CareCloud, Inc. — 2019 Q1 10-Q Summary
Entity identification: The supplied filing is for MTBC, Inc. (formerly Medical Transcription Billing, Corp.), not a registrant named CareCloud, Inc. Verify that this is the intended filing. Results are unaudited for the three months ended March 31, 2019, compared with the three months ended March 31, 2018.
Business context
MTBC provides healthcare technology and services, including revenue cycle management (RCM), electronic health records, and practice management. Its reportable segments are Healthcare IT and Practice Management. The Practice Management business and group purchasing services reflect the July 2018 Orion acquisition. The company reported serving more than 11,000 providers and approximately 1,800 practices and hospitals.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $15.08 million | $8.31 million |
| Operating income (loss) | $(238,000) | $39,000 |
| Net income (loss) | $(296,000) | $75,000 |
| Net loss attributable to common shareholders | $(1.79) million | $(700,000) |
| Basic and diluted loss per common share | $(0.15) | $(0.06) |
| Operating cash flow | $938,000 | $673,000 |
| Adjusted EBITDA (non-GAAP) | $1.58 million | $974,000 |
Revenue increased 82%, including approximately $7.7 million from Orion-related customers. RCM generated $10.56 million; Practice Management generated $2.96 million. Direct operating costs rose 120% to $9.85 million, and GAAP operating margin declined to negative 1.6% from positive 0.5%. Management-reported adjusted operating income was $1.15 million, with adjusted operating margin of 7.6%, versus $739,000 and 8.9% a year earlier.
At March 31, cash was $12.53 million, current assets $23.98 million, and current liabilities $9.47 million; working capital was approximately $14.5 million. Cash declined $1.95 million during the quarter. Investing used $511,000 and financing used $2.59 million, principally for $1.47 million of preferred dividends and $872,000 of employee stock-award tax withholding. No borrowings were outstanding under the $10 million Silicon Valley Bank revolver, which was fully available; the company reported compliance with its covenants. Notes payable totaled approximately $388,000, excluding operating lease liabilities of $4.16 million newly recognized under ASC 842.
Changes, outlook, risks, and unusual items
- Growth was substantially acquisition-related: Orion contributed approximately $7.7 million of Q1 2019 revenue. Direct costs, general and administrative costs, and amortization also rose, largely due to Orion.
- Net loss attributable to common shareholders widened despite positive adjusted EBITDA; preferred stock dividends were $1.49 million, versus $775,000 a year earlier. Stock-based compensation increased to $758,000 from $128,000.
- Management said it was forecasting a return to profitability, but provided no specific revenue, earnings, or cash-flow guidance in the supplied text. Forward-looking results depend on client retention and collections, acquisition integration, offshore operations, regulatory compliance, and access to capital.
- Revenue recognition involves estimates of customer collections, billing rates, claim volumes, and vaccine purchasing activity; changes in estimates could materially affect reported revenue. The contract asset was $2.36 million at quarter-end, including about $600,000 related to group purchasing.
- A New Jersey appellate decision dated April 23, 2019 ruled MTBC was not required to participate in a customer’s arbitration, but left subsidiary MAC subject to arbitration and remanded part of the matter. The claimant seeks $6.6 million; the company said it could not estimate a loss range and expects any loss, if any, to be substantially below the amount claimed.
- On April 3, 2019, MTBC acquired substantially all assets of Etransmedia Technology for $1.6 million cash plus assumed liabilities. Adoption of ASC 842 on January 1, 2019 recognized operating lease assets and liabilities; the filing says adoption did not materially affect results or equity.
- The filing identifies preferred-dividend payment capacity, lender covenant compliance, acquisition integration, customer retention, offshore operating risks, and privacy and regulatory compliance as risks. Management assessed disclosure controls as effective at a reasonable assurance level.
Important facts for investors to verify
- Confirm the intended issuer: this document names MTBC, Inc., not CareCloud, Inc.
- Assess how much growth and profitability depend on Orion and whether acquired operations are being integrated successfully.
- Review preferred-stock dividend obligations and their effect on cash available to common shareholders.
- Monitor operating cash conversion, contract-asset estimates, and the impact of customer collections and revenue assumptions.
- Check subsequent developments in the RPRWC arbitration, Etransmedia acquisition, and compliance with SVB covenants.