2nd Sep 2016 07:00
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF Article 7 of EU Regulation 596/2014.
2 September 2016
Constellation Healthcare Technologies, Inc.
("Constellation Healthcare Technologies", "CHT", "Company" or the "Group")
Interim Results for the Six Months Ended 30th June 2016
Key Performance Indicators
Interim 2016 | Interim 2015 | FY- 2015 | |||||||
REVENUE | +78% | $57.0 | * | $32.0 | * | $76.7 | * | ||
Income from Operations | +92% | $14.5 | 25% | $7.6 | 24% | $19.2 | 25% | ||
Profit Before Tax | +267% | $15.4 | 27% | $4.2 | 13% | $11.4 | 15% | ||
EBITDA | +121% | $21.1 | 37% | $9.6 | 30% | $23.9 | 31% | ||
RCM Revenue | +110% | $43.6 | 76% | $20.7 | 65% | $50.1 | 65% | ||
RCM EBITDA | +139% | $16.8 | 29% | $7.0 | 22% | $16.1 | 21% | ||
CASH FROM OPERATIONS | +160% | $10.9 | 19% | $4.2 | 13% | $15.5 | 20% | ||
* % of revenue
All amounts USD$M
Highlights
· Revenue Increased by 78% to $57.0M ($32.0M in 2015)
· 22% organic growth in the RCM business
· Cash from Operations increased by 19% to $10.9M ($4.2M in 2015)
· Debt facility paid down in full from internal cash generation
· 10,000+ US Physicians currently being serviced
· RCM business revenue increased by 110% to $43.6M ($20.7M in 2015)
· RCM EBITDA increased by 139% to $16.8M ($7.0M in 2015)
· Successful acquisition and integration of MDRX Medical Billing
· Further strengthening of the board with the appointment of Dr. Shawn Zimberg
Paul Parmar, Chief Executive of Constellation Healthcare Technologies, commented, "CHT has built a robust platform based on its efficient RCM processes and technologies. Coupled with a tried, tested and matured methodology of integrating and transitioning new clients and new business onto this highly scalable platform, this platform and experience allows CHT to rapid growth.
We are now starting to see the benefits of this investment as evidenced by the 78% increase in revenues with 22% of the revenue coming from organic growth and very strong cash generated from operations as evidenced by a 160% increase as compared to the same period last year. We strongly believe that our platform and our integration methodology along with the experience we have gained, uniquely places us to grow the business rapidly through organic growth and M&A.
At this point in time we feel very confident having delivered above expectations for the first half of 2016, that we will meet the markets guidance on revenue as well as profits for the full year 2016.
Enquiries:
Constellation Healthcare Technologies Paul Parmar, Chief Executive Officer / Sotirios 'Sam' Zaharis, Chief Financial Officer | c/o Redleaf Communications +44 (0)20 7382 4730 |
Redleaf Communications - PR adviser Charlie Geller / Sam Modlin | +44 (0)20 7382 4730 |
finnCap - Nominated Adviser and Joint Broker Julian Blunt / Scott Mathieson - corporate finance Simon Johnson - corporate broking | +44 (0)20 7220 0568 |
Stifel Nicholas Europe Limited - Joint Broker Jonathan Senior / Ben Maddison | +44 (0)20 7710 7600 |
Chief Executive's Review
2016 started with the closing of the MDRX transaction. The planning both around the acquisition itself and post-acquisition has paid off well. The integration of the business into the CHT platform has been seamless, both from the perspective of the customer and technology interface. The Company has also been focused on building a pipeline of future M&A opportunities to grow the Company and Shareholder value. When analysing a potential acquisition opportunity a lot of time goes into what happens post acquisition. This, I believe, is a key factor in the success of our M&A strategy. Importantly, CHT has never been reliant only on M&A for its growth and I am glad to report that the Company continues to win clients organically with 15 new clients won in H1 2016.
With a focus on optimising our capital structure, I was pleased to report to the market earlier in the year that we had paid off our debt facility in its entirety from internal cash generation. This would save the Company approximately $1.4M in interest expense on a yearly basis and the savings can be utilised in our M&A programme which yields a far greater return to stakeholders.
Earlier in the year we appointed Dr Shawn Zimberg to our Board of Directors. Dr. Zimberg brings with him a wealth of experience especially on the business side of the US healthcare industry and his insight has already been valuable to us when analysing M&A targets. We will be adding more U.S. based director's to complement our business later in the year.
The U.S. healthcare system is going through tremendous change at the moment. This provides a company like CHT significant opportunities, especially in an environment where there is significant cost pressure as well as new rules based changes. Both Physicians and their practices and hospitals need a partner like CHT to allow them to significantly cut costs and make their business more efficient, ultimately benefiting the patient.
Financial Performance
The CHT business continues to outperform with each one of our business segments showing robust growth in revenue and earnings over the course of the year. We anticipate that this will continue throughout the year. The business is very strong and whilst maintaining organic growth, it can easily be scaled with new acquisitions which will further cement our earnings for the coming years.
Our first half revenues increased by 78% from the same period last year and income from operations increased by 92% to $57M and our Income from Operations was up by 92% to $14.5M. CHT's EBITDA increased by a staggering 121% to $21.1M vs the same period in 2015. Our EBITDA margins have also increased by 7% to 37% based on the same period last year. Finally, cash from operations increased by 160% to $10.9.0M.
Strategy
CHT is focused on acquiring healthcare service businesses across the U.S. and improving revenue generation and profitability by utilizing CHT's proprietary technology. This is coupled with our efficient processing operation giving CHT a competitive edge. This acquisition strategy is complemented with the organic growth, which is a key driver going forward. CHT continues to increase the number of doctors using its platform and as of December 2015, it has over 10,000 independent practicing and hospital/contracting Physicians groups using its various service offerings. We expect that number will continue to grow this year and next.
Outlook
The U.S. healthcare system remains complex and is likely to continue to evolve to cater for the ever changing demographic as well as the newly insured, while containing costs at each level. CHT is well placed to take advantage of this new paradigm. The next few years remain exciting for our business as we build a truly scaled healthcare technology platform.
Paul Parmar
Chief Executive Officer
Constellation Healthcare Technologies
Constellation Healthcare Technologies, Inc. and Subsidiaries
Consolidated Balance Sheet
June 30, 2016 | June 30, 2015 | |||||
Current assets | ||||||
Cash and cash equivalents | $ 21,901,330 | $ 16,812,125 | ||||
Accounts receivable, net | 22,522,077 | 10,918,116 | ||||
Inventory | 262,868 | 231,002 | ||||
Prepaid expenses and other current assets | 621,898 | 873,974 | ||||
Deferred tax asset | 252,000 | 252,000 | ||||
Total current assets | 45,560,173 | 29,087,217 | ||||
Property and equipment, net | 9,195,254 | 9,713,553 | ||||
Other long-term assets | ||||||
Intangible assets, excluding goodwill | 30,135,334 | 26,158,611 | ||||
Goodwill | 68,949,211 | 17,643,127 | ||||
Deferred tax asset | 4,610,011 | 3,816,630 | ||||
Other assets, net | 291,334 | 205,136 | ||||
Total other long-term assets | 103,985,890 | 47,823,504 | ||||
Total assets | $ 158,741,317 | $ 86,624,274 | ||||
Current liabilities | ||||||
Accounts payable | $ 6,156,568 | $ 4,163,003 | ||||
Accrued expenses | 3,694,203 | 2,019,152 | ||||
Income taxes payable | 5,872,756 | 1,907,646 | ||||
Current portion of capital lease obligation | 552 | 15,198 | ||||
Current portion of long-term debt | 4,836,376 | 4,828,367 | ||||
Current portion of contingent consideration | 2,713,733 | - | ||||
Payable to related party | 800,000 | - | ||||
Payable to Sellers | 1,346,881 | - | ||||
Total current liabilities | 25,421,069 | 12,933,366 | ||||
Long-term liabilities | ||||||
Long-term debt, net of current portion | 7,516,447 | 12,137,754 | ||||
Contingent consideration | 5,574,124 | 884,412 | ||||
Deferred rent liability | 637,427 | 493,282 | ||||
Deferred tax liability | 7,541,322 | 4,086,029 | ||||
Total long-term liabilities | 21,269,320 | 17,601,477 | ||||
Commitments and Contingencies | ||||||
Stockholders' equity (deficit) | ||||||
Common stock, par value $0.0001; 150,000,000 shares authorized at June 30, 2016 and 111,226,912 shares authorized at June 30, 2015; 83,829,435 shares issued and outstanding at June 30, 2016 and 64,990,623 shares issued and outstanding at June 30, 2015. | 8,384 | 6,500 | ||||
Additional paid-in capital | 91,333,963 | 49,163,636 | ||||
Retained earnings | 20,730,019 | 6,919,295 | ||||
Accumulated other comprehensive loss | (126,426) | - | ||||
Total stockholders' equity | 111,945,940 | 56,089,431 | ||||
Non-controlling interest in consolidated entity | 104,988 | - | ||||
Total liabilities and stockholders' equity | $ 158,741,317 | $ 86,624,274 | ||||
Constellation Healthcare Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
Six months ended | Six months ended | |||||
June 30, 2016 | June 30, 2015 | |||||
Net revenues | $ 56,990,373 | $ 31,991,628 | ||||
Operating expenses: | ||||||
Salaries and benefits | 18,584,944 | 9,934,320 | ||||
Facility rent and related costs | 1,990,286 | 1,468,338 | ||||
Depreciation | 1,457,093 | 653,572 | ||||
Amortization | 5,128,200 | 1,338,551 | ||||
Professional and consulting fees | 8,494,722 | 6,085,660 | ||||
Insurance | 370,386 | 199,399 | ||||
Provision for doubtful accounts | 327,352 | 207,417 | ||||
Vaccines and medical supplies | 2,095,383 | 1,946,348 | ||||
Office and computer supplies | 182,228 | 109,065 | ||||
Postage and courier | 978,342 | 922,127 | ||||
Other | 2,893,252 | 1,566,941 | ||||
Total operating expenses | 42,502,188 | 24,431,738 | ||||
Income from operations | 14,488,185 | 7,559,890 | ||||
Other income (expenses): | ||||||
Interest expense | (994,590) | (1,375,865) | ||||
Change in fair value of contingent consideration | 2,115,774 | - | ||||
Other expense, net | (247,805) | (2,014,967) | ||||
Total other income (expenses), net | 873,379 | (3,390,832) | ||||
Income before provision for income taxes | 15,361,564 | 4,169,058 | ||||
Provision for income taxes | 6,351,330 | 1,816,874 | ||||
Net income | $ 9,010,234 | $ 2,352,184 | ||||
Loss from consolidated entity attributable to non-controlling interest | (144,380) | - | ||||
Net Income attributable to the company | 9,154,614 | 2,352,184 | ||||
Other Comprehensive gain, net of tax | ||||||
Foreign currency translation adjustments | (46,907) | - | ||||
Other Comprehensive gain | (46,907) | |||||
Comprehensive Income | $ 9,107,707 | $ 2,352,184 | ||||
Income per common shares | ||||||
Basic | ||||||
Common Stock | $ 0.11 | $ 0.04 | ||||
Diluted | ||||||
Common Stock | $ 0.11 | $ 0.04 | ||||
Weighted average number of shares for basic | ||||||
Common Stock | 83,330,704 | 57,066,420 | ||||
Weighted average number of shares for Diluted | ||||||
Common Stock | 83,330,704 | 57,066,420 | ||||
Constellation Healthcare Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended | Six months ended | ||||||
June 30, 2016 | June 30, 2015 | ||||||
Cash Flow from operating activities: | |||||||
Net Income | $ 9,750,755 | $ 2,352,184 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for doubtful accounts | 327,352 | 207,417 | |||||
Depreciation | 1,457,093 | 653,572 | |||||
Amortization | 5,128,200 | 1,338,551 | |||||
Deferred Tax | 1,018,264 | 131,086 | |||||
Change in fair value of contingent consideration | (2,115,774) | - | |||||
Amortization of deferred finance fees | 170,605 | 164,947 | |||||
Foreign currency exchange loss | (46,907) | - | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (8,372,253) | (2,524,532) | |||||
Inventory | (13,435) | 151,742 | |||||
Prepaid expenses and other assets | (16,153) | (210,332) | |||||
Deferred offering cost | - | ||||||
Other assets | (13,178) | 28,376 | |||||
Accounts payable, accrued expenses | 1,371,055 | 181,018 | |||||
Income tax payable | 3,040,458 | 1,685,788 | |||||
Other liabilities | - | - | |||||
Net cash provided by operating activities | 10,945,561 | 4,159,816 | |||||
Cash flows from investing activities | |||||||
Cash outlay for property and equipment | (273,132) | (6,196,762) | |||||
Development of software tool | - | (2,409,584) | |||||
Cash Paid for Acquisition | (31,800,000) | (12,800,000) | |||||
Net cash used in investing activities | (32,073,132) | (21,406,346) | |||||
Cash flows from financing activities | |||||||
Payments of capital lease obligations | (1,620) | (13,909) | |||||
Payments on long term loan | (2,431,465) | (3,739,395) | |||||
Payments on acquisition note payable | (36,805) | - | |||||
Loan from related party | 800,000 | - | |||||
Contribution from parent | - | 1,000,000 | |||||
Proceeds from sale of stock, net of related fees | 42,182,412 | 18,675,622 | |||||
Net cash provided by financing activities | 40,512,522 | 15,922,318 | |||||
Net increase/(decrease) in cash and cash equivalents | 19,384,951 | (1,324,212) | |||||
Cash and cash equivalents, beginning of period | 2,516,379 | 18,136,336 | |||||
Cash and cash equivalents, end of period | $ 21,901,330 | $ 16,812,125 | |||||
Supplemental Cash Flow Information | |||||||
Cash Paid for interest | $ 823,985 | $ 1,210,918 | |||||
Cash Paid for Income Taxes | $ 2,240,354 | $ 1,050,000 | |||||
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 2016
Common Stock | ||||||||||||||
Shares | Amount | Paid-in Capital | Retained Earnings | Accumulated other comprehensive loss | Non-controlling interest in consolidated entity | Total | ||||||||
Balances, January 1, 2015 |
55,615,056 | $ | 5,562 | $ | 29,488,952 | $ | 4,567,111 | $ | - | $ | - | $ | 34,061,625 | |
Proceeds from sale of stock, net of related fees | 9,375,567 | 938 | 18,674,684 | - | - | - | 18,675,622 | |||||||
Contribution from parent | - | - | 1,000,000 | - | - | - | 1,000,000 | |||||||
Net income for the period ended June 30, 2015 | - | - | - | 2,352,184 | - | - | 2,352,184 | |||||||
Balances, June 30, 2015 | 64,990,623 | $ | 6,500 | $ | 49,163,637 | $ | 6,919,295 | $ | - | $ | - | $ | 56,089,431 | |
Balances, January 1, 2016 | 64,990,623 | $ | 6,500 | $ | 49,163,637 | $ | 11,575,405 | $ | (79,519) | $ | 249,368 | $ | 60,915,391 | |
Proceeds from sale of stock, net of related fees | 18,814,962 | 1,881 | 42,120,329 | - | - | - | 42,122,210 | |||||||
Shares issued towards NEMS contingent consideration | 23,850 | 3 | 49,997 | - | - | - |
50,000 | |||||||
Other Comprehensive Loss | - | - | - | - | (46,907) | - | (46,907) | |||||||
Non-controlling interest in consolidated entity | - | - | - | - | - | (144,380) | (144,380) | |||||||
Net income for the period ended June 30, 2016 | - | - | - | 9,154,614 | - | - | 9,154,614 | |||||||
Balances, June 30, 2016 | 83,829,435 | $ | 8,384 | $ | 91,333,963 | $ | 20,730,019 | $ | (126,426) | $ | 104,988 | $ | 112,050,929 | |
1. Segment reporting information
Six months ended June 30, 2016 | Six months ended June 30, 2015 | ||
Revenue Cycle Management | |||
Revenues | $ 43,552,541 | $ 20,738,066 | |
Depreciation and amortization | 5,506,518 | 1,973,763 | |
Operating income before depreciation and amortization | 16,778,130 | 7,030,222 | |
GP & Corporate | |||
Revenues | 4,417,982 | 2,445,129 | |
Depreciation and amortization | 1,077,032 | 15,299 | |
Operating income before depreciation and amortization | 3,473,914 | 1,895,069 | |
Practice Management: | |||
Revenues | 9,019,850 | 8,808,433 | |
Depreciation and amortization | 1,743 | 3,061 | |
Operating income before depreciation and amortization | 821,434 | 626,723 |
Corporate expenses that are incurred for the Company's general administration have not been apportioned to other business segments. These costs are grouped under General Purchasing and Corporate segment
The operating segments are identified and reported on the basis of internal reports about components of the group that are regularly reviewed by the Management Board to assess the performance of the segments.
The group's internal management reporting is structured primarily on the basis of the market segments in which the 3 operating segments - Revenue Cycle Management, Practice Management and General Purchasing (GP) & Corporate - operate.
Management assesses the performance of segments based on the measures of revenue and earnings before depreciation, interest and taxes (EBITDA), whereby the EBITDA measure includes allocations of expenses from supporting functions within the group.
Company runs shared services for each of its three segments. All resources, who form part of general management & administration, HR, finance and accounting, IT, call center are part of shared services that are used by one or more segments and have been included in the reallocation.
Such allocations have been determined by the best management estimates based on number of resources served, volume of transactions processed and or relevant measures that reflect the level of benefits of these functions to each of the operating segments. As the 3 operating segments serve only external customers, there is no inter-segment revenue. Interest income and expenses and tax are not allocated to the segments. There is no measure of segment (non-current) assets and/or liabilities provided to the Management Board.
.
Reconciliation of reportable segment revenues and profit to the consolidated totals
Six months ended June 30, 2016 | Six months ended June 30, 2015 | ||
Total Revenues for reportable segments | $ 56,990,373 | $ 31,991,628 | |
Total Consolidated revenues | 56,990,373 | 31,991,628 | |
EBITDA for reportable segments | $ 21,073,478 | $ 9,552,013 | |
Depreciation & amortization | (6,585,293) | (1,992,123) | |
Interest expense | (994,590) | (1,375,865) | |
Change in fair value of contingent consideration | 2,115,774 | ||
Other income (expense), net | (247,805) | (2,014,967) | |
Provision for income taxes | (5,610,809) | (1,816,874) | |
Net income | $ 9,750,755 | $ 2,352,184 |
2. Intangible Assets, excluding Goodwill, net
Intangible assets, excluding goodwill, net consist of the following at June 30, 2016 and 2015:
June 30, 2016 | June 30, 2015 | |||
Software tool - work in progress | $ 17,083,401 | $ 14,608,919 | ||
Client relationships | 11,862,138 | 11,673,787 | ||
Management service agreements | 2,000,000 | 2,000,000 | ||
Group Purchasing agreements | 600,000 | 600,000 | ||
Trade Name | 3,349,536 | 1,450,869 | ||
Non-Compete | 6,598,047 | 15,000 | ||
41,493,122 | 30,348,575 | |||
Less accumulated amortization | (11,357,788) | (4,189,964) | ||
Net amount | $ 30,135,334 | $ 26,158,611 |
Estimated future annual amortization of our identifiable intangible assets is as follows:
Period ending:
Six months ended December 31, 2016 | $ 5,128,206 |
Year ended December 31, 2017 | 10,256,411 |
Year ended December 31, 2018 | 9,242,392 |
Year ended December 31, 2019 | 2,754,694 |
Year ended December 31, 2020 | 1,356,958 |
Thereafter | 1,396,673 |
Total | $ 30,135,334 |
Related Shares:
CHT.L