VANCOUVER, April 26, 2017 /PRNewswire/ - CRH Medical Corporation (TSX: CRH) (NYSE MKT: CRHM) (the “Company”), today announced its financial results for the quarter ended March 31, 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 ended March 31, 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
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 March 31, | ||||
2017 | 2016 | Change | ||
Anesthesia services revenue | 19,762,432 | 11,436,741 | 73% | |
Product revenue | 2,776,315 | 2,400,110 | 16% | |
Total revenue | 22,538,747 | 13,836,851 | 63% | |
Operating expenses adjusted 1 | ||||
Anesthesia services | 9,469,424 | 5,322,845 | 78% | |
Product | 1,036,979 | 998,234 | 4% | |
Corporate | 984,535 | 753,551 | 31% | |
Total operating expenses adjusted1 | 11,490,938 | 7,074,630 | 62% | |
Total adjusted operating EBITDA1 | 11,047,809 | 6,762,221 | 63% | |
Shareholders of the Company | 7,719,307 | 5,913,778 | 31% | |
Non-controlling interest2 | 3,328,502 | 848,443 | 292% | |
1 | Non-IFRS measure. Please refer to page 5 of this document for a reconciliation of reported results to non-IFRS measures. |
2 | Non-controlling interest reflects the ownership interest of persons holding non-controlling interests in non-wholly owned subsidiaries of the Company. |
Edward Wright, Chief Executive Officer of CRH, commented, “I am very pleased with the financial and operational success shown by our first quarter results. Financially we grew both total revenue and total adjusted operating EBITDA by 63% compared to the first quarter of last year. Operationally we completed two acquisitions and announced our first MAC development program.” Mr. Wright continued, “While acquiring less than 100% of an anesthesia business will obviously create more rapid increases to non-controlling interests versus purchasing the entire business, our joint venture strategy does significantly increase our opportunities for accretive acquisitions. As a result, our acquisition pipeline remains strong and we are confident in our ability to deliver on our growth strategy.”
Results of Operations Three Months Ended March 31, 2017
Revenues for the quarter ended March 31, 2017 were $22,538,747 compared to $13,836,851 for the quarter ended March 31, 2016. The increase is mainly attributable to revenue contributions from the anesthesia businesses acquired by the Company in the second quarter of 2016, in addition to the acquisitions completed in February and March of 2017.
Revenues from anesthesia services for the quarter ended March 31, 2017 were $19,762,432 compared to $11,436,741 for the first quarter of 2016. The increase was due to the Company’s anesthesia acquisitions throughout 2016 and 2017. The Company expects revenue from anesthesia services to continue to increase through organic growth in patient cases and deployment of available capital for future acquisitions.
During the three months ended March 31, 2017 there were no material changes in anesthesia reimbursement rates. However, there was a change in the payor mix in our GAA business as a result of the annual renewal process that insured individuals and companies go through when selecting their plans and providers. Changes in payor mix are normal, especially due to the competitive nature of the renewal process and such changes can have either a positive or negative impact, or no impact at all on our business.
With respect to GAA, the average revenue per case declined by 12% compared to the first quarter of 2016, which was partially offset by an increase in patient cases of 8%. The payor mix changes at GAA relate to a single commercial payor. Any future payor mix changes related to this payor will not be material. There were no material payor mix changes in any of our other anesthesia entities. The Company’s continued expansion of its anesthesia business has and is expected, in future, to mitigate the effect these kinds of changes in payor mix can have on our financial results.
In the quarter ended March 31, 2017, the anesthesia services segment serviced 42,363 patient cases compared to 24,440 patient cases during the quarter ended March 31, 2016.
Revenues from product sales for the quarter ended March 31, 2017 were $2,776,315 compared to $2,400,110 for the first 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.
As of March 31, 2017, the Company has trained 2,490 physicians to use the O’Regan System, representing 963 clinical practices. This compares to 2,240 physicians trained, representing 842 clinical practices, as of March 31, 2016.
For the quarter ended March 31, 2017, total adjusted operating expenses were $11,490,938 compared to $7,074,630 for the quarter ended March 31, 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 March 31, 2017 were $9,469,424, compared to $5,322,845 for the first quarter of 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 further acquisitions completed in 2015, 2016 and 2017. As a result, 2017 is not directly comparable to 2016, with the majority of the increase relating to operating expenses for acquired companies.
Product sales adjusted operating expenses for the quarter ended March 31, 2017 were $1,036,979 compared to $998,234 for the quarter ended March 31, 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.
Corporate adjusted operating expenses for the quarter ended March 31, 2017 were $984,535 compared to $753,551 for the quarter ended March 31, 2016. The increase in corporate adjusted operating expenses from 2016 is primarily due to higher professional fees and employee-related costs, and, in general, is reflective of the increasing complexity of our business, which is increasing our compliance costs.
Adjusted operating EBITDA attributable to shareholders of the Company for the quarter ended March 31, 2017 was $7,719,307, an increase of $1,805,529 from the quarter ended March 31, 2016. The increase in adjusted operating EBITDA attributable to shareholders is primarily a reflection of the adjusted operating EBITDA contribution from the Company’s anesthesia services providers acquired in 2016 and most recently in 2017.
Adjusted operating EBITDA attributable to non-controlling interest was $3,328,502 for the quarter ended March 31, 2017. This comprises the non-controlling interests’ share of revenues of $5,574,370 and adjusted operating expenses of $2,245,868.
Total adjusted operating EBITDA was $11,047,809 for the quarter ended March 31, 2017, an increase of $4,285,588 from the same period in 2016.
At March 31, 2017, the Company had $9,232,240 in cash and cash equivalents compared to $9,507,004 at the end of 2016. The decrease in cash and equivalents is primarily a reflection of cash generated from operations, less cash used to finance acquisitions during the first quarter of 2017.
Working capital was $9,859,625 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.
Conference Call
CRH will host a conference call to discuss its results on Thursday, April 27, 2017, at 11:00 am EST (08:00 am PST). To participate in the conference, please dial 1-800-319-4610, or 1-604-638-5340.
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 1307. The replay will be available until May 11, 2017.
About CRH Medical Corporation
CRH Medical Corporation is a North American company focused on providing gastroenterologists throughout the United States with innovative services and products for the treatment of gastrointestinal diseases. The CRH O’Regan System is a single-use, disposable, hemorrhoid banding technology that is safe and highly effective in treating all grades of hemorrhoids. CRH distributes the O’Regan System, treatment protocols, operational and marketing expertise as a complete, turnkey package directly to gastroenterology practices, creating meaningful relationships with the gastroenterologists it serves. CRH’s O’Regan System is currently used in all 48 lower US states. In 2014, CRH acquired Gastroenterology Anesthesia Associates, LLC (“GAA”), a full-service gastroenterology anesthesia company that provides anesthesia services for patients undergoing endoscopic procedures. Since then, CRH has incorporated ten additional acquisitions to its anesthesia business. CRH Anesthesia now services 27 ambulatory surgical centers in seven states and performs approximately 185,000 procedures annually.
Non-IFRS Measures
This document makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analyses of the Company’s financial information reported under IFRS.
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