Conference call begins at 11:00 a.m. Eastern
time today
Rennova Health, Inc. (NASDAQ:RNVA) (NASDAQ:RNVAZ), a
vertically integrated provider of industry-leading diagnostics and
supportive software (“Rennova” or the “Company”), reports financial
results for the three and six months ended June 30, 2016, and
provides a business update.
Business highlights for the second quarter of 2016 and recent
weeks include:
- Converted approximately $2.0 million of
liabilities into equity in August 2016
- Signed an agreement with Academy
Medical to provide laboratory services to U.S. federal government
customers in July 2016
- Completed a public equity raise
totaling $8.6 million in gross proceeds in July 2016
- Acquired Hartford Healthcare
Corporation’s interest in Genomas, Inc., a laboratory based in
Connecticut that specializes in pharmacogenomics
- Entered into a preferred provider
network agreement with Three Rivers Provider Network
- Added electronic medication management
functionality (eMAR) to the Company’s flagship M2Select electronic
health record (EHR) product
Financial highlights for the second quarter of 2016 compared
with the first quarter of 2016 include:
- Net revenues of $3.1 million, compared
with $1.9 million
- Clinical Laboratory Operations net
revenue of $2.5 million, compared with $1.5 million
- Supportive Software Solutions net
revenues of $0.6 million, compared with $0.5 million
- Decision Support and Informatics net
revenues of $0.2 million, compared with $0.2 million
- Gross margin of 87.2%, compared with
70.0%
Financial highlights for the second quarter of 2016 compared to
the second quarter of 2015 include:
- Net revenues of $3.1 million, compared
with $9.4 million
- Clinical Laboratory Operations net
revenue of $2.5 million, compared with $8.9 million
- Supportive Software Solutions net
revenues of $0.6 million, compared with $0.9 million
- Decision Support and Informatics net
revenues of $0.2 million, compared with no revenue
- Gross margin of 87.2%, compared with
71.6%
Management Commentary
“Our second quarter has been in keeping with the turnaround we
forecasted during our first quarter 2016 investor conference call
in May,” stated Seamus Lagan, Rennova’s Chief Executive Officer.
“We have made significant progress in growing our core business of
toxicology testing. We continue to add EHR customers to our
software division and in the last few weeks we hired a professional
to lead our billing services for substance abuse facilities, from
which we are experiencing strong demand for integrated
services.”
“I am particularly pleased with the success we are having adding
new payer contracts. These contracts continue to expand our target
market and provide more predictable and reliable payments for
diagnostic services. As an example of this success, we achieved a
63% increase in net revenues for the second quarter 2016 versus the
first quarter. This increase substantiates our belief that although
year-over-year results are down, we have begun to experience the
turnaround forecasted,” Mr. Lagan said.
“The sector in which we operate continues to be impacted by
compliance matters, with many insurance companies now actively
pursuing ‘bad-actors’ through the courts for reparation. Our focus
on compliance, along with our extensive offering of testing
services, which now includes pharmacogenomics tests, have resulted
in a number of attractive new contracts with reliable payers over
the past several months. For example, just last week we announced a
contract with Academy Medical to promote the sale of our services
to the U.S. federal government. We do not believe we would have
obtained this contract without our exceptional focus on compliance.
We expect to sign additional in-network contracts throughout the
year.”
“In March, we announced an alliance with Genomas to offer their
revolutionary PhyzioType Systems for DNA-guided management and
prescription of drugs. Subsequently, within the past month, we
significantly strengthened our relationship by purchasing Hartford
Healthcare Corporation’s interest in Genomas. We now expect to
accelerate our provision of diagnostics for DNA-guided management
and prescription of drugs. These products provide guidance to
physicians so that they may select the safest and most effective
drugs to improve patient outcomes and enhance patient compliance.
We will continue to expand this product offering in the coming
weeks.”
Mr. Lagan added, “During the second quarter we added eMAR
functionality to our flagship M2Select EHR solution, which
automates the process of monitoring patient medications, reducing
the risk of medication dispensing errors. Partnering with our EHR
clients is ongoing, and we have developed and improved our
offerings during the second quarter. We are excited about the
creation of a more sustainable relationship with our customers
because of our growing ability to provide this software and
integrated services.”
Commenting on expectations for the remainder of the year, Mr.
Lagan said, “We are securing additional customers – June was the
most active month of onboarding new customers in two years. In
addition, we are confident that the growth in core toxicology
diagnostics, combined with our investment in Genomas, will provide
additional revenue and open new market segments over the coming
months. We are continuing to explore and develop new revenue
sources for diagnostics, including direct-to-consumer testing.”
Mr. Lagan concluded, “We also continue to monitor our efficiency
and expect that the cost-containment measures we have taken in
recent months, which total $2.4 million annually, will further
manifest themselves in our financial performance in the coming
quarters. We anticipate that our current growth, combined with
ongoing efforts to contain costs, will see us back to cash flow
break even in the next few months.”
Financial Results
Net revenues for the second quarter of 2016 were $3.1 million,
compared with $9.4 million for the second quarter of 2015. Clinical
Laboratory Operations revenues for the second quarter of 2016 were
$2.5 million, compared with $8.9 million for the second quarter of
2015, a decrease of 72%. The decrease was primarily due to a
decline in insured test volume, partially offset by an increase in
the net revenue per insured test. During the first quarter of 2015
the Company transitioned a significant portion of its testing from
external reference laboratories to internal processing, which
resulted in a $0.5 million decrease in direct costs of revenues, or
a 62% decrease in direct costs per sample. Total samples processed
declined 68% year-over-year, resulting in a $1.8 million decrease
in direct costs of revenues.
Supportive Software Solutions net revenues were $0.6 million for
the second quarter of 2016, compared with $0.9 million for the
second quarter of 2015, a decline of 38%. The decline was due to a
reduction in the amounts charged by the Supportive Software
Solutions group to the Company’s Clinical Laboratory Operations
group, partially offset by $0.1 million of increased revenues
generated by sales of the Company’s Medical Mime product, which was
launched in the fourth quarter of 2015. Decision Support and
Informatics net revenues were $0.2 million for the second quarter
of 2016, compared with no revenues in the prior year’s second
quarter, as this segment was created with the acquisition of
CollabRx, Inc. in November 2015.
Operating expenses for the second quarter of 2016 were $8.1
million, compared with $14.0 million for the prior-year second
quarter. The decrease was primarily due to a decline in direct
costs of revenue of $2.3 million, a decline in general and
administrative expenses of $3.5 million and a decline in sales and
marketing expenses of $0.5 million, partially offset by a $0.6
engineering expense.
The Company reported other expense of $0.8 million for the
second quarter of 2016, compared with $0.5 million for the second
quarter of 2015. The increase was mainly due to an increase in
interest expense of $1.5 million during the quarter, largely offset
by a gain on the change in the value of derivative instruments of
$1.2 million. The Company recognized no income tax expense or
benefit for the second quarter of 2016, compared with an income tax
benefit of $0.9 million for the second quarter of 2015.
Net loss attributable to common stockholders for the second
quarter of 2016 was $5.9 million, or $0.40 per basic and diluted
share, compared with a net loss attributable to common stockholders
for the second quarter of 2015 of $5.1 million, or $0.42 per basic
and diluted share.
Net revenues for the six months ended June 30, 2016 were $4.9
million, compared with $23.0 million for the six months ended June
30, 2015. The decline was primarily due to a decline in insured
test volume in the Clinical Laboratory Operations segment.
Operating expenses declined to $16.8 million for the six months
ended June 30, 2016, compared with $25.4 million in the prior-year
period. The decrease was largely due to a $5.7 million reduction in
direct costs of revenue and a $3.2 million decrease in general and
administrative costs. The net loss attributable to common
stockholders was $10.1 million, or $0.69 per share, for the six
months ended June 30, 2016, compared with a net loss attributable
to common stockholders of $4.6 million, or $0.38 per basic and
diluted share, for the prior-year period.
The Company had cash and cash equivalents of $0.5 million as of
June 30, 2016, compared with $8.8 million as of December 31, 2015.
Subsequent to the close of the second quarter, the Company closed
an underwritten offering of common stock and warrants, from which
the Company raised approximately $8.6 million in gross
proceeds.
Non-GAAP Measures
To supplement Rennova Health’s consolidated financial statements
presented in accordance with GAAP, Rennova provides certain
non-GAAP measures of financial performance. These non-GAAP measures
include non-GAAP adjusted EBITDA, non-GAAP adjusted net (loss)
income and non-GAAP adjusted (loss) income per diluted share.
Rennova’s reference to these non-GAAP measures should be
considered in addition to results prepared under current accounting
standards, but are not a substitute for, nor superior to, GAAP
results. These non-GAAP measures are provided to enhance investors'
overall understanding of Rennova’s current financial performance
and to provide further information for comparative purposes.
Specifically, the Company believes the non-GAAP measures provide
useful information to both management and investors by isolating
certain expenses, gains and losses that may not be indicative of
the Company’s core operating results and business outlook. In
addition, Rennova believes non-GAAP measures enhance the
comparability of results against prior periods. Reconciliation to
the most directly comparable GAAP measure of all non-GAAP measures
included in this press release is as follows:
Three Months Ended
Six Months Ended June 30, June 30,
2016 2015
2016 2015
Loss before income taxes $ (5,862,091 )
$ (5,134,148 )
$
(10,106,102
)
$ (3,149,639 ) Adjustments to GAAP
measure: Depreciation and amortization 701,687 669,641
1,428,957 1,250,434 Interest expense 2,047,328 542,442 3,060,741
1,047,543 Stock compensation expense 353,271
2,712,958 362,581 3,069,421
Adjusted EBITDA $ (2,759,805 )
$ (1,209,107 ) $ (5,253,823
) $ 2,217,759 Depreciation and
amortization (701,687 ) (669,641 ) (1,428,957 ) (1,250,434 ) Cash
interest expense (748,823 ) (104,688 ) (972,860 ) (363,214 )
Provision for income taxes at standard 38.8% 1,633,602
769,573 2,970,388
(234,395 )
Adjusted net (loss) income $
(2,576,713 ) $ (1,213,863 )
$ (4,685,252 ) $ 369,716
Adjusted (loss) income per diluted share $
(0.17 ) $ (0.10 ) $
(0.32 ) $ 0.03
Conference Call and Webcast
Rennova Health management will hold a conference call and
webcast today at 11:00 a.m. Eastern time to discuss second quarter
financial results and provide a business update. To access the
conference call dial 888-563-6275 from within the U.S. or
706-634-7417 from outside the U.S. All listeners should provide the
following passcode: 60586247. Individuals interested in listening
to the live conference call via the Internet may do so by logging
on to the Company’s website at www.rennovahealth.com.
Following the conclusion of the conference call, a replay will
be available through August 21, 2016 and can be accessed by dialing
855-859-2056 from within the U.S. or 404-537-3406 from outsidethe
U.S. All listeners should provide passcode 60586247. The webcast
will be available for 30 days.
About Rennova Health, Inc.
Rennova Health, Inc. (NASDAQ: RNVA) provides industry-leading
diagnostics and supportive software solutions to healthcare
providers, delivering an efficient, effective patient experience
and superior clinical outcomes. Through an ever-expanding group of
strategic brands that work in unison to empower customers, we are
creating the next generation of healthcare. For more information
about Rennova Health, Inc., visit www.rennovahealth.com.
Rennova Health Safe Harbor Statement
This press release includes forward-looking statements that are
subject to significant risks and uncertainties; actual results
could differ materially from those projected and Rennova Health
cautions investors not to place undue reliance on the
forward-looking statements contained in this release. Risks and
uncertainties relating to Rennova Health include those found in
Rennova’s filings with the Securities and Exchange Commission,
which are available on www.sec.gov. Rennova Health undertakes no
obligation to update or revise any such forward-looking statements
to reflect subsequent events or circumstances, except as may be
required by law.
(Tables to follow)
Consolidated Balance Sheets
June 30, December 31, 2016
2015 (unaudited) ASSETS
Current assets: Cash $ 485,241 $ 8,833,230 Accounts
receivable, net 7,849,283 8,149,484 Prepaid expenses and other
current assets 1,506,204 1,193,077 Income tax refunds receivable
2,516,042 2,415,013
Total current
assets 12,356,770 20,590,804 Property and
equipment, net 5,760,694 7,148,295 Deposits 235,184
232,774
Total assets $
18,352,648 $ 27,971,873
LIABILITIES AND STOCKHOLDERS' DEFICIT Current
liabilities: Accounts payable $ 3,775,440 $ 4,360,035 Accrued
expenses 3,116,378 5,285,455 Current portion of notes payable
7,546,335 269,031 Current portion of notes payable, related party
5,112,990 5,133,888 Current portion of capital lease obligations
658,633 1,323,708
Total
current liabilities 20,209,776 16,372,117
Other liabilities: Notes payable, net of current portion
910,422 2,903,898 Capital lease obligations, net of current portion
2,394,172 2,394,171 Other non-current liabilities 2,031,821 -
Derivative liabilities 3,743,777 7,495,486
Total liabilities 29,289,968
29,165,672 Commitments and
contingencies Preferred stock, 5,000,000 shares
authorized: Series B preferred stock, $0.01 par value, 5,000 shares
authorized, issued and outstanding at June 30, 2016 and December
31, 2015 50 50 Series C preferred stock, $0.01 par value, 10,350
shares authorized, 8,740 and 9,000 shares issued and outstanding at
June 30, 2016 and December 31, 2015 87 90 Series E preferred stock,
$0.01 par value, 45,000 shares authorized, issued and outstanding
at June 30, 2016 and December 31, 2015 450 450 Common stock, $0.01
par value, 500,000,000 shares authorized, 14,886,331 shares issued
and outstanding at June 30, 2016, 50,000,000 shares authorized,
14,651,837 shares issued and outstanding at December 31, 2015
148,863 143,951 Additional paid-in-capital 27,046,509 26,688,837
Accumulated deficit (38,133,279 ) (28,027,177
)
Total stockholders' deficit (10,937,320
) (1,193,799 ) Total
liabilities and stockholders' deficit $
18,352,648 $ 27,971,873
Consolidated Statements of Operations
Three Months Ended Six Months Ended June
30, June 30, 2016
2015 2016
2015 Net Revenues $
3,053,712 $ 9,381,651 $
4,932,525 $ 23,030,433 Operating
expenses: Direct costs of revenue 390,103 2,668,357 954,303
6,699,631 General and administrative 5,894,327 9,396,040 11,848,373
15,035,973 Sales and marketing expenses 590,271 1,139,567 1,463,711
2,321,788 Engineering 567,409 - 1,090,177 - Bad debt 100 99,754
1,385 99,754 Depreciation and amortization 701,687
669,641 1,428,957 1,250,434
Total operating expenses 8,143,897 13,973,359
16,786,906 25,407,580
Loss from operations
(5,090,185 ) (4,591,708 )
(11,854,381 ) (2,377,147 )
Other income (expense): Other income 2 2 100,012 23 Change
in fair value of derivative instruments 1,293,072 - 4,726,660 -
(Loss) gain on legal settlement (17,652 ) - (17,652 ) 275,028
Interest expense (2,047,328 ) (542,442 )
(3,060,741 ) (1,047,543 )
Total other (expense)
income (771,906 ) (542,440
) 1,748,279 (772,492
) Loss before income taxes (5,862,091
) (5,134,148 ) (10,106,102 )
(3,149,639 ) (Benefit) provision for income
taxes - (878,700 ) -
98,800
Net loss (5,862,091 )
(4,255,448 ) (10,106,102 )
(3,248,439 ) Preferred stock dividends
- 797,344 - 1,320,394
Net loss attributable to common stockholders
$ (5,862,091 ) $ (5,052,792
)
$
(10,106,102
)
$ (4,568,833 ) Net loss per common
share: Basic and diluted
$ (0.40 )
$ (0.42 ) $ (0.69 )
$ (0.38 ) Weighted average number of
common shares outstanding during the period: Basic and
diluted
14,777,036 12,012,282
14,753,283 11,902,415
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version on businesswire.com: http://www.businesswire.com/news/home/20160815005338/en/
Rennova HealthSebastien Sainsbury,
561-666-9818ssainsbury@rennovahealth.comorInvestorsLHAKim Golodetz,
212-838-3777Kgolodetz@lhai.comorBruce Voss,
310-691-7100bvoss@lhai.com
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