Corporate Presentation – November 2015

Air Methods Corporation
NASDAQ: AIRM
Corporate Presentation – November 2015
Forward Looking Statements/
Non-GAAP Financial Information
•
Forward Looking Statements: Forward-looking statements in this news release are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Statements in this press release that are “forward-looking statements”, including those
related to (i) preliminary flight volume for April 2015; and (ii) increasing demand for our services, are based on current expectations and
assumptions that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number
of factors, including but not limited to, the size, structure and growth of the Company's air medical services, United Rotorcraft Division and
Tourism Division; the collection rates for patient transports; pace of collections; the continuation and/or renewal of air medical service
contracts; the final results of April 2015 flight volume; weather conditions across the U.S.; development and changes in laws and regulations,
including, without limitation, the impact of the Patient Protection and Affordable Care Act; increased regulation of the health care and
aviation industry through legislative action and revised rules and standards; and other matters set forth in the Company's filings with the
SEC. The Company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether
as a result of new information, future events or otherwise.
•
Non-GAAP Financial Information: This presentation discusses EBITDA, which is not calculated in conformity with U.S. Generally
Accepted Accounting Principles (GAAP). The Company defines EBITDA as earnings before interest, income taxes, depreciation,
amortization and gain or loss on disposition of assets. A table is provided in this press release to reconcile such non-GAAP financial measure
to net income, which is the most directly comparable financial measure prepared in accordance with GAAP. Such table below includes all
information reasonably available to the Company at the date of this press release and adjustments that the Company can reasonably predict.
Events that could cause the reconciliation to change include, but are not limited to, acquisitions and divestitures of businesses and goodwill
and other asset impairments. To supplement the Company’s consolidated financial statements presented on a GAAP basis, management
believes that this non-GAAP measure provides useful information about the Company’s core operating results and thus is appropriate to
enhance the overall understanding of the Company’s past financial performance and its prospects for the future. Management believes the
additions and subtractions from net income used to calculate EBITDA reflect the measurements that its bank creditors and third party stock
analysts use in evaluating the Company. These adjustments to the Company’s GAAP results are made with the intent of providing both
management and investors a more complete understanding of the Company’s underlying operational results and trends and performance.
Management uses this non-GAAP measure to evaluate the Company’s financial results. The presentation of non-GAAP measures is not
meant to be considered in isolation or as a substitute for or superior to financial results determined in accordance with GAAP.
2
Air Methods’ Profile
AIRM is the largest provider of air medical
transportation services in the estimated
$4.0 Billion U.S. market, transporting
approximately 98,765 patients (TTM 9/30/15) and
operating in 42 states.
AIRM’s helicopter tourism operations generated
$125 Million of revenue (TTM 9/30/15). Total US
helicopter tourism revenue is estimated to be in
excess of $500 Million.
3
Services Provided
•
Air Medical Services (AMS) (86% of TTM 9/30/15 Revenue)
•
Patient Transport (70%)
•
AMS Contract (15%)
•
Dispatch & Billing Services (1%)
•
Tourism (12%)
•
United Rotorcraft (2%)
4
Differences of Two Air Medical Service Delivery Models
Patient Transport Revenue (CBS)
TTM Revenue of $741 Million
AMS Contract Revenue (HBS)
TTM Revenue of $162 Million
•
Typically no contract with third party
•
Long term contract with hospital
•
Aviation services PLUS medical staffing,
dispatch and communications, and billing
and collections
•
Aviation services only
•
Approx. 80% fixed revenue stream
•
93 Bases
•
Approx. $1.7 million of revenue and $304,000
of contribution per base before any allocation
of G&A costs
•
Growth primarily driven from satellite
expansion, new contracts and annual
contractual prices
•
100% variable revenue stream
•
200 Bases
•
Approx. $3.9 million of revenue and $1.5
million of contribution per base before any
allocation of G&A costs
•
Growth primarily driven from outsourced
hospital programs, new base expansion and
increases in reimbursement
5
Growth of Air Medical Operations
2012
2013
%
Change
2014
%
Change
TTM
9/30/15
%
Change
$590,718
$585,459
(0.9%)
$676,213
15.5%
$741,261
9.6%
Net Revenue /
Transport
$10,509
$10,861
3.4%
$11,643
7.2%
$12,029
3.3%
Transports
56,210
53,805
(4.3%)
57,940
7.7%
61,496
6.1%
Transports + Weather
Cancellations
72,005
72,117
0.2%
76,566
6.2%
84,283
10.1%
169
179
5.9%
189
5.6%
200
5.8%
$224,956
$204,512
(9.1%)
$161,658
-8.5%
139
109
(21.6%)
93
-4.1%
Patient Transport Revenue
# Bases
AMS Contract Revenue
# Bases
$176,744 (13.6%)
97
(11.0%)
6
Air Medical Flight Services Map
7
Patient Transport Revenue
Transports
Q215
5,464
17,330
Q115
5,966
5,929
5,428
Q414
16,105
Q314
13,852
Q214
14,209
4,878
15,796
Q114
3,914
4,406
4,630
Q413
14,994
Q313
12,941
Q213
13,054
4,665
4,223
14,777
Q113
13,984
4,794
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
11,990
# of Transports/Cancellations
Seasonal Fluctuations for Patient Transports
Q315
Weather Cancellations
8
Scene vs Inter-Facility Flights
18,000
16,000
65.2%
64.9%
69.9%
67.9%
65.4%
64.4%
69.8%
62.7%
66.9%
8,000
67.8%
10,000
62.2%
12,000
Q115
34.8%
Q414
35.1%
Q314
30.1%
Q214
32.1%
Q114
34.6%
Q413
35.6%
Q313
30.2%
Q213
33.1%
2,000
37.3%
4,000
37.8%
6,000
32.2%
# of Transports
14,000
Q215
Q315
0
Q113
Scene
Inter-Facility
9
Patient Transport Revenue
Accounts Receivable Day’s Sales Outstanding (DSO)
140
120
100
133
Q414
131
123
Q314
129
Q413
115
Q313
116
97
116
100
115
60
106
80
Q115
Q215
Q315
40
20
0
Q113
Q213
Q114
Q214
10
DSO Reconciliation
DSO
Sept-14
Explanation
116
7
AIRM’s DSO calculation methodology excludes 3rd party collection agency receivables;
however, changes to these receivables impact revenues in the DSO calculation. Third
party collection agency receivables decreased YOY, resulting in higher DSOs. If these
receivables were included in the calculation in both periods, the YOY increase in DSOs
would have been reduced by seven days.
3
Payments from certain payers were on hold pending final contract negotiations at
quarter end. Since then, the payer has begun processing claims and we expect them
to be processed in full by year end.
New Bases
1
New base growth in recent periods is driving an increase in receivables. The future
impact of new bases on DSOs depends on Greenfield and conversion activity, which
has been high in recent periods.
Other
6
Represents denials for medical necessity, other payer tactics, and other causes that
increase DSOs.
3rd Party Collection Agency
Recovery Value Change
Accounts on Hold
Sept-15
133
11
Net Revenue Per Transport
(After Medicare/Medicaid Discount & Bad Debt Expense)
$14,000
$12,000
$10,000
Q314
Q414
Q115
Q215
$12,839
Q214
$11,298
$11,353
Q114
$11,651
$10,928
Q413
$12,238
$11,531
Q313
$11,972
$11,988
$4,000
$8,985
$6,000
$10,650
$8,000
$2,000
$0
Q113
Q213
Q315
12
Patient Transport Revenue
Collection Rate by Payor
Payor Mix
(T3M 6/30/15)
(TTM 09/30/14)
100%
10.1%
80%
27.8%
60%
24.6%
40%
33.9%
3.6%
20%
0%
Commercial Private Insurance
Gov't Sponsored Insurance
Medicare
Medicaid
Uninsured
Commercial
Gov't
Private
Sponsored
Insurance Insurance
Medicare
Medicaid
Uninsured
13
Air Medical Services Division
Payor Mix*
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
Commercial Insurance
28.1%
27.1%
29.4%
29.6%
27.7%
26.9%
29.1%
29.5%
27.0%
26.1%
27.8%
GovernmentSponsored Insurance
4.6%
4.8%
4.8%
4.7%
4.4%
3.6%
3.5%
3.2%
3.6%
4.1%
3.6%
Medicare
33.1%
34.2%
31.7%
31.5%
33.7%
34.5%
32.4%
32.1%
34.8%
35.9%
33.9%
Medicaid
20.7%
20.2%
20.1%
20.6%
20.1%
24.1%
23.6%
23.4%
23.9%
24.7%
24.6%
Self-Pay
13.5%
13.7%
14.0%
13.6%
14.2%
10.9%
11.4%
11.8%
10.7%
9.2%
10.1%
* The above payor mix percentages are aged 3 months.
14
Patient Transport Revenue
(Commercial Private Insurance Collection Rate Percentage)
90%
80%
70%
60%
79.1%
80.3%
81.2%
81.6%
81.7%
80.9%
80.1%
78.4%
77.5%
75.7%
40%
78.9%
50%
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
30%
20%
10%
0%
15
Air Medical Competitors
• AIRM - $903M TTM
Based on Revenue
• National Competitors (3)
 Air Medical Group Holdings (Air
Evac/MedTrans)- est. TTM $620M
 PHI, Inc. - $305M
 Metro Aviation, Inc. - est. TTM $100M
• Regional Competitors (numerous)
• Hospitals and Other
AIRM
23%
Hospital and
Other
52%
PHII
8%
AMGH
16%
Metro
Aviation
3%
16
Tourism Operations
•
Largest tour operator in Hawaii (Blue Hawaiian) and third largest operator in
Las Vegas (Sundance Helicopters).
•
TTM 9/30/15 revenue of $125 million.
•
Low working capital requirements – revenue paid mostly in advance.
•
Relatively stable operations and cash flow.
•
Common fleet with AMS creates operational synergies and purchasing power.
•
Provides strong talent pipeline into AMS as Tourism pilots fly up to 4 times the
flight hours per year.
17
Tourism Flight Services
Sundance
• Flights to Grand Canyon, the
Strip and Hoover Dam
• 30 aircraft
• Headquarters in Las Vegas
Blue Hawaiian
• Flights to tourist attractions
• 31 aircraft
• Headquarters in Maui
18
Summary of Tourism Operations
September 30, 2015 TTM
Tourism Revenue
$125,204
Operating and Other Expenses
$111,777
EBITDA
$20,992
# of Passengers
456,370
# of Aircraft
61
19
Tourism Competitors
• AIRM - $125M TTM combined for
Blue Hawaiian and Sundance
Helicopters
• Regional Competitors (2)
 Maverick – Las Vegas est. $65M
 Papillion – Las Vegas est. - $120M
Based on Revenue
Others
38%
AIRM
25%
Maverick
13%
• Other Operators - est. $190M
Papillion
24%
20
Operating Fleet Summary
September 30, 2015
Helicopters
Airplanes
Total
Owned – Unencumbered
115
16
131
Owned – Promissory Note
91
3
94
Leased
94
2
96
Customer Owned
50
4
54
350
25
375
Owned - Unencumbered
42
1
43
Owned – Promissory Note
17
1
18
59
2
61
Air Medical Services
Tourism
21
Operational Fleet Summary
Average Age of Fleet (including Tourism)
14
12
10
10.4
9.7
10.1
10.3
10.0
10.1
6
10.4
8
2009
2010
2011
2012
2013
2014
9/30/15
4
2
0
22
United Rotorcraft
• Expert in design, engineering, manufacturing,
installation and certification of aero medical and
aerospace products
• Supports AIRM fleet
• ISO 9001 certified
• Includes two exclusive military contracts to
retro fit Blackhawk helicopters and Medical
Evacuation Vehicles (MEV), with anticipated
significant future orders
23
Growth and Value Drivers
• Inelastic pricing.
 Solid participation in price increases.
 Net benefit from price increases typically ranges from 8% - 12% annually.
• Hospital base conversions (28 bases since 2010).
 Average growth in base revenue of $2.2 million and base contribution of $1.2 million
before any allocation of G&A costs.
 9 bases outsourced in 2014 and 13 through October 2015.
 18 bases in discussion for conversion.
• Greenfield base expansions (44 bases since 2012).
 Annualized contribution of $38.8 million.
24
Growth and Value Drivers
• Positive reimbursement outlook from healthcare reform and/or an
improving economy.
 Healthcare reform (movement in payor mix currently unknown but should be
positive).
 1% shift from Uninsured to Medicaid = $1.0 million.
 1% shift from Uninsured to Medicare = $3.0 million.
 1% shift from Uninsured to Government Insured = $6.0 million.
 1% shift from Uninsured to Commercial Insured = $21.0 million.
 Expanded insurance coverage as national employment profile improves - if the labor
force participation rate improves, the number of Americans with commercial
insurance likely will increase as well.
25
Growth and Value Drivers
• National relationships/transfer center services
 CHS agreement potential
 Over 4,500 total CBS transports in 2014 vs 3,000 in 2013, 2,800 in 2012 and 1,100 in 2011.
 Additional CBS transports with the HMA acquisition.
 Transfer center operations
 Facilitating the movement of patients between hospitals.
 Total air medical flight volume of over 9,200 TTM September 30, 2015, 7,800 in 2014,
6,000 in 2013 and 5,000 in 2012.
 TTM September 30, 2015 flight volume includes over 2,700 CBS flights and over 2,800
HBS flights.
 Never lost a customer where we have provided transfer center or other value-added
services.
26
Growth and Value Drivers
• Tourism diversification and consolidation
 Sundance Helicopters acquired in December 2012 and Blue Hawaiian acquired in
December 2013.
 Attractive purchase price multiples and availability of leverage financing.
 Operational efficiencies around fleet and spare parts procurement, and employee
recruitment.
 Can use existing tourism operations as a platform for future acquisitions.
 Talent pipeline for pilots and mechanics.
 Ability to re-deploy air medical aircraft into the Tourism Division.
• Other
 International.
 Government services contracts.
 United Rotorcraft.
27
Growth and Value Drivers
• Solid free cash flow.
 Continue to buy out aircraft leases – bought out $43 million in 2014 and expect to
buyout $23 million in 2015.





Over $110 million of lease buyouts in 2013.
Reduces depreciation and interest expense.
Reduces monthly capital lease payments.
Some financed with fixed interest rate, long term promissory notes.
Provides current tax deductions. 9.4% cash tax rate in 2014 vs. 17.0% in 2013 and 28.1%
in 2012.
 Continue to pay down variable rate debt – approximately 48% of outstanding
indebtedness (excluding capital leases).
 Continue M&A activity.
 Cash dividends and stock buybacks.
28
AIRM Free Cash Flow Before Debt Service
($ Millions)
FY
2011*
FY
2012*
FY
2013*
FY
2014*
TTM
9/30/15*
EBITDA-Continuing Operations
$170.9
$257.4
$203.0
$265.6
$286.3
Interest
$19.4
$20.1
$19.6
$20.8
$19.3
Cash Payments for Income Taxes
$15.4
$43.0
$17.4
$15.4
$31.1
Capital Expenditures Exclusive
of Aircraft Lease Buyouts **
$21.5
$27.0
$62.4
$119.8
$127.4
Excess Cash Flow
$114.6
$167.3
$103.6
$109.6
$108.5
Excess Cash Flow/Share
$2.98
$4.28
$2.64
$2.79
$2.75
(*) Includes Omniflight operations from August 1, 2011.
(**) Capital Expenditures includes aircraft that have been financed and excludes
asset sale proceeds.
29
Operational Challenges/Uncertainties
• Accidents.
• Variability in operating results due to seasonality, weather, changes in patient
mix, timing of maintenance and changes in fuel prices.
• Regulations – aviation, reimbursement, licensure, government contracts.
• Growth in industry capacity, changes in technology and general health care
trends could curtail utilization of air ambulance services.
• Increasingly higher reliance on private insurance for net revenue – currently
73% of patient transport revenue.
• Portfolio of like kind aircraft – cost effective platform.
• Availability of talented labor force.
30