Diplomat Announces 2nd Quarter 2015 Financial Results
FLINT, Mich. – Aug. 3, 2015 – 2nd Quarter Revenue Increased 49%, Net Income Increased 102%, Adjusted EBITDA Increased 287%, Raising Full Year 2015 Guidance
Diplomat Pharmacy, Inc. (NYSE: DPLO), the nation’s largest independent specialty pharmacy, announced financial results for the quarter ended June 30, 2015. All comparisons, unless otherwise noted, are to the quarter ended June 30, 2014.
Second Quarter 2015 Highlights include:
- Revenue of $808 million, an increase of 49% or $266 million
- Total prescriptions dispensed of 234,000, an increase of 19%
- Gross margin of 8.6% versus 5.5%
- Adjusted EBITDA of $22.7 million, an increase of 287% or $16.8 million
- Adjusted EPS of $0.16 versus $0.06
Phil Hagerman, Chairman and CEO of Diplomat, commented, “This was another great quarter for Diplomat. We saw strong performance across the entire company as we continued to capitalize on our role as the nation’s largest independent specialty pharmacy. We continued to integrate our previously acquired specialty infusion entities and, in an effort to expand our hepatitis C capabilities, we acquired Burman’s Specialty Pharmacy in June. The acquisition, including use of Burman’s proprietary technology, will allow us to more deeply penetrate the hepatitis C market across the Diplomat enterprise. As a result of our solid financial results in the quarter, we are also raising our 2015 financial outlook.”
Second Quarter Financial Summary:
Revenue for the second quarter of 2015 was $808.0 million, compared to $541.7 million in the second quarter of 2014, an increase of $266.3 million or 49%. The increase was the result of approximately $91 million of revenue from drugs that were new to the market or newly dispensed by Diplomat and approximately $109 million from our acquisitions. The remaining increase is primarily attributable to the impact of manufacturer price increases, a richer mix of high-priced drugs, and payor mix changes.
Gross profit in the second quarter of 2015 was $69.7 million, compared to $29.6 million in the second quarter of 2014 and generated gross margin of 8.6% compared to 5.5%. The gross margin improvement in the quarter was driven by drug mix changes, including the impact of our recently acquired entities, and continued favorable trends in manufacturer-derived gross profit.
Selling, general, and administrative expenses (“SG&A”) for the second quarter of 2015 was $62.5 million, an increase of $35 million, compared to $27.5 million in the second quarter of 2014. Of this increase, $11.2 million relates to an increase in the fair value of contingent consideration and amortization expense from definite-lived intangible assets of our acquisitions. Total employee cost increased by $14.0 million, and includes the employee expense from our acquired entities. The increased employee expense was primarily attributable to the 24% increase in dispensed and serviced prescription volume, combined with the increased administrative complexity associated with our mix of business. The remaining increase was in all other SG&A to support our growth including public company requirements, bad debt expense, consulting fees, travel, and other miscellaneous expenses. As a percent of revenue, SG&A, excluding acquisition-related amortization and change in contingent consideration, accounted for 6.3% of total revenues for the three months ended June 30, 2015 compared to 5.0% in the year-ago period. This increase is primarily attributable to the more clinically intensive businesses we have acquired and the additional operating expense associated with servicing those patients.
Net income allocable to common shareholders for the second quarter of 2015 was $3.4 million, or $0.05 per common share, compared to $1.4 million, or $0.04 per common share for the second quarter of 2014. On a diluted basis, we had net income per common share of $0.05 in the second quarter of this year, compared to $0.04 per common share in the year-ago quarter. Diluted non-GAAP Adjusted EPS (“Adjusted EPS”) was $0.16 in the second quarter of this year compared to $0.06 in the second quarter of 2014. Compared to the year-ago period, our weighted average common shares outstanding in the second quarter of 2015 were significantly impacted by our IPO, our follow-on equity offering, the use of shares as partial consideration for our acquisitions, and certain stock option exercises and repurchases.
Adjusted EBITDA for the second quarter of 2015 was $22.7 million versus $5.9 million in the second quarter of 2014, an increase of 287%.
2015 Financial Outlook
For the full-year 2015, we are increasing our financial guidance. We now expect:
- Revenue between $3.2 and $3.4 billion, up from our previous range of $2.9 to $3.1 billion
- Net income between $11 and $13 million, compared to our previous range of $14 to $16 million; significantly influenced by actual year to date, and expected continued, increase in non-cash BioRx contingent consideration
- Adjusted EBITDA between $80 and $84 million, up from our previous range of $64 to $68 million
- Adjusted EPS between $0.56 and $0.60, up from our previous range of $0.48 to $0.51
Our Adjusted EPS expectations now assume approximately 62,700,000 weighted average common shares outstanding for the full year 2015, which could differ materially. This includes the impact of our March 2015 common stock offering, contributions from our BioRx and Burman’s acquisitions, and interest expense associated with our new credit facility.
Earnings Conference Call Information
As previously announced, the Company will hold a conference call to discuss its second quarter and 2015 performance this evening, August 3, 2015, at 5:00 p.m. Eastern Time. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 877-201-0168 (or 647-788-4901 for international callers) and referencing participant code 67973099 approximately 15 minutes prior to the call. A live webcast of the conference call will be available on the investor relations section of the Company’s website and an audio file of the call will also be archived for 90 days at ir.diplomat.is.
Diplomat (NYSE: DPLO) serves patients and physicians in all 50 states. Headquartered in Flint, Michigan, the Company focuses on medication management programs for people with complex chronic diseases, including oncology, immunology, hepatitis, multiple sclerosis, HIV, specialized infusion therapy and many other serious or long-term conditions. Diplomat opened its doors in 1975 as a neighborhood pharmacy with one essential tenet: “Take good care of patients, and the rest falls into place.” Today, that tradition continues – always focused on improving patient care and clinical adherence. For more information visit www.diplomat.is. Follow us on Twitter and LinkedIn and like us on Facebook.
Adjusted EPS adds back, net of income taxes, the impact of all merger and acquisition related expenses, including amortization of intangible assets, the change in contingent consideration related to our acquisitions, as well as deal-related costs. We exclude merger and acquisition related expenses from Adjusted EPS because we believe the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and such expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired intangible assets or ultimate realization of contingent consideration. Investors should note that acquisitions, once consummated, contribute to revenue in the periods presented as well as future periods and should also note that amortization and contingent consideration expenses will recur in future periods. A reconciliation of Adjusted EPS, a non-GAAP measure, to EPS as prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) can be found in the appendix.
We define Adjusted EBITDA as net income (loss) before interest expense, income taxes, depreciation and amortization, share-based compensation, restructuring and impairment charges, equity loss and impairment of non-consolidated entities, and certain other items that we do not consider indicative of our ongoing operating performance (which items are itemized below in the reconciliation to net income). Adjusted EBITDA is not in accordance with, or an alternative to, GAAP. In addition, this non‑GAAP measure is not based on any comprehensive set of accounting rules or principles. You should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in the presentation, and we do not infer that our future results will be unaffected by unusual or non-recurring items.
We consider Adjusted EBITDA and Adjusted EPS to be supplemental measures of our operating performance. We present Adjusted EBITDA and Adjusted EPS because they are used by our Board of Directors and management to evaluate our operating performance. They are also used as a factor in determining incentive compensation, for budgetary planning and forecasting overall financial and operational expectations, for identifying underlying trends and for evaluating the effectiveness of our business strategies. Further, we believe they assist us, as well as investors, in comparing performance from period to period on a consistent basis. Other companies in our industry may calculate Adjusted EBITDA and Adjusted EPS differently than we do and these calculations may not be comparable to our Adjusted EBITDA and Adjusted EPS metrics. A reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income can be found in the appendix.
This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Diplomat’s expectations regarding revenues, Adjusted EBITDA, net income (loss), Adjusted EPS, market share, the performance of acquisitions and growth strategies. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to adapt to changes or trends within the specialty pharmacy industry; significant and increasing pricing pressure from third-party payors; our relationships with key pharmaceutical manufacturers; bad publicity about, or market withdrawal of, specialty drugs we dispense; a significant increase in competition from a variety of companies in the health care industry; our ability to expand the number of specialty drugs we dispense and related services; maintaining existing patients; revenue concentration of the top specialty drugs we dispense; our ability to maintain relationships with a specified wholesaler and pharmaceutical manufacturer; increasing consolidation in the healthcare industry; managing our growth effectively; limited experience with acquisitions and our ability to recognize the expected benefits therefrom on a timely basis or at all; and the additional factors set forth in “Risk Factors” in Diplomat’s Annual Report on Form 10-K for the year ended December 31, 2014 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Except as may be required by any applicable laws, Diplomat assumes no obligation to publicly update such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.
Bob East, Westwicke Partners
443-213-0500 | Diplomat@westwicke.com
The table below presents a reconciliation of net income attributable to Diplomat Pharmacy, Inc. to Adjusted EBITDA for the periods indicated:
Adjusted EPS (diluted)
Below is a reconciliation of the Company’s diluted net income attributable to Diplomat Pharmacy, Inc. per common share to Adjusted EPS for the three and six months ended June 30, 2015 and 2014.