Q3 2025 Medical Facilities Corp Earnings Call

Speaker #3: Good morning everyone . Welcome to Medical Facilities Corporation's 2025 third quarter earnings call . After management's remarks , this call will include a question and answer session when qualified equity analysts may ask questions before turning the call over to management .

Speaker #3: Listeners are reminded that today's call may contain forward looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws .

Speaker #3: Forward looking statements involve risks and uncertainties and undue reliance should not be placed on such statements . Certain material factors or assumptions are applied in making forward looking statements and actual results may differ materially from those expressed or implied in such statements .

Speaker #3: For additional information , please consult the mDNA for this quarter . The risk Factor section of the Annual Information Form and Medical facilities .

Speaker #3: Other filings with Canadian securities regulators . Medical facilities does not undertake to update any forward looking statements except as required by law . Such statements speak only as of the date made .

Speaker #3: I would now like to turn the meeting over to Mr. Jason Redman , president and CEO of Medical Facilities . Please go ahead .

Speaker #3: Mr. Redman .

Speaker #4: Good morning , everyone , and thank you for joining us today on the call to me as our chief Financial officer , David Watson .

Speaker #4: This morning , we reported our third quarter results . Our news release , financial statements and MDA are available on our website have been filed on Kdr+ .

Speaker #4: Please note that the income statement variances discussed by David at This Morning are for continuing operations and exclude government stimulus amounts from last year .

Speaker #4: As usual , all dollar amounts are in US dollars unless otherwise specified . We had a strong quarter with growth and income from operations and EBITDA driven by increased facility service revenue at each of our highly rated surgical facilities .

Speaker #4: A big contributor in the quarter was Sioux Falls Specialty Hospital , where , as expected , surgical case volumes had a solid rebound following the planned relocation of a key referral groups clinic earlier in the year .

Speaker #4: While the clinic move had a temporary negative impact on volumes in the second quarter , the transition is now behind them . We are pleased to see that the clinic was back to business as usual by the third quarter .

Speaker #4: On a consolidated basis , facility service revenue was up 7.5% in the quarter , benefiting from the favorable impacts of case and payer mix .

Speaker #4: Higher payer rates , and increased surgical case volumes . Income from operations was up 28.4% and EBITDA increased 17.7% in the quarter . On the topic of our hospitals , I want to give a quick shout out to the folks at Sioux Falls in Arkansas , both of which received five star ratings in September for Nurse Communications based on CMS hospital consumer Assessment of Healthcare providers and systems data .

Speaker #4: Finally , on the capital allocation front , we returned $5.6 million to shareholders in the quarter to the repurchase of 514,200 common shares under a normal course , issuer bid .

Speaker #4: For the first nine months of the year , share repurchases under both our normal course and substantial issuer bids totaled about 4.7 million shares , representing $56.8 million being returned to shareholders and a 20% reduction outstanding share count .

Speaker #4: Even after these significant returns , our corporate cash position at quarter end remains strong . At $34.5 million , with that , I'll turn the call over to David to review our financial results in more detail .

Speaker #4: David .

Speaker #5: Thank you . Jason . Good morning everyone . Starting with the top line , we have facility service revenue of 82.6 million for the quarter , which is an increase of 7.5% .

Speaker #5: As Jason mentioned , the increase was mainly due to the combined impact of case and payer mix . In addition , payer rate increases resulted in higher reimbursements per surgical case , and our surgical case volumes were up 1.1% for the quarter .

Speaker #5: Outpatient cases were up 3.3% , but inpatient cases decreased by 5.3% and observation observation cases were down 3.1% . Pain management cases were down 15.4% in the quarter , mainly due to decreases at Arkansas Surgical Hospital and Sioux Falls Specialty Hospital .

Speaker #5: Pain cases were down at ash following the departure of a pain doctor in Q4 of last year . As we said in our call last quarter , a new pain doctor started at Ash this August and a new spine surgeon joined a referral practice in September .

Speaker #5: Pain cases at Sioux Falls were impacted by the departure of a pain physician in the second quarter . The hospital is actively recruiting for both a pain doctor and a spine surgeon .

Speaker #5: Our operating expenses for the quarter were about 3.1 million higher than prior year . As increases to consolidated salaries and benefits , and to drugs and supplies more than offset our lower G&A expenses .

Speaker #5: Consolidated salaries and benefits increased 6.2% . Primarily reflecting annual merit adjustments , market wage pressures , and higher benefit costs related to increased health plan utilization .

Speaker #5: This was partially offset by a reduction in salaried physicians and clinical staff , including one physician who transitioned from being an employee to joining a referring practice and becoming an owner in the hospital .

Speaker #5: At the end of last year . Drugs and supplies rose by 10.5% , mainly reflecting a shift in case mix toward higher acuity procedures .

Speaker #5: This increase was partially offset by improved implant cost savings achieved in certain facilities . Higher surgical case volumes also contributed to the increase .

Speaker #5: While higher vendor rebates provided a modest offset . Meanwhile , G&A expenses were down 4.9% , largely due to lower corporate level costs for share based compensation plans .

Speaker #5: In addition to savings realized in professional fees and contracted services . These reductions were partly offset by higher repairs and maintenance expenses , along with increased recruiting costs and physician guarantees .

Speaker #5: Looking at our profitability for the quarter and again excluding the government stimulus income from last year, income from operations increased 28.4% to $12.2 million, and EBITDA increased 17.7% to $16.1 million.

Speaker #5: Turning to our balance sheet at the end of September , we had consolidated net working capital of $43 million with cash and cash equivalents of 46.8 million .

Speaker #5: This compares to net working capital of 76.4 million , and cash and cash equivalents of 108.5 million at the end of 2020 . For .

Speaker #5: The decrease in consolidated net working capital was primarily driven by the completion of the substantial issuer bid in March , which reduced cash and cash equivalents by 43.7 million .

Speaker #5: Other significant drivers for the $14.4 million tax payment in April related to the gain on sale of Black Hills Surgical Hospital and $14.8 million used to repurchase shares under our normal course .

Speaker #5: Issuer bid . We remain free of corporate level bank debt , having fully repaid our corporate credit facility near the end of last year .

Speaker #5: As we announced last quarter on August 6th , we executed a new credit agreement with Canadian Imperial Bank of Commerce . The agreement is for a $40 million revolving credit facility with an option to increase facility by up to $25 million .

Speaker #5: Contingent upon meeting specified conditions . This concludes our prepared remarks . We would now like to open the call up for questions . Operator .

Speaker #3: Yes , thank you very much . We will now begin the question and answer session . Should you have a question , please press the star , followed by the one on your touchtone phone .

Speaker #3: You will hear prompt that your hand has been raised should you wish to decline from the polling process , please press . The star , followed by the two .

Speaker #3: If you are using a speakerphone , please lift the handset before pressing any keys . We will wait for one minute , then for everyone to queue up for questions .

Speaker #3: Just please press star one if you have a question . Okay , it seems we have no questions at this time . As a quick reminder , you just need to press star one to ask a question .

Speaker #3: Okay , I believe we have no questions at this time . Okay , I will now turn the call back to Mr. Redmond for closing remarks .

Speaker #3: Please go ahead .

Speaker #6: Thank you . Operator .

Speaker #4: Thank you for joining us this morning. We appreciate your continued support and look forward to keeping you updated on our progress. Have a great day.