Centric Health Announces Results for the Third Quarter of 2017

Date : 11/14/2017 @ 9:01PM
Source : PR Newswire (Canada)
Stock : Centric Health Corporation (CHH)
Quote : 0.68  0.0 (0.00%) @ 10:04AM

Centric Health Announces Results for the Third Quarter of 2017

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Impact of transitional delays in Specialty Pharmacy partially offset by continued strong results in Surgical and Medical Centres

TORONTO, Nov. 14, 2017 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today reported its financial results for the third quarter ended September 30, 2017.

Highlights for the Third Quarter of 2017
(All comparative figures are for the third quarter 2016)

  • Revenue from continuing operations declined marginally by 1.0%, after normalizing for the $1.2 million reclassification of Revenue to cost of sales, due to timing differences in the transition of beds for a new large national customer in Specialty Pharmacy that was expected to replenish beds off-boarded from a concluded contract, which was delayed due to a technical issue with a third-party supplier, as the Company prioritized quality and safety. The impact of the timing differences was partially offset by organic growth in the Surgical and Medical Centres;
  • Adjusted EBITDA1 from continuing operations declined by 3% to $4.1 million from $4.2 million primarily due
  • to the transition of the contracts in Specialty Pharmacy, partially offset by growth in the Surgical and Medical Centres, which increased 39.7% to $1.5 million from $1.1 million. The on-boarding of the beds under the new national contract is expected to be substantially complete by the end of the year;
  • Adjusted EBITDA1 margin from continuing operations was flat year over year at 10%;
  • Continued to generate positive cash flows from operations of $0.8 million for the fourth consecutive quarter;
  • The Company signed a strategic distribution and supply agreement on August 9, 2017 with AceAge Inc. ("AceAge") for its home-based automated drug delivery appliance ("Karie") in addition to a strategic investment in AceAge. Karie is an innovative device designed to solve the medication compliance issues of individuals taking multiple medications, particularly seniors living independently, or without full-time care. Delivery is expected in the spring of 2018; and,
  • False Creek Surgical Centre was awarded a four year accreditation from the College of Physicians and Surgeons of British Columbia.

"In the third quarter we continued to focus on bringing on-board the new beds under the national long-term care pharmacy contract awarded at the end of last year. We are making steady progress while maintaining a careful patient-centric approach. This will be substantially complete by the end of 2017," said David Cutler, President and Chief Executive Officer of Centric Health. "In addition, we continued to execute our growth strategy by forging an agreement that will enable us to serve the needs of seniors at home and others faced with managing multiple medications. Karie is an innovative device that will improve drug safety and provide peace-of-mind to caregivers."

"We are also very pleased with the continued growth in surgical volume experienced in our Surgical and Medical Centres," added Mr. Cutler. "With a 5% growth in revenue and an increase in Adjusted EBITDA margin to 13.6% from 10.3% the previous year, we are continuing to see the benefits of the increased utilization at our facilities throughout the year."

FINANCIAL RESULTS

Discontinued Operations

The Company's discontinued operations consist of the businesses divested as part of the sale of its Physiotherapy, Rehabilitation and Medical Assessments segment in 2015 and London Scoping Centre in 2016.

Selected Financial Information

(All amounts in the chart below are in thousands except per share, shares outstanding, and percentage data)                                                                       


For the three month periods
ended September 30,

For the nine month periods
ended September 30,


2017

2016

2015

2017

2016

2015

(thousands of Canadian Dollars)

$

$

$

$

$

$

Revenue

40,250

41,917

41,548

126,639

125,536

119,204

Income (loss) from continuing operations

464

(187)

(1,281)

1,639

(3,959)

(7,791)

Income (loss) from continuing
operations before interest expense
and income taxes

1,127

(1,110)

(1,531)

4,100

(9,326)

(6,500)

EBITDA1  from continuing operations

3,383

1,909

1,129

11,090

(415)

1,367

Adjusted EBITDA1  from continuing







operations

4,084

4,191

2,835

13,457

11,216

6,727


Per share - Basic and diluted

$0.02

$0.03

$0.02

$0.07

$0.07

$0.04

Adjusted EBITDA1  Margin from







continuing operations

10.1%

10.0%

6.8%

10.6%

8.9%

5.6%

Adjusted EBITDA1

4,084

4,198

8,210

13,457

11,102

25,177


Per share - Basic2 and diluted2

$0.02

$0.03

$0.05

$0.07

$0.07

$0.16

Adjusted EBITDA1 Margin

10.1%

9.9%

9.4%

10.6%

8.8%

9.6%

Net income (loss)

248

3,409

(4,961)

(1,022)

(18,060)

(24,352)


Per share - Basic2 and diluted2

$0.00

$0.02

$(0.03)

$0.00

($0.11)

$(0.15)








Cash provided by (used in) operations

787

10,832

7,330

10,633

(1,282)

22,036








Weighted Average Shares
Outstanding (Basic and diluted)
3

199,595

163,806

160,684

192,808

162,860

158,468

Shares Outstanding, September 303

199,484

166,813

160,883

199,484

166,813

160,883

1

See "Non-IFRS Measures" below.

2

Basic and diluted earnings per share is based on the profit or loss attributable to shareholders of Centric Health Corporation.

3

Excludes contingent escrowed shares and restricted shares.

 

Consolidated Results

Consolidated Revenue from continuing operations for the three month period ended September 30, 2017 decreased 4.0% to $40.3 million from $41.9 million. However, after normalizing for the $1.2 million reclassification of Revenue to cost of sales, the decline in Revenue was only 1.0% to $41.5 million from $41.9 million. Revenue growth in Specialty Pharmacy was dampened due to timing differences in the transitions of certain contracts in Specialty Pharmacy due to the conclusion of a contract with a large long-term care and retirement home operator, and delay in the transition to beds for a new large national customer expected to replenish the beds off-boarded from the concluded contract. This delay was the result of a technical issue with a third-party supplier, with the Company prioritizing quality and safety during the transition process. Management expects the on-boarding of beds under the new contract to be completed by the beginning of 2018, allowing for a continued return to revenue growth in future periods.

Adjusted EBITDA1 from continuing operations for the three month period ended September 30, 2017 decreased to $4.1 million from $4.2 million. The decrease was primarily due to the transition of certain contracts noted above, partially offset by growth in the Surgical and Medical Centres segment.

Consolidated revenue from continuing operations for the nine month period ended September 30, 2017 increased by 0.9%, or $1.1 million, to $126.6 million from $125.5 million for the same period in the prior year.

Adjusted EBITDA from continuing operations for the nine month period ended September 30, 2017 increased to $13.5 million compared to $11.2 million over the same period in the prior year.

The increase in Revenue and Adjusted EBITDA for the nine month period ended September 30, 2017 was primarily driven by acquisitions and organic growth in the Specialty Pharmacy business in Western Canada, as well as organic growth in the Surgical and Medical Centres businesses.

Segment Results

(All amounts in the charts below are in thousands except per share, shares outstanding, and percentage data)

For the three month periods ended
September 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2017

2016

2017


2016


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

29,357

31,582

4,111

14.0

4,690

14.9

Surgical and Medical Centres

10,893

10,335

1,482

13.6

1,061

10.3

Corporate

(1,509)

(1,560)

Total

40,250

41,917

4,084

10.1

4,191

10.0







For the nine month periods ended
September 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2017

2016

2017


2016


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

93,383

93,696

13,406

14.4

12,255

13.1

Surgical and Medical Centres

33,256

31,840

4,571

13.7

3,867

12.1

Corporate

(4,520)

(4,906)

Total

126,639

125,536

13,457

10.6

11,216

8.9

 

SHARES OUTSTANDING

As at September 30, 2017, the Company had total shares outstanding of 205,005,472. The outstanding shares at September 30, 2017 include 5,521,025 shares which are restricted or held in escrow and will be released to certain vendors of previously acquired businesses based on the achievement of certain stated performance targets and certain customers. Accordingly, for financial reporting purposes, the Company reported 199,484,447 common shares outstanding as at September 30, 2017 and 169,982,529 shares outstanding at December 31, 2016. The number of options outstanding is 2,547,500 at September 30, 2017. The number of restricted share units outstanding is 4,233,661 at September 30, 2017. The number of warrants outstanding is 2,900,000 at September 30, 2017. Should all outstanding options and warrants that were exercisable at September 30, 2017 be exercised, the Company would receive proceeds of $2.6 million.

As at the date of this press release, November 14, 2017, the Company had total shares outstanding of 205,205,469 which include 5,521,025 shares which are restricted or held in escrow. The number of options outstanding is 2,347,500; the number of warrants outstanding is 2,900,000; and the number of restricted share units outstanding is 3,880,328.

1NON-IFRS MEASURES

This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share. These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (recovery). Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs, changes in the fair value of the contingent consideration liability, impairments, stock based compensation expense, change in fair value of derivative financial instruments and gain on disposal of property and equipment recognized in the statement of income. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDAdivided by the weighted outstanding shares on both a basic and diluted basis. The Company believes that Adjusted EBITDA1 is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives. The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA1 as a key component of the covenant calculations. EBITDA and Adjusted EBITDA1 are not recognized measures under IFRS.

Reconciliation of Non-IFRS Measures


For the three month
periods ended
September 30,

For the nine month
periods ended
September 30,


2017

2016

2017

2016

(in $000)

$

$

$

$

Income (loss) from continuing operations

248

3,428

(4,222)

(16,853)

Depreciation and amortization

2,314

3,071

7,128

9,125

Interest expense

1,467

3,328

8,417

15,191

Amortization of lease incentives

(58)

(52)

(138)

(214)

Income tax expense (recovery)

(588)

(7,866)

(95)

(7,664)

EBITDA from continuing operations

3,383

1,909

11,090

(415)

Transaction and restructuring costs

1,028

1,231

4,123

5,709

Change in fair value of contingent consideration





liability

(151)

897

(1,695)

5,407

Reversal of impairment losses

(322)

(322)

Stock-based compensation expense

324

128

656

556

Change in fair value of derivative financial





instruments

(190)

26

(444)

(40)

Gain (loss) on disposal of property and equipment

12

49

(1)

Adjusted EBITDA from continuing operations

4,084

4,191

13,457

11,216

Adjusted EBITDA from discontinued operations

7

(114)

Adjusted EBITDA

4,084

4,198

13,457

11,102

Basic and diluted weighted average number of





shares

199,595

163,806

192,808

162,860

Adjusted EBITDA per share from continuing





operations (basic and diluted)

$0.02

$0.03

$0.07

$0.07

Adjusted EBITDA per share (basic and diluted)

$0.02

$0.03

$0.07

$0.07

 

PRESENTATION OF FINANCIAL RESULTS

The Company presents two reportable operating segments as follows: Specialty Pharmacy and Surgical and Medical Centres. The financial results of the Company's Performance Medical Group, are included as part of the Surgical and Medical Centres segment.

CONFERENCE CALL

Centric Health will host a conference call, including a slide presentation, to discuss its third quarter financial results on Wednesday, November 15, 2017 at 9:30 a.m. (ET).

Telephone Dial-In Access Information

To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. Those participating in the conference call by telephone can view the slide presentation by accessing the online webcast (see instructions below) and choosing the Non-Streaming Audio option.

Webcast Access Information

A live webcast of the conference call, including the slide presentation, will be available on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/ events-and-presentations.html). Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. To view the webcast presentation with slides, please choose either the Real Streaming Audio or Windows Streaming Audio option.

Archive Access Information

The conference call will be archived for replay by telephone until Wednesday, November 22, 2017 at midnight. To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 8564256.

The webcast with slide presentation will be archived for 90 days on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html)

For further information please refer to the Company's complete filings at www.sedar.com.

About Centric Health

Centric Health's vision is to be Canada's most respected and recognized provider in the independent healthcare sectors in which it operates, world renowned for delivering the highest levels of quality care and outcomes, innovative solutions and value to patients, clients and stakeholders. To this end, Centric Health primarily focuses on two core healthcare businesses:

  • The Specialty Pharmacy division is a "Patient First" model composed of a growing national network of fulfilment centres that deliver high-volume solutions for the cost effective supply of chronic medication and other specialty clinical care services, serving more than 29,000 residents in over 425 seniors communities (long term care facilities, retirement homes and assisted living facilities) nationally. The Specialty Pharmacy division also provides pharmaceutical dispensing services for employees insured by corporate health plans.

  • The Surgical & Medical Centres division is Canada's largest independent surgical provider operating five facilities across four provinces. It serves a diversified customer base with private paid non-insured surgeries and diagnostics, government outsourcing of insured surgeries and diagnostics and other procedures funded by third-party payors (including Workers Compensation) and is the proud owner of Canada's first Centre of Excellence in Metabolic and Bariatric Surgery.

With national networks of facilities in each of its businesses, deep knowledge and experience of healthcare delivery and extensive, trusted relationships with payers, physicians, and government agencies, the Company is uniquely positioned to address current and future healthcare needs in growing markets as the Canadian healthcare industry goes through a major transformation over the medium to long term.

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive there-from.

SOURCE Centric Health Corporation

Copyright 2017 Canada NewsWire

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