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Third Quarter 2008 Highlights:
Adam D. Singer, M.D., Chief Executive Officer, stated, "We are very pleased with our growth in third quarter 2008 results, which demonstrate the continued strength of our business model with 32% overall net revenue growth and 19% same-market area net revenue growth. In addition, we continue to generate operating leverage as our revenue base expands, resulting in year-over-year growth in our operating income margin to 8.5% from 5.8%."
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Dr. Singer added, "During the quarter, we closed the previously announced acquisition of Hospitalists of America, which provided us with an entry into the Southeast Florida market. Also, we recently completed three in-market acquisitions in Dallas, Texas, Ocala, Florida and Phoenix, Arizona demonstrating our growth strategy to expand in existing markets. Our acquisition pipeline remains robust in this highly fragmented industry, and we will continue to look for opportunities across the hospitalist sector."
Third Quarter 2008
IPC's third quarter 2008 patient encounters rose 27% to 692,000, compared to 544,000 in the same period last year. The Company reported third quarter 2008 net revenue of $63.2 million, a 32% increase from $47.8 million for the third quarter of 2007. Of the increase in net revenue, 57% was attributed to same-market areas. Third quarter 2008 same-market area net revenue grew 19% and same-market area patient encounters rose 14%. The increase in same-market area net revenue was primarily due to an increase in patient encounters from existing hospitalists, as well as new hospitalists either hired or added from in-market acquisitions.
Physician practice salaries and other expenses for the third quarter of 2008 were $45.8 million, compared to $35.4 million in the third quarter of 2007. The physician practice expenses as a percentage of net revenue decreased to 72.5%, compared to 74% for the same period of the prior year. The decrease in physician costs as a percentage of revenue was the result of higher average productivity per physician.
General and administrative expenses for the third quarter of 2008 were $11.4 million, compared to $9.3 million for the third quarter of 2007. General and administrative expenses as a percentage of revenue declined to 18% for the third quarter of 2008, compared to 19.4% for the third quarter of 2007, as the Company continues to leverage these costs over a larger revenue base.
Income from operations for the third quarter of 2008 increased 93% to $5.4 million, compared to $2.8 million for the third quarter of 2007, which was net of depreciation and amortization of $0.6 million and $0.4 million for 2008 and 2007, respectively. Operating margin rose to 8.5% for the third quarter of 2008, compared to 5.8% for the third quarter of 2007. The increase in operating margin was the result of the reduction of physician costs as a percentage of revenue and general and administrative expenses as a percentage of revenue as the Company continues to leverage its administrative costs over a larger revenue base as it grows its existing practices and continues to acquire new practices.
Third quarter 2008 net income was $3.2 million, or $0.20 per pro-forma diluted share, compared to a net loss of $7.3 million, or a loss of $0.65 per pro-forma diluted share, for the third quarter of 2007. The third quarter of 2007 included a loss of $8.7 million due to the change in the fair value of preferred stock warrant liabilities.
Nine Months Ended September 30, 2008
For the nine months ended September 30, 2008, IPC reported net revenue of $182.9 million, an increase of 33% from $137.4 million for the comparable 2007 period. Income from operations was $15.6 million compared to $9.7 million for the first nine months of 2007. Net income for the first nine months of 2008 was $8.9 million or $0.59 per pro-forma diluted share compared to a net loss of $3.7 million or a loss $0.33 per pro-forma diluted share for the same period of the prior year. The comparable period of 2007 included a loss of $8.8 million due to the change in the fair value of preferred stock warrant liabilities.
Recent Developments
In October, the Company completed the acquisition of three in-market acquisitions in Dallas, Texas, Ocala, Florida and Phoenix, Arizona.
Guidance
The Company previously announced financial guidance for the full year 2008 for revenue to be in the range of $254 million to $257 million and earnings per pro-forma diluted share to be in the range of $0.85 to $0.88. Based on the overall negative economic environment and softness in hospital census, the Company now expects full year 2008 financial results to be close to the low end of the previously announced range.
Conference Call
IPC The Hospitalist Company will host an investor conference call to review the quarterly results at 5:00 p.m. ET (2:00 p.m. PT) today. To participate in the conference call, please dial 877-719-9795 (USA) or 719-325-4776 (International). In addition, a dial-up replay of the conference call will be available beginning November 11, 2008 at 8:00 p.m. ET (5:00 p.m. PT) and ending on November 25, 2008. The replay telephone number is 888-203-1112 (USA) or 719-457-0820 (International) Replay Passcode: 9105145. A live web cast of the call will also be available from the Investor Relations section on the corporate web site at http://www.hospitalist.com. A web cast replay can be accessed on the corporate web site beginning November 11, 2008 at approximately 8:00 p.m. ET (5:00 p.m. PT) and will remain available until December 11, 2008.
About IPC The Hospitalist Company
IPC The Hospitalist Company, Inc. (Nasdaq: IPCM) is a leading national hospitalist physician group practice focused on the delivery of hospitalist medicine services. IPC's physicians and affiliated providers manage the care of hospitalized patients in coordination with primary care physicians and specialists. The Company provides its hospitalists with the comprehensive training, information technology, and management support systems necessary to improve the quality and reduce the cost of inpatient care in the facilities it serves. For more information, visit the IPC website at www.hospitalist.com.
Safe Harbor Statement
Certain statements and information in this press release may be deemed to be "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release may include, but are not limited to, those statements set forth under the section titled "Guidance" regarding projected operating results, revenues, earnings, and IPC's growth opportunities and strategy. Forward-looking statements are often characterized by terminology such as "believe", "hope", "may", "anticipate", "should", "intend", "plan", "will", "expect", "estimate", "project", "positioned", "strategy" and similar expressions. Any forward-looking statements are necessarily based on a variety of estimates and assumptions which, though considered reasonable by the Company, may not be realized and are inherently subject to significant business, economic, competitive, industry, regulatory, market and financial uncertainties and contingencies, many of which are and will be beyond IPC's control. Important risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements are described in IPC's most recent Annual Report on Form 10-K, including the section titled "Risk Factors" and actual results could differ materially from those anticipated in forward-looking statements.
In particular the following risks and uncertainties may have such an impact:
IPC undertakes no obligation following the date of this press release to update or revise any such statements or projections whether as a result of new information, future events, or otherwise.
-- Net revenue increased 32% year-over-year to $63.2 million, largely driven by same-market area net revenue growth of 19% -- Patient encounters increased 27% year-over-year to 692,000 -- Income from operations rose 93% year-over-year to $5.4 million, as operating margin increased to 8.5% from 5.8% -- Net income increased to $3.2 million, or $0.20 per pro-forma diluted share
SOURCE IPC The Hospitalist Company, Inc.
