Company Reports Historic Revenue Growth,
on Track for Record Year
MTBC (the “Company” or “MTBC”) (Nasdaq: MTBC) (Nasdaq: MTBCP), a
leading provider of proprietary, cloud-based healthcare IT
solutions and services, today announced financial and operational
results for the first nine months of 2018 along with an update to
its guidance for the year. The Company’s management will host a
conference call today at 8:30 a.m. Eastern Time to discuss these
results and management’s outlook after completing the largest
acquisition in its history.
Stephen Snyder, CEO said, “We are pleased to
report another quarter of strong growth, with revenue during the
third quarter exceeding our total revenue from the first half of
2018. As we’ve doubled our scale, we’ve also delivered our sixth
consecutive quarter of positive adjusted EBITDA, while generating a
record $2.8 million in cash from operations.”
“For full year 2018, we’re on track to grow our
revenue, year-over-year, by more than 50%, while increasing our
full year adjusted EBITDA by approximately 100%,” continued Stephen
Snyder. “Moreover, our latest acquisition has further demonstrated
the power of our unique model and disciplined approach to
identifying, acquiring, and integrating complementary businesses –
and with positive cash from operations and a record total of more
than $20 million in cash and availability on our line of credit,
we’re better positioned than ever to continue investing in our
growth.”
Three Month Financial
Results
Revenues for third quarter 2018 were $17.0
million, an increase of 127% or $9.5 million compared to $7.5
million in the same period last year and an increase of 96%
compared to the prior quarter. The increase was primarily a result
of the Orion acquisition, which occurred on July 1, 2018. This was
the Company’s largest percent increase in revenue of any quarter in
MTBC’s history.
In addition to doubling the Company’s size, the
Orion acquisition added additional service offerings to MTBC’s
portfolio. During the third quarter, MTBC generated $3.3 million of
revenue from practice management services. “We now manage three
pediatric practices in Ohio and Illinois, through multi-decade
management services agreements. We employ nurses, medical
assistants, receptionists, practice managers and other practice
personnel in five locations,” said Bill Korn, MTBC Chief Financial
Officer. “We share patient revenue with the physicians in the
practices, and exclude the physicians’ portion from the revenue we
report.” “We also now manage a group purchasing
organization, enabling thousands of physicians to purchase vaccines
from leading pharmaceutical companies at discounted rates,”
continued Bill Korn. “During the quarter we generated $477,000 of
revenue from this group purchasing organization. Physicians
purchase vaccines directly from Merck and Sanofi Pasteur, and we
receive rebate checks from the pharmaceutical manufacturers.”
The third quarter 2018 GAAP net loss was $1.8
million, compared to a net loss of $980,000 in the same period last
year. Bill Korn remarked, “Similar to our previous acquisitions,
from an accounting perspective, a large portion of the purchase
price will be attributed to intangible assets, most of which we
will amortize over the next few years. This means that our non-cash
amortization expense has increased. This does not impact our cash
flow and is excluded from non-GAAP financial measures, but we
expect to report a GAAP net loss for the next few quarters.”
The GAAP net loss for third quarter 2018 was
$0.25 per share, calculated using the net loss attributable to
common shareholders divided by the weighted average number of
common shares outstanding. Net loss attributable to common
shareholders takes into account the value of preferred stock
dividends declared during the quarter.
Non-GAAP adjusted net income for third quarter
2018 was $507,000, an increase of $826,000 compared to adjusted net
income of ($319,000) in the same period last year, and was the
Company’s fourth consecutive quarter of positive adjusted net
income.
Non-GAAP adjusted net income excludes $559,000
of non-cash amortization of purchased intangible assets, $987,000
of stock-based compensation expense, $227,000 of foreign exchange
losses and other expenses, as well as $806,000 of integration and
transaction costs associated with acquisitions and a $265,000 tax
benefit.
Non-GAAP adjusted net income was $0.04 per
share, calculated using the end-of-period common shares
outstanding.
Adjusted EBITDA for third quarter 2018 was
$865,000, or 5.1% of revenue, compared to adjusted EBITDA of
$609,000 in the same period last year. “The third quarter 2018
adjusted EBITDA represents an important achievement for MTBC, since
we were able to grow quarterly adjusted EBITDA, year-over-year,
notwithstanding the investments we made in integrating Orion, such
as temporary operational redundancies to support a smooth
transition. Three factors made this possible. First, our core
business remained profitable. Second, Orion’s practice management
business and group purchasing organization were contributing to
profitability. Third, our team moved quickly and effectively with
regard to the acquired revenue cycle management assets, replacing
subcontractors and otherwise reducing costs. Our overall adjusted
EBITDA was a remarkable $865,000 for the quarter.” “The
difference of $2.7 million between adjusted EBITDA and the GAAP net
loss in the third quarter of 2018 reflects $822,000 of non-cash
amortization and depreciation expense, $987,000 of stock-based
compensation, $806,000 of integration and transaction costs related
to acquisitions, $80,000 of net interest expense, an $25,000
increase in our contingent consideration liability, $227,000 of
foreign exchange losses and other expenses, offset by a $250,000
tax benefit,” said Bill Korn.
Bill Korn continued, “Cash flow from operations
for the quarter was $2.8 million, in part reflecting the
advantageous terms of the Orion acquisition, where we were able to
retain accounts receivable but did not assume most accounts
payable. Since MTBC had sufficient cash on July 1 to complete the
Orion acquisition, doubling the Company’s size without issuing
additional common stock or incurring any debt, and we immediately
generated positive cash from operations, this transaction was
accretive for our shareholders from day one. This was an
exceptional transaction.”
Nine Month Financial
Results
Revenues for the first nine months of 2018 were
$34.0 million, an increase of 45% or $10.5 million compared to
$23.5 million in the same period last year. Revenue for this
nine-month period was larger than for any full year in the
Company’s history.
For the first nine months of 2018 the GAAP net
loss was $1.6 million, an improvement of $3.8 million from the
first nine months of 2017. The improvement was largely a result of
Company’s efforts at improving profitability from the business it
acquired from MediGain in October of 2016. MTBC reported positive
GAAP net income and operating income during the first two quarters
of 2018, and we have started a similar effort to reduce operating
expenses associated with the Orion acquisition.
Non-GAAP adjusted net income for the first nine
months of 2018 was $2.5 million, an increase of $3.7 million
compared to the adjusted net income of ($1.2 million) in the same
period last year. Non-GAAP adjusted net income was or $0.21 per
share, calculated using the end-of-period common shares
outstanding.
For the first nine months of 2018 the GAAP
operating loss was $1.7 million, an improvement of $2.4 million
from the first nine months of 2017. Both the year-to-date 2018
operating loss and net loss include non-cash amortization and
depreciation expense of $2.0 million.
Non-GAAP adjusted operating income for the first
nine months of 2018 was $2.6 million, an increase of $2.7 million
compared to adjusted operating income of ($66,000) in the same
period last year. Cash flow from operations was $4.7 million for
the nine months of 2018, an improvement of $6.1 million over the
nine months of last year. Bill Korn stated, “Management looks
closely at non-GAAP metrics such as adjusted operating income,
which we believe are closer to reflecting our operating cash
flow.”
Adjusted EBITDA for the first nine months of
2018 was $3.4 million, or 10.0% of revenue, compared to adjusted
EBITDA of $763,000, or 3.2% of revenue, in the same period last
year. Adjusted EBITDA excludes $2.0 million of non-cash
depreciation and amortization expense, $1.5 million of stock-based
compensation expense, $1.5 million of integration and transaction
costs associated with acquisitions, $193,000 of net interest
expenses, $68,000 of changes in contingent consideration, as well
as a $152,000, benefit for income taxes and $105,000 of foreign
exchange gains and other income.
Cash Balance
As of September 30, 2018, the Company had $1.3
million in cash and positive working capital of approximately $5.7
million. The Company has an untapped secured revolving credit
facility with Silicon Valley Bank (“SVB”), where borrowings are
based on 200% of repeatable revenue adjusted by an annualized
attrition rate as defined in the agreement. During September, this
line of credit was doubled in size to $10 million. Subject to its
terms, the SVB line can be used for future growth initiatives,
including acquisitions with SVB’s approval.
The Company raised net proceeds of $13.4 million
from the sale of 600,000 additional shares of its non-convertible
Series A Preferred Stock via a public offering during the two weeks
of October. The preferred shares trade on the Nasdaq Capital Market
under the ticker MTBCP, and pay monthly cash dividends at the rate
of 11% per annum. Our Series A Preferred Stock is perpetual, and
has no mandatory redemption, although the Company can choose to
redeem shares at $25.00 per share starting in November 2020.
According to Bill Korn, “This was MTBC’s largest
offering of our Series A Preferred Stock, and as with previous
offerings in 2017 and 2018, demand was so large that the offering
was oversubscribed. Because the Company already had over $5.6
million of working capital, an untapped line of credit and positive
cash flows, this additional capital was solely to position us to
take advantage of the opportunities we see for consolidation in the
market.”
2018 Full Year Guidance
MTBC is reaffirming its following
forward-looking guidance for revenue and adjusted EBITDA for the
year ending December 31, 2018:
For the Year Ending December 31, 2018Forward-Looking
Guidance |
Revenue |
$49
– $50 million |
Adjusted EBITDA |
$4.0 – $5.0
million |
Bill Korn said, “With revenues of $34.0 million
for the first nine months of 2018, we are reaffirming our guidance
for full year 2018 revenue, which represents growth in excess of
50% over 2017 revenue. We expect adjusted EBITDA to be $4.0 to $5.0
million for full year 2018, approximately double our 2017 adjusted
EBITDA, after achieving $3.4 million of adjusted EBITDA during the
first nine months of 2018. The Orion transaction will help us
significantly scale our business, enabling us to grow revenues
without a corresponding increase in overhead. As we leverage our
experienced U.S.-based and offshore team members, reducing
dependence on third-party contractors, and move to smaller, less
expensive facilities, we expect to expand our margins while
providing world class service”.
Conference Call Information
MTBC management will host a conference call
today at 8:30 a.m. Eastern Time to discuss the third quarter 2018
results. The live webcast of the conference call can be accessed
under Events & Presentations at ir.mtbc.com/events or by
dialing 412-317-5131 and referencing “MTBC Third Quarter 2018
Earnings Call.”
A replay of the conference call will be
available approximately one hour after conclusion of the call at
the same link. An audio replay can also be accessed by dialing
412-317-0088 and providing access code 10125804.
About MTBC
MTBC is a healthcare information technology
company that provides a fully integrated suite of proprietary
web-based solutions, together with related business services, to
healthcare providers practicing in ambulatory care settings. Our
integrated Software-as-a-Service (or SaaS) platform helps our
customers increase revenues, streamline workflows and make better
business and clinical decisions, while reducing administrative
burdens and operating costs. MTBC’s common stock trades on the
NASDAQ Capital Market under the ticker symbol “MTBC,” and its
Series A Preferred Stock trades on the NASDAQ Capital Market under
the ticker symbol “MTBCP.”
For additional information, please visit our
website at www.mtbc.com. To view MTBC’s latest investor
presentation, read recent articles, and listen to interviews with
management, please visit ir.mtbc.com/events.
Follow MTBC on LinkedIn, Twitter and
Facebook.
Use of Non-GAAP Financial
Measures
In our earnings releases, prepared remarks,
conference calls, slide presentations, and webcasts, we may use or
discuss non-GAAP financial measures, as defined by SEC Regulation
G. The GAAP financial measure most directly comparable to each
non-GAAP financial measure used or discussed, and a reconciliation
of the differences between each non-GAAP financial measure and the
comparable GAAP financial measure, are included in this press
release after the condensed consolidated financial statements. Our
earnings press releases containing such non-GAAP reconciliations
can be found in the Investor Relations section of our web site at
ir.mtbc.com.
Forward-Looking Statements
This press release contains various
forward-looking statements within the meaning of the federal
securities laws. These statements relate to anticipated future
events, future results of operations or future financial
performance. In some cases, you can identify forward-looking
statements by terminology such as “may,” “might,” “will,” “should,”
“intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential,” or “continue” or
the negative of these terms or other comparable terminology.
Our operations involve risks and uncertainties,
many of which are outside our control, and any one of which, or a
combination of which, could materially affect our results of
operations and whether the forward-looking statements ultimately
prove to be correct. Forward-looking statements in this press
release include, without limitation, statements reflecting
management’s expectations for future financial performance and
operating expenditures, expected growth, potential acquisitions,
profitability and business outlook, increased sales and marketing
expenses, and the expected results from the integration of our
acquisitions.
These forward-looking statements are only
predictions, are uncertain and involve substantial known and
unknown risks, uncertainties and other factors which may cause our
(or our industry’s) actual results, levels of activity or
performance to be materially different from any future results,
levels of activity or performance expressed or implied by these
forward-looking statements. New risks and uncertainties emerge from
time to time, and it is not possible for us to predict all of the
risks and uncertainties that could have an impact on the
forward-looking statements, including without limitation, risks and
uncertainties relating to the Company’s ability to manage growth,
migrate newly acquired customers and retain new and existing
customers, maintain cost-effective operations in Pakistan and Sri
Lanka, increase operational efficiency and reduce operating costs,
predict and properly adjust to changes in reimbursement and other
industry regulations and trends, retain the services of key
personnel, and other important risks and uncertainties referenced
and discussed under the heading titled “Risk Factors” in the
Company’s filings with the Securities and Exchange Commission.
The statements in this press release are made as
of the date of this press release, even if subsequently made
available by the Company on its website or otherwise. The Company
does not assume any obligations to update the forward-looking
statements provided to reflect events that occur or circumstances
that exist after the date on which they were made.
MEDICAL TRANSCRIPTION BILLING,
CORP.CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,259,574 |
|
|
$ |
4,362,232 |
|
Accounts
receivable - net of allowance for doubtful accounts of $189,000 and
$185,000 at September 30, 2018 and December 31, 2017,
respectively |
|
|
8,443,857 |
|
|
|
3,879,463 |
|
Contract
asset |
|
|
2,480,479 |
|
|
|
- |
|
Inventory |
|
|
456,136 |
|
|
|
- |
|
Current
assets - related party |
|
|
25,203 |
|
|
|
25,203 |
|
Prepaid
expenses and other current assets |
|
|
1,112,134 |
|
|
|
662,822 |
|
Total
current assets |
|
|
13,777,383 |
|
|
|
8,929,720 |
|
Property and equipment
- net |
|
|
1,869,513 |
|
|
|
1,385,743 |
|
Intangible assets -
net |
|
|
7,180,153 |
|
|
|
2,509,544 |
|
Goodwill |
|
|
12,681,055 |
|
|
|
12,263,943 |
|
Other assets |
|
|
553,338 |
|
|
|
436,713 |
|
TOTAL ASSETS |
|
$ |
36,061,442 |
|
|
$ |
25,525,663 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
2,711,580 |
|
|
$ |
991,859 |
|
Accrued
compensation |
|
|
1,866,482 |
|
|
|
1,137,351 |
|
Accrued
expenses |
|
|
1,389,170 |
|
|
|
616,778 |
|
Deferred
rent (current portion) |
|
|
94,348 |
|
|
|
81,826 |
|
Deferred
revenue (current portion) |
|
|
30,214 |
|
|
|
62,104 |
|
Accrued
liability to related party |
|
|
10,663 |
|
|
|
10,675 |
|
Notes
payable - other (current portion) |
|
|
375,503 |
|
|
|
168,718 |
|
Contingent consideration (current portion) |
|
|
560,169 |
|
|
|
505,557 |
|
Dividend
payable |
|
|
1,056,218 |
|
|
|
747,147 |
|
Total
current liabilities |
|
|
8,094,347 |
|
|
|
4,322,015 |
|
Notes payable -
other |
|
|
264,854 |
|
|
|
120,899 |
|
Deferred rent |
|
|
231,036 |
|
|
|
333,788 |
|
Deferred revenue |
|
|
19,632 |
|
|
|
28,615 |
|
Contingent
consideration |
|
|
- |
|
|
|
97,854 |
|
Deferred tax
liability |
|
|
185,000 |
|
|
|
372,072 |
|
Total
liabilities |
|
|
8,794,869 |
|
|
|
5,275,243 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY: |
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001 per share - authorized 4,000,000 shares;
issued and outstanding 1,536,289 and 1,086,739 shares at September
30, 2018 and December 31, 2017, respectively |
|
|
1,536 |
|
|
|
1,087 |
|
Common
stock, $0.001 par value - authorized 19,000,000 shares; issued
12,570,557 and 12,271,390 shares at September 30, 2018 and December
31, 2017, respectively; outstanding, 11,829,758 and 11,530,591
shares at September 30, 2018 and December 31, 2017,
respectively |
|
|
12,571 |
|
|
|
12,272 |
|
Additional paid-in capital |
|
|
52,518,310 |
|
|
|
45,129,517 |
|
Accumulated deficit |
|
|
(23,627,402 |
) |
|
|
(23,509,386 |
) |
Accumulated other comprehensive loss |
|
|
(976,442 |
) |
|
|
(721,070 |
) |
Less:
740,799 common shares held in treasury, at cost at September 30,
2018 and December 31, 2017 |
|
|
(662,000 |
) |
|
|
(662,000 |
) |
Total
shareholders’ equity |
|
|
27,266,573 |
|
|
|
20,250,420 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
$ |
36,061,442 |
|
|
$ |
25,525,663 |
|
MEDICAL TRANSCRIPTION BILLING,
CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
NET
REVENUE |
|
$ |
17,044,526 |
|
|
$ |
7,513,592 |
|
|
$ |
34,034,788 |
|
|
$ |
23,518,416 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs |
|
|
12,123,907 |
|
|
|
4,171,932 |
|
|
|
20,941,535 |
|
|
|
13,592,492 |
|
Selling
and marketing |
|
|
461,512 |
|
|
|
228,991 |
|
|
|
1,169,583 |
|
|
|
853,460 |
|
General
and administrative |
|
|
5,131,295 |
|
|
|
2,474,139 |
|
|
|
10,786,234 |
|
|
|
8,232,613 |
|
Research
and development |
|
|
263,717 |
|
|
|
249,045 |
|
|
|
768,517 |
|
|
|
843,294 |
|
Change in
contingent consideration |
|
|
25,473 |
|
|
|
- |
|
|
|
68,253 |
|
|
|
151,423 |
|
Depreciation and amortization |
|
|
822,098 |
|
|
|
664,441 |
|
|
|
1,972,565 |
|
|
|
3,637,131 |
|
Restructuring charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
275,628 |
|
Total
operating expenses |
|
|
18,828,002 |
|
|
|
7,788,548 |
|
|
|
35,706,687 |
|
|
|
27,586,041 |
|
OPERATING LOSS |
|
|
(1,783,476 |
) |
|
|
(274,956 |
) |
|
|
(1,671,899 |
) |
|
|
(4,067,625 |
) |
OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
24,544 |
|
|
|
5,446 |
|
|
|
59,768 |
|
|
|
13,598 |
|
Interest
expense |
|
|
(104,872 |
) |
|
|
(678,103 |
) |
|
|
(253,120 |
) |
|
|
(1,242,672 |
) |
Other
(expense) income - net |
|
|
(218,721 |
) |
|
|
32,494 |
|
|
|
151,242 |
|
|
|
107,364 |
|
LOSS BEFORE INCOME
TAXES |
|
|
(2,082,525 |
) |
|
|
(915,119 |
) |
|
|
(1,714,009 |
) |
|
|
(5,189,335 |
) |
Income tax (benefit)
provision |
|
|
(250,072 |
) |
|
|
65,000 |
|
|
|
(151,872 |
) |
|
|
192,332 |
|
NET LOSS |
|
$ |
(1,832,453 |
) |
|
$ |
(980,119 |
) |
|
$ |
(1,562,137 |
) |
|
$ |
(5,381,667 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividend |
|
|
1,056,214 |
|
|
|
652,697 |
|
|
|
3,080,263 |
|
|
|
1,283,151 |
|
NET LOSS ATTRIBUTABLE
TO COMMON SHAREHOLDERS |
|
$ |
(2,888,667 |
) |
|
$ |
(1,632,816 |
) |
|
$ |
(4,642,400 |
) |
|
$ |
(6,664,818 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share: basic and diluted |
|
$ |
(0.25 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.62 |
) |
Weighted-average common shares used to compute basic and diluted
loss per share |
|
|
11,770,178 |
|
|
|
11,485,811 |
|
|
|
11,684,659 |
|
|
|
10,835,142 |
|
MEDICAL TRANSCRIPTION BILLING,
CORP.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2018 AND 2017
|
|
2018 |
|
|
2017 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,562,137 |
) |
|
$ |
(5,381,667 |
) |
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,972,565 |
|
|
|
3,637,131 |
|
Amortization of sales commissions |
|
|
42,943 |
|
|
|
- |
|
Deferred
rent |
|
|
(49,608 |
) |
|
|
(38,544 |
) |
Deferred
revenue |
|
|
(40,873 |
) |
|
|
13,807 |
|
Provision
for doubtful accounts |
|
|
261,541 |
|
|
|
357,671 |
|
(Benefit)
provision for deferred income taxes |
|
|
(187,072 |
) |
|
|
165,000 |
|
Foreign
exchange gain |
|
|
(105,418 |
) |
|
|
(27,145 |
) |
Interest
accretion |
|
|
143,030 |
|
|
|
672,998 |
|
Non-cash
restructuring charges |
|
|
- |
|
|
|
17,001 |
|
Stock-based compensation expense |
|
|
1,523,682 |
|
|
|
333,854 |
|
Change in
contingent consideration |
|
|
68,253 |
|
|
|
151,423 |
|
Changes
in operating assets and liabilities, net of businesses
acquired: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
901,683 |
|
|
|
437,557 |
|
Contract
asset |
|
|
(464,470 |
) |
|
|
- |
|
Inventory |
|
|
(148,858 |
) |
|
|
- |
|
Other
assets |
|
|
(24,869 |
) |
|
|
107,532 |
|
Accounts
payable and other liabilities |
|
|
2,418,110 |
|
|
|
(1,754,255 |
) |
Net cash
provided by (used in) operating activities |
|
|
4,748,502 |
|
|
|
(1,307,637 |
) |
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(743,115 |
) |
|
|
(499,988 |
) |
Cash paid
for acquisition |
|
|
(12,600,000 |
) |
|
|
(205,000 |
) |
Net cash
used in investing activities |
|
|
(13,343,115 |
) |
|
|
(704,988 |
) |
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock, net of placement costs |
|
|
- |
|
|
|
2,000,000 |
|
Proceeds
from issuance of preferred stock, net of placement costs |
|
|
9,354,910 |
|
|
|
13,484,552 |
|
Preferred
stock dividends paid |
|
|
(2,771,192 |
) |
|
|
(846,825 |
) |
Settlement of tax withholding obligations on stock issued to
employees |
|
|
(333,007 |
) |
|
|
(195,912 |
) |
Repayments of notes payable |
|
|
(329,426 |
) |
|
|
(7,626,088 |
) |
Repayment
of Prudential obligation |
|
|
- |
|
|
|
(5,000,000 |
) |
Proceeds
from line of credit |
|
|
6,625,000 |
|
|
|
7,000,000 |
|
Repayments of line of credit |
|
|
(6,625,000 |
) |
|
|
(7,000,000 |
) |
Contingent consideration payments |
|
|
(111,495 |
) |
|
|
(79,603 |
) |
Other
financing activities |
|
|
(33,150 |
) |
|
|
(335,239 |
) |
Net cash
provided by financing activities |
|
|
5,776,640 |
|
|
|
1,400,885 |
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
|
(284,685 |
) |
|
|
(75,758 |
) |
NET DECREASE IN
CASH |
|
|
(3,102,658 |
) |
|
|
(687,498 |
) |
CASH - Beginning of the
period |
|
|
4,362,232 |
|
|
|
3,476,880 |
|
CASH - End of
period |
|
$ |
1,259,574 |
|
|
$ |
2,789,382 |
|
SUPPLEMENTAL NONCASH
INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Vehicle
financing obtained |
|
$ |
90,284 |
|
|
$ |
30,746 |
|
Dividends
declared, not paid |
|
$ |
1,056,218 |
|
|
$ |
638,905 |
|
Purchase
of prepaid insurance through assumption of note |
|
$ |
271,248 |
|
|
$ |
298,698 |
|
Warrants
issued |
|
$ |
101,989 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATION - Cash paid during the period for: |
|
|
|
|
|
|
|
|
Income
taxes |
|
$ |
29,673 |
|
|
$ |
9,513 |
|
Interest |
|
$ |
45,083 |
|
|
$ |
599,950 |
|
RECONCILIATION OF CHANGES IN REVENUE
STANDARD(UNAUDITED)
The following table provides a bridge between
the Statement of Operations as presented under the new revenue
recognition standard required for the nine months ended September
30, 2018 to the results recorded under the previous revenue
recognition standard used for the nine months ended September 30,
2017. Total revenue as presented for the nine months ended
September 30, 2018 varies from revenue that would have been
reported under the previous revenue recognition standard for the
same period, as the new standard changes the timing and recognition
pattern for the majority of our revenue, as well as for a portion
of our sales commission expense. The change for each item in our
Statement of Operations is calculated as if the nine months ended
September 30, 2018 were reported under the previous revenue
recognition standard for the same period, to separate the impact of
the change in the revenue recognition standard from the results of
operations.
|
|
Nine Months Ended September 30, |
|
|
Change |
|
|
|
2018 |
|
|
2017 |
|
|
Amount |
|
|
Percent |
|
|
|
As Presented |
|
|
Impact of New Revenue Standard |
|
|
Previous Revenue Standard |
|
|
|
($ in thousands) |
|
|
|
|
Revenue |
|
$ |
34,035 |
|
|
$ |
76 |
|
|
$ |
33,959 |
|
|
$ |
23,518 |
|
|
$ |
10,441 |
|
|
|
44 |
% |
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs |
|
|
20,942 |
|
|
|
- |
|
|
|
20,942 |
|
|
|
13,592 |
|
|
|
7,350 |
|
|
|
54 |
% |
Selling
and marketing |
|
|
1,170 |
|
|
|
(6 |
) |
|
|
1,176 |
|
|
|
853 |
|
|
|
323 |
|
|
|
38 |
% |
General
and administrative |
|
|
10,786 |
|
|
|
- |
|
|
|
10,786 |
|
|
|
8,233 |
|
|
|
2,553 |
|
|
|
31 |
% |
Research
and development |
|
|
769 |
|
|
|
- |
|
|
|
769 |
|
|
|
843 |
|
|
|
(74 |
) |
|
|
(9 |
%) |
Change in
contingent consideration |
|
|
68 |
|
|
|
- |
|
|
|
68 |
|
|
|
151 |
|
|
|
(83 |
) |
|
|
(55 |
%) |
Depreciation and amortization |
|
|
1,972 |
|
|
|
- |
|
|
|
1,972 |
|
|
|
3,638 |
|
|
|
(1,666 |
) |
|
|
(46 |
%) |
Restructuring charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
276 |
|
|
|
(276 |
) |
|
|
(100 |
%) |
Total
operating expenses |
|
|
35,707 |
|
|
|
(6 |
) |
|
|
35,713 |
|
|
|
27,586 |
|
|
|
8,127 |
|
|
|
29 |
% |
OPERATING (LOSS)
INCOME |
|
|
(1,672 |
) |
|
|
82 |
|
|
|
(1,754 |
) |
|
|
(4,068 |
) |
|
|
2,314 |
|
|
|
(57 |
%) |
OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest expense |
|
|
(193 |
) |
|
|
- |
|
|
|
(193 |
) |
|
|
(1,228 |
) |
|
|
1,035 |
|
|
|
(84 |
%) |
Other
income - net |
|
|
151 |
|
|
|
- |
|
|
|
151 |
|
|
|
107 |
|
|
|
44 |
|
|
|
41 |
% |
(LOSS) INCOME BEFORE
INCOME TAXES |
|
|
(1,714 |
) |
|
|
82 |
|
|
|
(1,796 |
) |
|
|
(5,189 |
) |
|
|
3,393 |
|
|
|
(65 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
provision |
|
|
(152 |
) |
|
|
- |
|
|
|
(152 |
) |
|
|
193 |
|
|
|
(345 |
) |
|
|
(179 |
%) |
NET (LOSS) INCOME |
|
$ |
(1,562 |
) |
|
$ |
82 |
|
|
$ |
(1,644 |
) |
|
$ |
(5,382 |
) |
|
$ |
3,738 |
|
|
|
(69 |
%) |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURESTO
COMPARABLE GAAP MEASURES (UNAUDITED)
The following is a reconciliation of the
non-GAAP financial measures used by us to describe our financial
results determined in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). An
explanation of these measures is also included below under the
heading “Explanation of Non-GAAP Financial Measures.”
While management believes that these non-GAAP
financial measures provide useful supplemental information to
investors regarding the underlying performance of our business
operations, investors are reminded to consider these non-GAAP
measures in addition to, and not as a substitute for, financial
performance measures prepared in accordance with GAAP. In addition,
it should be noted that these non-GAAP financial measures may be
different from non-GAAP measures used by other companies, and
management may utilize other measures to illustrate performance in
the future. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with our results of
operations as determined in accordance with GAAP.
Adjusted EBITDA
Set forth below is a reconciliation of our
“adjusted EBITDA” to our GAAP net loss.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
Net
revenue |
|
$ |
17,045 |
|
|
$ |
7,514 |
|
|
$ |
34,035 |
|
|
$ |
23,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss |
|
$ |
(1,832 |
) |
|
$ |
(980 |
) |
|
$ |
(1,562 |
) |
|
$ |
(5,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit)
provision for income taxes |
|
|
(250 |
) |
|
|
65 |
|
|
|
(152 |
) |
|
|
192 |
|
Net
interest expense |
|
|
80 |
|
|
|
673 |
|
|
|
193 |
|
|
|
1,229 |
|
Foreign
exchange / other expense |
|
|
227 |
|
|
|
(24 |
) |
|
|
(105 |
) |
|
|
(34 |
) |
Stock-based compensation expense |
|
|
987 |
|
|
|
126 |
|
|
|
1,524 |
|
|
|
334 |
|
Depreciation and amortization |
|
|
822 |
|
|
|
664 |
|
|
|
1,973 |
|
|
|
3,637 |
|
Integration, transaction and restructuring costs |
|
|
806 |
|
|
|
85 |
|
|
|
1,457 |
|
|
|
636 |
|
Change in
contingent consideration |
|
|
25 |
|
|
|
- |
|
|
|
68 |
|
|
|
151 |
|
Adjusted EBITDA |
|
$ |
865 |
|
|
$ |
609 |
|
|
$ |
3,396 |
|
|
$ |
763 |
|
Non-GAAP Adjusted Operating
Income
Set forth below is a reconciliation of our
non-GAAP “adjusted operating income” and non-GAAP “adjusted
operating margin” to our GAAP operating loss and GAAP operating
margin.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
Net
revenue |
|
$ |
17,045 |
|
|
$ |
7,514 |
|
|
$ |
34,035 |
|
|
$ |
23,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss |
|
$ |
(1,832 |
) |
|
$ |
(980 |
) |
|
$ |
(1,562 |
) |
|
$ |
(5,382 |
) |
(Benefit)
provision for income taxes |
|
|
(250 |
) |
|
|
65 |
|
|
|
(152 |
) |
|
|
192 |
|
Net
interest expense |
|
|
80 |
|
|
|
673 |
|
|
|
193 |
|
|
|
1,229 |
|
Other
expense (income) - net |
|
|
219 |
|
|
|
(32 |
) |
|
|
(151 |
) |
|
|
(107 |
) |
GAAP operating
loss |
|
|
(1,783 |
) |
|
|
(274 |
) |
|
|
(1,672 |
) |
|
|
(4,068 |
) |
GAAP
operating margin |
|
|
(10.5 |
%) |
|
|
(3.6 |
%) |
|
|
(4.9 |
%) |
|
|
(17.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
987 |
|
|
|
126 |
|
|
|
1,524 |
|
|
|
334 |
|
Amortization of purchased intangible assets |
|
|
559 |
|
|
|
419 |
|
|
|
1,257 |
|
|
|
2,881 |
|
Integration, transaction and restructuring costs |
|
|
806 |
|
|
|
85 |
|
|
|
1,457 |
|
|
|
636 |
|
Change in
contingent consideration |
|
|
25 |
|
|
|
- |
|
|
|
68 |
|
|
|
151 |
|
Non-GAAP adjusted
operating income |
|
$ |
594 |
|
|
$ |
356 |
|
|
$ |
2,634 |
|
|
$ |
(66 |
) |
Non-GAAP
adjusted operating margin |
|
|
3.5 |
% |
|
|
4.7 |
% |
|
|
7.7 |
% |
|
|
(0.3 |
%) |
Non-GAAP Adjusted Net
Income
Set forth below is a reconciliation of our
non-GAAP “adjusted net income” and non-GAAP “adjusted net income
per share” to our GAAP net loss and GAAP net loss per share.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
GAAP
net loss |
|
$ |
(1,832 |
) |
|
$ |
(980 |
) |
|
$ |
(1,562 |
) |
|
$ |
(5,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange / other expense |
|
|
227 |
|
|
|
(24 |
) |
|
|
(105 |
) |
|
|
(34 |
) |
Stock-based compensation expense |
|
|
987 |
|
|
|
126 |
|
|
|
1,524 |
|
|
|
334 |
|
Amortization of purchased intangible assets |
|
|
559 |
|
|
|
419 |
|
|
|
1,257 |
|
|
|
2,881 |
|
Integration, transaction and restructuring costs |
|
|
806 |
|
|
|
85 |
|
|
|
1,457 |
|
|
|
636 |
|
Change in
contingent consideration |
|
|
25 |
|
|
|
- |
|
|
|
68 |
|
|
|
151 |
|
Income
tax (benefit) expense related to goodwill |
|
|
(265 |
) |
|
|
55 |
|
|
|
(187 |
) |
|
|
165 |
|
Non-GAAP adjusted net
income |
|
$ |
507 |
|
|
$ |
(319 |
) |
|
$ |
2,452 |
|
|
$ |
(1,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period
shares |
|
|
11,829,758 |
|
|
|
11,530,591 |
|
|
|
11,829,758 |
|
|
|
11,530,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted net
income per share |
|
$ |
0.04 |
|
|
$ |
(0.03 |
) |
|
$ |
0.21 |
|
|
$ |
(0.11 |
) |
For purposes of determining non-GAAP adjusted
net income per share, we use the number of common shares
outstanding at the end of the period on September 30, 2018 and
2017. Non-GAAP adjusted net income per share does not take into
account dividends paid on our preferred stock.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
GAAP
net loss attributable to common shareholders, per share |
|
$ |
(0.25 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.40 |
) |
|
$ |
(0.62 |
) |
Impact of
preferred stock dividend |
|
|
0.10 |
|
|
|
0.05 |
|
|
|
0.27 |
|
|
|
0.15 |
|
Net loss per
end-of-period share |
|
|
(0.15 |
) |
|
|
(0.09 |
) |
|
|
(0.13 |
) |
|
|
(0.47 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange / other expense |
|
|
0.02 |
|
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
0.00 |
|
Stock-based compensation expense |
|
|
0.08 |
|
|
|
0.01 |
|
|
|
0.13 |
|
|
|
0.03 |
|
Amortization of purchased intangible assets |
|
|
0.04 |
|
|
|
0.04 |
|
|
|
0.11 |
|
|
|
0.25 |
|
Integration, transaction and restructuring costs |
|
|
0.07 |
|
|
|
0.01 |
|
|
|
0.12 |
|
|
|
0.06 |
|
Change in
contingent consideration |
|
|
0.00 |
|
|
|
- |
|
|
|
0.01 |
|
|
|
0.01 |
|
Income
tax (benefit) expense related to goodwill |
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
(0.02 |
) |
|
|
0.01 |
|
Non-GAAP adjusted net
income per share |
|
$ |
0.04 |
|
|
$ |
(0.03 |
) |
|
$ |
0.21 |
|
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period
shares |
|
|
11,829,758 |
|
|
|
11,530,591 |
|
|
|
11,829,758 |
|
|
|
11,530,591 |
|
Explanation of Non-GAAP Financial
Measures
We report our financial results in accordance
with accounting principles generally accepted in the United States
of America, or GAAP. However, management believes that, in order to
properly understand our short-term and long-term financial and
operational trends, investors may wish to consider the impact of
certain non-cash or non-recurring items, when used as a supplement
to financial performance measures in accordance with GAAP. These
items result from facts and circumstances that vary in frequency
and impact on continuing operations. Management also uses results
of operations before such items to evaluate the operating
performance of MTBC and compare it against past periods, make
operating decisions, and serve as a basis for strategic planning.
These non-GAAP financial measures provide management with
additional means to understand and evaluate the operating results
and trends in our ongoing business by eliminating certain non-cash
expenses and other items that management believes might otherwise
make comparisons of our ongoing business with prior periods more
difficult, obscure trends in ongoing operations, or reduce
management’s ability to make useful forecasts. Management believes
that these non-GAAP financial measures provide additional means of
evaluating period-over-period operating performance. In addition,
management understands that some investors and financial analysts
find this information helpful in analyzing our financial and
operational performance and comparing this performance to our peers
and competitors.
Management uses adjusted EBITDA, adjusted
operating income, adjusted operating margin, and non-GAAP adjusted
net income to provide an understanding of aspects of operating
results before the impact of investing and financing charges and
income taxes. Adjusted EBITDA may be useful to an investor in
evaluating our operating performance and liquidity because this
measure excludes non-cash expenses as well as expenses pertaining
to investing or financing transactions. Management defines
“adjusted EBITDA” as the sum of GAAP net income (loss) before
provision for (benefit from) income taxes, net interest expense,
foreign exchange gain and loss, other expense, stock-based
compensation expense, depreciation and amortization expense,
integration costs, transaction costs, restructuring costs and
changes in contingent consideration.
Management defines “non-GAAP adjusted operating
income” as the sum of GAAP operating income (loss) before
stock-based compensation expense, amortization of purchased
intangible assets, integration costs, transaction costs,
restructuring costs and changes in contingent consideration, and
“non-GAAP adjusted operating margin” as non-GAAP adjusted operating
income divided by net revenue.
Management defines “non-GAAP adjusted net
income” as the sum of GAAP net income (loss) before stock-based
compensation expense, amortization of purchased intangible assets,
foreign exchange gain and loss, other expense, integration costs,
transaction costs, restructuring costs changes in contingent
consideration, any tax impact related to these preceding items and
income tax expense related to goodwill, and “non-GAAP adjusted net
income per share” as non-GAAP adjusted net income divided by common
shares outstanding at the end of the period, including the shares
which were issued but are subject to forfeiture and considered
contingent consideration.
Management considers all of these non-GAAP
financial measures to be important indicators of our operational
strength and performance of our business and a good measure of our
historical operating trends, in particular the extent to which
ongoing operations impact our overall financial performance.
In addition to items routinely excluded from
non-GAAP EBITDA, management excludes or adjusts each of the items
identified below from the applicable non-GAAP financial measure
referenced above for the reasons set forth with respect to that
excluded item:
Foreign exchange / other expense. Other expense
is excluded because foreign currency gains and losses and other
non-operating expenses are expenditures that management does not
consider part of ongoing operating results when assessing the
performance of our business, and also because the total amount of
the expense is partially outside of our control. Foreign currency
gains and losses are based on global market factors which are
unrelated to our performance during the period in which the gains
and losses are recorded.
Stock-based compensation expense. Stock-based
compensation expense is excluded because this is primarily a
non-cash expenditure that management does not consider part of
ongoing operating results when assessing the performance of our
business, and also because the total amount of the expenditure is
partially outside of our control because it is based on factors
such as stock price, volatility, and interest rates, which may be
unrelated to our performance during the period in which the
expenses are incurred. Stock-based compensation expense includes
cash-settled awards based on changes in the stock price.
Amortization of purchased intangible assets.
Purchased intangible assets are amortized over their estimated
useful lives and generally cannot be changed or influenced by
management after the acquisition. Accordingly, this item is not
considered by management in making operating decisions. Management
does not believe such charges accurately reflect the performance of
our ongoing operations for the period in which such charges are
incurred.
Transaction costs. Transaction costs are upfront
costs related to acquisitions and related transactions, such as
brokerage fees, pre-acquisition accounting costs and legal fees,
and other upfront costs related to specific transactions.
Management believes that such expenses do not have a direct
correlation to future business operations, and therefore, these
costs are not considered by management in making operating
decisions. Management does not believe such charges accurately
reflect the performance of our ongoing operations for the period in
which such charges are incurred.
Integration costs. Integration costs are
severance payments for certain employees relating to our
acquisitions and exit costs related to terminating leases and other
contractual agreements. Accordingly, management believes that such
expenses do not have a direct correlation to future business
operations, and therefore, these costs are not considered by
management in making operating decisions. Management does not
believe such charges accurately reflect the performance of our
ongoing operations for the period in which such charges are
incurred.
Restructuring costs. Restructuring charges
primarily represent employee severance costs, remaining lease and
termination fees, disposal of property and equipment and
professional fees associated with the closing of facilities.
Accordingly, management believes that such expenses do not have a
direct correlation to future business operations, and therefore,
these costs are not considered by management in making operating
decisions. Management does not believe such charges accurately
reflect the performance of our ongoing operations for the period in
which such charges are incurred.
Changes in contingent consideration. Contingent
consideration represents the amount payable to the sellers of
certain acquired businesses based on the achievement of defined
performance measures contained in the purchase agreements.
Contingent consideration is adjusted to fair value at the end of
each reporting period, and changes arise from changes in MTBC’s
stock price as well as changes in the forecasted revenues of the
acquired businesses.
Tax expense related to goodwill. Income tax
expense resulting from the amortization of goodwill related to our
acquisitions represents a charge to record the tax expense
resulting from amortizing goodwill over 15 years for tax purposes.
Goodwill is not amortized for GAAP reporting. This expense is not
anticipated to result in a cash payment.
Disclaimer
This press release is for information purposes
only, and does not constitute an offer to sell or solicitation of
an offer to buy, nor shall there be any sale of these securities in
any state or other jurisdiction in which such offer, solicitation
or sale would be unlawful prior to the registration or
qualification under the securities laws of such state or
jurisdiction.
SOURCE MTBC
Company and Investor
Contact:
Bill KornChief Financial
OfficerMTBCbkorn@mtbc.com732-873-5133
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