CareCloud, Inc. — filing identity note
The supplied filing is a Form 10-Q for MTBC, Inc. (Nasdaq: MTBC and MTBCP), not CareCloud, Inc. The summary below reflects the filing itself; confirm that it is the intended company before relying on it.
Business context and reporting period
Quarterly report for the three and nine months ended September 30, 2019, filed November 6, 2019. MTBC provides healthcare information technology and services, including revenue cycle management, practice management, and related software and services. It reports Healthcare IT and Practice Management segments.
The results include the April 2019 acquisition of substantially all of Etransmedia Technology’s assets (ETM); 2018 comparisons also reflect the Orion acquisition, which closed in July 2018. MTBC reported serving more than 11,000 providers and approximately 1,800 practices and hospitals.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $16.85 million | $17.04 million | $48.68 million | $34.03 million |
| Operating income (loss) | $0.67 million | $(1.78) million | $(0.80) million | $(1.67) million |
| Net income (loss) | $(0.14) million | $(1.83) million | $(1.20) million | $(1.56) million |
| Net loss attributable to common shareholders | $(1.74) million | $(2.89) million | $(5.79) million | $(4.64) million |
| Adjusted EBITDA (non-GAAP) | $2.59 million | $0.87 million | $5.32 million | $3.40 million |
| Operating cash flow | $1.44 million | $2.78 million | $4.75 million | $4.75 million |
- Margins: Q3 GAAP operating margin was 4.0%, versus (10.5%) a year earlier; nine-month operating margin was (1.6%), versus (4.9%). Non-GAAP adjusted operating margin was 13.5% and 8.8%, respectively, compared with 3.5% and 7.7%. Direct operating costs were 62.5% of Q3 revenue and 65.3% of nine-month revenue.
- Cash and liquidity: Cash was $13.99 million at September 30, 2019, down $0.49 million from December 31, 2018. Current assets were $26.06 million and current liabilities $11.30 million, implying working capital of about $14.76 million. The company reported no bank debt outstanding.
- Debt and leases: Notes payable totaled approximately $0.51 million, including current and long-term portions. The $10 million Silicon Valley Bank revolving facility was undrawn; it is secured by domestic assets and 65% of shares in offshore facilities. Operating lease liabilities were $4.46 million following adoption of the lease accounting standard.
- Cash uses and financing: Nine-month investing cash outflow was $2.93 million, including $1.60 million for ETM and $1.33 million of capital expenditures. Financing cash outflow was $2.54 million, including $4.46 million of preferred dividends and $1.32 million of employee stock-tax withholding payments. An at-the-market preferred-stock sale generated $3.72 million net during the quarter.
- Preferred dividends: The company recorded $4.58 million of preferred dividends for the first nine months; $1.59 million was payable at quarter-end. These dividends materially widened the loss attributable to common shareholders.
Changes versus the prior comparable period
- Q3 revenue decreased 1% year over year, while nine-month revenue increased 43%, largely reflecting acquired businesses. The filing attributes $9.1 million of Q3 and $26.0 million of nine-month 2019 revenue to customers acquired in the Orion and ETM transactions.
- Q3 operating results improved to income from a prior-year loss. Management cited lower direct operating costs and general and administrative expense; a favorable $280,000 contingent-consideration adjustment also benefited Q3 operating results.
- Nine-month GAAP net loss narrowed, but loss attributable to common shareholders increased, mainly alongside higher preferred-stock dividends. Operating cash flow was essentially unchanged year over year.
- Healthcare IT revenue was $38.52 million for the first nine months, up from $30.72 million. Practice Management revenue rose to $10.16 million from $3.31 million, principally reflecting Orion.
Outlook, commentary, risks, and unusual items
- The filing provides no specific quantitative revenue, earnings, or cash-flow guidance. Management said it was forecasting a return to profitability, while noting that historical cumulative losses made realization of deferred tax assets uncertain; a valuation allowance remained recorded.
- Management identifies acquisition integration and growth, client retention and revenue levels, offshore operations in Pakistan and Sri Lanka, healthcare regulation, privacy and security, competition, key-person retention, and compliance with lender covenants as risks. It also identifies the ability to pay monthly Series A preferred dividends as a risk.
- Foreign-currency transaction losses contributed to Q3 other expense of $688,000. The nine-month other expense was $224,000. Foreign exchange movements can affect reported results.
- Q3 included $136,000 of restructuring and impairment charges associated with leased facilities no longer used; the company was seeking to sublease one facility. ETM acquisition-related revenue was approximately $1.7 million in Q3 and $3.7 million year to date.
- A customer, Randolph Pain Relief and Wellness Center, seeks $6.6 million plus costs in an arbitration-related dispute. Proceedings described in the filing concerned whether MTBC and its subsidiary must participate; the company said it could not estimate a possible loss range and intends to defend the claims.
- Related-party arrangements include leases with the Executive Chairman and an aircraft lease with an entity he owns. The filing reports associated rent and lease balances.
- Management concluded disclosure controls were effective at a reasonable-assurance level as of September 30, 2019. The filing says MTBC was in compliance with SVB covenants.
Important facts for investors to verify
- Whether this MTBC filing is the intended filing for CareCloud, given the company-name mismatch in the request.
- How much of reported revenue growth and segment performance is attributable to acquisitions, and whether acquired customers are retained.
- Cash conversion and earnings quality, including the effect of non-cash items, acquisition-related adjustments, and the company’s non-GAAP exclusions.
- The capacity to fund operations, preferred dividends, leases, and future acquisitions; confirm the availability and borrowing-base terms of the undrawn SVB facility.
- The outcome and potential exposure from the $6.6 million arbitration claim, and any developments in facility subleasing or restructuring.
- Preferred-stock issuance, dividend accruals, and their effect on common-shareholder returns and dilution.