Carecloud, Inc. — 10-K summary
Issuer identity: The supplied filing identifies the registrant as MTBC, Inc. (formerly Medical Transcription Billing, Corp.), not CareCloud, Inc. It reports fiscal year ended December 31, 2018; quarterly figures below are for Q4 2018.
Business context and reporting period
MTBC provides healthcare revenue-cycle management (RCM), web-based practice-management and EHR software, mobile health tools, group-purchasing services, and administrative management of medical practices. It reported serving approximately 10,000 providers and 1,800 practices at year-end. Its operating model relies substantially on staff in Pakistan and Sri Lanka.
In July 2018, MTBC acquired substantially all of Orion Healthcorp’s RCM, practice-management, and group-purchasing assets for $12.6 million in cash. Orion contributed approximately $17.8 million of 2018 revenue. The company changed its legal name to MTBC, Inc. in February 2019.
Financial performance and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $50.5 million | $31.8 million |
| Operating loss | $2.5 million | $4.5 million |
| Net loss | $2.1 million | $5.6 million |
| Net loss attributable to common shareholders | $7.0 million | $7.6 million |
| Basic and diluted loss per share | $0.59 | $0.69 |
| Adjusted EBITDA, non-GAAP | $4.8 million | $2.3 million |
| Cash provided by operating activities | $6.8 million | $0.3 million |
For Q4 2018, revenue was $16.5 million versus $8.3 million in Q4 2017; net loss was $576,000 versus $184,000, and adjusted EBITDA was $1.4 million versus $1.5 million. Quarterly adjusted EBITDA is a non-GAAP measure.
Annual revenue increased 59%, primarily reflecting Orion and other acquired businesses. Direct operating costs rose 77% and were 61.8% of revenue, compared with 55.6% in 2017; the company remained loss-making under GAAP. FY 2018 revenue included $38.6 million from RCM, $6.5 million from practice management, and $655,000 from group purchasing.
At December 31, 2018, cash was $14.5 million, working capital was positive $17.9 million, total assets were $47.6 million, and total liabilities were $8.8 million. There were no borrowings on the $10 million Silicon Valley Bank revolving facility. Notes payable were approximately $500,000. Operating cash flow was positive, while investing cash outflow was $13.6 million, largely due to Orion; financing cash inflow was $17.7 million, including $22.8 million of net preferred-stock proceeds. Preferred-stock dividends declared in 2018 were $4.8 million.
Material changes versus the prior comparable period
- Orion expanded the company’s customer base and added practice-management and group-purchasing operations; the acquisition materially increased revenue and operating costs.
- Annual net loss narrowed to $2.1 million from $5.6 million, while operating loss narrowed to $2.5 million from $4.5 million. Adjusted EBITDA rose to $4.8 million from $2.3 million.
- Operating cash flow improved to $6.8 million from $282,000. Year-end cash rose to $14.5 million from $4.4 million, and the company ended both years with no bank borrowings.
- The company issued 1.02 million preferred shares in 2018, raising approximately $22.8 million net. Preferred dividends increased to $4.8 million from $2.0 million, substantially affecting the loss attributable to common shareholders.
- Customer renewal rates were 89% in 2018 versus 90% in 2017; among customers using MTBC’s EHR, renewal was 91% versus 98%.
Outlook, risks, contingencies, and unusual items
- Management provided no specific revenue or earnings guidance. It stated that forecasts indicated sufficient liquidity to meet obligations for the next 12 months and described a focus on profitability through revenue growth and expense management.
- Key risks include integrating Orion and retaining acquired clients, competitive and pricing pressure, and dependence on revenue tied to customer collections. Political, infrastructure, regulatory, and currency disruptions in Pakistan or Sri Lanka could impair the cost advantage and service delivery.
- The business handles sensitive health information and faces HIPAA, privacy, cybersecurity, service-disruption, and healthcare-regulatory risks. Management reported effective disclosure controls and internal control over financial reporting, but Orion was excluded from management’s internal-control assessment; the auditor did not attest to internal-control effectiveness.
- A New Jersey arbitration dispute involving an acquired business remained stayed pending MTBC’s appeal, with oral arguments held in January 2019. Management stated it did not believe the matter would have a material adverse effect.
- ASC 606 adoption increased opening retained earnings by approximately $1.4 million and created a contract asset; year-end contract assets were $2.6 million and depended partly on estimates of future collections and purchasing volumes. Management reported no goodwill impairment in 2018.
- The company had a full valuation allowance against deferred tax assets. It also expected adoption of the new lease standard in 2019 to materially increase reported assets and liabilities, but not materially affect earnings or cash flows.
Important facts for investors to verify
- Confirm issuer identity: this source is MTBC, Inc.’s 10-K, not a CareCloud filing.
- Assess Orion’s post-acquisition client retention, integration costs, and contribution to recurring revenue and margins.
- Review the quality and sustainability of positive operating cash flow, especially changes in receivables, contract assets, and payables.
- Evaluate the 11% cumulative preferred stock’s dividend burden, cash requirements, and any lender restrictions; common-stock dividends were not anticipated.
- Check compliance with SVB’s adjusted-EBITDA and minimum-liquidity covenants, and track the pending arbitration and material cybersecurity or regulatory developments.