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Q1 2015 Earnings Call Transcript

Published: 8 May 2015

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Alliance HealthCare Services First Quarter 2015 Earnings Call. My name is Rick Johns, and I am the Company's Executive Vice President and General Counsel. This conference is being recorded for the rebroadcast and all lines have been placed on mute. We will open up the conference for questions and answers after the presentation. This conference call will contain forward-looking statements, which are based on the company's current expectations, forecasts and assumptions, including statements related to our business strategy, growth opportunities, the impact of the Affordable Care Act, the 2014 Medicare fee schedule, our 2015 guidance, our expected capital expenditures for 2015, expected cost reductions and the company's effective tax rate. As most of you know, forward-looking statements involve risks and uncertainties, which could cause actual outcomes and results to differ materially from the company's expectations, forecasts and assumptions. These risks and uncertainties are described in the 2014 guidance release under the heading Forward-Looking Statements, as well as in the Risk Factors section of the company's Annual Report on Form 10-K for the year ended, December 31, 2014, as such report may be modified. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Financial and other statistical information presented on this conference call or information required by the SEC's Regulation G may be accessed through the Investor Relations Section of the company's website. Please visit our website for replay information of this call. On today's call, our CEO, Tom Tomlinson, will provide commentary regarding our first quarter 2014 results and business performance. Our Chief Financial Officer, Howard Aihara, will follow with the financial details of the first quarter 2015 results. With that, I will now turn the conference over to Tom. Tom, please go ahead.

[Tom Tomlinson:]

Thanks, Rick, and good afternoon, everyone. Welcome to our call today. As Rick mentioned, I would like to begin the call with an overview of Alliance's first quarter 2015 earnings, and a brief commentary regarding our business performance. For the first quarter of 2015, we produced a $109.4 million of revenue, which is up $4 million over the same quarter last year. We generated strong operating cash flow of $20.8 million, a 9% increase from the $19 million we generated in Q1 of last year. Same-store volumes are up in both the radiology and oncology businesses. Overall radiology delivered 5.8% same-store volume increase and oncology increased by 0.4%. Adjusted EBITDA results of $30.1 million are consistent with our expectations in full year financial guidance. The quarter also marks the first quarter of reported earnings contributions from our February 17, 2015 acquisition of The Pain Center of Arizona. Our business did face some headwinds during the first quarter as results were impacted by difficult winter weather in the first two months of the year, in particular in the Northeast where we have significant operations. Patient volumes came back strongly in March and have continued to accelerate in April. I am going to highlight a few of the additional industry trends we're focusing on as we refine our strategy and execute operationally. Hospital operators continue to experience solid volume performance in part due to an increase in the insured population flowing from the Affordable Care Act. This is particularly true in the states that have elected to expand their Medicaid program. Our radiology business benefits from this trend as over 75% of our revenue is derived from hospital relationships. The industry wide shift to value based care that's driving hospitals and providers to reduce costs and become more efficient in delivering care is affecting our business in two ways. In the near term it's putting pressure on the price and margin structure of our mobile diagnostic radiology business. However that same trend is also accelerating the opportunity to partner with hospitals to build efficient high quality sites of service to deliver care to their patient base. Exactly the opportunity our RAD360 strategy is focused on capturing. As we stated several times over the past year, peer actions affecting coverage and utilization. Most predominantly those of radiology benefit managers and that reducing PET/CT utilization have impacted same-store volumes. On our last earnings call we mentioned that as we entered 2015 we believe that we could grow our PET/CT business from the new industry baseline. Looking at our Q1 results, our team did deliver positive same-store growth in this important segment and we look to continue that momentum. Now I'll move into the details of our first quarter 2015 results by division. In our oncology business, revenues are up 17% over the same quarter last year as we continue to drive strong results from the partnerships we initiated in 2014, including the Medical University of South Carolina and the Charleston Area Medical Center in West Virginia. This year we expect to drive further growth at MUSC and CAMC as a result of technology improvements designed to expand their radiation oncology programs. At MUSC, the technology investments made in the third and fourth quarters last year have enabled us to expand their stereotactic body radiosurgery program, facilitating new treatments, services and capabilities in 2015. And by mid summer of 2015, we expect to install new radiation therapy units at the CAMC Cancer Center, which will expand the cancer treatments available in the new state-of-the-art Radiation Therapy Department and fuel growth in the latter part of 2015 and beyond. In terms of same-store performance, while stereotactic radiosurgery volume grew 4.2%, linear accelerator volume trailed last year by 7.3%. Although adverse winter weather impacted January and February treatment volumes across the Board, SRS volume rebounded to above planned levels in March while Linac volume remained lower than expected. Our business development efforts in the quarter have continued to progress oncology deals. We're nearing execution of definitive documents for a new partnership in the Northeast. The two Letters of Intent we signed in Q4 of 2014 with a national for-profit health system have moved into the next stage of our pipeline which is negotiation of definitive legal documents. These projects and others in our pipeline will continue -- will contribute revenue and earnings in the current year as well as in 2016. Our expanded business development efforts continue to produce a robust pipeline of opportunities with numerous active deal discussions taking place with hospitals and health systems across the nation. In terms of the new de novo centers coming online this year, our San Francisco CyberKnife center in partnership with Dignity Health will begin treating patients next month. We expect to begin generating revenues from this new center during the second quarter. And the fourth quarter of 2014 we filed for a Certificate of Need of CON for our third location in seventh radiation therapy device with MUSC in North Charleston South Carolina. This CON is pending state approval by end of year and our current projections for this new MUSC Center has estimates construction to begin sometime next year. In our radiology business, consistent with our 2015 guidance provided earlier this year, quarterly revenues were impacted by continued reimbursement pressure and strategic price reductions taken to remain competitive, retain market share and sustain our position as the market leader in this segment. As a result, radiology revenues were down approximately 3% in the quarter. We anticipate that both the price softening and intensely competitive market conditions we're facing today in our core mobile radiology business which began in Q3 of 2014 will continue throughout 2015. Still mobile contracts continue to be an important component of our value proposition to customers who need flexibility and scalability as they navigate the changing healthcare landscape in challenging market dynamics to growth their radiology service line. They also generate significant free cash flow which we're using to invest in higher growth businesses. The strategic decision we made to aggressively compete at current market level prices by taking down our prices as we contracted with new and existing mobile customers has proven effective as we continue to successfully win business in the majority of cases. The combination of this competitive pricing strategy coupled with targeted investments aimed at maintaining our fleet and securing contract wins from our competition are critical to sustaining our market leading position in competitive advantage. They've also enabled us to improve customer attention and secure 11 new mobile contracts, which we believe will result in approximately $1.6 million in annualized revenue. In terms of performance by modality, our radiology same-store growth was strong in the first quarter with MRI up 7.4% and PET/CT up 3.4% over the same quarter in 2014. The same-store growth is the result of a combination of factors. First improvements made to build and mature our physician facing sales and the marketing team and align activities to key metrics have helped our teams to deliver referral growth in customer accounts. Second, payer actions affecting coverage and utilization, which initially impacted volumes last year have set a new base line for same-store volume growth particularly for PET/CT. This quarter we also added a new RAD360 site in the Southeast, which brings our total number of RAD360 sites currently in operation to nine. RAD360 accounts take advantage of our comprehensive outsourced service line solution offering, which utilizes our proprietary diagnostic tool and full service solutions to deliver growth for our hospitals radiology service line. Our first two RAD360 pilot sites launched with a large hospital system in the third quarter of 2014 continue to perform well and we're on track to achieve our customer's growth goals of $12 million in new revenues this year. In addition, similar RAD360 opportunities are progressing nicely through our pipeline. We've three new RAD360 sites starting operation in the second quarter of 2015 and we're on track to deliver an additional four to eight new RAD360 sites this year. As outlined in our 2015 guidance we expect that price pressures in payer coverage and utilization actions will continue to impact radiology revenues throughout the 2015. So to partially offset this impact, we've identified over $5 million in annualized cost savings this year along with a number of other growth initiatives that we expect to speak more about as the year progresses. We believe that the combination of increased competitive intensity driving our hospital sales in our core business improved physician facing sales strategy driving same-store volume growth and expanded business development activities driving new RAD360 partnerships will continue to produce favorable results and deliver both customer and business growth. Now turning to our new business offering of interventional services, we made a significant stride this quarter in laying the foundation for our expansion into this attractive and high growth adjacent segment of healthcare with the February 17 acquisition of a majority ownership position in The Pain Center of Arizona or TPC. This transaction officially marks our entrance into the interventional services space through our partnership with TPC, a market leading interventional pain management practice. TPC also forms the foundation for the new interventional services division we're building. This new division will be focused on providing interventional therapeutic care including interventional radiology services, like end geographies in biopsies, interventional pain management services like nerve blocks and injections and interventional therapeutic services like stents and embolizations amongst others. As you've heard me mention on prior calls, interventional pain management is the largest segment within the interventional services space and it's a natural complement to our diagnostic radiology business. As an adjacent service line there are a number of synergies between diagnostic radiology and interventional services. The use of imaging modalities, hospital customers, physician referrals by way of example, so it makes sense that they will benefit from a coordinated sales and business development effort contributing to organic growth and this also aligns with our vision to provide multiple service lines to a single hospital customer. The mid February closing of the transaction with TPC was immediately accretive to earnings and adds $3.9 million in revenue to our first quarter 2015 results. Looking ahead, we're actively focused on building this ne interventional services division and expect to make one or two more strategic acquisitions to strengthen our offering. We'll provide further details throughout the year as strategic developments progress. In summary, our first quarter 2015 results show the solid progress we've made to strengthen our value proposition to hospitals, expand our service line offerings and diversify our revenue and earnings. Although we still have work to do drive earnings growth, we're executing well against our strategic initiatives, gaining strong momentum within our markets and seeing good traction with new and existing customers. Adding multiple additional sites to existing oncology and radiology partnerships is proof that our customers appreciate both the powerful value proposition and demonstrated results that we bring to the table. We're excited by the many opportunities that lie ahead in the oncology, radiology and interventional services space and we're confident that we can deliver long-term growth. Now I'll hand the call over to Howard to provide some financial details of our first quarter 2015 results.

[Howard Aihara:]

Thanks Tom and good afternoon. Following our financial highlights from our first quarter 2015 earnings release, revenue totaled $109.4 million in this year's first quarter an increase of 4% over last year's first quarter. Revenue increased $4 million year-over-year mainly due to our recent partnerships with Charleston Area Medical Center and West Virginia in the fourth quarter of 2014 and The Pain Center of Arizona mid February of this year. On an organic basis, revenue decreased $4.4 million, almost all of which are $4.1 million was due to price reductions and MRI and PET/CT, which we expected and discussed on our 2015 guidance call on March. As Tom mentioned, also impacting Q1 revenue and adjusted EBITDA was the severe winter weather in the Northeast and Midwest. Alliance oncology revenue continues to grow primarily driven by our West Virginia partnership with the Charleston Area Medical Center and strong same-store volume growth in stereotactic radiosurgery. Oncology revenue totaled $24.2 million and that represents a 22% of total company revenue. On an organic basis, revenue increased 7% year-over-year, including organic growth from our de novo partnership with Medical University of South Carolina, which commenced in March of last year and SRS same-store growth. Alliance Radiology revenue totaled $81.4 million in the first quarter a 3% decrease over Q1 of last year. This was primarily driven by the $4.1 million of pricing pressure I mentioned previously offset by MRI and PET/CT scan volume growth, due to strong same-store volume performance and continued contribution from our RAD360 growth initiative, which in aggregate totaled $1.4 million. Another highlight from this year's first quarter to our bottom line profitability, pro forma diluted EPS was $0.30 in the first quarter of 2015 compared to $0.28 in last year's first quarter. As reported diluted EPS for the first quarter was $0.18 -- $0.16 compared to $0.18 a year ago. Included in the as reported diluted EPS was a $0.14 charge in the first quarter of 2015 and a $0.10 charge in last year's first quarter for legal matter expenses, transaction costs, severance and related costs, restructuring charges and the differences in the GAAP income tax rate from our historical rate of 42.5%. In terms of CapEx, we made significant investments in growth capital projects, an efficient upgrade of our assets. In the first quarter of 2015, our CapEx investments totaled $11.9 million compared to $5.7 million last year. Per our discussion on full year 2015 guidance call, we're excited about our pipeline of growth opportunities and invested $7.7 million in growth CapEx. Also in the first quarter, we invested $4.2 million in maintenance CapEx. Cash CapEx totaled $7.6 million and finance CapEx was $4.3 million. Alliance continues to generate strong free cash flow. We define free cash flow as a change in net debt before investments and acquisitions and debt financing fees. Alliance generated $2.8 million of free cash flow before growth investments in the first quarter of 2015. After growth investments, Alliance's net debt increased $5 in this year's first quarter. We continue to manage our balance sheet through debt pay down and free cash flow generation. During the first quarter of 2015, we paid down $6.1 million in our term loan facility. At the end of this year's first quarter, Alliance had cash balances of $31 million. Long term debt totaled $534 million including $23 million borrowed under our revolver of the finance the pace in our Arizona acquisition. Net debt was $503 million at the end of March 2015. Now I'll reaffirm our financial guidance for full year 2015. As I mentioned on our guidance call, this is an exciting time for Alliance with many growth opportunities in radiology, oncology and our new venture in interventional services. Full year 2015 revenue is expected to range from $470 million to $505 million. 2015 adjusted EBITDA is expected to range from $125 million to $150 million. Offsetting growth and adjusted EBITDA from radiology, radiation oncology and interventional services is the aforementioned pricing pressure in our core radiology mobile business for approximately $15 million. This entire revenue and adjusted EBITDA in the second quarter of 2015 than the first quarter will have a full quarter contribution from The Pain Center of Arizona acquisition, which we completed in mid first quarter, the expected opening later in the second quarter of San Francisco CyberKnife project in partnership with Dignity Health and higher patient volumes in both radiology and oncology due to typically better seasonality in Q2. 2015 maintenance CapEx are expected to total approximately $35 million. The pipeline of growth projects we have for RAD360, Alliance oncology and interventional services, we expect growth CapEx to be in the $45 million to $55 million range, much of which is expected to be financed under capital leases. These growth projects are also positively impact our 2016 results. 2015 cash and contractual are expected to be in the $10 million to $15 million range. As of yearend 2014, we had $13 million of Federal and State NOLs all of which we expect to use during 2015. Free cash flow before growth CapEx is expected to range from $20 million to $45 million. Free cash flow after growth CapEx is expected to range from minus $10 million to minus $25 million. Thank you for interest in Alliance. We look forward to answering your questions. And I’ll turn the call back over to the operator to begin the Q&A session.

[Operator:]

[Operator Instructions] First question comes from the line of Mark Kaufman.

[Mark Kaufman:]

Good afternoon. How are you?

[Tom Tomlinson:]

Good Mark. How are you?

[Mark Kaufman:]

Okay. I have a question about your projections and how you build the range, could you comment as to whether it has more to do with price or volume as far as the variability in the range for revenue and profitability?

[Howard Aihara:]

Sure Mark, this is Howard. In terms of how we build our projection, we actually go through a very detailed planning process in which we look at our business by our different divisions radiology, radiation oncology and interventional services and from there, we look at kind of our base business, which includes our volume and price assumptions for each of those businesses as well as new projects that we look to undertake -- our growth projects we look to undertake during the 2015 year. So it's built up from the ground up and we put ranges around those projections based on the sensitivity and the variability of the starts of those new projects. So that's at a very high level kind of how we do our projections. Obviously we did a very thorough review of our interventional services transaction that we did, that we completed in February of 2015 and was a very detailed planning process with the Interventional Services Management Team as well.

[Mark Kaufman:]

Okay. Thanks very much.

[Operator:]

Your next question comes from the line of Alan Webber.

[Alan Webber:]

Good afternoon. When you talk about some of the oncology partnerships you're doing, can you just talk about what kind of the investment it is and financial impact they are because you're not really -- it did not -- they're not acquisitions correct?

[Tom Tomlinson:]

This is Tom speaking. Each of those transactions tend to be different. So I think it's hard to say that they are all either are not an acquisition or different structures to use an example, the Medical University or MUSC transaction that we've talked about, that's not an acquisition per se, that's a long term management agreement into which we will invest significant capital -- have invested significant capital. The CAMC transaction we've talked about was an acquisition of an existing site that we then brought into a three way partnership with Charleston Area Medical Center. The site that will open in San Francisco is true de novo. So three very different transaction structures if you will, all representative of the kinds of transactions that we're looking to enter into. Does that answer your question Alan?

[Alan Webber:]

Yeah it does. And then I guess for 2015 when you talk about the capital spending, can you just roughly talk about -- you talked about what part was growth and what areas is it all. Is mostly the growth CapEx evolving around oncology?

[Tom Tomlinson:]

In the plan I would say I don't remember the exact breakdown between oncology and radiology, but that's -- it's in those two segments. As you might in the oncology business where a new state of the art radiation therapy device is north of $4 million, it takes some substantial capital investments. As we've talked openly with investors over the last year, we've made some significant investments in expanding our business development team in oncology because we see the opportunity space there to be a very attractive growth area for us and so what you're seeing terms of our intended investment capital or growth CapEx as we call it, as we look at 2015, you're basically seeing the result of having an expanded business development team both in oncology and in radiology bringing more growth opportunity to the company. And so while our use of cash is going up, it's being used we believe in some very exciting growth opportunities that will yield nice earnings results for shareholders in the future.

[Alan Webber:]

And I guess my final question was when you talked about some of the pricing pressures on the radiation side or the radiology side, can you talk about what your assumptions are in terms of pricing for 2016?

[Tom Tomlinson:]

Yes, I would say the 2015 year is the year where we will absorb through the financial statements and financial performance of the company. The significant majority of the pricing pressure that we believe we will see in this segment. There will be some additional price pressure in the 2016 year. I don't think I would be comfortable giving you a dollar range on that. Yet, I think we're too far away from the start of the 2016 year to give you a more precise number on that, but I would tell you that it would be our view that the significant majority of the price pressure that we see in mobile radiology is being felt here at the tail end of 2014 and through the full year of 2015.

[Alan Webber:]

And then would you hope in 2016 that the volume would offset what price pressures you would see?

[Tom Tomlinson:]

I think it can offset it to a substantial degree. Obviously the same-store performance we've been delivering now in radiology for in MRI for the last four or five quarters has been very strong. We can continue to deliver on that kind of same-center growth that certainly helps a lot. It's a substantial improvement for us to see our PET/CT same-center numbers turn well into the positive category in this quarter. As you probably recall last year it was pretty tough, pretty tough going in the PET/CT business because of RBM driven utilization changes. So I think we can offset a significant degree of that price pressure will be willing to talk about that in a little more precise manner as we progress the 2015 year.

[Alan Webber:]

Okay. Great. Thank you very much.

[Operator:]

Next question comes from the line of John Newall.

[John Newall:]

Yes hi guys, just one question. If I look at your guidance you obviously would be free cash flow positive before the growth expenditures and then negative after the growth expenditures and so you could be free cash flow positive if you wanted to be, but you're spending additional money to grow. Does that mean that the basically the deleveraging of the company is basically behind you and you're comfortable with the current level of debt or maybe even a little bit more level of debt from where you're at now basically deleveraging is no longer a top priority.

[Tom Tomlinson:]

Thanks for the question John. I would tell you that we're still pretty conservative guys. So we would love to see some additional deleveraging. However, we also see some very compelling growth opportunities for the company. And given that our mandate if you will is to grow value for shareholders to the extent we can continue to deliver accretive growth projects like some of the ones we've talked about that are good investments, then we want to continue to make those investments. If for whatever reason that opportunity pipeline dries up or we don't find attractive investments, we certainly will take the cash that is generated by the company and use that to de-lever as another way of creating equity value. As I mentioned in response I think the question by Alan, we have added additional resources to the business development teams both in oncology and radiology and as a result of that, we're seeing quite a number of very interesting growth opportunities that we want to plan for and again if they don't pan out, I guess the good news is we are still generating a lot of free cash flow and we can use that to reduce debt. So I think you will see us gauge how much we use cash flow to de-lever versus invest in growth projects very dependent on the attractiveness of the growth projects that we identify and can bring to the table.

[John Newall:]

Okay. Great. Thank you very much.

[Tom Tomlinson:]

Thanks John.

[Operator:]

The next question comes from the line of Brooks O'Neil.

[Brooks O'Neil:]

Good afternoon, guys. I was hoping you could just take a step back and talk to us a little bit about your position in the mobile business and sort of the strategy you see playing out there in terms of the intermediate term if you will sort of why you're pursuing the aggressive price strategy and what you hope will come from that over time?

[Tom Tomlinson:]

Thanks for the question Brooks. The mobile business as we've disclosed, it's a highly competitive business. We have been the market leader in that business for probably a decade at least and when I say market leader that means largest in terms of market share. It is a business because it's logistically intensive where size actually matters and so continuing to be the market share leader with densely concentrated operations to support efficient logistic is an important element in that business. In addition to that, when you think about the mobile diagnostic imaging business strategically, one of the critical values that it brings to the table is it puts us in relationship with hundreds of hospitals all across America and so as you see us transition our business strategy where we're focused on what we've talked about as the RAD360 strategy of being a more comprehensive radiology service line joint venture partner with hospitals as we drive further into growing the oncology business now as we've launched a third adjacent space business in interventional services. Having that footprint of existing relationships with hundreds of hospitals across the country where we're already a trusted provider of healthcare services to their patient is a huge asset that this company has and one that we think is critical to sustain and maintain and expand upon. So that asset base of all those relationships where we're seen as a trusted partner that then we can go back and say let's expand that relationship in radiology, let's talk about how we can help you in radiation therapy or oncology. Let's talk about how we can do something with you together in the interventional space and ASC space which is part of interventional. We think that footprint is a huge asset of the company and one that we want to continue to invest in and continue to be the market leader.

[Brooks O'Neil:]

Great. That makes a lot of sense to me. Thank you very much. I also was hoping you can talk a little bit about what you're seeing in the oncology business? Obviously you're having great success there. On the other hand I have some sense that many players think that the oncology business in the United States is a replacement market, not a real growth market and I am just curious if you could talk to us about what you're seeing out there and how you think you can go after that market over the next couple of years?

[Tom Tomlinson:]

I'll make a couple of points on that topic Brooks. You're exactly right that I think from a standpoint of equipment manufacturer the United States is a saturated market to a significant degree, I wouldn't say entirely. I think there is still de novo opportunity and stereotactic radio surgery for instance so like the San Francisco project. However the fact that the market is very, very heavily penetrated, when we look at that, we actually think that presents a huge opportunity. I think I might have referenced in a couple of calls ago when we tried to scope out the size of our market opportunity in the oncology space to make some decisions about how much we should scale up the business development team in that division. One of the more salient things that we looked at is some data I think it's by IMV that surveys hundreds of hospital executives around what their plans are and radiation therapy for operating their radiation therapy equipment, trying to drive a more significant overall oncology service line performance and the numbers are pretty compelling. I think there were 730 existing sites of where radiation therapy was being delivered that in the next three years plans to significantly upgrade or change the equipment to offer a more compelling and complete service to their market area. We think those opportunities are ones that are a great place for us to engage with hospital partners because they're looking at it just like MUSC did. This is the exact position they were in. They are looking at that situation saying we're going to have to write some substantial checks to upgrade 12-year old equipment so that we can provide care to some new disease states that we can't provide care to today given the equipment we have and as we think about doing that, we would love to have an operating partner that can help us drive greater volume and demand, provide clinical services to a national network of physicists and other radiation oncologists to be able to quickly ramp up treatment to new disease states. So for instance have you put in a new piece of equipment, now you got the equipment but now you have to train you radiation oncologists, your physicists, your staff to be able to deliver care to these new disease states that your technology now enables you to provide care to. We've got a national network of providers already doing that and therefore can quickly help their staff ramp up and deliver care to new disease states once that capital investment is made. So we actually look at the market today and the fact that there is over 700 sites that based on this survey data say, they're going to be making significant investments over the next several years. We look at that and we're very excited about the opportunity. When we look at our pipeline, it's full of opportunities where existing providers are making those kinds of decisions that I just described and looking for an operating partner that can help them make that investment more worthwhile.

[Brooks O'Neil:]

Great. That's really, really helpful. Then I guess I would just like to touch on the business, is the interventional piece and maybe you can just talk a little bit more about how you see that business expanding over the next couple of years? Is it going to be primarily acquisitions or do you think you'll make sort of a foundational acquisition in an area and then maybe build out around it somehow?

[Tom Tomlinson:]

I think you'll see a combination of acquisitions in de novo growth. The TPC acquisition is a very robust platform from which we can grow, certainly regionally. I believe also nationally. I think in the near term, so our near term will be in the next six to 18 months, I think you'll see our growth skew a little bit more towards acquisitions with some de novos, in particular de novo in conjunction with hospital relationships or hospital joint venture partners. I think as you get out to 12 to 24 to 36 months, I think you'll see the mix of growth beginning to move away from acquisitions a little bit more toward de novo and a little bit more towards hospital joint venture types of growth similar to what we're doing in RAD360 because there is a great demand for hospitals who today don't really have much of a play in outpatient interventional services for them to get into relationship with that portion of the healthcare community because many people that are chronic long term patients under care for pain management eventually will need acute care services. So a hospital being able to be engaged in delivering that service in the community, it can be a key driver downstream of acute care services. So we think it fits really well with our hospital strategy. We think once we get the platform up and running, 12, 18, 24 months out from now, we'll be able to take that service, engage our hospital partners with that opportunity and begin to drive some de novo growth together with our hospital partners.

[Brooks O'Neil:]

Great. Perfect. Thanks a lot for all the explanation.

[Tom Tomlinson:]

You bet. Good questions Brooks, appreciate it.

[Operator:]

Your next question comes from Kyle Mallory.

[Kyle Mallory:]

Hey Tom, couple of my questions were already answered but real quick, can you drill down on linear accelerator since our sale decline, I see that the total treatment, number of treatments was only down modestly quarter-over-quarter and up significantly year-over-year. So can you comment on same-store sales decline there?

[Tom Tomlinson:]

I think on the Linac side, if you move one particular center that there has been some competitive dynamics going on there, the number would be more like a negative four rather than a negative seven plus number. So a portion of that decline year-over-year for like quarter is really driven by $0.01 to a kind of a unique circumstance. The rest is pretty broad brush across kind of a mix of centers. I am actually cautiously optimistic that I think we'll see Linac kind of bounce back here later in the year. It is a business when you look back over the last number of year it does seem to have some degree of variability to it and I wish I could give you an analytical reason for why we see some of that. When I look for instance that consults which typically are patient comes in and to consult with the radiation oncologist and then a portion of those consults turn into future treatments. Consults are healthy, so I think let's track with it another quarter, see where we stand and I don't think there is anything that I see that's systemic that is overly concerning to me. And like I said about not quite half of our challenge here in this last quarter was unique to one side.

[Kyle Mallory:]

Sure, so it's not a matter of any provider changing pricing or changing referral recommendation or something is just noise.

[Tom Tomlinson:]

Yes I don't -- like I said I don't see anything systemic in the numbers. I think it's within a range of variation that we have seen in the business. Historically obviously we've got the referring physical facing sales team pushing hard, the site mangers pushing hard to get the numbers back where we would like them to be. So we're working that hard. Let's see where we stand another quarter out.

[Kyle Mallory:]

Yes and my last question relates to the RAD360 program, so you wanted the numbers in and I tied to jot it down nine current centers and you said okay there is four that are coming on in this quarter and then you said four to eight new sites, is that the nine plus the four plus the four to eight or is the four to eight inclusive of the stores already open, excuse me, centers already open?

[Tom Tomlinson:]

We opened one in the quarter. We believe we will deliver three in Q2 and we believe through the balance of the year in Q3 and Q4, we'll deliver between four and eight.

[Kyle Mallory:]

Okay. Got it. Thank you very much.

[Tom Tomlinson:]

You bet.

[Operator:]

If there are no further questions, I'll now conclude the conference call.

[Tom Tomlinson:]

Thanks everybody for joining us today. Look forward to our next call in a few months.

[Operator:]

Ladies and gentlemen, this concludes the Alliance HealthCare Services conference call for today. Thank you for all your participating and have a nice day. All parties may disconnect now.