LHC Group announces second quarter 2022 financial results

LAFAYETTE, La., Aug. 3, 2022 /PRNewswire/ -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter ended June 30, 2022.

Second Quarter 2022 Financial Results

• Net service revenue increased 5.5% to $576.2 million.
• Net income attributable to LHC Group's common stockholders was $10.6 million, or $0.35 per diluted share.
• Adjusted net income attributable to LHC Group's common stockholders was $29.8 million, or $0.98 adjusted earnings per diluted share.
• Adjusted EBITDA was $53.0 million.

A reconciliation of all non-GAAP financial results in this release appears on pages 9-10.

Operational and Strategic Highlights

• LHC Group's quality and patient satisfaction scores continue to exceed the national average as the Company remains a leader among industry peers.
• Home Health quality star ratings continue to improve from 4.20 in the April 2022 release to 4.25 in the July 2022 release and Home Health quality patient satisfaction ratings continue to improve from 3.83 in the April 2022 release to 4.01 in the July 2022 release.
• Organic growth in hospice admissions increased 5.5% in the second quarter of 2022 compared with the same period in 2021.
• On May 3, 2022, LHC Group announced that it has finalized a joint venture partnership for in-home services with Archbold Medical Center in Thomasville, Georgia.

The Company has posted supplemental financial information on the second quarter results, which can be found under Financial Results on the Company's Investor Relations page. In light of the pending acquisition of the Company by UnitedHealth Group Incorporated ("UNH"), LHC Group will not conduct a quarterly earnings call to discuss the second quarter results.

About LHC Group, Inc.
LHC Group, Inc. is a national provider of in-home healthcare services and innovations for communities around the nation, offering quality, value-based healthcare to patients primarily within the comfort and privacy of their home or place of residence. The company's 29,000 employees deliver home health, hospice, home- and community-based services, and facility-based care in 37 states and the District of Columbia – reaching 68 percent of the U.S. population aged 65 and older. Through Imperium Health, the company's ACO management and enablement company, LHC Group helps partners improve both savings and patient outcomes with a value-based approach. As the preferred joint venture partner for more than 400 leading U.S. hospitals and health systems, LHC Group works in cooperation with providers to customize each partnership and reach more patients and families with an effective and efficient model of care.

Forward-looking Statements
This press release contains "forward-looking statements" (as defined in the Securities Litigation Reform Act of 1995) regarding, among other things, future events or the future financial performance of the Company, or the timing or anticipated benefits of pending acquisition of the Company by UnitedHealth Group Incorporated. Words such as "anticipate," "expect," "project," "intend," "believe," "will," "estimates," "may," "could," "should" and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. Forward-looking statements are based on information currently available to the Company and involve estimates, expectations and projections. Investors are cautioned that all such forward-looking statements are subject to risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those discussed and described in our most recent Annual Report on Form 10-K, including those risks described in Part I, Item 1A. Risk Factors thereof, and in other reports filed subsequently by us with the Securities and Exchange Commission and, with respect to the pending acquisition of the Company by UnitedHealth Group Incorporated, include, but are not limited to, those discussed in the proxy statement filed by the Company with the SEC on May 17, 2022. All forward-looking statements included in this document are based on information available to us on the date hereof, and the Company assumes no obligation to update any such forward-looking statements to reflect future events or circumstances, except as required by law.

LHC GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data) (Unaudited)
	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash	$         27,400		$          9,809
Receivables:
Patient accounts receivable	342,068		348,820
Other receivables	13,304		13,780
Amounts due from governmental entities	483		—
Total receivables	355,855		362,600
Prepaid income taxes	19,613		7,531
Prepaid expenses	20,556		28,401
Other current assets	36,166		24,801
Total current assets	459,590		433,142
Property, building and equipment, net of accumulated depreciation of $106,541 and $98,394, respectively	155,978		153,959
Goodwill	1,751,430		1,748,426
Intangible assets, net of accumulated amortization of $21,902 and $19,152, respectively	397,121		400,002
Operating lease right of use asset	109,925		113,399
Other assets	63,830		46,693
Total assets	$    2,937,874		$   2,895,621
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$       124,222		$        98,118
Salaries, wages, and benefits payable	94,432		100,532
Self-insurance reserves	41,302		33,784
Contract liabilities - deferred revenue	8,222		106,489
Current operating lease payable	36,929		37,630
Amounts due to governmental entities	3,034		5,447
Current liabilities - deferred employer payroll tax	26,790		26,790
Total current liabilities	334,931		408,790
Deferred income taxes	80,691		70,026
Income taxes payable	7,754		7,320
Revolving credit facility	759,000		661,197
Long-term operating lease liabilities	75,971		78,688
Total liabilities	1,258,347		1,226,021
Noncontrolling interest — redeemable	17,210		17,501
Commitments and contingencies
Stockholders' equity:
LHC Group, Inc. stockholders' equity:
Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding	—		—
Common stock — $0.01 par value; 60,000,000 shares authorized; 36,703,550  and 36,549,524 shares issued, and 30,567,333 and 30,634,414 shares outstanding, respectively	367		365
Treasury stock —  6,136,217 and  5,915,110 shares at cost, respectively	(194,390)		(164,790)
Additional paid-in capital	990,247		979,642
Retained earnings	781,063		751,025
Total LHC Group, Inc. stockholders' equity	1,577,287		1,566,242
Noncontrolling interest — non-redeemable	85,030		85,857
Total stockholders' equity	1,662,317		1,652,099
Total liabilities and stockholders' equity	$    2,937,874		$   2,895,621

 

LHC GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited)
	Three Months Ended    June 30,				Six Months Ended   June 30,
	2022		2021		2022		2021
Net service revenue	$       576,193		$       545,907		$    1,147,688		$    1,070,742
Cost of service revenue (excluding depreciation and amortization)	353,933		317,872		704,321		628,144
Gross margin	222,260		228,035		443,367		442,598
General and administrative expenses	196,390		167,061		380,749		330,310
Impairment of intangibles and other	842		760		2,071		937
Operating income	25,028		60,214		60,547		111,351
Interest expense	(6,407)		(143)		(10,578)		(406)
Income before income taxes and noncontrolling interest	18,621		60,071		49,969		110,945
Income tax expense	3,679		13,318		10,048		22,759
Net income	14,942		46,753		39,921		88,186
Less net income attributable to noncontrolling interests	4,358		9,110		9,883		15,884
Net income attributable to LHC Group, Inc.'s common stockholders	$         10,584		$         37,643		$         30,038		$         72,302
Earnings per share:
Basic	$              0.35		$              1.21		$              0.98		$              2.32
Diluted	$              0.35		$              1.20		$              0.98		$              2.30
Weighted average shares outstanding:
Basic	30,543		31,225		30,508		31,188
Diluted	30,676		31,430		30,623		31,423

 

LHC GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)
		Six Months Ended June 30,
		2022			2021
Operating activities:
Net income	$	39,921		$	88,186
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		11,723			9,541
Amortization of operating lease right of use asset		20,412			17,995
Stock-based compensation expense		9,319			7,506
Deferred income taxes		10,665			19,489
Loss on disposal of assets		221			19
Impairment of intangibles and other		2,071			937
Changes in operating assets and liabilities, net of acquisitions:
Receivables		5,686			(25,649)
Prepaid expenses		7,845			(4,484)
Other assets		(13,403)			6,170
Prepaid income taxes		(12,083)			(13,739)
Accounts payable and accrued expenses		31,358			(9,148)
Salaries, wages, and benefits payable		1,338			(4,560)
Contract liabilities - deferred revenue		(98,267)			(65,026)
Operating lease liabilities		(20,286)			(17,962)
Income taxes payable		434			(21,042)
Net amounts due to/from governmental entities		758			(57)
Net cash used in operating activities		(2,288)			(11,824)
Investing activities:
Purchases of property, building and equipment		(11,138)			(15,619)
Proceeds from sale of property, building and equipment		—			150
Cash paid for acquisitions, net of cash acquired		(2,570)			(649)
Proceeds from sale of an entity		—			1,531
Minority interest investments		(15,100)			(10,100)
Net cash used in investing activities		(28,808)			(24,687)
Financing activities:
Proceeds from line of credit		597,250			—
Payments on line of credit		(499,447)			(20,000)
Government stimulus advance		—			(93,257)
Proceeds from employee stock purchase plan		1,233			1,222
Payments on repurchasing common stock		(34,565)			—
Noncontrolling interest distributions		(11,541)			(13,332)
Withholding taxes paid on stock-based compensation		(3,867)			(10,754)
Purchase of additional controlling interest		(376)			(2,113)
Sale of noncontrolling interest		—			284
Net cash provided by (used in) financing activities		48,687			(137,950)
Change in cash		17,591			(174,461)
Cash at beginning of period		9,809			286,569
Cash at end of period	$	27,400		$	112,108
Non-Cash Financing Activity:
Supplemental disclosures of cash flow information:
Interest paid	$	9,321		$	1,322
Income taxes paid	$	11,191		$	38,103
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations	$	18,633		$	25,656
Reduction to right of use assets and liabilities	$	(1,695)			—
Non-Cash Investing Activity:
Net working capital adjustment	$	1,440			—
Accrued capital expenditures	$	74		$	1,108

 

LHC GROUP, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Amounts in thousands) (Unaudited)
	Three Months Ended June 30, 2022
	Home health services		Hospice services		Home and community- based services		Facility- based services		HCI		Total
Net service revenue	$     392,782		$   102,617		$    44,718		$     30,709		$      5,367		$     576,193
Cost of service revenue (excluding depreciation and amortization)	228,511		67,848		31,788		22,830		2,956		353,933
General and administrative expenses	134,623		33,423		12,444		12,211		3,689		196,390
Impairment of intangibles and other	481		361		—		—		—		842
Operating income (loss)	29,167		985		486		(4,332)		(1,278)		25,028
Interest expense	(4,488)		(949)		(564)		(281)		(125)		(6,407)
Income (loss) before income taxes and noncontrolling interest	24,679		36		(78)		(4,613)		(1,403)		18,621
Income tax expense (benefit)	6,565		(160)		(1,413)		(960)		(353)		3,679
Net income (loss)	18,114		196		1,335		(3,653)		(1,050)		14,942
Less net income (loss) attributable to non controlling interests	4,324		888		(34)		(817)		(3)		4,358
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$       13,790		$         (692)		$      1,369		$      (2,836)		$     (1,047)		$       10,584
Total assets	$  1,746,161		$   807,100		$  240,481		$     80,617		$    63,515		$ 2,937,874

 

LHC GROUP, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Amounts in thousands) (Unaudited)
	Three Months Ended June 30, 2021
	Home health services		Hospice services		Home and community- based services		Facility- based services		HCI		Total
Net service revenue	$     396,534		$     63,804		$     48,407		$     31,030		$       6,132		$    545,907
Cost of service revenue (excluding depreciation and amortization)	219,925		39,647		34,683		20,460		3,157		317,872
General and administrative expenses	123,245		18,114		11,923		10,906		2,873		167,061
Impairment of intangibles and other	760		—		—		—		—		760
Operating income (loss)	52,604		6,043		1,801		(336)		102		60,214
Interest expense	(106)		(20)		(10)		(5)		(2)		(143)
Income (loss) before income taxes and noncontrolling interest	52,498		6,023		1,791		(341)		100		60,071
Income tax expense (benefit)	11,706		1,280		470		(152)		14		13,318
Net income (loss)	40,792		4,743		1,321		(189)		86		46,753
Less net income (loss) attributable to noncontrolling interests	7,500		1,208		85		322		(5)		9,110
Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$       33,292		$       3,535		$       1,236		$         (511)		$            91		$      37,643
Total assets	$  1,681,871		$   288,985		$   245,071		$     85,520		$     65,678		$ 2,367,125

 

LHC GROUP, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Amounts in thousands) (Unaudited)
	Six months ended June 30, 2022
	Home health services		Hospice services		Home and community- based services		Facility- based services		HCI		Total
Net service revenue	$      780,674		$   204,523		$     89,058		$     62,848		$     10,585		$ 1,147,688
Cost of service revenue (excluding depreciation and amortization)	456,718		133,913		60,743		47,035		5,912		704,321
General and administrative expenses	261,430		64,768		23,862		23,639		7,050		380,749
Impairment of intangibles and other	930		1,087		54		—		—		2,071
Operating income (loss)	61,596		4,755		4,399		(7,826)		(2,377)		60,547
Interest expense	(7,458)		(1,447)		(977)		(489)		(207)		(10,578)
Income (loss) before income taxes and noncontrolling interest	54,138		3,308		3,422		(8,315)		(2,584)		49,969
Income tax expense (benefit)	11,334		436		845		(1,922)		(645)		10,048
Net income (loss)	42,804		2,872		2,577		(6,393)		(1,939)		39,921
Less net income (loss) attributable to non controlling interests	8,920		1,568		51		(646)		(10)		9,883
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$        33,884		$       1,304		$       2,526		$      (5,747)		$      (1,929)		$      30,038

 

LHC GROUP, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Amounts in thousands) (Unaudited)
	Six months ended June 30, 2021
	Home health services		Hospice services		Home and community- based services		Facility- based services		HCI		Total
Net service revenue	$      770,362		$   126,538		$     97,532		$     64,399		$     11,911		$ 1,070,742
Cost of service revenue (excluding depreciation and amortization)	432,298		78,217		69,555		41,635		6,439		628,144
General and administrative expenses	242,642		36,241		23,452		22,163		5,812		330,310
Impairment of intangibles and other	937		—		—		—		—		937
Operating income (loss)	94,485		12,080		4,525		601		(340)		111,351
Interest expense	(288)		(56)		(34)		(19)		(9)		(406)
Income (loss) before income taxes and noncontrolling interest	94,197		12,024		4,491		582		(349)		110,945
Income tax expense (benefit)	19,596		2,347		988		(95)		(77)		22,759
Net income (loss)	74,601		9,677		3,503		677		(272)		88,186
Less net income (loss) attributable to non controlling interests	12,349		2,223		364		979		(31)		15,884
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$        62,252		$       7,454		$       3,139		$         (302)		$         (241)		$      72,302

 

LHC GROUP, INC. AND SUBSIDIARIES SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA (Unaudited)
		Three Months Ended June 30,											Six Months Ended June 30,
Key Data:		2022					2021						2022						2021
Home Health Services:
Locations		543						531						543						531
Total new admissions		107,268						109,082						220,390						217,004
Episodic new admissions		66,419						68,738						134,573						136,130
Average daily census		84,320						85,554						84,833						84,745
Average episodic daily census		53,415						55,706						53,191						55,152
Completed episodes		104,053						105,393						204,580						207,129
Average reimbursement per completed episodes		$2,878						$2,882						$2,906						$2,869
Total visits		2,089,747						2,151,665						4,207,819						4,209,298
Total episodic visits		1,286,584						1,352,608						2,573,685						2,641,261
Average visits per episodes		12.4						12.8						12.6						12.8
Organic growth: (1)
Revenue		-3.4		%				16.4		%				-1.5			%			9.4			%
Episodic revenue		-4.2		%				14.8		%				-3.0			%			8.0			%
Total new admissions		-4.3		%				16.4		%				-1.4			%			7.3			%
Episodic new admissions		-6.3		%				13.4		%				-4.4			%			4.6			%
Average daily census		-3.5		%				10.3		%				-2.2			%			10.2			%
Average episodic daily census		-6.4		%				5.7		%				-5.7			%			4.5			%
Completed episodes		-3.7		%				11.0		%				-3.5			%			5.5			%
Hospice Services:
Locations		169						120						169						120
Admissions		7,370						4,967						15,746						10,418
Average daily census		7,123						4,454						7,093						4,433
Patient days		648,216						405,339						1,284,037						802,313
Average revenue per patient day		$	160.97					$	158.54					$		161.99				$		160.19
Organic growth: (1)
Total new admissions		5.5			%			1.1		%				7.1			%			4.7			%
Home and Community-Based Services:
Locations		135						135						135						133
Average daily census		11,598						13,514						11,864						13,613
Billable hours		1,694,994						1,878,138						3,368,686						3,779,419
Revenue per billable hour		$	27.22					$	25.88					$	27.19					$	25.96
Facility-Based Services:
Long-term Acute Care
Locations		12						12						12						12
Average revenue per patient day		$	1,479					$	1,517					$	1,463					$	1,517
Patient days		17,550						20,199						38,063						41,359
(1)     Organic growth is calculated as the sum of same store plus de novo for the period divided by total from the same period in the prior year.

 

RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC. (Amounts in thousands) (Unaudited)
		Three Months Ended  June 30,								Six Months Ended  June 30,
		2022				2021				2022				2021
Net income attributable to LHC Group, Inc.'s common stockholders		$	10,584			$	37,643			$	30,038			$	72,302
Add (net of tax):
Acquisition, de novo and legal expenses (1)		6,771				3,477				9,790				3,477
Closures/relocations/consolidations (2)		3,010				1,048				5,142				1,179
COVID-19 impact:
PPE, supplies and other expenses (3)		—				7,999				—				16,851
ERP implementation (4)		2,446				728				4,138				728
Cost improvement initiatives (5)		6,562				—				10,204				—
Cost report and contract settlements (6)		465				—				3,963				—
Adjusted net income attributable to LHC Group, Inc.'s common stockholders		$	29,838			$	50,895			$	63,275			$	94,537

 

RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC. PER DILUTED SHARE (Unaudited)
		Three Months Ended  June 30,								Six Months Ended  June 30,
		2022				2021				2022				2021
Net income attributable to LHC Group, Inc.'s common stockholders		$	0.35			$	1.20			$	0.98			$	2.30
Add (net of tax):
Acquisition, de novo and legal expenses (1)		0.22				0.11				0.32				0.11
Closures/relocations/consolidations (2)		0.10				0.03				0.17				0.04
COVID-19 impact:
PPE, supplies and other expenses (3)		—				0.26				—				0.54
ERP implementation (4)		0.08				0.02				0.14				0.02
Cost improvement initiatives (5)		0.21				—				0.33				—
Cost report and contract settlements (6)		0.02				—				0.13				—
Adjusted net income attributable to LHC Group, Inc.'s common stockholders		$	0.98			$	1.62			$	2.07			$	3.01

 

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (Amounts in thousands) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Net income attributable to LHC Group, Inc.'s common stockholders		$	10,584			$	37,643			$	30,038			$	72,302
Add:
Income tax expense		3,679				13,318				10,048				22,759
Interest expense, net		6,407				143				10,578				406
Depreciation and amortization		6,106				4,542				11,723				9,541
Adjustment items (*)		26,233				17,942				45,137				30,109
Adjusted EBITDA		$	53,009			$	73,588			$	107,524			$	135,117
* Adjustment items (pre-tax):
Acquisition, de novo and legal expenses (1)		9,226				4,708				13,307				4,708
Closures/relocation/consolidations (2)		4,101				1,419				6,983				1,596
COVID-19 PPE, supplies and other expenses (3)		—				10,829				—				22,819
ERP implementation (4)		3,332				986				5,619				986
Cost improvement initiatives (5)		8,941				—				13,865				—
Cost report and contract settlements (6)		633				—				5,363				—
Total adjustments		$	26,233			$	17,942			$	45,137			$	30,109

 

1. Expenses and other costs associated with recently announced or completed acquisitions, de novos and the pending acquisition by UnitedHealth Group. ($9.2 million pre-tax in the three months ended June 30, 2022 and $13.3 million pre-tax in the six months ended June 30, 2022; $4.7 million pre-tax in the three and six months ended June 30, 2021).
2. Loss on the sale of an asset and other expenses associated with a closure or consolidation, including impairment ($4.1 million pre-tax in the three months ended June 30, 2022 and $7.0 million in the six months ended June 30, 2022; $1.4 million pre-tax in the three months ended June 30, 2021 and $1.6 million in the six months ended June 30, 2021).
3. COVID-19 related expenses for purchases of personal protective equipment (PPE), supplies and wage adjustments (No adjustments were made in the three months and six months ended June 30, 2022; $10.8 million pre-tax in the three months ended June 30, 2021 and $22.8 million pre-tax in the six months ended June 30, 2021).
4. Expenses and other costs associated with the implementation of an Enterprise Resource Planning software ($3.3 million pre-tax in the three months ended June 30, 2022 and $5.6 million pre-tax in the six months ended June 30, 2022; $1.0 million pre-tax in the three and six months ended June 30, 2021).
5. Expenses associated with cost improvement initiatives implemented in the first and second quarters of 2022, which consisted of contract terminations and general and administrative cost reductions ($8.9 million pre-tax in the three months ended June 30, 2022 and $13.9 million pre-tax in the six months ended June 30, 2022).
6. Expenses associated with a 2004 cost report settlement along with other disputed contract settlements ($0.6 million pre-tax in the three months ended June 30, 2022 and $5.4 million pre-tax in the six months ended June 30, 2022).

Contact:	Eric Elliott
	Senior Vice President of Finance
	(337) 233-1307
	eric.elliott@lhcgroup.com

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SOURCE LHC Group, Inc.