Company Reports Strong Revenue Growth and
Record Profitability
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 second quarter of 2018 and provided guidance. The
Company’s management will conduct a conference call later today at
8:30 a.m. Eastern Time to discuss these results and management’s
outlook for future financial and operational performance after
completing the largest acquisition in its history.
Stephen Snyder, CEO said, “We’re pleased to
report another quarter of strong revenue growth and profitability.
Both GAAP net income and adjusted EBITDA achieved record levels
this quarter. We have dramatically reduced costs since our last
major acquisition in fourth quarter 2016, are generating positive
cash flow, and have again proven our ability to successfully
integrate acquired businesses in a way that is accretive to our
shareholders. Our Orion acquisition, which closed on July 1, 2018,
has positioned us to further accelerate our growth, while expanding
our margins.”
Stephen Snyder continued, “As we look ahead to
the second half of 2018, we expect our revenue to nearly double as
compared to the first half of 2018. We also expect to approximately
double full year adjusted EBITDA for 2018 as compared to 2017, in
spite of Orion-related acquisition ramp-up costs.”
Three Month Financial
Results
Revenues for second quarter 2018 were $8.7
million, an increase of 12% compared to $7.8 million in the same
period last year. Revenue increased $376,000 or 5% compared to Q1
2018.
The second quarter 2018 GAAP net income was
$195,000, or 2.2% of revenue, an increase of $120,000 compared to a
net income of $75,000 in first quarter 2018 and an improvement of
$1.9 million from the net loss of $1.7 million in second quarter
2017.
“The $1.9 million improvement in our GAAP net
loss from the second quarter of 2017 was a result of significant
cost savings since we acquired MediGain,” said Bill Korn, MTBC
Chief Financial Officer. “While second quarter revenue increased by
$898,000 from the prior year, total operating expenses decreased by
$557,000.”
The GAAP net loss for second quarter 2018 was
$0.09 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 second quarter
2018 was $1.3 million, an increase of $1.4 million compared to
adjusted net income of ($77,000) in the same period last year and
an increase of $613,000 compared to first quarter 2018. Non-GAAP
adjusted net income was $0.11 per share, calculated using the
end-of-period common shares outstanding.
Non-GAAP adjusted net income excludes
significant non-cash expenses and integration and transaction
costs, such as $337,000 of amortization of purchased intangible
assets, $409,000 of stock-based compensation expense, as well as
$472,000 of integration and transaction costs associated with
acquisitions.
The second quarter 2018 GAAP operating income
was $72,000, or 1% of revenue, which represents an improvement of
$1.5 million from the $1.4 million GAAP operating loss in second
quarter 2017.
Non-GAAP adjusted operating income was $1.3
million, or 15% of revenue. “Second quarter 2018 adjusted operating
income represents an improvement of $562,000 from the $739,000
adjusted operating income in our prior quarter and a $1.2 million
improvement from second quarter 2017,” said Bill Korn. “Achieving
15% non-GAAP adjusted operating income is an important milestone,
especially for a company of MTBC’s size. Cash flow from operations
for the quarter was also $1.3 million. 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 second quarter 2018 was $1.6
million, or 18% of revenue, compared to adjusted EBITDA of
$468,000, or 6% of revenue, in the same period last year. “The
second quarter 2018 adjusted EBITDA represents 233% growth on an
annual basis, as well as 60% growth or an improvement of $583,000
from the $974,000 adjusted EBITDA in our prior quarter, reflecting
the significant cost savings we have achieved,” continued Bill
Korn. “Second quarter represents the highest adjusted EBITDA MTBC
has ever achieved. The higher scale we achieved from the MediGain
acquisition has allowed us to spread our fixed expenses over a
larger revenue base and generate larger adjusted EBITDA than we
ever have before. We expect that the Orion acquisition will have a
similar effect in the future.”
“The difference of $1.4 million between adjusted
EBITDA and the GAAP net income in the second quarter of 2018
reflects $560,000 of non-cash amortization and depreciation
expense, $472,000 of integration and transaction costs related to
acquisitions, $409,000 of stock-based compensation, $44,000 of net
interest expense, an $11,000 increase in our contingent
consideration liability, and $51,000 of provision for taxes, offset
by a $185,000 foreign exchange gain,” says Bill Korn.
Six Month Financial Results
Revenues for the first half of 2018 were $17.0
million, an increase of 6% compared to $16.0 million in the same
period last year.
The first half of 2018 GAAP net income was
$270,000 compared to a GAAP net loss of $4.4 million in the same
period last year. 2018 GAAP net income includes non-cash
amortization and depreciation expense of $1.2 million, which was
$1.8 million less than during 2017, as well as $985,000 of
additional revenue and a reduction of $603,000 of direct operating
costs.
Non-GAAP adjusted net income for the first half
of 2018 was $1.9 million, an increase of $2.9 million compared to
the adjusted net income of ($930,000) in the same period last year.
Non-GAAP adjusted net income was or $0.17 per share, calculated
using the end-of-period common shares outstanding.
Adjusted EBITDA for the first half of 2018 was
$2.5 million, or 14.9% of revenue, compared to adjusted EBITDA of
$154,000, or 1.0% of revenue, in the same period last year.
Cash flow from operations was $2.0 million for
the six months, an improvement of $2.7 million over the six months
of last year.
Cash Balance
As of June 30, 2018, the Company had $11.7
million in cash and a working capital surplus of approximately
$14.2 million. The Company has a $5 million 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. The SVB line can be
used for future growth initiatives, including acquisitions with
SVB’s approval.
According to Bill Korn, “Raising additional
capital through a sale of additional shares of our non-convertible
Series A Preferred Stock in early April positioned us to take
advantage of a compelling opportunity for consolidation in the
market. Having capital available was a key factor enabling MTBC to
purchase key businesses from Orion Healthcorp, Inc. and 13 of its
affiliates for an attractive price of $12.6 million.”
The Orion acquisition will further expand our
client base, team, and service offerings. Orion brings us 150
hospitals and independent healthcare practices as clients. As of
July 1, more than 300 additional U.S.-based employees, with offices
in 10 states, are now part of the MTBC team. We purchased three
lines of business from Orion, in an all-cash transaction.
“Orion gives MTBC the opportunity to expand our
business in two new directions,” said A. Hadi Chaudhry, President.
He continued, “In addition to growing our revenue cycle management
business, we are now in the practice management business. 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. We also now manage a group
purchasing organization, enabling thousands of physicians to
purchase vaccines from leading pharmaceutical companies at
discounted rates.”
Guidance
“The Orion transaction will help us
significantly scale our business, enabling us to grow revenues
without a corresponding increase in overhead, while expanding
margins and investing in the people and technology that enable us
to provide world class service,” said Bill Korn. “We expect that
Orion will nearly double MTBC’s revenue during the second half of
2018. You can expect our second half revenue to be in the range of
$32 to $33 million, close to double our revenue for the first half
of 2018.”
Bill Korn continued, “As with past acquisitions,
for the revenue cycle management portion of Orion’s business, we
will be leveraging our experienced U.S.-based and offshore team
members, to enable us to reduce dependence on third-party
contractors. We will be moving to smaller, less expensive
facilities, since we did not assume most of Orion’s leases. We will
begin utilizing our technology to improve service for clients.
These will all improve profitability, but will take several
quarters before the full impact occurs.”
“However, Orion’s practice management business
and group purchasing organization are already profitable, so we
expect that the profits from these new businesses will offset any
temporary operating losses in the revenue cycle management business
while waiting for cost savings to have an impact. Hence, you can
expect our full year adjusted EBITDA to be between $4.0 and $5.0
million.”
“Please note that like our previous
acquisitions, from an accounting perspective, a large portion of
the value will be attributed to intangible assets, which we will
amortize over the next few years. This means that our non-cash
amortization expense will increase. This is excluded from adjusted
EBITDA, but the positive GAAP net income we showed this quarter
will be reduced to a net loss for the next few quarters. This does
not impact our cash flow. However, as we reduce costs and spread
our fixed overhead across larger revenue, you can expect our
adjusted EBITDA will continue to grow in 2019, and that our GAAP
net income will return positive.”
Conference Call Information
MTBC management will host a conference call
today at 8:30 a.m. Eastern Time to discuss the second quarter 2018
results. The live webcast of the conference call can be accessed
under Events & Presentations at ir.mtbc.com or by dialing
412-317-5131 and referencing “MTBC Second 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 10122104.
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.
Follow MTBC on LinkedIn, Twitter, LinkedIn 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.
We cannot provide any assurances that the
transaction described in this press release will be consummated, or
that if consummated, it will be consummated on the terms as
described in this press release.
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, 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
|
|
June 30, 2018 |
|
|
December 31, 2017 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
11,722,619 |
|
|
$ |
4,362,232 |
|
Accounts
receivable - net of allowance for doubtful accounts of $192,000 and
$185,000 at June 30, 2018 and December 31, 2017, respectively |
|
|
3,437,850 |
|
|
|
3,879,463 |
|
Contract
asset |
|
|
1,669,323 |
|
|
|
- |
|
Current
assets - related party |
|
|
25,203 |
|
|
|
25,203 |
|
Prepaid
expenses and other current assets |
|
|
1,730,621 |
|
|
|
662,822 |
|
Total
current assets |
|
|
18,585,616 |
|
|
|
8,929,720 |
|
Property and equipment
- net |
|
|
1,388,173 |
|
|
|
1,385,743 |
|
Intangible assets -
net |
|
|
1,702,240 |
|
|
|
2,509,544 |
|
Goodwill |
|
|
12,263,943 |
|
|
|
12,263,943 |
|
Other assets |
|
|
424,725 |
|
|
|
436,713 |
|
TOTAL ASSETS |
|
$ |
34,364,697 |
|
|
$ |
25,525,663 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
590,266 |
|
|
$ |
991,859 |
|
Accrued
compensation |
|
|
1,033,945 |
|
|
|
1,137,351 |
|
Accrued
expenses |
|
|
922,244 |
|
|
|
616,778 |
|
Deferred
rent (current portion) |
|
|
88,697 |
|
|
|
81,826 |
|
Deferred
revenue (current portion) |
|
|
27,675 |
|
|
|
62,104 |
|
Accrued
liability to related party |
|
|
10,663 |
|
|
|
10,675 |
|
Notes
payable - other (current portion) |
|
|
81,295 |
|
|
|
168,718 |
|
Contingent consideration (current portion) |
|
|
563,466 |
|
|
|
505,557 |
|
Dividend
payable |
|
|
1,056,217 |
|
|
|
747,147 |
|
Total
current liabilities |
|
|
4,374,468 |
|
|
|
4,322,015 |
|
Notes payable -
other |
|
|
140,613 |
|
|
|
120,899 |
|
Deferred rent |
|
|
255,468 |
|
|
|
333,788 |
|
Deferred revenue |
|
|
28,212 |
|
|
|
28,615 |
|
Contingent
consideration |
|
|
- |
|
|
|
97,854 |
|
Deferred tax
liability |
|
|
450,072 |
|
|
|
372,072 |
|
Total
liabilities |
|
|
5,248,833 |
|
|
|
5,275,243 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY: |
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001 per share - authorized 2,000,000 shares;
issued and outstanding 1,536,289 and 1,086,739 shares at June 30,
2018 and December 31, 2017, respectively |
|
|
1,536 |
|
|
|
1,087 |
|
Common
stock, $0.001 par value - authorized 19,000,000 shares; issued
12,405,973 and 12,271,390 shares at June 30, 2018 and December 31,
2017, respectively; outstanding, 11,665,174 and 11,530,591 shares
at June 30, 2018 and December 31, 2017, respectively |
|
|
12,406 |
|
|
|
12,272 |
|
Additional paid-in capital |
|
|
52,710,345 |
|
|
|
45,129,517 |
|
Accumulated deficit |
|
|
(21,794,949 |
) |
|
|
(23,509,386 |
) |
Accumulated other comprehensive loss |
|
|
(1,151,474 |
) |
|
|
(721,070 |
) |
Less:
740,799 common shares held in treasury, at cost at June 30, 2018
and December 31, 2017 |
|
|
(662,000 |
) |
|
|
(662,000 |
) |
Total
shareholders’ equity |
|
|
29,115,864 |
|
|
|
20,250,420 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
$ |
34,364,697 |
|
|
$ |
25,525,663 |
|
MEDICAL TRANSCRIPTION BILLING,
CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
NET REVENUE |
|
$ |
8,682,937 |
|
|
$ |
7,784,750 |
|
|
$ |
16,990,262 |
|
|
$ |
16,004,824 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs |
|
|
4,333,573 |
|
|
|
4,197,824 |
|
|
|
8,817,628 |
|
|
|
9,420,560 |
|
Selling
and marketing |
|
|
403,057 |
|
|
|
268,958 |
|
|
|
708,071 |
|
|
|
624,469 |
|
General
and administrative |
|
|
3,054,205 |
|
|
|
2,771,811 |
|
|
|
5,654,939 |
|
|
|
5,758,474 |
|
Research
and development |
|
|
248,921 |
|
|
|
313,400 |
|
|
|
504,800 |
|
|
|
594,249 |
|
Change in
contingent consideration |
|
|
11,030 |
|
|
|
162,611 |
|
|
|
42,780 |
|
|
|
151,423 |
|
Depreciation and amortization |
|
|
559,696 |
|
|
|
1,453,145 |
|
|
|
1,150,467 |
|
|
|
2,972,690 |
|
Restructuring charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
275,628 |
|
Total
operating expenses |
|
|
8,610,482 |
|
|
|
9,167,749 |
|
|
|
16,878,685 |
|
|
|
19,797,493 |
|
OPERATING INCOME
(LOSS) |
|
|
72,455 |
|
|
|
(1,382,999 |
) |
|
|
111,577 |
|
|
|
(3,792,669 |
) |
OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
29,939 |
|
|
|
4,731 |
|
|
|
35,224 |
|
|
|
8,152 |
|
Interest
expense |
|
|
(74,167 |
) |
|
|
(285,144 |
) |
|
|
(148,248 |
) |
|
|
(564,569 |
) |
Other
income - net |
|
|
218,589 |
|
|
|
36,839 |
|
|
|
369,963 |
|
|
|
74,870 |
|
INCOME (LOSS) BEFORE
INCOME TAXES |
|
|
246,816 |
|
|
|
(1,626,573 |
) |
|
|
368,516 |
|
|
|
(4,274,216 |
) |
Income tax
provision |
|
|
51,536 |
|
|
|
67,030 |
|
|
|
98,200 |
|
|
|
127,332 |
|
NET INCOME (LOSS) |
|
$ |
195,280 |
|
|
$ |
(1,693,603 |
) |
|
$ |
270,316 |
|
|
$ |
(4,401,548 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
dividend |
|
|
1,248,717 |
|
|
|
427,875 |
|
|
|
2,024,049 |
|
|
|
630,454 |
|
NET LOSS ATTRIBUTABLE
TO COMMON SHAREHOLDERS |
|
$ |
(1,053,437 |
) |
|
$ |
(2,121,478 |
) |
|
$ |
(1,753,733 |
) |
|
$ |
(5,032,002 |
) |
Loss per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.48 |
) |
Weighted-average basic and diluted shares outstanding |
|
|
11,665,174 |
|
|
|
10,833,075 |
|
|
|
11,641,190 |
|
|
|
10,504,417 |
|
MEDICAL TRANSCRIPTION BILLING,
CORP.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
|
|
2018 |
|
|
2017 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
270,316 |
|
|
$ |
(4,401,548 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,150,467 |
|
|
|
2,972,690 |
|
Amortization of sales commissions |
|
|
26,472 |
|
|
|
- |
|
Deferred
rent |
|
|
(36,022 |
) |
|
|
(22,013 |
) |
Deferred
revenue |
|
|
(34,832 |
) |
|
|
659 |
|
Provision
for doubtful accounts |
|
|
112,406 |
|
|
|
320,616 |
|
Provision
for deferred income taxes |
|
|
78,000 |
|
|
|
110,000 |
|
Foreign
exchange gain |
|
|
(332,100 |
) |
|
|
(2,835 |
) |
Interest
accretion |
|
|
95,604 |
|
|
|
134,870 |
|
Non-cash
restructuring charges |
|
|
- |
|
|
|
17,001 |
|
Stock-based compensation expense |
|
|
537,402 |
|
|
|
208,035 |
|
Change in
contingent consideration |
|
|
42,780 |
|
|
|
151,423 |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
329,207 |
|
|
|
530,913 |
|
Other
assets |
|
|
(91,643 |
) |
|
|
30,449 |
|
Accounts
payable and other liabilities |
|
|
(180,452 |
) |
|
|
(739,145 |
) |
Net cash
provided by (used in) operating activities |
|
|
1,967,605 |
|
|
|
(688,885 |
) |
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(376,430 |
) |
|
|
(345,215 |
) |
Cash
deposit paid for acquisition |
|
|
(1,000,000 |
) |
|
|
- |
|
Net cash
used in investing activities |
|
|
(1,376,430 |
) |
|
|
(345,215 |
) |
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 |
|
|
9,415,000 |
|
|
|
6,536,217 |
|
Preferred
stock dividends paid |
|
|
(1,714,979 |
) |
|
|
(410,827 |
) |
Settlement of tax withholding obligations on stock issued to
employees |
|
|
(213,675 |
) |
|
|
(195,912 |
) |
Repayments of notes payable |
|
|
(139,485 |
) |
|
|
(4,287,506 |
) |
Proceeds
from line of credit |
|
|
- |
|
|
|
400,000 |
|
Repayments of line of credit |
|
|
- |
|
|
|
(400,000 |
) |
Contingent consideration payments |
|
|
(82,725 |
) |
|
|
(33,114 |
) |
Other
financing activities |
|
|
(60,090 |
) |
|
|
(217,448 |
) |
Net cash
provided by financing activities |
|
|
7,204,046 |
|
|
|
3,391,410 |
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
|
(434,834 |
) |
|
|
(23,704 |
) |
NET INCREASE IN
CASH |
|
|
7,360,387 |
|
|
|
2,333,606 |
|
CASH - Beginning of the
period |
|
|
4,362,232 |
|
|
|
3,476,880 |
|
CASH - End of
period |
|
$ |
11,722,619 |
|
|
$ |
5,810,486 |
|
SUPPLEMENTAL NONCASH
INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Vehicle
financing obtained |
|
$ |
75,372 |
|
|
$ |
30,746 |
|
Dividends
declared, not paid |
|
$ |
1,056,217 |
|
|
$ |
422,206 |
|
SUPPLEMENTAL
INFORMATION - Cash paid during the period for: |
|
|
|
|
|
|
|
|
Income
taxes |
|
$ |
29,673 |
|
|
$ |
7,263 |
|
Interest |
|
$ |
20,221 |
|
|
$ |
254,414 |
|
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 six months ended June 30,
2018 to the results recorded under the previous revenue recognition
standard used for the six months ended June 30, 2017. Total revenue
as presented for the six months ended June 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 six months ended June 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.
|
|
Six Months Ended June 30, |
|
|
Change |
|
|
|
2018 |
|
|
2017 |
|
|
Amount |
|
|
Percent |
|
|
|
As Presented |
|
|
Impact of New Revenue Standard |
|
|
Previous Revenue Standard |
|
|
|
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
16,990 |
|
|
$ |
327 |
|
|
$ |
16,664 |
|
|
$ |
16,005 |
|
|
$ |
659 |
|
|
|
4 |
% |
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs |
|
|
8,818 |
|
|
|
- |
|
|
|
8,818 |
|
|
|
9,421 |
|
|
|
(603 |
) |
|
|
(6 |
%) |
Selling
and marketing |
|
|
708 |
|
|
|
(11 |
) |
|
|
719 |
|
|
|
624 |
|
|
|
95 |
|
|
|
15 |
% |
General
and administrative |
|
|
5,655 |
|
|
|
- |
|
|
|
5,655 |
|
|
|
5,758 |
|
|
|
(104 |
) |
|
|
(2 |
%) |
Research
and development |
|
|
505 |
|
|
|
- |
|
|
|
505 |
|
|
|
594 |
|
|
|
(89 |
) |
|
|
(15 |
%) |
Change in
contingent consideration |
|
|
43 |
|
|
|
- |
|
|
|
43 |
|
|
|
151 |
|
|
|
(109 |
) |
|
|
(72 |
%) |
Depreciation and amortization |
|
|
1,151 |
|
|
|
- |
|
|
|
1,151 |
|
|
|
2,972 |
|
|
|
(1,822 |
) |
|
|
(61 |
%) |
Restructuring charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
276 |
|
|
|
(276 |
) |
|
|
(100 |
%) |
Total
operating expenses |
|
|
16,879 |
|
|
|
(11 |
) |
|
|
16,890 |
|
|
|
19,797 |
|
|
|
(2,907 |
) |
|
|
(15 |
%) |
OPERATING INCOME
(LOSS) |
|
|
112 |
|
|
|
338 |
|
|
|
(226 |
) |
|
|
(3,793 |
) |
|
|
3,567 |
|
|
|
(94 |
%) |
OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest expense |
|
|
(113 |
) |
|
|
- |
|
|
|
(113 |
) |
|
|
(556 |
) |
|
|
443 |
|
|
|
(80 |
%) |
Other
income - net |
|
|
370 |
|
|
|
- |
|
|
|
370 |
|
|
|
75 |
|
|
|
295 |
|
|
|
394 |
% |
INCOME (LOSS) BEFORE
INCOME TAXES |
|
|
369 |
|
|
|
338 |
|
|
|
31 |
|
|
|
(4,274 |
) |
|
|
4,305 |
|
|
|
(101 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
provision |
|
|
98 |
|
|
|
- |
|
|
|
98 |
|
|
|
127 |
|
|
|
(29 |
) |
|
|
(23 |
%) |
NET INCOME (LOSS) |
|
$ |
270 |
|
|
$ |
338 |
|
|
$ |
(68 |
) |
|
$ |
(4,402 |
) |
|
$ |
4,334 |
|
|
|
(98 |
%) |
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 income (loss).
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
Net revenue |
|
$ |
8,683 |
|
|
$ |
7,785 |
|
|
$ |
16,990 |
|
|
$ |
16,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) |
|
$ |
195 |
|
|
$ |
(1,694 |
) |
|
$ |
270 |
|
|
$ |
(4,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
|
51 |
|
|
|
67 |
|
|
|
98 |
|
|
|
127 |
|
Net
interest expense |
|
|
44 |
|
|
|
280 |
|
|
|
113 |
|
|
|
556 |
|
Foreign
exchange / other expense |
|
|
(185 |
) |
|
|
28 |
|
|
|
(332 |
) |
|
|
(10 |
) |
Stock-based compensation expense |
|
|
409 |
|
|
|
79 |
|
|
|
537 |
|
|
|
208 |
|
Depreciation and amortization |
|
|
560 |
|
|
|
1,453 |
|
|
|
1,151 |
|
|
|
2,973 |
|
Integration, transaction and restructuring costs |
|
|
472 |
|
|
|
92 |
|
|
|
651 |
|
|
|
551 |
|
Change in
contingent consideration |
|
|
11 |
|
|
|
163 |
|
|
|
43 |
|
|
|
151 |
|
Adjusted EBITDA |
|
$ |
1,557 |
|
|
$ |
468 |
|
|
$ |
2,531 |
|
|
$ |
154 |
|
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 income (loss) and GAAP
operating margin.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
Net revenue |
|
$ |
8,683 |
|
|
$ |
7,785 |
|
|
$ |
16,990 |
|
|
$ |
16,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) |
|
$ |
195 |
|
|
$ |
(1,694 |
) |
|
$ |
270 |
|
|
$ |
(4,402 |
) |
Provision
for income taxes |
|
|
51 |
|
|
|
67 |
|
|
|
98 |
|
|
|
127 |
|
Net
interest expense |
|
|
44 |
|
|
|
280 |
|
|
|
113 |
|
|
|
556 |
|
Other
income - net |
|
|
(218 |
) |
|
|
(37 |
) |
|
|
(370 |
) |
|
|
(75 |
) |
GAAP operating income
(loss) |
|
|
72 |
|
|
|
(1,384 |
) |
|
|
111 |
|
|
|
(3,794 |
) |
GAAP
operating margin |
|
|
0.8 |
% |
|
|
(17.8 |
%) |
|
|
0.7 |
% |
|
|
(23.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
409 |
|
|
|
79 |
|
|
|
537 |
|
|
|
208 |
|
Amortization of purchased intangible assets |
|
|
337 |
|
|
|
1,199 |
|
|
|
698 |
|
|
|
2,462 |
|
Integration, transaction and restructuring costs |
|
|
472 |
|
|
|
92 |
|
|
|
651 |
|
|
|
551 |
|
Change in
contingent consideration |
|
|
11 |
|
|
|
163 |
|
|
|
43 |
|
|
|
151 |
|
Non-GAAP adjusted
operating income |
|
$ |
1,301 |
|
|
$ |
149 |
|
|
$ |
2,040 |
|
|
$ |
(422 |
) |
Non-GAAP
adjusted operating margin |
|
|
15.0 |
% |
|
|
1.9 |
% |
|
|
12.0 |
% |
|
|
(2.6 |
%) |
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 income (loss) and GAAP net loss per
share.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
($ in thousands) |
|
GAAP net income
(loss) |
|
$ |
195 |
|
|
$ |
(1,694 |
) |
|
$ |
270 |
|
|
$ |
(4,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange / other expense |
|
|
(185 |
) |
|
|
28 |
|
|
|
(332 |
) |
|
|
(10 |
) |
Stock-based compensation expense |
|
|
409 |
|
|
|
79 |
|
|
|
537 |
|
|
|
208 |
|
Amortization of purchased intangible assets |
|
|
337 |
|
|
|
1,199 |
|
|
|
698 |
|
|
|
2,462 |
|
Integration, transaction and restructuring costs |
|
|
472 |
|
|
|
92 |
|
|
|
651 |
|
|
|
551 |
|
Change in
contingent consideration |
|
|
11 |
|
|
|
163 |
|
|
|
43 |
|
|
|
151 |
|
Income
tax expense related to goodwill |
|
|
40 |
|
|
|
56 |
|
|
|
78 |
|
|
|
110 |
|
Non-GAAP adjusted net
income |
|
$ |
1,279 |
|
|
$ |
(77 |
) |
|
$ |
1,945 |
|
|
$ |
(930 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period
shares |
|
|
11,665,174 |
|
|
|
11,451,427 |
|
|
|
11,665,174 |
|
|
|
11,451,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted net
income per share |
|
$ |
0.11 |
|
|
$ |
(0.01 |
) |
|
$ |
0.17 |
|
|
$ |
(0.08 |
) |
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 June 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 June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
GAAP net loss
attributable to common shareholders, per share |
|
$ |
(0.09 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.48 |
) |
Impact of
preferred stock dividend |
|
|
0.11 |
|
|
|
0.05 |
|
|
|
0.17 |
|
|
|
0.10 |
|
Net income (loss) per
end-of-period share |
|
|
0.02 |
|
|
|
(0.15 |
) |
|
|
0.02 |
|
|
|
(0.38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange / other expense |
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
(0.03 |
) |
|
|
0.00 |
|
Stock-based compensation expense |
|
|
0.04 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.02 |
|
Amortization of purchased intangible assets |
|
|
0.03 |
|
|
|
0.11 |
|
|
|
0.06 |
|
|
|
0.21 |
|
Integration, transaction and restructuring costs |
|
|
0.04 |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.05 |
|
Change in
contingent consideration |
|
|
0.00 |
|
|
|
0.01 |
|
|
|
0.00 |
|
|
|
0.01 |
|
Income
tax expense related to goodwill |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Non-GAAP adjusted net
income per share |
|
$ |
0.11 |
|
|
$ |
(0.01 |
) |
|
$ |
0.17 |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End-of-period
shares |
|
|
11,665,174 |
|
|
|
11,451,427 |
|
|
|
11,665,174 |
|
|
|
11,451,427 |
|
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 Korn
Chief Financial Officer
MTBC
bkorn@mtbc.com
732-873-5133
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