CRH Medical, today announced financial and operating results for the three and nine months ended September 30, 2017.
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VANCOUVER, Nov. 1, 2017 /PRNewswire/ - CRH Medical, today announced financial and operating results for the three and nine months ended September 30, 2017. This news release should be read in conjunction with the Company's unaudited interim financial statements and management discussion and analysis for the quarters and Year-to-Date ended September 30, 2017 and 2016 that have been filed on SEDAR and are available at www.sedar.com and on the Company's website at www.crhmedcorp.com. Edward Wright, Chief Executive Officer of CRH commented, "We announced a number of acquisitions during the quarter: one acquisition in August and three more in September, bringing our total to six acquisitions year-to-date and 15 acquisitions since December 2014. Today, CRH Anesthesia serves 35 ASCs in seven states and performs approximately 235,000 annual patient cases. While our revenues have grown, changes within our commercial payors have reduced our average revenue per case. Additionally, we have incurred increased costs compared to prior periods to develop the infrastructure necessary to support our existing and future network. Commercial payor changes and investment in infrastructure have contributed to a reduction in operating EBITDA compared with prior periods." Wright further stated, "We continue to generate approximately $6 million in free cash flow each quarter and maintain strong margins. We have access to capital through our credit facility and as a result are able to grow our business without issuing stock and diluting shareholders." Except where otherwise indicated, all financial information discussed in this document is expressed in USD, represents 100% of the consolidated results of the Company, and includes both the Company's interest in subsidiaries, as well as non-controlling interests in non-wholly owned subsidiaries of the Company. Consolidated Financial Highlights
Three Months Ended Year-to-Date
September 30, September 30,
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2017 2016 Change 2017 2016 Change
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Anesthesia services revenue 20,480,288 19,446,645 5% 59,510,491 44,813,732 33%
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Product revenue 2,864,742 2,661,492 8% 8,428,735 7,718,797 9%
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Total revenue 23,345,030 22,108,137 6% 67,939,226 52,532,529 29%
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Operating expenses - adjusted (1)
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Anesthesia services 10,362,959 8,794,079 18% 29,671,929 20,275,129 46%
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Product 1,094,305 974,257 12% 3,273,259 2,976,377 10%
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Corporate 993,672 684,464 45% 2,822,097 2,291,288 23%
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Total operating expenses - adjusted(1) 12,450,936 10,452,800 19% 35,767,285 25,542,794 40%
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Total adjusted operating EBITDA(1) 10,894,094 11,655,337 (7%) 32,171,941 26,989,735 19%
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Shareholders of the Company 7,775,349 9,122,282 (15%) 22,846,790 22,089,735 3%
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1 Non-IFRS measure. Please refer
to page 7 of this document for
a reconciliation of reported
results to non-IFRS measures.
Results of Operations - Three and Nine Months Ended September 30, 2017 Revenues from anesthesia services for the quarter ended September 30, 2017 were $20,480,288 compared to $19,446,645 for the third quarter of 2016. The increase was primarily due to the Company's anesthesia acquisitions throughout 2017; however, there were a number of factors which impacted the change between the third quarter of 2017 and the third quarter of 2016. The increase in revenue from the prior period is reflective of the following:
Anesthesia revenues for the nine months ended September 30, 2017 were $59,510,491 compared to $44,813,732 for the nine months ended September 30, 2016. The increase in revenue from the prior period is reflective of the following:
During the three and nine months ended September 30, 2017, there were the following factors that impacted revenue which also impacted operating income and adjusted operating EBITDA when compared to both the previous year and previous quarter:
In the quarter ended September 30, 2017, the anesthesia services segment serviced 49,113 patient cases compared to 42,203 patient cases during the quarter ended September 30, 2016. Year to date patient cases total 137,664 compared to 95,979 cases in the nine months ended September 30, 2016. Revenues from product sales for the quarter ended September 30, 2017 were $2,864,742 compared to $2,661,492 for the third quarter of 2016. The increase in product sales is the result of the continuing successful execution of the Company's direct to physician program that allows physicians to purchase our hemorrhoid banding technology, treatment protocols, marketing and operational experience. Revenues from product sales for the nine months ended September 30, 2017 were $8,428,735 compared to $7,718,797 for the nine months ended September 30, 2016. As of September 30, 2017, the Company has trained 2,620 physicians to use the O'Regan System, representing 1,011 clinical practices. This compares to 2,355 physicians trained, representing 902 clinical practices, as of September 30, 2016. For the three months ended September 30, 2017, total adjusted operating expenses were $12,450,936 compared to $10,452,800 for the quarter ended September 30, 2016. For the nine months ended September 30, 2017, total adjusted operating expenses were $35,767,285 compared to $25,542,794 for the nine months ended September 30, 2016. Increases in adjusted operating expenses are primarily related to adjusted operating expenses in the anesthesia services business. Factors impacting the fluctuation of total adjusted operating expenses are consistent with those impacting operating expenses. Anesthesia services adjusted operating expenses for the quarter ended September 30, 2017 were $10,362,959, compared to $8,794,079 for the three months ended September 30, 2016. Anesthesia services adjusted operating expenses primarily include labor related costs for Certified Registered Nurse Anesthetists and MD anesthesiologists, medical drugs and supplies, and billing and management related expenses. The Company's first anesthesia acquisition was in the fourth quarter of 2014, with fourteen further acquisitions completed in 2015, 2016 and in the nine months ended September 30, 2017. As a result, the third quarter of 2017 is not directly comparable to 2016, with the majority of the increase relating to operating expenses for acquired companies and as a result of infrastructure investments made by the Company throughout 2017. As the Company works toward its acquisition strategy, it has invested in resources and infrastructure to support its initiatives. The investment in resource and infrastructure contributed approximately $300,000 in anesthesia adjusted operating expenses in the quarter. Though quarterly revenue may fluctuate significantly, quarterly adjusted operating expenses which are primarily employee related costs, due to their fixed nature, are not expected to fluctuate materially. These expenses are primarily impacted by the Company's acquisition strategy. Anesthesia services adjusted operating expenses for the nine months ended September 30, 2017 were $29,671,929 compared to $20,275,129 for the nine months ended September 30, 2016. Similar to the third quarter of 2017, the first nine months of 2017 is not comparable to the first nine months of 2016 due to the timing of acquisitions. Investments in infrastructure and resources contributed approximately $1.1 million to anesthesia services adjusted operating expenses in the year to date period. Product sales adjusted operating expenses for the quarter ended September 30, 2017 were $1,094,305 compared to $974,257 for the quarter ended September 30, 2016. The increase in product sales adjusted operating expenses compared to 2016 is a reflection of higher employee related costs as a result of increased sales activity as well as an increase in professional fees related to continuing efforts to distribute our product in China. Product sales expenses primarily include employee wages, product cost and support, marketing programs, office expenses, professional fees, and insurance. In the future, the Company expects adjusted operating expenses to increase as the Company continues to invest in activities aimed at increasing demand for training and use of the CRH O'Regan System. Product sales adjusted operating expenses for the nine months ended September 30, 2017 were $3,273,259 compared to $2,976,377 for the nine months ended September 30, 2016. Corporate adjusted operating expenses for the quarter ended September 30, 2017 were $993,672 compared to $684,464 for the quarter ended September 30, 2016. The increase in corporate adjusted operating expense is a reflection of higher professional fees and employee related costs, and, in general, is reflective of the increasing complexity of our business which is also increasing our compliance costs. Corporate adjusted operating expenses for the nine months ended September 30, 2017 were $2,822,097 compared to $2,291,288 for the nine months ended September 30, 2016. Adjusted operating EBITDA attributable to shareholders of the Company for the quarter ended September 30, 2017 was $7,775,349, a decrease of $1,346,933 from the quarter ended September 30, 2016. The decrease in adjusted operating EBITDA attributable to shareholders is primarily a reflection of the negative revenue rate and payor mix variances recorded in the quarter in respect of the Company's anesthesia providers acquired prior to 2016. Adjusted operating EBITDA attributable to shareholders of the Company for the nine months ended September 30, 2017 was $22,846,790, an increase of $757,054 from the same period in 2016. Total adjusted operating EBITDA was $10,894,094 for the quarter ended September 30, 2017, a decrease of $761,243 from the same period in 2016. Total adjusted operating EBITDA was $32,171,941 for the nine months ended September 30, 2017, an increase of $5,182,206 from the same period in 2016. At September 30, 2017, the Company had $10,361,977 in cash and cash equivalents compared to $9,507,004 at the end of 2016. The increase in cash and equivalents is primarily a reflection of cash generated from operations and debt financing activities, less cash used to finance acquisitions during the first nine months of 2017, less repayment of debt in the period. Working capital was $13,083,449 compared to working capital of $9,657,303 at December 31, 2016. The Company expects to meet its short-term obligations, including short-term obligations in respect of its notes payable and deferred consideration through cash earned through operating activities. The average number of days receivables outstanding at September 30, 2017 was 39 days. At December 31, 2016, the average number of days receivables outstanding was 34 days. Conference Call An audio replay of the conference will be available shortly after the call by dialing 1-855-669-9658, or (604) 674-8052 and access code 1687. The replay will be available for two weeks after the call. About CRH Medical Corporation Non-IFRS Measures The non-IFRS measures are reconciled to reported IFRS figures in the tables below: Adjusted operating EBITDA
For the three months ended 2017 2016 2015
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(USD in thousands) Sep Jun Mar Dec Sep Jun Mar Dec Sep
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Adjusted operating EBITDA attributable
to:
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Shareholders of the Company 7,775 7,352 7,719 10,281 9,122 7,054 5,914 6,797 5,758
Non-controlling interest 3,119 2,878 3,328 4,219 2,533 1,518 848 465 142
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Total adjusted operating EBITDA 10,894 10,230 11,047 14,500 11,655 8,572 6,762 7,263 5,900
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Amortization expense (5,897) (5,603) (5,059) (4,715) (4,711) (2,925) (2,475) (2,188) (1,745)
Depreciation and related expense (22) (20) (13) (30) (31) (30) (15) (18) (17)
Stock based compensation (968) (781) (906) (525) (297) (290) (264) (261) (1,001)
Acquisition expenses (355) (88) (127) (58) (21) (286) (62) (123) (221)
Impairment of inventory - - - - - - - - (241)
Impairment of intangible assets - - - - - - - - (390)
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Operating income 3,652 3,738 4,946 9,172 6,595 5,041 3,946 4,673 2,285
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Net finance income (expense) 400 (3,571) (1,246) (1,175) (1,381) (2,156) 289 (5,914) (1,013)
Income tax (expense) recovery (604) 453 (397) (1,643) (188) (1,219) (1,205) 1,541 442
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Net and comprehensive income (loss) 3,448 620 3,302 6,354 5,026 1,666 3,030 300 1,714
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Adjusted operating expenses
For the three months ended 2017 2016 2015
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(USD in thousands) Sep Jun Mar Dec Sep Jun Mar Dec Sep
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Anesthesia services - adjusted operating expense 10,362 9,840 9,469 9,492 8,794 6,158 5,323 5,061 4,023
Amortization expense 5,897 5,603 5,056 4,715 4,711 2,925 2,475 2,188 1,745
Depreciation and related expense 2 3 2 1 3 2 2 4 3
Stock based compensation 100 106 149 120 38 27 17 12 13
Acquisition expenses 356 87 127 58 21 286 62 123 221
Impairment of intangible assets - - - - - - - - 390
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Anesthesia services expense 16,718 15,639 14,803 14,386 13,567 9,398 7,879 7,389 6,395
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Product sales - adjusted operating expense 1,094 1,142 1,037 1,083 974 1,004 998 950 888
Amortization expense 1 1 5 - - - - - -
Depreciation and related expense 14 12 8 15 15 15 1 1 1
Stock based compensation 90 76 110 125 90 99 84 81 106
Impairment of inventory - - - - - - - - 241
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Product sales expense 1,199 1,231 1,160 1,223 1,079 1,118 1,083 1,031 1,236
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Corporate - adjusted operating expenses 994 844 985 746 684 853 754 664 798
Amortization expense - - (4) - - - - - -
Depreciation and related expense 6 5 3 14 14 13 13 14 14
Stock based compensation 777 599 647 280 169 164 162 167 882
Acquisition expenses - - - - - - - - -
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Corporate expense 1,776 1,448 1,630 1,040 867 1,030 929 845 1,694
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Total adjusted operating expense 12,451 11,825 11,491 11,321 10,453 8,015 7,075 6,675 5,709
Total operating expense 19,693 18,317 17,593 16,649 15,514 11,546 9,891 9,265 9,325
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Caution Regarding Forward-looking Statements Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. Readers are cautioned regarding statements discussing profitability; growth strategies; anticipated trends in our industry; our future financing plans; our anticipated needs for working capital; and other events or conditions that may occur in the future. Actual events or results may differ materially from those discussed in forward-looking statements. There can be no assurance that the forward-looking statements currently contained in this report will in fact occur. The Company bases its forward-looking statements on information currently available to it, and assumes no obligation to update them. The Company disclaims any intent or obligations to update or revise publicly any forward-looking statements whether as a result of new information, estimates or options, future events or results or otherwise, unless required to do so by law. Forward-looking statements are based on a number of assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors and material assumptions include, among others: our need to raise additional capital to fund future operations; risks related to various restrictive covenants and events of default under our credit facilities; risks associated with incurring substantially more debt, which could further exacerbate the risks associated with increased leverage; the risk of ASCs or other customers terminating or choosing not to renew their agreements; the Centers for Medicare & Medicaid Services ("CMS") may review and reduce the reimbursement of anesthesia procedure codes relevant to GI procedures; the risk of a significant number of our affiliated physicians leaving our affiliated ASCs; the ability to enforce the non-competition and other restrictive covenants in our agreements; risks related to changing regulations or regulatory interpretations; the ability to successfully recruit and retain qualified anesthesiologists or other independent contractors; risks related to failure to manage third-party service providers; the continuing development of our products and provision of our services depends upon us maintaining strong relationships with physicians; the ability to successfully identify and complete corporate transactions on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances, which could result in unforeseen operating difficulties and expenditures or require significant management resources and significant charges; our senior management has been key to our growth, and we may be adversely affected if we lose any member of our senior management; the ability to effectively undertake or manage our growth initiatives; risks associated with the failure to manage growth; patient Protection and Affordable Care Act ("ACA") reform in the United States may have an adverse effect on our business, financial conditions, results of operations and cash flows and the trading price of our securities; changing legislative and regulatory requirements and healthcare spending and pricing pressures may adversely affect our business; the policies of health insurance carriers may affect the amount of revenue the Company receives; risks associated with operating in an industry that is subject to extensive federal, state, and local regulation, and changes in law and regulatory interpretations; competition in our industry; unfavorable changes or conditions could occur in the states where our operations are concentrated; changes in federal or state laws, rules, regulations, or interpretations of such federal or state laws, rules or regulations, which may require the Company to redeem our physician partners' ownership interests in anesthesia companies under the savings clause in our joint venture operating agreements; changes in the United States federal Anti-Kickback Statute and Stark Law and/or similar state laws, rules, and regulations could result in criminal offenses and potential sanctions; the risk that government authorities or other parties may assert that our business practices violate antitrust laws; risks associated with significant price and volume fluctuations of our common shares; risks related to losing our foreign private issuer status under United States federal securities laws; significant shareholders of the Company could influence our business operations and sales of our shares by such significant shareholders could influence our share price; anti-takeover provisions could discourage a third party from making a takeover offer that could be beneficial to our shareholders; continuing unfavorable economic conditions could have an adverse effect on our business; changes in the medical industry and the economy may affect the Company's business; income tax audits and changes in our effective income tax rate could affect our results of operations; our dependence on suppliers could have a material adverse effect on our business, financial condition and results of operations; health and safety risks in our industry; adverse events related to our product or our services may subject us to risks associated with product liability, medical malpractice or other legal claims, insurance, recalls and other liabilities, which may adversely affect our operations; various risks associated with governmental investigations into marketing and other business practices in our industry; the risk of regulatory investigations, claims, lawsuits, and other proceedings; the risk that we are unable to adequately protect or enforce our intellectual property; the Company's ability to successfully market its products and services; risks related to evolving regulation of corporate governance and public disclosure; risks related to criminal or civil sanctions in connection with a failure to comply with privacy regulations regarding the use and disclosure of patient information; the risk that our employees and third-party contractors may not appropriately record or document services that they provide; write-offs of intangible assets; exposure to adverse movements in foreign currency exchange rates; risks associated with the failure of our employees and business partners to appropriately secure and protect confidential information in their possession; dependence on complex information systems; and, conflicts of interest arising among the Company's officers and directors as a result of their involvement with other companies. This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this report and elsewhere. For a complete discussion of the Company's business including the assumptions and risks set out above, see the Company's annual information form which is available on SEDAR at www.sedar.com. SOURCE CRH Medical Corporation |
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Company Codes: Toronto:CRH, AMEX:CRHM |
