Business context and reporting period
This is Medical Transcription Billing, Corp.’s (MTBC) Form 10-K for the fiscal year ended December 31, 2017—not a CareCloud, Inc. filing. The filing describes a healthcare IT and revenue-cycle-management company serving providers through its PracticePro platform and related services. It reports approximately 980 customers, including about 750 medical practices representing 3,500 providers. Most revenue is tied to customer collections. Acquisitions, particularly the 2016 MediGain transaction, materially shaped the year’s results.
Financial performance and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $31.8 million | $24.5 million |
| Operating loss | $4.5 million | $7.9 million |
| Net loss | $5.6 million | $8.8 million |
| Net loss attributable to common shareholders | $7.6 million | $9.5 million |
| Basic and diluted loss per common share | $0.69 | $0.95 |
| Adjusted EBITDA (non-GAAP) | $2.3 million | $(0.6) million |
| Cash from operations | $0.3 million | $(0.9) million |
Revenue grew 30%. GAAP operating margin improved to approximately -14.2% from -32.3%; net loss margin was approximately -17.5%. Adjusted operating income was $1.3 million, a 4.1% margin, versus an adjusted operating loss of $1.3 million, or -5.4%, in 2016. These adjusted measures are non-GAAP and exclude specified items.
At December 31, 2017, cash was $4.4 million and working capital was positive $4.6 million, compared with a $7.4 million working-capital deficit a year earlier. The company had no borrowings on its $5 million Silicon Valley Bank revolving facility; it reported approximately $0.3 million of notes payable and other obligations. Total liabilities were $5.3 million. Investing activities used $0.9 million; financing activities provided $1.8 million. Fourth-quarter revenue was $8.3 million, net loss $0.2 million, and management reported $1.6 million of operating cash flow.
Material changes versus the prior comparable period
- Revenue increased $7.3 million, including $17.0 million from customers acquired in 2016 and $0.3 million from the 2017 Washington Medical Billing acquisition; customer attrition partly offset acquisition revenue.
- Management cited MediGain integration and cost reductions—including facility closures, elimination of duplicate functions, and shifting work offshore—as contributors to improved operating results and liquidity.
- Interest expense rose to $1.3 million from $0.7 million, including a $0.5 million write-off of deferred financing costs when the Opus facility was terminated. Other income included foreign-exchange gains and $59,000 received in settlement of an acquisition-related dispute.
- The company raised $18.4 million net through common- and preferred-stock financings, repaid the Opus facility and a $5 million Prudential obligation, and replaced its bank facility with the $5 million SVB line. Preferred stock outstanding increased to approximately 1.09 million shares.
- Customer renewal rate improved to 90% from 85%; median days in accounts receivable rose to 37 from 33 for primary care and 41 from 40 for combined specialties. First-pass acceptance and resolution rates were approximately 96% and 94% in both years.
Outlook, risks, contingencies and unusual items
Management said it expects sufficient liquidity to meet obligations for the next 12 months and is focused on revenue growth, expense control, and returning to profitability. It provided no specific revenue or earnings guidance. Management reported no substantial doubt about the company’s ability to continue as a going concern, while acknowledging that its forecasts depend on assumptions that may prove incorrect.
- Key risks include continued operating losses, customer attrition (particularly among acquired accounts), acquisition integration and financing needs, competition and pricing pressure, and dependence on offshore operations in Pakistan and Sri Lanka.
- Healthcare regulation and reimbursement changes, privacy and cybersecurity incidents, service disruptions, and compliance with SVB financial covenants could adversely affect operations, liquidity, or preferred dividends.
- The 11% cumulative preferred stock carries substantial dividend obligations; $2.0 million of preferred dividends were attributable in 2017. Common-stock dividends are not anticipated and are restricted by the lender.
- Management recorded $276,000 of restructuring charges related to closing operations in India and Poland. It reported no goodwill impairment and no material legal proceedings pending; ordinary-course claims were not expected by management to have a material effect.
- The Tax Cuts and Jobs Act effects were not fully finalized. The company estimated a $331,000 transition tax, offset by net operating losses, and reported a $6.6 million valuation allowance against deferred tax assets. It expected an approximately $1.2 million contract-asset adjustment upon adopting the new revenue standard in 2018.
- Management concluded disclosure controls and internal control over financial reporting were effective at year-end. The independent auditor issued an unqualified opinion on the financial statements but did not attest to internal-control effectiveness, consistent with the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for Medical Transcription Billing, Corp. (MTBC), not CareCloud, Inc.; the requested “2017 Q4” period is covered by an annual report for the year ended December 31, 2017.
- Assess whether operating cash generation and the reported liquidity position can be sustained without further equity issuance, given continuing GAAP losses and preferred dividend commitments.
- Review the terms and covenant headroom of the SVB facility, including the borrowing-base formula and restrictions on dividends and acquisitions.
- Evaluate acquisition-related revenue retention and the economics of moving acquired customers onto MTBC’s platform; management disclosed historical acquired-customer revenue attrition.
- Check subsequent results against management’s profitability and liquidity expectations, and verify the final effects of revenue-standard adoption and the Tax Act.
- Consider dilution and governance: 2017 equity issuance, outstanding warrants and equity awards, and significant voting influence held by insiders.