Health and Hospice reimbursement rates issued by CMS, but excludes any ongoing losses from closed or sold locations as they are wound down and any acquisition-related expenses.
Flashback to the Harden acquistion where the company predicted:

On a pro-forma basis the company should be able to generate revenues between $2.1 and $2.2 billion, while adjusted EBITDA should come in between $210 and $220 million, excluding share-based compensation.  
That's a revenue shortfall of $104 to $200 million and EBDITA gap of $25 to $27 million from prior expectations.

Excluding acquisition related expenses is interesting.  Gentiva is spending big bucks on recruiting a suitor that will keep their top management team in place.  Barclays Capital, Greenberg Traurig, Kekst, Edge Healthcare Partners and MacKenzie Partners don't work cheap.  Will those costs ever be revealed? 

Slusser spoke to the company's commitment regarding capital expenditures:

CapEx, probably expected to stay fairly consistent. We're kind of in that $3 million-a-quarter mode. There's a little bit of increase, but moderate. As we have talked about, we -- the last piece of our integration work is to convert the Harden Home Health over to our GentivaLink system in the third quarter. By no means is that a significant amount, but that's a moderate increase for Q3, as that is completed this quarter. Other than that, when I look at what's in there and the expectations, I don't see anything significant beyond that roughly $3 million, $3.5 million a quarter.
Gentiva, with $2 billion in expected revenues, will spend a mere $12 to $14 million on capital items.  That's a mere 0.6% to 0.7% of net revenues.  Amedisys, with $1.25 billion in revenues in 2013, spent $18 million on capital expenditures. 

A commenter suggested Gentiva leaders are spit shinging the financials for potential buyers.  Today's underinvestment could be tomorrow's higher stock price.  A few months ago a Gentiva executive stated:

We've had some rocky years.  In this industry there's been a negative environment that's been out there in both the home health and hospice.  We all hope that will subside over time and we'll get back to focusing on the patient need, patient care and the industry will start to climb again.   
With attention on deals, deals and more deals and driving costs out via the OneGentiva initiative, patient need and patient care remain on the back burner. 

Management is clear on their priorities.  How many patients are aware of Gentiva senior leaders' needs?  Patients, especially those on hospice, should feel them directly or indirectly.  I pray it's not a direct hit from the Gentiva leadership bus.

Anonymous (from Gentiva)

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