CareCloud, Inc. — 2017 Third-Quarter Form 10-Q Summary
Entity-name note: The supplied filing identifies the registrant as Medical Transcription Billing, Corp. (MTBC), not CareCloud, Inc. This summary reflects the filing text provided; verify the company and filing before relying on it.
Business context and reporting period
The unaudited report covers the quarter and nine months ended September 30, 2017. MTBC provides cloud-based healthcare software and revenue-cycle-management services, supported by operations in the United States, Pakistan, and Sri Lanka. Revenue is largely tied to customer collections. The 2016 MediGain and other acquisitions materially expanded the business; MTBC also acquired Washington Medical Billing effective July 1, 2017. In April 2017, it began winding down its India and Poland operations.
Financial performance and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $7.514 million | $5.341 million | $23.518 million | $15.664 million |
| Operating loss | $275,000 | $1.270 million | $4.068 million | $4.145 million |
| Net loss | $980,000 | $1.495 million | $5.382 million | $4.773 million |
| Net loss attributable to common shareholders | $1.633 million | $1.726 million | $6.665 million | $5.323 million |
| Loss per common share | $0.14 | $0.17 | $0.62 | $0.53 |
| Adjusted EBITDA, non-GAAP | $609,000 | $130,000 | $763,000 | $208,000 |
| GAAP operating margin | (3.6%) | (23.8%) | (17.3%) | (26.5%) |
For Q3, non-GAAP adjusted operating income was $356,000, or a 4.7% margin, versus a $39,000 adjusted operating loss and (0.7%) margin a year earlier. For the nine-month period, adjusted operating loss was $66,000, or (0.3%), compared with a $252,000 loss, or (1.6%). These company-defined non-GAAP measures exclude selected costs and should be considered alongside GAAP results.
At September 30, cash was $2.789 million, working capital was positive $913,000, and total current liabilities were $6.196 million. The company had $2.0 million outstanding on its Opus revolving line; reported term debt was zero, while other notes payable totaled about $384,000 current and long term. It had paid Prudential $5.0 million plus accrued interest during Q3. Nine-month operating cash flow was negative $1.308 million, investing cash flow negative $705,000, and financing cash flow positive $1.401 million. Cash declined $687,000 from year-end 2016.
Material changes versus the prior comparable period
- Revenue rose 41% in Q3 and 50% for the nine months. Management attributed the increase principally to acquired customers, including approximately $4.1 million of Q3 and $12.8 million of nine-month revenue from the 2016 acquisitions; customer attrition partly offset this growth.
- Q3 operating and net losses narrowed, but the nine-month net loss increased. Nine-month operating expenses rose 39%, with higher direct costs associated with acquired operations, while Q3 amortization declined as some older acquired intangibles became fully amortized.
- Interest expense increased to $678,000 in Q3 and $1.243 million year to date. It included a $463,000 noncash write-off of deferred financing costs following early termination of the Opus facility.
- Equity offerings raised approximately $15 million net during Q2 and Q3: about $2 million from common stock and $13 million from preferred stock. Preferred stock carries an 11% cumulative annual dividend; declared dividends payable at September 30 totaled $639,000.
- The company recorded $276,000 in 2017 restructuring charges related to closing India and Poland operations. It acquired WMB for an initial $205,000; additional revenue-based payments were considered unlikely under its forecast.
Outlook, risks, contingencies, and unusual items
Management said the equity raises, Prudential repayment, and improved working capital removed substantial doubt about the company’s ability to continue as a going concern. It forecast positive operating cash flow over the next 12 months and said it expected expense management and revenue growth to strengthen liquidity. These expectations depend on assumptions that may prove incorrect; no specific revenue or earnings guidance was provided.
In October 2017, after quarter-end, MTBC replaced the Opus facility with a secured $5 million revolving line from Silicon Valley Bank (SVB). The company reported more than $4 million currently available, subject to borrowing-base calculations tied to repeatable revenue and attrition. The facility bears interest at prime plus 1.75%, includes financial covenants, and restricts future acquisitions without lender approval. SVB received warrants for 125,000 common shares; the exercise price was to be determined.
Principal risks discussed include customer retention and migration, acquisition integration and growth management, access to capital, lender covenant compliance, competition, offshore operations, healthcare regulation, and protection of patient information. Contingent consideration liabilities were approximately $670,000 at September 30 and could change with acquisition performance estimates. Management said ordinary-course legal matters were not expected to have a material adverse effect. Deferred tax assets remained subject to a full valuation allowance because of cumulative losses. The company also disclosed related-party aircraft and property leases involving the CEO.
During Q3, MTBC launched talkEHR and EnrollmentPlus. Management reported more than 200 talkEHR provider sign-ups and said a few had upgraded to premium billing. It also reported that MediGain integration and internal-control validation had been completed during the quarter.
Important facts for investors to verify
- Confirm the registrant identity: the filing names Medical Transcription Billing, Corp. (MTBC), while the request names CareCloud, Inc.
- Check the October 2017 SVB facility’s borrowing availability, covenants, collateral, fees, and warrant terms, as well as compliance after closing.
- Assess whether acquired-customer revenue is being retained and whether operating cash flow turns positive as management forecast.
- Review the sustainability and cash cost of preferred dividends, alongside common-share dilution from equity issuance and awards.
- Track contingent consideration, restructuring and liquidation costs, related-party arrangements, and the effects of the planned adoption of revenue-recognition guidance.