Business context and reporting period
This is Medical Transcription Billing, Corp. (MTBC; now identified in the request metadata as Carecloud, Inc.)’s Form 10-K for the fiscal year ended December 31, 2014. The filing is for the full year, not solely Q4; quarterly figures below identify the three months ended December 31. MTBC provides web-based practice management, electronic health records, revenue cycle management, and mobile health services to ambulatory healthcare practices.
In July 2014, MTBC completed its IPO and acquired Omni, Practicare, and CastleRock. At year-end it served approximately 980 practices and 2,200 providers, versus 450 practices and 1,110 providers at year-end 2013.
Financial performance and liquidity
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $18.30 million | $10.47 million |
| Operating loss | $4.04 million | $0.13 million |
| Net loss | $4.51 million | $0.18 million |
| Basic and diluted loss per share | $0.64 | $0.03 |
| Adjusted EBITDA (non-GAAP) | $(1.73) million | $1.07 million |
| Operating cash flow | $(2.70) million | $0.93 million |
| Investing cash flow | $(12.65) million | $(0.71) million |
| Financing cash flow | $15.88 million | $0.03 million |
Revenue grew 75%, including $8.2 million from the three businesses acquired in July. Direct operating costs were 58.1% of revenue (40.8% in 2013); total operating expenses were 122.1% of revenue. Adjusted EBITDA margin was negative 9.4%, versus positive 10.2%.
For Q4 2014, revenue was $7.10 million, operating loss $0.93 million, net loss $0.995 million, and adjusted EBITDA loss $0.838 million. Q4 2013 revenue was $2.98 million, operating income $0.246 million, net income $0.029 million, and adjusted EBITDA $0.516 million.
At December 31, 2014, cash was $1.05 million, current assets $4.58 million, current liabilities $8.14 million, and working capital was negative $3.56 million. The company reported $1.215 million drawn on its revolving credit line and $48,564 of long-term notes payable; additional current notes and a $2.626 million contingent-consideration liability were reported separately. In March 2015, the line limit rose to $3.0 million and was fully drawn by the filing date. The IPO generated $16.3 million of net proceeds, much of which funded the acquisitions.
Changes, outlook, and material risks
- Operating expenses rose 111%, faster than revenue. The acquired businesses contributed substantially to revenue and expenses; acquisition-related amortization rose to $2.53 million. The company also incurred $1.08 million in integration and transaction costs.
- A $1.81 million reduction in the fair value of contingent acquisition consideration lowered reported operating expenses. This was a noncash gain, largely reflecting the decline in MTBC’s share price and revised revenue expectations.
- Operating cash flow swung from positive to negative, and accounts receivable increased by $2.17 million. Acquisition spending was $11.54 million; capital expenditures were $1.12 million.
- Management expected cost savings from shifting acquired-business work to Pakistan and stated it believed cash flow and the expanded credit line would meet working-capital and capital-expenditure needs for at least 12 months. It also anticipated a return to profitability, higher sales and marketing investment, and continued product development. These are forward-looking expectations, not guarantees.
- The auditor’s report and management disclosures identify substantial doubt about the company’s ability to continue as a going concern. The credit line matured in November 2015, required lender renewal, and had not been extended as of the filing; management said additional financing might be needed. The company had breached a debt-service covenant at year-end, which TD Bank waived.
- Disclosure controls were deemed ineffective due to a material weakness in financial close, review, and complex-transaction accounting. Remediation was ongoing and expected to continue through 2015. The filing states the financial statements were fairly presented; the auditor did not express an opinion on internal controls.
- Additional exposures include acquisition customer-retention and contingent-payment terms, dependence on operations in Pakistan and currency movements, potential financing dilution, and related-party arrangements. Insiders held 43.8% of shares and voting power. No material legal proceedings were reported; the filing’s risk-factor section was omitted under the smaller-reporting-company exemption.
Most important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for Medical Transcription Billing, Corp. (MTBC), not a company named Carecloud, Inc.
- Check the status and renewal terms of the fully drawn $3.0 million credit line, the November 2015 maturity, and the company’s going-concern financing plans.
- Assess whether acquired-customer retention, migration, and cost reductions support management’s profitability and cash-flow expectations.
- Review the contingent-consideration valuation, acquisition-related intangible amortization, and subsequent CastleRock settlement effects.
- Track remediation of the material weakness and evaluate related-party transactions, including the CEO loan and leases.