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University General Health System, Inc. (UGHS) Reports Third Quarter Operating Income of $11.7 Million on 74% Increase in Revenue

University General Health System, Inc., a diversified, integrated multi-specialty health delivery system, today announced significantly improved operating results for the third quarter and first nine months of 2012. The Company will host an investor conference call at 11:15 a.m. Eastern Time Thursday, November 15, 2012 to discuss third quarter and nine-month operating results and other topics of interest (see details below).

Highlights for the quarter ended September 30, 2012:

  • Net patient revenue increased 71.3% to approximately $31.9 million, compared with approximately $18.6 million in the quarter ended September 30, 2011. Average daily inpatient census at University General Hospital increased by 15.0% relative to prior-year levels, reflecting an average occupancy rate of 66.7%. The increase in net patient revenue was primarily attributable to the ongoing execution of the Company’s physician-centric, integrated health delivery system strategy.
  • Resident revenue for the senior living business segment approximated $2.0 million, support services revenue totaled $0.7 million, and other revenue totaled $1.5 million in the most recent quarter. The senior living properties reported continued stable utilization, with an overall occupancy rate in excess of 94% for the quarter ended September 30, 2012.
  • Total revenue rose 74% to $36.0 million, compared with $20.6 million in the third quarter of 2011. Total revenue in the third quarter of 2011 did not include revenue from acquired hospital outpatient departments (HOPDs), which are now reported in the Company’s hospital business segment.
  • Net patient revenue from Medicare and Medicaid, excluding a provision for doubtful accounts, accounted for approximately 26.6% of total net patient revenue, and revenue from commercial and managed care providers accounted for approximately 72.6% of net patient revenue, during the quarter ended September 30, 2012. This compared with 34.0% of total net patient revenue from Medicare and Medicaid and 62.8% from commercial and managed care providers in the prior-year quarter. Self-pay revenue decreased from 3.2% of total net patient revenue in the quarter ended September 30, 2011 to 0.8% in the quarter ended September 30, 2012. The provision for doubtful accounts increased to 9.9% of patient revenue in the most recent quarter, versus 1.9% in the comparable 2011 period.
  • Operating income improved 362% to approximately $11.7 million in the third quarter of 2012, versus approximately $2.5 million in the prior-year quarter, primarily due to the increase in revenue, along with the success of cost-containment measures implemented in the fourth quarter of 2011.
  • In connection with the issuance of preferred stock in a private placement in April 2012, wherein the Company received approximately $3.7 million from accredited investors and institutions, the Company also issued warrants at an original issue discount. After deducting fees and expenses, the net proceeds from this capital raise approximated $3.1 million. Primarily due to an increase in the Company’s stock price since April 2012, the Company recorded a non-cash derivative expense and change in the fair market value of the derivatives totaling $5.7 million in the most recent quarter.
  • The Company recorded net income attributable to common shareholders of $2.0 million, or $0.01 per share, in the most recent quarter, compared with net income attributable to common shareholders of $1.0 million, or $0.00 per share, in the comparable quarter of 2011.
  • Adjusted EBITDA for the quarter increased 212% to approximately $14.4 million in the most recent quarter, versus approximately $4.6 million in the first quarter of 2011 (EBITDA is a non-GAAP measure that is reconciled with GAAP results in a table at the end of this press release).
  • Total shareholders’ equity improved to $8.5 million at September 30, 2012, from ($573,472) at December 31, 2011.

“This was a great quarter for the Company, and we are pleased that our financial results reflect management’s ongoing commitment to the development of our physician-centric health delivery system,” commented Dr. Hassan Chahadeh, M.D., Chairman and Chief Executive Officer of University General Health System, Inc. “Financially, our revenues grew by 74% relative to the third quarter of 2011, and our operating income increased more than 360% from prior-year levels. In addition we have made great progress with our lenders and have significantly improved our balance sheet, thereby positioning the Company for greater growth in 2013.”

Highlights for the nine months ended September 30, 2012:

  • Net patient revenue increased 44.4% to approximately $75.0 million, compared with approximately $51.9 million in the nine months ended September 30, 2011.
  • Resident revenue for the senior living business segment approximated $5.7 million, support services revenue totaled $1.6 million, and other revenue totaled $1.9 million in the first nine months of 2012. The senior living properties reported continued stable utilization, with an overall occupancy rate in excess of 93% for the most recent nine-month period.
  • Total revenue rose 56% to $84.2 million, compared with $54.0 million in the first nine months of 2011. Year-to-date total revenue in 2011 did not include a full year of revenue from acquired senior living segment, support services; nor did it include revenues from acquired hospital outpatient departments (HOPDs), which are now reported in the Company’s hospital business segment.
  • Net patient revenue from Medicare and Medicaid, excluding a provision for doubtful accounts, accounted for approximately 29.2% of total net patient revenue, and revenue from commercial and managed care providers accounted for approximately 65.1% of net patient revenue, during the nine months ended September 30, 2012. This compared with 34.7% of total net patient revenue from Medicare and Medicaid and 61.2% from commercial and managed care providers in the corresponding period of the previous year. Self-pay revenue increased from 4.1% of total net patient revenue in the nine months ended September 30, 2011 to 5.7% in the nine months ended September 30, 2012. The provision for doubtful accounts increased to 9.3% of patient revenue in the first nine months of 2012, versus 1.9% in the comparable 2011 period.
  • Operating income improved 454% to approximately $23.6 million in the first nine months of 2012, versus approximately $4.3 million in the prior-year period.
  • Primarily due to an increase in the Company’s stock price since April 2012, the Company recorded a non-cash derivative expense and change in the fair market value of the derivatives totaling $6.0 million in the first nine months of 2012.
  • The Company recorded net income attributable to common shareholders of $3.3 million, or $0.01 per share, in the nine months ended September 30, 2012, compared with net income attributable to common shareholders of $0.4 million, or $0.00 per share, in the comparable period of 2011.
  • Adjusted EBITDA for the nine months ended September 30, 2012 increased 203% to approximately $29.7 million, versus approximately $9.8 million in the first nine months of 2011 (EBITDA is a non-GAAP measure that is reconciled with GAAP results in a table at the end of this press release).

“The Company’s improvement in operating efficiencies during 2012 is clearly evident in EBITDA margins, which improved from 22.3% of total revenue in the third quarter of 2011 to 39.9% of total revenue in the most recent quarter,” noted Donald W. Sapaugh, President of University General Health System, Inc. “EBITDA margin for the nine months ended September 30, 2012 increased to 35.3% of total revenue, compared with 18.2% in the prior-year period.”

“The third quarter reflects continued positive quarter-on-quarter growth, which we believe validates our physician-centric, integrated, diversified regional delivery system and lays a foundation for further expansion in the Houston area and replication in other markets,” concluded Sapaugh.

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