Q1 2020 Earnings Call
Please note that todays call is being recorded.
I'd now like to turn the conference over.
Mr. Bill demo of I see our please go ahead.
Thank you operator, Hello, everyone and welcome to New Frontier Health first quarter 2020 earnings Conference call.
Company's earnings results were released earlier today and are available on the Companys IR website at Www Dot at age Dot C O M dot see yet.
In addition remarks today will be accompanied by a presentation, which can also be found on the Companys <unk> web site just referenced.
Before we continue please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such our results might be materially different from the views expressed today.
Further information regarding these and other risks and uncertainties as included in our form 20-F filed with the U.S. Securities and Exchange Commission March 31st 2020, another documents filed with the U.S. I see.
You frontier does not assume any obligation to update any forward looking statements.
Except as required under applicable law.
Mark. So they also include financial measures that are not calculated in accordance with international financial reporting standards.
International accounting standards sport for reconciliations of these measures to most comparable measures calculated in accordance with <unk> RF.
Please see the earnings release, our Investor presentation published by New Frontier held today filed with the FCC form 6K.
Allow me to introduce the management team on the call today, Mr., Roberta Lipson, Chief Executive Officer, Mr., Carl will the chairman of the Executive Committee of the Board will provide operating updates for the quarter. Following management's prepared remarks, well open up the called the questions. During the Q1 day session, New Frontier Health CFO Walter show an.
Executive Director, David talked will also be available to answer questions.
With that said I would now like to turn the call over to Roberta right up. Please go ahead.
Thank you Bill and thank you all for joining us on our first quarter Twentytwenty Conference call. The beginning of 2020 has been a difficult one for many individuals and families around the world. We continue to grapple with the profound impact some challenges of the cope with 19 pandemic, but we are beginning to.
See signs of recovery the progress of the scientists working globally to develop treatments and vaccine brings on health and we are deeply appreciate it.
Healthcare workers on the front line as well the individuals working to keep society functioning.
The first quarter up 2020 has been a challenging one for many industries due to the effect of the Covance 19 pandemic.
As expected our business was also negatively impacted but we haven't seen significant recovery since late February and we're continuing to make progress in pursuing our strategic growth.
So for those of you following with our presentation deck. Please turn to slide 15 Trust snapshot of our corridor.
Nearly all U.S. age facilities remained open to continue to service our patience during the difficult time. However, a decrease in volume for the quarter was largely a result, a strict social distancing wrong countrywide shut down the businesses and restrictions in movement across China due to the pen.
In addition, various government preventive measures also had negative impact on the company's kitchen, including temporary suspension of certain non emergency services, such as dental in ophthalmology as well is temporary closures of several of our outpatient clinic facilities.
Border control, which resulted in fewer expatriate patients and temporary suspension of multi site practice licenses for physicians and a number of cities.
This state. However, most of these restrictions have begun to be lifted or removed all together.
Our patient volumes were especially impacted throughout the month of February as a result overall outpatient visits during the quarter decreased by 41% year on year and inpatient admissions declined by 21%.
Fewer patients says it negatively impacted our revenues and adjusted EBITDA for the quarter. However, I'd like to point out that our S. P. In both categories increased as a result of an increase in service mix of higher acuity services I'll address this later in greater detail.
Now please turn to slide 16.
Up until January Twentyth, we reported favorable growth and performance, which was inline with expectations for both revenue and EBITDA, primarily this was driven by strong relative inpatient services you patient days increased by 20% and each of our business segment achieved.
Double digit growth the number of surgeries performed increased by 43% year over year, which demonstrated our continuous efforts to provide higher acuity services to our patients.
Slide 17 mentioned healthcare workers are the essential key element the battle against called at 19.
Our employees had heroically done their duty in our hospitals and clinics and US volunteers. During this unprecedented period. They are on the front line knowing that they can be Chris confronted with the disease at any moment I can't emphasize enough how much we value and appreciate the efforts of our front of mind team.
In providing essential care to our patients during this difficult time, they are truly the greatest assets of our company.
The safety of our patience and staff is of Paramount importance to us that new frontier help.
That's such a primary focus for us what supply chain management and in particular, the availability of personal protective equipment for our patients then employees during this period.
My first knowledge of the growing Kogas 19 crisis, we activated our global supply chain network to source P. P to ensure that all of our frontline staff had and we'll continue to have adequate P. P. Throughout the pandemic. In addition, our efforts will ensure.
We have adequate P.P. reserves for the foreseeable future.
We're proud of our facilities being among a handful of private health care operators in China designated by the Chinese government to operate fever screening centers, we have implemented careful acquired a team in hygiene policies to protect us DAP and patients and provided infection control.
Occasion, and training to all of our staff members.
I'm pleased to announce that today, we have had your old confirmed cases of cold in 19, among our staff or among our patients.
As shown on slide 18, we were able to re chartering funds from new Frontier group and several strategic partners during the pandemic.
Our experience supply chain team, then sourced urgently needed medical equipment and supplies from various vendors across China and around the globe for donations, which we sent directly to the medical institutions in will happen at the front lines of the epidemic when they were needed most.
These donations included 29, I see you ventilators essential for the care of Cold in 19 patients in critical condition portable X Ray machine and the large batch of P.P., including and 95 math for frontline workers.
Yeah, So grateful for the generosity of these donors I'm proud to have been able to leverage our leading global supply chain network to source and deliver be supplies to the front lines of the fight against Cold is 19.
Now please turn to slide 19.
During the pandemic period, we saw a higher levels of growth in our high acuity services.
During the pendency <unk> the government imposed strict measures on public hospitals, which reduced the number of available appointment.
Turning to the elective surgeries and reduced bed capacity available for non called it related services.
Also many patients had concerns of potential covenant infection risks and public hospital.
In one of the most recognized private premium health care brands in China, our facilities, we're uniquely positioned to capture high acuity patient groups, who had reduced access to debt, it's no public providers.
We've seen proactive referrals from a large number of external position from hospitals and clinics outside of our network demonstrating our reputation and the recognition of the technical capabilities of our facilities.
Revenue at our New Hope Oncology Center in Beijing. For example grew significantly during the quarter net revenues there increased by 39% year over year and volume of new treatments patients increased by 92% year over year, including for radiation and chemotherapy served.
Yes.
We've also seen a number of complex high acuity cases, and I see you cases referred to United family facilities from new channel throughout the country.
Recognition of our capabilities have also gained our facilities approval to provide coven 19 testing from government health authorities.
As such.
All you FH facilities are opposed to provide the cobot 19, PCR tests and coven 1980 anybody as agent.
Such tests can be conducted on our site and in some cities we consumed our team to collect samples at corporate clients workplaces are at school campuses for bulk testing.
We started such testing services in mid April and we've provided PCR an antibody test should more than 5000 patients to date.
The company. It's also currently in discussions with a number of other large fortune 500 companies with offices in China to provide coven 19 testing to their employees and some cases to their customers, which coke, which could potentially generate additional revenue and attract new patients should the company's network.
[noise] I'll now turn the call overtime Carlo will continue this discussion of our operations Carl Please go ahead.
Thank you all that up.
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Okay, and anyhow medical G, which you saw the ability to provide integrated medical solution ranging from imaging diagnosis surgical procedure vaccination.
Agent services and others.
Continuing to be longer digital platform will allow us to enhance our patient experience and sticking with that's well, it's creating new pulled up okay. He with a wide range of use cases, such as we know online and offline consultations with puts on like medical team.
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I don't make any bags and the willingness to pay for high quality health care.
Secondly, the growth of can make your health insurance fairly you actually good reputation in the providing quality because that's where it's gotten in Boston demonstrated that regulation you can imagine those patient screening for Beijing, and last weekend, where they've been overcrowded I'll be pulp.
I became come from Salix rent them, all being implemented several calls maybe Michigan.
He thought illustrated and listed on slide 24 in Sydney Blake.
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I told me direction senior management voluntarily paid reduction that's urinary.
We expect to save me 36 million I'd be sometime in the headcount reduction and 26 million from voluntarily paid.
I would take into consideration one seven expenses and possibly you cite the pulsating niches that conducted during the year expected safe deposit 79 million.
At this level compared to 29 cheap.
This is the looking level, if implemented hiring and selling we wrote other than all from my seat as.
Well you presented trouble outsell said with the supplies absolutely and others.
Overall, we believe they can achieve a total I mean, maybe 250 million I'd be baking cookies.
Yeah, John just like any six supplementing all call saving money should that I synergies creative wall baking mother restructuring, we treat implemented in much the consolidated results today.
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Leadership to remove redundant and the macerich with gross.
Streamline the problem capture and optimizing headcount.
In addition, we expect to gain reduction in cost synergies from cost, we settled and centralized stopping generically speaking <unk> language.
Okay, optimizing folks need for people teaching within the Beijing walking you through restructuring except to say one way of 11 million might be better yet.
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Good morning, 30 years of executive leadership, it's moving the mentored by three and couple of finding Asia movies like I said, so continued growth.
Okay bullets in the remainder of 22.
<unk> focus on all strategic priority, which I listed on slide 10 gig.
Already came to be thoughtful about geographic market in the organization.
Formulation and expects to continue to push up even more energy becoming maam.
They adopt facility, who don't Guangjo continued to ramp up double digits young you'd note this quarter.
Looking back a bit more coal market and continue to be again offering.
Wonderful all Beijing, Kinsey women and children that somebody help you in the Boston area will help balance has me at all existing baking halt.
Now on quality, that's where the as mentioned earlier that the economics, but explicit.
Growth during the pandemic.
We also remain focused on developing digital capability in the coming corporate.
We continue to implement call control and management.
This is recovery that Michigan mentioned earlier.
Well the mall, we remain on track with the opening up within hospital, where we have you mentioned contract model.
Finally on page 35.
Growth is supported by strong cash position, which was 1.4 billion I'd be much cities as well.
Well, we expect all second quarter revenue to be creep back your part yet.
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Experienced positive patient Golden trend.
April.
Which we beat me to continue barring and usage and cope with Mike.
At the overall condemning situation continues to improve in China, we hope to tend to a more normalized real voting by the summer. This ballpark reflects all come into new deals, which are subject to change.
This concludes our prepared remarks, operator were now ready for questions.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you made fresh start to if you would like to remove your question from the Q for participant.
Do you think speaker equipment and may be necessary to pick up your handset before pressing the star Keith one moment, please while we poll for questions.
Your first question comes from the line of Jason Lu with Credit Suisse. Please proceed with your question.
Hi, good morning, and good evening. Thanks for taking my question I had a three questions that I want you imagine team I call. I know you just mentioned that there would be a slight or if I had not heard wrong, but there was gonna be a for a revenue decrease in second quarter. I was wondering if we could have some kind of a quantifiable numbers.
That that would be more my first question.
And then my second question would be to Roberta regarding I know, we talked about a week over week recovery is around 93%, including Beijing now I'm curious to know for across all of the facilities is that pretty much that everyone is around 93% or is there a big difference between.
Some of the tier one tier two or other assets have some recover faster or some are still recovering.
And then my first question is around.
Financial cost items regarding the expense increases for financial costs I'm curious to know I know, it's due to the senior secured term loan I'm curious to know whether this payment reflects only just <unk> interest payment that is being paid back to this loan or does it also include our principal payment to this thanks either.
Marianna.
So I think the first question for you Carl to quantify.
Yeah.
[noise] skill so I think Jason So of course those question, we put in a press release.
There were guiding a button decline all 15% to 18%.
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Okay No. That's a lot. So while this is like I didn't really depend from you on.
Or the regulatory cutting you might be assuming somewhere in.
Yeah, it's quite a range.
Obesity.
So you could be.
He will be topic.
Okay I'm question too, whether we have seen kind of consistent growth across the system. So I can tell you that for example.
Our expansion that there have been growing back faster over 100% year over year. So we've seen positive growth in the expansion facility.
Hospitals have been impacted lesson connect.
So it was a hospital growth the overall, it's tough to then outpatient clinic cross.
I'm rehab hospital has had very stable growth talking with all periods hardly impact it very much at all and the tier two cities a bit more slowly than tier one cities. So that's that's basically the whole.
And then on the interest question with just not online to take that.
Yeah. This is David.
To answer your question Jason.
The financial costs for Q1, that's most oh.
It's mostly interest expense.
And there's no principal repayment for Q1 just to be these quality more background to the two that that we have totaled 2.1 billion R&D.
Principal side thing peril loans denominated in R&D, So we have no effect, but yes.
No. It's seven year alone was 5.8 year average life.
So this is a very back end weighted.
Me payment schedule.
We had minimal principal repayments in the first three years.
So primarily for three years to me.
And interest rate for the long.
To put them.
The Jeff opaque deals and then Chuck benchmark.
Got it.
Thanks, Thanks, a they saw further clarification. Thank you.
Yes.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad as a reminder, if you'd like to ask the question. Please press star one on your telephone keypad one moment, please while we pull from more questions.
[noise].
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad as a reminder, if you'd like to ask question. Please press star one on your telephone keypad.
We have a follow up question from Jason Lu with Credit Suisse. Please proceed with your question.
Jason Your line is locked.
I'm sorry, it was on mute Ah, Yes, hi, all just had a few follow up question that someone asked the team as well since I have the opportunity to regarding some of the cost saving initiatives that are to be implemented in 2020 was curious to know whether we'll see some of these are mostly just to be the onetime occurrence.
Or will we see any of these measures continue across 2021.
And then I guess another question, maybe a little more macro but regarding some of <unk> fiscal stimulus that may come out to the healthcare sector.
Just to know what.
The key themes are kind of EUR expectations, maybe this would be two impacts of the private hospitals, the private hospital sector and then specifically to the company. Thank you.
Okay.
Maybe I can answer the question with baby. So Jason I think you tend to page 10 default. The presentation. I mean, if you bought so I could you do one by one of the thought and coffee beans on head count reduction.
It would be permanent Ah Ah.
We know it doesn't go.
You need we view, our Oh, that's got to something the bottom of the can.
The second one Oh, great and Dr. Bob.
But.
Boats, we expect to be more concrete mixer.
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During the year so.
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Yes.
Second question the cost savings.
Stimulus.
Programs from the government has generally not been directed specifically a private health care that having been said, we're expecting to see some new new initiatives coming out after the two meetings that are going on now.
But during the period, we didn't get some relief in many of our facilities, where the government with our landmark we got some relief on rent. We've also gotten some liberation of social insurance requirements for several months and most cities.
So there were some savings for the period I'm from the government and.
The government so looking at other stimulus measures and we expect that well see some things like further coverage for social insurance. There was announcement during the pandemic that during the epidemic in China that online consultations would be.
We are reimbursed by public insurance.
We were also told that it would be more we would be more welcome in most of our cities to get online hospital license.
They would like to see more health care going online unless there is a license theres a possibility of getting public reimbursement.
We expect that the government will also continue to support the development of the private health insurance industry and I wouldn't be surprised if we saw some new regulations and incentives coming out for the expansion up commercial health insurance, but we're still waiting to see the specifics on the side.
Got it thank you both.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad. As a reminder, if you would like to ask a question. Please press star one on your telephone keypad now.
[noise] [noise], ladies and gentlemen, we have reached the end of the question answer session and I would like to tie.
During the call back to management for closing remarks.
Thank you all so much again for joining us on today's call 'em. We really appreciate your ongoing support and we look forward to updating you on our progress in the weeks and months ahead. So I don't have a good day and stay safe.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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