ADPT generates systemwide net patient services revenue of $104.5 million for Q2 2015

Adeptus Health Inc. (NYSE: ADPT) ("ADPT" or the "Company"), the largest operator of freestanding emergency rooms in the U.S., announced its results for the second quarter ended June 30, 2015. All comparisons included in this release are for the same period in the prior year, unless otherwise noted.

Second Quarter 2015 Highlights:

• Systemwide net patient services revenue was $104.5 million versus $44.2 million in prior year, an increase of 136%;
• Net operating revenue was $89.6 million versus $44.2 million in prior year, an increase of 103%;
• Adjusted EBITDA was $22.9 million versus $5.9 million in prior year, an increase of 286%;
• Adjusted earnings per share was $0.44 and GAAP earnings per share was $0.97
• Net income attributable to Adeptus Health Inc. was $10.6 million;
• Cash flow from operating activities was $13.0 million versus $0.3 million in prior year; and
• The Company opened six freestanding facilities during the second quarter 2015.

2015 Guidance

Based on our strong performance in the second quarter of 2015 and continued full year growth plans including 24 freestanding facilities and two new hospitals, we are again raising guidance. We expect to generate systemwide net patient services revenue, which includes revenue from our unconsolidated joint ventures, of $400.0 million to $405.0 million for the full year 2015. We expect Adjusted EBITDA of $69.0 million to $71.0 million and Adjusted earnings per share of $1.10 to $1.15 for the full year 2015.

Results of Operations for the Second Quarter 2015

Thomas S. Hall, Chairman and CEO, stated, "We are pleased with the second quarter results, which reflect our continued strong growth momentum. During the quarter, we opened six additional freestanding emergency rooms, entered into a new partnership with University of Colorado Health and grew our existing partnership with Dignity Health in Arizona. As we continue to execute on our strategic plan, both through expanding our network of freestanding emergency rooms and forging partnerships with leading healthcare providers, we are helping to transform the delivery of emergency care in the U.S."

So far this year, ADPT has opened 15 new facilities, including 12 freestanding emergency facilities in Texas and Colorado, and its first hospital and two freestanding emergency facilities in Arizona with partner, Dignity Health. In July, as part of its partnership with University of Colorado Health, its 13 freestanding emergency rooms in Colorado were rebranded as UC Health Emergency Room and construction began on two hospitals.

For the second quarter of 2015, ADPT generated total net operating revenue of $89.6 million, an increase of 103%. Net operating revenue excludes revenue from 13 facilities in Colorado and the Arizona hospital and its freestanding facility, which are accounted for as equity method investments. The increase was primarily attributable to the impact of patient volumes from the expansion of the number of freestanding facilities from 38 to 68 and annual gross charge increases.

Adjusted EBITDA increased 286% to $22.9 million. This increase was primarily attributable to a $45.4 million increase in net operating revenue, partially offset by increases in salaries, wages and benefits and other costs related to our growth initiatives. See "Non-GAAP Financial Measures Description and Reconciliation" and "Reconciliation of Adjusted EBITDA to Net Income (Loss)" below for further information related to Adjusted EBITDA and its reconciliation to net income (loss).

ADPT generated net income of $27.7 million for the quarter, of which $10.6 million was attributable to Adeptus Health Inc., compared to a net loss of $9.4 million from the prior year, of which $2.0 million was attributable to Adeptus Health Inc. The increase in net income was due to an increase of $45.4 million in net operating revenue, coupled with a gain recognized on the contribution and change of control of previously owned freestanding facilities to the joint venture with University of Colorado Health. This increase was partially offset by increases in salaries, wages and benefits and other costs related to our growth initiatives and an increase in depreciation and amortization expense.

Adjusted earnings per share was $0.44 per share and GAAP earnings per share was $0.97 per share for the quarter. Adjusted earnings per share is calculated using a weighted average of both Class A and Class B common shares outstanding, which was an aggregate of 20,766,094 common shares at June 30, 2015. Adjustments for the quarter include a $24.3 million gain recognized on the contribution of existing freestanding facilities to the joint venture with University of Colorado Health, $2.0 million of preopening costs associated with new facility openings, $0.6 million of stock compensation expense, $1.0 million related to public offerings of our Class A common stock and $0.8 million of other costs associated with our growth initiatives and an adjustment for taxes in order to establish a normalized tax rate of 35% for comparability purposes. See "Non-GAAP Financial Measures Description and Reconciliation" and "Earnings Per Share Reconciliation" below for further information related to Adjusted earnings per share and its reconciliation to net income (loss).

Systemwide Financial Results

For the second quarter of 2015, ADPT generated systemwide net patient services revenue of $104.5 million, an increase of 136%. The increase was primarily attributable to the impact of increased patient volumes from the expansion of the number of freestanding facilities from 38 to 68, annual gross charge increases and the opening of the Dignity Health Arizona General Hospital, a full service general hospital located in Laveen, Arizona.

As of June 30, 2015, 13 freestanding facilities associated with our joint venture with University of Colorado Health and our Arizona hospital and its freestanding facility associated with our joint venture with Dignity Health were accounted for using the equity method. For consolidated subsidiaries, the Company's financial statements reflect 100% of the revenues and expenses for these subsidiaries, after elimination of intercompany transactions and accounts. For our unconsolidated joint ventures, consolidated statements of operations reflect those earnings in two line items:

• Equity in earnings of unconsolidated joint ventures, which represents our share of the net income or loss of each equity method joint venture based on our ownership percentage; and
• Management and contract services revenues, which represent the Company's combined income from management and contract services that are earned from managing the day-to-day operations and providing contract staffing of the facility.

As a result of this accounting treatment in our reported results, management supplementally focuses on non-GAAP systemwide metrics to analyze the results of operations. These systemwide metrics include systemwide net patient services revenue. Systemwide metrics treat our unconsolidated facilities as if they were consolidated. While the revenues earned at the unconsolidated facilities are not recorded in our consolidated financial statements, management believes systemwide net patient services revenue growth is important to understand the Company's financial performance because it is used to interpret the sources of our growth and provide a growth metric incorporating the revenues earned by all affiliated facilities, regardless of the accounting treatment. As we execute on our strategy of partnering with health systems, management expects the number of our facilities accounted for under the equity method to increase relative to the total number of affiliated facilities.

Liquidity

At the end of the second quarter, the Company had cash of $46.1 million and $9.5 million available under its revolving credit facility. Net cash flow from operations was $13.0 million for the second quarter. Prior to the expiration of the delayed draw component of its credit facility, the Company borrowed an additional $30.0 million in the second quarter. At June 30, 2015, the Company had total long-term debt and capital lease obligations of $159.0 million and debt net of cash of $112.9 million.

Market Outlook

We are maintaining the growth of our freestanding emergency room network at an expected rate of opening 24 new sites per year, including both owned and joint venture facilities. Our second hospital, located in Carrollton, Texas, a Dallas-Ft Worth suburb, remains on schedule to open later this year.

ADPT's growth is addressing the shortage of quality emergency medical care in the U.S. As the most recent American College of Emergency Physicians (ACEP) survey highlights, emergency visits are on the rise. Respondents noted that this rise is combined in part with an increase in the acuity of patients' injuries and/or illnesses. Again, this underscores the growing need for additional access points to high quality, 24/7 emergency care. Our facilities offer just that with convenient neighborhood locations.

"Our network of freestanding emergency rooms and partnerships with leading healthcare systems, such as Dignity Health and UC Health, provides us with flexibility in addressing the unmet need for expanded access to emergency medical care. We are continuously talking to other healthcare systems around the country about how we can help them bring improved access to the highest quality emergency care to the communities they serve," added Hall.