23rd Mar 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.
23 March 2016
Constellation Healthcare Technologies, Inc.
("Constellation Healthcare Technologies", "CHT", "Company" or the "Group")
Preliminary Announcement of Final Results for the Year Ended 31st December 2015
Key Performance Indicators
FY- 2015 | FY - 2014 |
| ||||||
REVENUE | +40% | $76.7 | * | $54.6 | * | |||
Income from Operations | +76% | $19.2 | 25% | $10.9 | 20% | |||
Profit Before Tax | +356% | $11.4 | 15% | $2.5 | 5% | |||
EBITDA | +68% | $23.9 | 31% | $14.2 | 26% | |||
RCM Revenue | +76% | $50.1 | 65% | $28.4 | 52% | |||
RCM EBITDA | +115% | $16.1 | 21% | $7.5 | 14% | |||
CASH FROM OPERATIONS | +91% | $15.5 | 20% | $8.1 | 15% | |||
* % of FY15 revenue
All amounts USD$M
Highlights
· Revenue Increased by 40% to $76.7M ($54.6M in 2014)
· Cash from Operations increased by 91% to $15.5M ($8.1M in 2014 )
· 9000+ US Physicians being currently serviced
· RCM business revenue increased by 76% to $50.1M ($28.4M in 2014)
· RCM EBITA increased by 115% to $16.1M ($7.5M in 2014)
· 8.8% organic growth in RCM business
· Appointment of Sir Rodney Aldridge as Non-Executive Director and Sam Zaharis as CFO
· Three successful acquisitions and integration to the CHT platform during the year; Physicians Practice Plus Inc. (PPP), Phoenix Healthcare, LLC ("Phoenix") and Northstar First Health, LLC ("NorthStar")
Paul Parmar, Chief Executive Officer of Constellation Healthcare Technologies, commented, "CHT enjoyed a successful year across all metrics. We increased our revenue base and more importantly, significantly increased our profitability for the year. Our acquisition and integration strategy is proven and we are quickly becoming one of the largest healthcare and technology services businesses in the U.S, serving the billing requirements of 9,000+ doctors."
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 / Harriet Lynch
| +44 (0)20 7382 4730 |
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Stifel Nicholas Europe Limited - Joint Broker Jonathan Senior / Ben Maddison
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Chief Executive's Review
The Company is always evaluating new acquisitions and we spend significant time and resources micro analysing potential deals. The acquisitions we do make must meet very strict and immovable criteria. Only once this is met can we be confident that we can achieve the value accretion we require.
Given the strict criteria for making acquisitions it was very pleasing to complete three accretive transactions in the year. In March, we acquired PPP for a maximum cash consideration of up to $20 million. PPP is a New York-based collection of Revenue Cycle Management businesses for healthcare providers. In September, we also acquired NorthStar for a maximum consideration of $18M and Phoenix for $14M.
NorthStar is a New Jersey based RCM business, and we expect to collect an additional $170m annually from doctors as a result of this acquisition. Phoenix is a New Jersey based group of RCM businesses, which also has a national clearing house operating in the worker's compensation and automobile claims processing vertical for healthcare providers. These complementary businesses added a number of new areas of expertise to CHT.
In December of last year we also returned to the equity market to raise £30m (approximately $45.5m) to fund further acquisitions. This fundraising closed shortly after the New Year and enabled us to acquire MDRX Medical Billing, LLC ("MDRX") in February 2016 for an initial consideration of $28.0 million. MDRX is a US based healthcare service provider primarily operating in the billing practice management and healthcare consulting space. MDRX has a nationwide presence and added approximately 3,500 doctors to the CHT platform. The majority of these doctors are from large sized hospital based groups.
The acquisition of MDRX means that CHT is now working with doctors in new territories, including Alabama, Louisiana, New Mexico and Utah. As a result of this transaction CHT is also now collecting approximately $2 billion annually for physicians across the US. The three acquisitions completed by CHT during the year together with the acquisition of MDRX after the year-end means that the Company now has 9,000+ physicians on its platform in the US.
Following the fundraise and the acquisition of MDRX, CHT has approximately $15.5M in the bank to fund additional acquisitions during 2016. In the meantime this money leaves the group net debt free (excluding deferred consideration) on a proforma basis.
CHT also grew organically and secured a number of new contracts in the year, including four new contracts in April. These four contracts were expected to see CHT collect approximately $136 million in billings annually on behalf of nearly 400 new doctors, resulting in approximately $6 - 7 million in annual revenue and approximately $2 - 3 million in annual EBITA.
Getting M&A right is just one part of the equation. CHT has also focused on getting the right team in place. CHT appointed Sir Rodney Aldridge as a non-executive director in July 2015. Sir Rodney is a shareholder and we believe his experience of acquiring and operating businesses will be invaluable. In addition, Sam Zaharis joined as our President and Chief Financial Officer in July. Sam brings a wealth of operational experience to our business and a proven track record in both M&A and, importantly, the successful integration of those businesses.
Financial Performance
The financial results for 2015 demonstrate that our unique business model is working successfully. CHT's revenues increased by 40.5% to $76.7M compared with the same period last year and EBITA increased by 63.3% from $14.2M in 2014 to $23.9M in 2015. The core Orion business is going from strength to strength and the other acquired businesses (NEMS, PPP, NorthStar, Phoenix and MDRX) are performing well.
Conversion of operating profit into cash flow was robust, demonstrating the cash generative nature of our business model. Cash Generated from operations increased by 91% from $8.1M in 2014 to $15.5M in 2015. Strong cash generation enabled us to invest significantly in capital expenditure. We continue to build efficiencies through better technology including workflow automation, business analytics, business intelligence, automated data transfer tools and the management of operations using various KPI's. The enabling software products, i.e. workflow automation, business intelligence and data extraction tools have reached a significant maturity in terms of their functionalities. We expect very little development and mostly maintenance expense going forward. The quality and cost of our operations, enabled by these proprietary technologies, continues to be superior to our competition and forms a fundamental part of our strategy.
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 to give CHT a competitive edge. Organic growth is also 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 while the number of people who continue to receive healthcare insurance and utilize the system continuously increases. This provides an excellent back drop for CHT to operate in and consolidate the sector in a major way.
Paul Parmar
Chief Executive Officer
Constellation Healthcare Technologies
CONSTELLATION HEALTHCARE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 2015
Consolidated Balance Sheets
December 31, 2015 | December 31, 2014 | |||||
Current assets | ||||||
Cash and cash equivalents | $ 2,516,379 | $ 18,136,336 | ||||
Accounts receivable, net | 15,060,632 | 8,601,001 | ||||
Inventory | 249,433 | 382,745 | ||||
Prepaid expenses and other current assets | 605,744 | 663,644 | ||||
Deferred finance costs | 409,455 | 329,894 | ||||
Deferred tax asset | 252,000 | 252,000 | ||||
Total current assets | 19,093,643 | 28,365,620 | ||||
Property and equipment, net | 9,546,085 | 4,170,363 | ||||
Other long-term assets | ||||||
Intangible assets, excluding goodwill | 35,263,534 | 15,419,629 | ||||
Goodwill | 37,982,340 | 13,722,379 | ||||
Deferred tax asset | 5,596,995 | 4,018,178 | ||||
Deferred finance costs | 307,088 | 577,309 | ||||
Deferred offering costs | 60,202 | - | ||||
Other assets, net | 278,156 | 223,796 | ||||
Total other long-term assets | 79,488,315 | 33,961,291 | ||||
Total assets | $ 108,128,043 | $ 66,497,274 | ||||
Current liabilities | ||||||
Accounts payable | $ 4,496,760 | $ 3,024,679 | ||||
Accrued expenses | 4,423,110 | 1,823,586 | ||||
Income taxes payable | 2,832,298 | 1,271,858 | ||||
Current portion of capital lease obligation | 2,172 | 29,107 | ||||
Current portion of long-term debt | 11,579,428 | 4,631,771 | ||||
Current portion of contingent consideration | - | 638,700 | ||||
Payable to Sellers | 1,967,141 | - | ||||
Total current liabilities | 25,300,909 | 11,419,701 | ||||
Long-term liabilities | ||||||
Long-term debt, net of current portion | 3,342,921 | 16,327,108 | ||||
Contingent consideration | 10,453,631 | - | ||||
Deferred rent liability | 605,149 | 532,349 | ||||
Deferred tax liability | 7,510,042 | 4,156,491 | ||||
Total long-term liabilities | 21,911,743 | 21,015,948 | ||||
Commitments and Contingencies | ||||||
Stockholders' equity (deficit) | ||||||
Common stock, par value $0.0001; 150,000,000 shares authorized at December 31, 2015 and 111,226,912 shares authorized at December 31, 2014; 64,990,623 shares issued and outstanding at December 31, 2015 and 55,615,056 shares issued and outstanding at December 31, 2014. | 6,500 | 5,562 | ||||
Additional paid-in capital | 49,163,637 | 29,488,953 | ||||
Retained earnings | 11,575,405 | 4,567,110 | ||||
Accumulated other comprehensive loss | (79,519) | - | ||||
Total stockholders' equity (deficit) | 60,666,023 | 34,061,625 | ||||
Non-controlling interest in consolidated entity | 249,368 | - | ||||
Total liabilities and stockholders' equity (deficit) | $ 108,128,043 | $ 66,497,274 | ||||
Consolidated Statements of Operations
Year ended | Year ended | |||||
December 31, 2015 | December 31, 2014 | |||||
Revenues | $ 76,735,069 | $ 54,605,827 | ||||
Operating expenses: | ||||||
Salaries and benefits | 21,465,227 | 17,334,464 | ||||
Facility rent and related costs | 3,318,017 | 2,538,546 | ||||
Depreciation | 1,327,392 | 1,363,293 | ||||
Amortization | 3,378,174 | 1,887,247 | ||||
Professional and consulting fees | 15,629,191 | 10,139,620 | ||||
Insurance | 444,081 | 651,211 | ||||
Provision for doubtful accounts | 733,764 | 427,643 | ||||
Vaccines and medical supplies | 4,417,260 | 4,371,464 | ||||
Office and computer supplies | 232,443 | 288,622 | ||||
Postage and courier | 1,807,249 | 1,891,431 | ||||
Other | 4,783,213 | 2,728,127 | ||||
Total operating expenses | 57,536,011 | 43,621,668 | ||||
Income from operations | 19,199,058 | 10,984,159 | ||||
Other income (expenses): | ||||||
Interest expense | (2,579,398) | (3,035,955) | ||||
Change in fair value of contingent consideration | (1,075,899) | - | ||||
Fees paid to debt providers | - | (2,164,089) | ||||
Debt related expenses | - | (3,213,194) | ||||
Other expense, net | (4,192,337) | (44,997) | ||||
Total other income (expenses), net | (7,847,634) | (8,458,235) | ||||
Income before provision for income taxes | 11,351,424 | 2,525,924 | ||||
Provision for income taxes | 4,392,347 | 888,071 | ||||
Net income | $ 6,959,077 | $ 1,637,853 | ||||
Loss from consolidated entity attributable to non-controlling interest | (49,217) | - | ||||
Net Income attributable to the company | 7,008,294 | 1,637,853 | ||||
Other Comprehensive Loss, net of tax | ||||||
Foreign currency translation adjustments | (79,519) | - | ||||
Other Comprehensive Loss | (79,519) | |||||
Comprehensive Income | $ 6,928,775 | $ 1,637,853 | ||||
Income per common shares | ||||||
Basic | ||||||
Common Stock | $ 0.11 | $ 0.45 | ||||
Diluted | ||||||
Common Stock | $ 0.11 | $ 0.45 | ||||
Weighted average number of shares for basic | ||||||
Common Stock | 61,061,591 | 3,657,815 | ||||
Weighted average number of shares for Diluted | ||||||
Common Stock | 61,061,591 | 3,657,815 | ||||
Consolidated Statements of Cash Flows
Year ended | Year ended | ||||||
December 31, 2015 | December 31, 2014 | ||||||
Cash Flow from operating activities: | |||||||
Net Income | $ 6,928,775 | $ 1,637,853 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for doubtful accounts | 733,764 | 427,643 | |||||
Depreciation | 1,327,392 | 1,363,293 | |||||
Amortization | 3,378,174 | 1,887,247 | |||||
Deferred Tax | 1,761,921 | (208,282) | |||||
Provision for taxes | 2,630,426 | 1,096,353 | |||||
Change in fair value of contingent consideration | 1,075,899 | - | |||||
Foreign currency exchange loss | 39,498 | - | |||||
Conversion of PIK interest to principal | - | 54,708 | |||||
Amortization of deferred finance fees | 363,044 | 1,759,984 | |||||
Debt related expenses paid by parent | - | 2,905,000 | |||||
Loss from consolidated entity attributable to non-controlling interest | (49,217) | - | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (5,279,143) | (3,346,577) | |||||
Inventory | 133,314 | (42,755) | |||||
Prepaid expenses and other assets | 57,900 | 632,530 | |||||
Deferred offering cost | (60,202) | - | |||||
Other assets | (54,360) | 624 | |||||
Accounts payable, accrued expenses | 5,895,190 | (12,456) | |||||
Income tax payable | (2,893,572) | - | |||||
Change in fair value of contingent consideration | (537,199) | - | |||||
Other liabilities | - | (97,000) | |||||
Net cash provided by operating activities | 15,451,604 | 8,058,164 | |||||
Cash flows from investing activities | |||||||
Cash outlay for property and equipment | (6,703,114) | (68,662) | |||||
Cash acquired from acquisition | - | 11,900 | |||||
Development of software tool | (3,078,701) | (4,960,714) | |||||
Net deposits to restricted cash | - | 97,000 | |||||
Capital Paid for Acquisition | (34,650,000) | - | |||||
Net cash used in investing activities | (44,431,815) | (4,920,476) | |||||
Cash flows from financing activities | |||||||
Payments of capital lease obligations | (26,935) | (21,174) | |||||
Borrowings on line of credit | - | - | |||||
Payments on line of credit | - | (500,000) | |||||
Payments on long term loan | (6,036,530) | (24,072,889) | |||||
Net proceeds from long term debt | - | 23,000,000 | |||||
Cash outlay for deferred finance costs | (172,384) | (414,541) | |||||
Distribution to parent | - | (4,389,756) | |||||
Dividends paid | (176,390) | - | |||||
Contribution from parent | 1,000,000 | 3,910,350 | |||||
Proceeds from sale of stock, net of related fees | 18,852,012 | 13,466,231 | |||||
Net cash provided by financing activities | 13,439,773 | 10,978,222 | |||||
Effect of exchange rate changes in cash | (79,519) | - | |||||
Net increase in cash and cash equivalents | (15,619,957) | 14,115,910 | |||||
Cash and cash equivalents, beginning of period | 18,136,336 | 4,020,426 | |||||
Cash and cash equivalents, end of period | $ 2,516,379 | $ 18,136,336 | |||||
| Year ended | Year ended | |||||
December 31, 2015 | December 31, 2014 | ||||||
Supplemental Cash Flow Information | |||||||
Cash Paid for interest | $ 2,579,398 | $ 2,931,240 | |||||
Cash Paid for Income Taxes | 1,050,000 | - | |||||
Supplemental Schedule of Non-Cash Investing and Financing Activities | |||||||
Notes payable issued for accrued interest | $ - | $ 162,716 | |||||
YEAR ENDED DECEMBER 31, 2015
Common Stock | ||||||||||||||
Shares | Amount | Paid-in Capital | Retained Earnings | Accumulated other comprehensive loss | Non-controlling interest in consolidated entity | Total | ||||||||
Balances, January 1, 2014 | 1,000 | $ | 1 | $ | 16,214,070 | $ | 2,929,257 | $ | - | $ | - | $ | 19,143,328 | |
Proceeds from sale of stock, net of related fees | 55,614,056 | 5,561 | 13,460,670 | - | - | - | 13,466,231 | |||||||
Distributions to parent | - | - | (4,389,756) | - | - | - | (4,389,756) | |||||||
Contribution from parent | - | - | 3,910,350 | - | - | - | 3,910,350 | |||||||
Deal fees and deferred financing fees paid by parent | - | - | 4,623,315 | - | - | - | 4,623,315 | |||||||
Effect of push down accounting | - | - | (4,329,696) | - | - | - | (4,329,696) | |||||||
Net income for 2014 | - | - | - | 1,637,853 | - | - | 1,637,853 | |||||||
Balances, December 31, 2014 | 55,615,056 | $ | 5,562 | $ | 29,488,953 | $ | 4,567,110 | $ | - | $ | - | $ | 34,061,625 | |
Proceeds from sale of stock, net of related fees | 9,375,567 | $ | 938 | $ | 18,851,074 | $ | - | $ | - | $ | - | $ | 18,852,012 | |
Contribution from parent | - | - | 1,000,000 | - | - | - | 1,000,000 | |||||||
Dividends Paid | - | - | (176,390) | - | - | - | (176,390) | |||||||
Other Comprehensive Loss | - | - | - | - | (79,519) | - | (79,519) | |||||||
Non-controlling interest in consolidated entity | - | - | - | - | - | 298,585 | 298,585 | |||||||
Net income for 2015 | - | - | - | 7,008,295 | - | (49,217) | 6,959,078 | |||||||
Balances, December 31, 2015 | 64,990,623 | $ | 6,500 | $ | 49,163,637 | $ | 11,575,405 | $ | (79,519) | $ | 249,368 | $ | 60,915,391 | |
1. Segment reporting information
Year ended December 31, 2015 | Year ended December 31, 2014 | ||
Revenue Cycle Management | |||
Revenues | $ 50,131,907 | $ 28,425,915 | |
Depreciation, Depletion and Amortization | 3,769,051 | 2,249,960 | |
Operating Income before Depreciation & Amortization | 16,145,524 | 7,549,170 | |
GP & Corporate | |||
Revenues | 7,666,437 | 7,048,604 | |
Depreciation, Depletion and Amortization | 930,444 | 991,481 | |
Operating Income before Depreciation & Amortization | 6,338,577 | 5,179,558 | |
Practice Management: | |||
Revenues | 18,936,725 | 19,131,308 | |
Depreciation, Depletion and Amortization | 6,071 | 9,099 | |
Operating Income before Depreciation & Amortization | 1,420,523 | 1,505,971 |
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 (EBDIT), whereby the EBDIT 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
Year ended December 31, 2015 | Year ended December 31, 2014 | ||
Total Revenues for reportable segments | $ 76,735,069 | $ 54,605,827 | |
Total Consolidated revenues | $ 76,735,069 | $ 54,605,827 | |
Operating profit before depreciation and amortization for reportable segments | $ 23,904,624 | $ 14,234,699 | |
Depreciation & amortization | (4,705,566) | (3,250,540) | |
Interest expense | (2,216,354) | (3,035,955) | |
Contingent consideration adjustment | (1,075,899) | - | |
Fees paid to debt providers | - | (2,164,089) | |
Amortization of deferred finance fees | (363,044) | (3,213,194) | |
Other income (expense), net | (4,192,337) | (44,997) | |
Provision for income taxes | (4,392,347) | (888,071) | |
Net income (loss) | $ 6,959,077 | $ 1,637,853 |
2. Intangible Assets, excluding Goodwill, net
Intangible assets, excluding goodwill, net consist of the following at December 31, 2015 and 2014:
December 31, 2015 | December 31, 2014 | |||
Software tool - work in progress | $ 17,083,401 | $ 7,056,043 | ||
Client relationships | 11,862,138 | 8,380,000 | ||
Management service agreements | 2,000,000 | 2,000,000 | ||
Group Purchasing agreements | 600,000 | 600,000 | ||
Trade Name | 3,349,536 | 220,000 | ||
Non-Compete | 6,598,047 | 15,000 | ||
41,493,122 | 18,271,043 | |||
Less accumulated amortization | (6,229,588) | (2,851,414) | ||
Net amount | $ 35,263,534 | $ 15,419,629 |
Estimated future annual amortization of our identifiable intangible assets is as follows:
Period ending December 31:
Year ended December 31, 2016 | $ 10,256,411 |
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 | 1,396,668 |
Total | $ 35,263,534 |
Related Shares:
CHT.L