U.S. Markets closed

Edited Transcript of NHC.TO earnings conference call or presentation 2-May-17 1:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Nobilis Health Corp Earnings Call

Houston May 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Nobilis Health Corp earnings conference call or presentation Tuesday, May 2, 2017 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Harry Joseph Fleming

Nobilis Health Corp. - CEO

* Kenneth D. Efird

Nobilis Health Corp. - President

* Marissa Arreola

Nobilis Health Corp. - Chief Strategy Officer and President of Concertis

* Paul David Young

Nobilis Health Corp. - CFO

================================================================================

Conference Call Participants

================================================================================

* Charles Edward Haff

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Dana Rolfson Hambly

Stephens Inc., Research Division - Research Analyst

* William Sutherland

The Benchmark Company, LLC, Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nobilis Health Corp. Q1 Earnings Release Conference Call.

(Operator Instructions) Thank you.

Marissa Arreola, President of Concertis, you may begin your conference.

--------------------------------------------------------------------------------

Marissa Arreola, Nobilis Health Corp. - Chief Strategy Officer and President of Concertis [2]

--------------------------------------------------------------------------------

Thank you, operator. And good morning, ladies and gentlemen. Welcome to our 2017 First Quarter Financial Results Conference Call.

On the call today are Harry Fleming, Chief Executive Officer; Kenneth Efird, President; and David Young, Chief Financial Officer. Following the formal portion of the call, we will be pleased to take your questions.

For your information, this call is being recorded, and a replay will be made available shortly after the call. Instructions for obtaining the replay will be posted on our website at www.nobilishealth.com.

Some of the statements that we make today may be considered forward looking, including statements regarding future acquisitions, the expected performance of our business and our long-term growth and innovation. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our Form 10-K for the fiscal year 2016 filed with the SEC on March 14, 2017. Any forward-looking statements that we make are based on assumptions as of today, and we undertake no obligation to update them.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the press release that we filed earlier today.

I will now turn the call over to Harry.

--------------------------------------------------------------------------------

Harry Joseph Fleming, Nobilis Health Corp. - CEO [3]

--------------------------------------------------------------------------------

Thank you, Marissa. And thank you, everybody, for joining us on our call today.

I will begin by recapping our first quarter financial results.

For the first quarter of 2017, we recorded total revenue of $68.3 million, a year-over-year increase of $17 million or 33%. This is the 20th straight quarter with double-digit year-over-year growth. Adjusted EBITDA for the quarter rose from $351,000 in the first quarter of 2016 to $2 million in 2017, an increase of $1.7 million. This improvement on the bottom line through double-digit growth on -- in the top line is further supported by our first quarter efforts to implement a more effective cost structure. The first quarter of 2017 was the strongest first quarter we have recorded to date and is a great indicator where we are trending as a company in 2017.

Total revenue grew by 33%, while total expenses increased by only 17%, which continues to illustrate our ability to grow revenue and improve margins while vertically integrating our system. We have a proven ability to generate significant revenue growth, but as I mentioned on our last earnings call, management's top high priority in 2017 is to cultivate a strong operating discipline within the organization that will lay the support for year-over-year growth in the bottom line through our marketing programs. As part of this effort, we have recruited key executives from several national health care systems with excellent operating programs. These executives provide invaluable experience and perspective that is needed for the continued aggressive growth of Nobilis. This financial and operational expertise will be critical as Nobilis continues its expansion.

While operating discipline is a top priority, we are also focused on finding ways to increase shareholder value. In conjunction with this, the board has formally approved and instructed management to carry out an official share buyback program. Management and the board share the belief that Nobilis' current share price does not accurately reflect the current or even past operating results of the company. Accordingly, we believe a share buyback is an appropriate and efficient use of our resources. The buyback plan will allow Nobilis to purchase up to 5% of its outstanding shares or approximately 4 million shares, subject to any applicable rules and regulations and/or banking requirements.

We have spent the last few months building a physician employment model which will allow Nobilis to continue and keep evolving its system from out of network to in network. The physicians, all in-network providers, will complement our in-network growth strategy by creating a new patient acquisition vehicle that will help grow the in-network revenue component of our business, allowing us to offer our products across the continuum of care. Also, I'm happy to announce that we have just executed a significant in-network care contract in our Dallas market with one of the largest insurance companies in the nation. I'm exceptionally pleased with the outcome of our negotiations and we're looking to carry this momentum forward as we continue in-network negotiations with the other major payers.

As we move through 2017, we will continue to negotiate in-network contracts as well as seek in-network acquisitions. We now own 25 facilities, including 4 hospitals, 10 ASCs and 11 clinics. The addition of industry veterans like David Young and Marc Celia to our management team, among several other additions, has already had a dramatic impact on Nobilis by bringing a new level of expertise to our company and, as a result, the bottom line.

I will now hand the call over to David to expand on our progress.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Harry.

I'll begin by covering the major line items for our first quarter 2017 financials.

First quarter revenues of $68.3 million were 33.2% higher than in the first quarter of 2016, driven by Medical Segment revenues, which comprised 95% of total revenue and were up 40% year-over-year. Contracted marketing revenues declined by approximately 60.4% as we continued to shift case volumes to Nobilis facilities. Case volume increased 11.5% to 4,431 cases, and revenue per case increased year-over-year by 19.5% to $15,415 per case. This increase in revenue per case is primarily the result of the growth of our Hospital and Ancillary divisions.

Our gross margin for the first quarter of 2017 was $4.2 million versus a loss of $862,000 for the prior corresponding period. Our corporate costs for Q1 were $7.3 million, a decline of $1.5 million over Q1 of 2016. Interest expense was $1.3 million in the first quarter of 2017, up from $684,000 in the prior corresponding period.

Net loss for the first quarter of 2017 was $2.4 million versus a loss of $5 million in the prior corresponding period. Adjusted EBITDA for the first quarter of 2017 was $2 million, an increase of $1.7 million over the first quarter of 2016.

On the balance sheet, total cash for the quarter was $31.2 million compared with $24.6 million at December 31, 2016. Accounts receivables finished with a 90-day DSO of 135 days, up 4 days from prior year. Despite this, total accounts receivable was reduced 17.8% or approximately $22 million from the end of 2016. And we continue to make progress towards collecting our 2016 balances. In addition to the improvement in the accounts receivable balance, medical supplies declined by 11.3% year-over-year to $4 million, and accounts payable was reduced by approximately $4.8 million as well. Total bank debt was approximately $67.5 million versus $65.5 million at the end of 2016.

Net cash provided by operating activities rose $12 million year-over-year from $4.5 million to $16.5 million for the first quarter of 2017. This was primarily the result of the year-over-year improvement in the operating results and the 17.8% or $22.2 million reduction in accounts receivable. CapEx for the quarter totaled $3.5 million. And we funded the Hamilton Vein acquisition for $7.9 million. We drew $3 million on our revolver for working capital purposes, bringing our outstanding balance on the revolver to $18 million, with an additional $12 million still available.

Now that we've gone through the usual line items, I'd like to get more specific discussing the why and how as it relates to the key increases and decreases that drove our year-over-year improvement.

Obviously, most of the improvement came from the operating division. By introducing various inventory management protocols at the facility level, we were able to reduce spend and more effectively utilize supplies. Combined with the purchased -- purchasing benefits of our GPO, we were able to realize significant cost savings in this area. As a result, our drugs and supplies line item increased by $724,000, while total revenue increased by $17 million, year-over-year. And as a percentage of revenues, supplies improved to 18.7% compared to 23.4% in the first quarter of 2016. We also saw a 210 basis point improvement in our facilities, salaries and benefits in the first quarter of 2017, improving year-over-year to 22.4% of total revenue. These results are evidence that we're making progress in controlling our facility spend. From a corporate cost perspective, we had an overall reduction in total corporate expenses. Our salaries and benefits edged up from investments in our IT and finance infrastructure, while general and administrative and legal expenses trended downward, offsetting the increase in salaries and benefits. As a result, total corporate costs for the quarter declined year-over-year by $1.5 million from $8.8 million to $7.3 million.

Lastly, I want to discuss the cost-cutting measures we've been working to implement these past few months.

As Harry mentioned, we wanted -- we want to establish a culture of operating discipline in the organization. And to help us achieve that, we have focused on and making improvements in 3 key areas: supplies, marketing and headcount. Supplies -- supply management, as I mentioned, is an area that we've already made progress in during the first quarter. Continuing these efforts, we believe, will provide approximately $2 million to $3 million of savings annually. Also, we are focused on ensuring our marketing dollars are spent effectively. This is a much more difficult area to adjust given the potential impact on our revenue, but we believe we can also reduce this spend by another $2 million to $3 million annually by strategically aligning our resources. With regard to headcount management, the management team began reviewing the company's entire organizational structure in the first quarter. This process included both the corporate and operating divisions. Following recommendations from department and division heads, management made the decision to carry out a companywide reduction in force in early April. This impacted approximately 80 positions throughout the company, many of which were redundant positions from recent acquisitions. While difficult, this reduction has helped to create more efficient processes and improve the channels of communication within the company and is expected to produce annual savings of approximately $6 million to $7 million.

Combined, these actions will provide annual savings of approximately $10 million to $13 million, with $8 million to $9 million of those savings expected to be realized in 2017.

Before handing the call over to Kenneth, I want to confirm our full year 2017 guidance, which includes total revenue in the range of $310 million to $325 million, with adjusted EBITDA in the range of $40 million to $45 million.

With that, I'll now turn the call over to Ken for a few business development updates.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [5]

--------------------------------------------------------------------------------

Thank you, David.

In addition to focusing on operating efficiencies, Nobilis continues to execute on previously announced initiatives in growing its suite of services. For example, we are happy to share that our months-long hospital EMR upgrade was completed as of April 18. This is a tremendous enhancement of our internal reporting capabilities and represents a long-term investment in our growing IT infrastructure. The ability to consolidate data from multiple locations and platforms will allow us to quickly and efficiently identify underlying patterns and trends and ultimately will allow us to track hospital performance in real time. This will allow the Nobilis financial department to analyze costs and expenses on a regular and timely basis. Having acquired each hospital in separate transactions at different points in time and from various sellers, this software upgrade represents a long-term investment in Nobilis IT infrastructure. In the future, as more health systems are added to the Nobilis network, management will have the tools to integrate and manage in an efficient manner. Additionally, the care navigation services we currently offer our physicians have become much more robust with this IT investment. We can now integrate new physician practices into the Nobilis system more quickly and efficiently, which benefits both the physician and patient and promotes further physician alignment within Nobilis.

Our acquisition of Hamilton Vein Center in March has had no disruption on their performance in Q1. HVC's clinics produced approximately 2,900 in-network patient encounters in the first quarter, with over 100 vein procedures performed in a Nobilis ASC setting. Encouraged by strong Q1 volumes and to facilitate future growth, we have added another physician to join Dr. Hamilton's team and will continue to grow this division. In addition, Nobilis has identified operational synergies within HVC that will be addressed over the course of 2017, which we believe will result in annual cost savings of approximately $500,000. We've been able to maximize our marketing dollars by capitalizing on the brand equity HVC has cultivated in its markets over the last several years. While promoting the Clarity brand, we applied a similar strategy in the Arizona market with our Arizona Vein brand. This strategy allows us to leverage the established brand equity inherent in both Hamilton Vein Clinic and Arizona Vein and has resulted in comparatively lower patient acquisition costs for both brands.

The integration of HVC is near completion. HVC's employees, physicians, IT and HR have already been transitioned into the Nobilis system. The integration is 90% complete, with the remaining 10% to be addressed within the next 45 days. Overall, the transition process has gone extremely smooth, and that is due to the role Dr. Hamilton has played in organizing and leading his team during this transaction. We're excited to be working with someone that shares our enthusiasm for growth and clinical expertise.

Our Ancillary division started 2 years ago and initially included intraoperative monitoring services or IOM first assist and anesthesia. This division contributed revenue of $8.3 million in the first quarter of 2017, up $7.2 million from the first quarter of 2016. In the fourth quarter of 2016, we expanded our offerings by providing clinical laboratory services in Houston; and physical therapy services in Dallas during the first quarter of 2017. Providing ancillary services promotes Nobilis' strategic goals to vertically integrate and create additional revenue streams from surgical procedures provided at our facilities, enhance its relationship with primary care providers either through acquisition or alignment and expand the suite of products Nobilis can market to both consumers and providers. Nobilis is well positioned to maintain strong footholds across the continuum of care.

I'll now turn the call over to Marissa, our President of Concertis, for a brief update on bundled payment initiatives.

--------------------------------------------------------------------------------

Marissa Arreola, Nobilis Health Corp. - Chief Strategy Officer and President of Concertis [6]

--------------------------------------------------------------------------------

Thank you, Ken.

Concertis is Nobilis' alternative reimbursement vehicle. It negotiates with payers, including insurance companies and self-insured employers, to combine reimbursements for multiple providers and facilities in a single comprehensive bundled payment that covers all of the services involved in a patient's episode of care. Patients no longer receive multiple bills from facilities and providers. Concertis receives the reimbursements and distributes it to the providers and facilities, ensuring physician alignment with the facilities. This clinical integration strategy results in improved patient outcomes, integrated care, expense savings and enhanced earnings.

While 2016 set building the supporting infrastructure behind Concertis, 2017 has been marked by the successful conversion of case volumes through the Concertis brand as well as owned and affiliated facilities. We are currently performing surgeries in Texas and Minneapolis, with Phoenix and other markets coming online shortly. Concertis has listed offerings in 7 specialties and 45 procedures. This host of products has attracted affiliations with TPAs and self-insured employers across the country. Concertis has positioned itself as a provider of a wide array of procedures while maintaining the strategic benefits of offering patients an individualized, concierge-style service, just as we do with all other patients moving through Nobilis' direct-to-consumer programs.

With that, I will turn the call back over to Harry.

--------------------------------------------------------------------------------

Harry Joseph Fleming, Nobilis Health Corp. - CEO [7]

--------------------------------------------------------------------------------

Thank you, Marissa.

Before we start the Q&A portion of the call, I'd like to give everyone a sense on how we're doing on the M&A front. As usual, we cannot share any major deal-specific details at this time, but I can say that we are currently under an LOI with a 100% in-network acquisition opportunity, that we're very excited about it. However, as we know, these deals take time to work through. Our pipeline of acquisition targets is extensive and focused on the in-network business.

With that, I'll turn the call over to the operator to begin the Q&A.

Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Bill Sutherland with The Benchmark Company.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [2]

--------------------------------------------------------------------------------

I just wonder if I can get a little more color on revenue per case, which was very strong; and just trying to kind of get a sense of, well, just color on that because I'm just thinking about the addition of the vein of Arizona. And that would obviously be taking revenue per case the other way, I would think.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [3]

--------------------------------------------------------------------------------

So that is correct. As we add volume with the vein and vascular division, those procedures tend to have a lower average revenue per case with some of the higher-acuity cases like spine, bariatrics and orthopedics, but again, it also is relative to the size of the system. And if you reference the hospital, ASC and ancillary service line, you can see that with our continued development of system we've had an increase of revenue per case. And we -- as we mentioned in past calls, we anticipate that becoming flat at some point in time until we have a shift in specialty blend as we may experience in the future with vein and vascular.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [4]

--------------------------------------------------------------------------------

Yes. Bill, this is David. Just a little more kind of on the financial end of that, we're were getting -- a lot of the help is from our Ancillary businesses and what -- where we have -- our strategy there has been to build a model that we can continue to add revenues as patients move through the system. And you're seeing the impact of that come through. So the ancillary lines are helping out quite a bit.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [5]

--------------------------------------------------------------------------------

Okay. And I had a question on quarterly phasing. Last 2 or 3 years, Q4 obviously anywhere from just under 40% to well over 40% of full year revenue. Are we thinking about the same kind of phasing this year. Or is there a little less of a swing in the last quarter?

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [6]

--------------------------------------------------------------------------------

We anticipate Q4 continuing to be our strongest quarter of the year, but as we have developed our system and have more in-network service lines and vertically integrated the system, we anticipate blunting of that spike in Q4, as we experienced in 2016, but it will continue to be our strongest quarter.

--------------------------------------------------------------------------------

William Sutherland, The Benchmark Company, LLC, Research Division - Equity Analyst [7]

--------------------------------------------------------------------------------

Okay. And then last question from me is on the DSO and again just maybe giving us a sense of how to think about the -- that directionally for the rest of the year.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [8]

--------------------------------------------------------------------------------

Yes, thanks, Bill. So the -- directionally, I still -- we've been talking about 110 to 115. We still think that's appropriate. We are seeing the seasonal impact here in Q1, but definitely as we work through the balance of the year, my projections still keep us in that 110 to 115.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

(Operator Instructions) Your next question comes from the line of Dana Hambly with Stephens.

--------------------------------------------------------------------------------

Dana Rolfson Hambly, Stephens Inc., Research Division - Research Analyst [10]

--------------------------------------------------------------------------------

Just following up on the DSO. Just on revenue cycle management, I know Andy left last year, and I just want to make sure that you're still very comfortable with collecting 100% of what you're sending out given all the other network exposure.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [11]

--------------------------------------------------------------------------------

Yes, that's a -- it's a good point. I can -- Dana, one of the things that I'll tell you is I work on this particular part of our business with a sense of -- frankly, just a keen sense of awareness. I kind of call it acuity, but -- so we really look at a lot of different metrics there. And one of the metrics -- so at the end, we talked a lot about this. And one of the metrics we look at is the collections as a percentage of AR at the end of the quarter. And we were dead in line with where we were last year at the same time, which is a little bit over half of our AR was collected through -- of -- the 12 31 balance was collected at the end of Q1. So we still feel good about that. Historically, we've always collected 100%, sometimes a little bit more. So we still feel like that, that is in-line and we expect to collect the balances.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [12]

--------------------------------------------------------------------------------

And Dana, I'll also add. As Harry and David mentioned, we've added additional resources and talent within our revenue cycle that far exceed our previous capabilities.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [13]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Dana Rolfson Hambly, Stephens Inc., Research Division - Research Analyst [14]

--------------------------------------------------------------------------------

Okay, okay, no, good to hear.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [15]

--------------------------------------------------------------------------------

It's an intense -- yes. It's an intense area of focus. We understand. We -- just from a business perspective the risk but the sensitivity to our -- for shareholders and to any banks and things like that, so we're paying a lot of attention to it.

--------------------------------------------------------------------------------

Dana Rolfson Hambly, Stephens Inc., Research Division - Research Analyst [16]

--------------------------------------------------------------------------------

Okay, that’s helpful. And then also the comment on the marketing expenses. You're looking for a $2 million to $3 million savings there, but you're being careful because of the potential impact on revenue. It's -- I wonder if you could expand on those comments.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [17]

--------------------------------------------------------------------------------

I'm happy to. So obviously, as we spend more money with lead generation, as those leads go through the funnel, it generates revenue, but we're continuing to focus throughout the entire organization on an operational efficiency and discipline. And we've already seen some success with that in Q1. So for example, in Arizona vein and vascular, we recently acquired a system. In Q1, we were able to spend 28% less for lead generation while generating 9% more leads. As we continue with that discipline and that focus on operational efficiency throughout the year, we anticipate that savings of $2 million to $3 million in the marketing division.

--------------------------------------------------------------------------------

Dana Rolfson Hambly, Stephens Inc., Research Division - Research Analyst [18]

--------------------------------------------------------------------------------

Okay, okay. And then last one for me: With the new Dallas market in-network contract, do you have an estimate of kind of revenue that would be in network versus out of network on a pro forma basis?

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [19]

--------------------------------------------------------------------------------

Yes. The nature of those contracts is confidential, so we can't disclose that. And we -- from an operational perspective, I'll let Kenneth speak to that.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [20]

--------------------------------------------------------------------------------

Yes. So as we've said several times, when we look at the conversion from out of network to in network, it's our focus and desire to not make this conversion while sacrificing revenue. And we feel, with this contract, that's exactly what we have in place. As -- what is unknown, though, in that market is how much additional volume we can drive through the market and the revenue impact it will have.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Your next question comes from the line of Charles Haff with Craig-Hallum.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [22]

--------------------------------------------------------------------------------

I was wondering if there were any facilities in the first quarter that outperformed or underperformed your expectations.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [23]

--------------------------------------------------------------------------------

Yes, the -- there were -- I will say we had a little bit of both. What we saw in the Arizona market was really strong growth there. So that one was one that we definitely saw a nice improvement. And then in the Dallas market, we -- that business there was a little soft, so that one was not quite to our expectations.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [24]

--------------------------------------------------------------------------------

And then the Houston market continued to grow (inaudible).

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [25]

--------------------------------------------------------------------------------

Yes, the Houston market was solid. So it performed as expected.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [26]

--------------------------------------------------------------------------------

Okay, great. And then on the reduction of force of 80 people, you rattled off the numbers kind of quickly there. I wasn't able to keep up, but what was the savings? And what's the charges or early termination expenses that you have for that?

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [27]

--------------------------------------------------------------------------------

So we estimate $6 million to $7 million of annual savings. About $4 million, $4.5 million of that in -- will be realized in 2017. And the severance associated with that is about $300,000. It was relatively moderate.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [28]

--------------------------------------------------------------------------------

You said $200,000?

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [29]

--------------------------------------------------------------------------------

$300,000.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [30]

--------------------------------------------------------------------------------

$300,000, okay. And the Hamilton Vein had -- did you say 2,900 encounters? Is that the same as cases? Or the -- what were the cases, if that's different?

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [31]

--------------------------------------------------------------------------------

It is different. That's talking about the total patient encounters, whether they'd be clinic visits, office visits, a visit to a hospital or ASC.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [32]

--------------------------------------------------------------------------------

And the number of cases that you did at Hamilton, do you have that available?

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [33]

--------------------------------------------------------------------------------

We do. They are well above our mark. We had over 100 just in Q1 within the Nobilis facilities, ASC or hospital.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [34]

--------------------------------------------------------------------------------

Okay, great. And then one of the metrics that we kind of look at is SG&A per case. And it looks like that moved up this quarter relative to past periods. And is that a function of kind of these lower-ASP vein procedures? Or is that a metric that you guys track, David? Or how should we kind of think about SG&A per case moving forward?

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [35]

--------------------------------------------------------------------------------

Yes. I would say they're really not related. If you're -- and I just want to make sure we're talking about the same section on the income statement there: Are you talking about not the G&A inside a facility but the G&A inside of corporate?

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [36]

--------------------------------------------------------------------------------

Yes. We lumped together the SG&A at the facility level as well as the SG&A at the corporate level and then divided it by the 4,431 cases to come up with $12,571 SG&A per case.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [37]

--------------------------------------------------------------------------------

Yes. I mean I understand why you would do that from a contribution value standpoint, but I mean, from our perspective, we don't really look at it that way. The reason you may be seeing that increase is -- on a case -- per-case basis is we -- as I mentioned in my comments, we made an investment last year in the IT and the -- finance infrastructure. And so then we -- so we did see there's an increase there in the -- in our salary line. But overall, total costs were down, as I noted, mostly not in the same ratio that you were seeing on the case volume.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [38]

--------------------------------------------------------------------------------

So with -- and it's S&B per case, drugs and supplies per case and G&A per case are metrics we often look at. And we do anticipate to continue to see improvement in those throughout the years.

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [39]

--------------------------------------------------------------------------------

On the [upper years of the offering].

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [40]

--------------------------------------------------------------------------------

All the offerings that -- [be in the] remainder of the year. As he did mention, though, as we continue to evolve our system and expand on the Ancillary division, we may see some movement of those numbers, so we -- also we anticipate our analysts looking at it as a percentage of net as well for a fair analysis.

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [41]

--------------------------------------------------------------------------------

Okay. And David, what do you think the expenses were for the IT upgrades and so forth? Do you have a sense for what you -- what extra that you spent for those improvements?

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [42]

--------------------------------------------------------------------------------

I do not have that number handy. I don't know if...

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [43]

--------------------------------------------------------------------------------

Are you talking about in Q1, or '16 full year?

--------------------------------------------------------------------------------

Charles Edward Haff, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [44]

--------------------------------------------------------------------------------

In Q1.

--------------------------------------------------------------------------------

Kenneth D. Efird, Nobilis Health Corp. - President [45]

--------------------------------------------------------------------------------

Yes, I don't have that. I'll have to look...

--------------------------------------------------------------------------------

Paul David Young, Nobilis Health Corp. - CFO [46]

--------------------------------------------------------------------------------

I'll get it for you. I do not have that number handy.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

There are no further questions in queue. I would like to turn the call back over to Harry Fleming, CEO, for closing remarks.

--------------------------------------------------------------------------------

Harry Joseph Fleming, Nobilis Health Corp. - CEO [48]

--------------------------------------------------------------------------------

Thank you, operator. And thanks, everyone, for listening today. We appreciate all the questions, and we look forward to our next conference call in August.

Thanks again.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

This concludes today's conference call. You may now disconnect.