Centric Health Continues to Deliver Growth in Second Quarter of 2017
– Seventh consecutive quarter of increased Adjusted EBITDA1 driven by organic and acquisition growth –
TORONTO, Aug. 9, 2017 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today reported its financial results for the second quarter ended June 30, 2017.
Highlights for the Second Quarter of 2017
(All comparative figures are for the second quarter 2016)
- Revenue from continuing operations grew 3% after normalizing for the $1.4 million reclassification of Revenue to cost of sales despite the timing differences in the transitions of certain contracts in Specialty Pharmacy and was flat before normalization at $42.8 million compared to $42.9 million;
- Adjusted EBITDA1 from continuing operations grew 19% to $4.9 million from $4.1 million as a result of accretive acquisitions made in 2016 and organic growth in both the Specialty Pharmacy and Surgical and Medical Centres businesses;
- Adjusted EBITDA1 margin from continuing operations expanded to 11% from 10%;
- Continued to generate positive cash flows from operations of $8.7 million for the fourth consecutive quarter;
- Closed the initial advance of the new credit facilities on May 30, 2017, being $100 million in senior secured facilities (the "Senior Facilities") and $13.5 million in a secured subordinated term credit facility (the "Subordinated Facility") with an option, subject to the satisfaction of certain conditions, to increase the Senior Facilities by an additional $25 million (collectively, the "New Credit Facilities"). The proceeds of the initial advance were applied to:
- pay down the Company's existing Revolving Facility of up to $35 million, of which $26 million was drawn at closing;
- redemption of all of its 8.625% notes due April 18, 2018 of $25.9 million ("Notes") for the full redemption price of approximately $25.9 million, plus accrued and unpaid interest; and
- redemption of all of its 6.75% 2017 Convertible Notes that were set to mature on October 31, 2017 ("October 2017 CDs") for the full redemption price of approximately $27.5 million, plus accrued and unpaid interest;
- Reduced the Company's weighted-average interest rate from 6.7% to 6.1%, with further reductions expected over the term of the New Credit Facilities; and
- On June 23, 2017, the Company repaid $2 million of its Subordinated Facility.
Highlights Subsequent to the Quarter
- As the Company continues its pursuit of competitive differentiators that enhance patient outcomes, the Company made significant strides in its focus on innovation and technology by signing an agreement on August 9, 2017 with AceAge Inc. ("AceAge") for its home-based automated drug delivery appliance ("Karie"). Karie is an innovative device designed to solve the medication compliance issues of individuals taking multiple medications, particularly seniors living independently, or without full-time care. From its internal pre-loaded cartridge, Karie automatically dispenses prescription drugs, in the correct dosage and at the correct time while making a visual and audible alert. To ensure compliance, Karie can also notify the individual's family members or primary caregiver. Centric has an exclusive distribution and supply agreement for the device in Canada and has made a strategic investment in AceAge.
"The continued growth in Adjusted EBITDA we have achieved over the past several quarters is the result of the successful realignment of our business and the positive contributions from accretive acquisitions made in 2016," said David Cutler, President and Chief Executive Officer of Centric Health. "These results will be bolstered in the second half of the year as we on-board the remaining beds in our national long-term care pharmacy contract."
"We are also very pleased with the higher surgical volume experienced in our SmartShape facility," Mr. Cutler added. "We have Canada's only centre of excellence for bariatric surgery which we expect will drive further volume growth and increased utilization at the facility."
FINANCIAL RESULTS
Discontinued Operations
The Company's discontinued operations consist of the businesses divested as part of the sale of its Physiotherapy, Rehabilitation and Medical Assessments segment in 2015 and London Scoping Centre in 2016.
Selected Financial Information
(All amounts in the chart below are in thousands except per share, shares outstanding, and percentage data)
| For the three month periods |
For the six month periods |
||||||
| 2017 |
2016 |
2015 |
2017 |
2016 |
2015 |
||
| (thousands of Canadian Dollars) |
$ |
$ |
$ |
$ |
$ |
$ |
|
| Revenue |
42,826 |
42,925 |
41,019 |
86,389 |
83,619 |
77,656 |
|
| Income (loss) from continuing operations |
1,589 |
(2,672) |
(2,500) |
2,257 |
(3,772) |
(6,510) |
|
| Income (loss) from continuing operations before interest expense and income taxes |
2,578 |
(6,875) |
432 |
4,055 |
(8,216) |
(4,968) |
|
| EBITDA1 from continuing operations |
4,445 |
(3,923) |
3,106 |
7,705 |
(2,326) |
239 |
|
| Adjusted EBITDA1 from continuing operations |
4,915 |
4,146 |
2,790 |
9,371 |
7,023 |
3,892 |
|
| Per share - Basic and diluted |
$0.02 |
$0.03 |
$0.02 |
$0.05 |
$0.04 |
$0.02 |
|
| Adjusted EBITDA1 Margin from continuing operations |
11.5% |
9.7% |
6.8% |
10.8% |
8.4% |
5.0% |
|
| Adjusted EBITDA1 |
4,915 |
4,082 |
9,622 |
9,371 |
6,902 |
16,966 |
|
| Per share - Basic2 and diluted2 |
$0.02 |
$0.03 |
$0.06 |
$0.05 |
$0.04 |
$0.11 |
|
| Adjusted EBITDA1 Margin |
11.5% |
9.4% |
10.6% |
10.8% |
8.2% |
9.7% |
|
| Net income (loss) |
3,141 |
(11,447) |
(7,054) |
(188) |
(21,469) |
(19,390) |
|
| Per share - Basic2 and diluted2 |
$0.02 |
($0.07) |
$(0.08) |
$0.00 |
($0.13) |
$(0.40) |
|
| Cash provided by (used in) operations |
8,732 |
(4,906) |
12,697 |
9,846 |
(12,114) |
14,706 |
|
| Weighted Average Shares Outstanding (Basic and diluted)3 |
198,917 |
162,741 |
159,937 |
189,358 |
162,357 |
157,535 |
|
| Shares Outstanding, June 303 |
199,296 |
162,752 |
160,350 |
199,296 |
162,752 |
160,350 |
|
| 1 |
See "Non-IFRS Measures" below. |
| 2 |
Basic and diluted earnings per share is based on the profit or loss attributable to shareholders of Centric Health Corporation. |
| 3 |
Excludes contingent escrowed shares and restricted shares. |
Consolidated Results
Consolidated Revenue from continuing operations for the three month period ended June 30, 2017 decreased 0.2% to $42.8 million from $42.9 million. Revenue growth in Specialty Pharmacy was dampened due to timing differences in the off-boarding of beds from a discontinued contract compared to the addition of new beds under a new national contract. Revenue growth from continuing operations, normalized for the $1.4 million that was reclassified to cost of sales, was 3.0%. This increase was primarily driven by acquisitions in the Specialty Pharmacy business and organic growth in both the Specialty Pharmacy and Surgical and Medical Centres businesses.
Adjusted EBITDA1 from continuing operations for the three month period ended June 30, 2017 increased to $4.9 million from $4.1 million. The increase was primarily the result of the organic growth in both the Specialty Pharmacy and Surgical and Medical Centres segments as well as accretive tuck-in acquisitions.
Consolidated revenue from continuing operations for the six month period ended June 30, 2017 increased by 3.3%, or $2.8 million to $86.4 million from $83.6 million for the same period in the prior year.
Adjusted EBITDA from continuing operations for the six month period ended June 30, 2017 increased to $9.4 million compared to $7.0 million over the same period in the prior year.
The increase in Revenue and Adjusted EBITDA for the six month period ended June 30, 2017 was a result of accretive acquisitions made in 2016 and organic growth in the Specialty Pharmacy and Surgical and Medical Centres businesses.
Segment Results
(All amounts in the charts below are in thousands except per share, shares outstanding, and percentage data)
| For the three month periods ended |
Revenue |
Adjusted EBITDA1 from continuing |
|||||
| 2017 |
2016 |
2017 |
2016 |
||||
| (in $000) |
$ |
$ |
$ |
% |
$ |
% |
|
| Specialty Pharmacy |
31,120 |
31,811 |
4,369 |
14.0 |
4,284 |
13.5 |
|
| Surgical and Medical Centres |
11,706 |
11,114 |
1,913 |
16.3 |
1,567 |
14.1 |
|
| Corporate |
— |
— |
(1,367) |
— |
(1,705) |
— |
|
| Total |
42,826 |
42,925 |
4,915 |
11.5 |
4,146 |
9.7 |
|
| For the six month periods ended |
Revenue |
Adjusted EBITDA1 from continuing |
||||||
| 2017 |
2016 |
2017 |
2016 |
|||||
| (in $000) |
$ |
$ |
$ |
% |
$ |
% |
||
| Specialty Pharmacy |
64,027 |
62,114 |
9,297 |
14.5 |
7,567 |
12.2 |
||
| Surgical and Medical Centres |
22,362 |
21,505 |
3,086 |
13.8 |
2,803 |
13.0 |
||
| Corporate |
— |
— |
(3,012) |
— |
(3,347) |
— |
||
| Total |
86,389 |
83,619 |
9,371 |
10.8 |
7,023 |
8.4 |
||
SHARES OUTSTANDING
As at June 30, 2017, the Company had total shares outstanding of 204,817,136. The outstanding shares at June 30, 2017 include 5,521,025 shares which are restricted or held in escrow and will be released to certain vendors of previously acquired businesses based on the achievement of certain stated performance targets and certain customers. Accordingly, for financial reporting purposes, the Company reported 199,296,111 common shares outstanding as at June 30, 2017 and 169,982,529 shares outstanding at December 31, 2016. The number of options outstanding is 2,597,500 at June 30, 2017. The number of restricted share units outstanding is 4,246,997 at June 30, 2017. The number of warrants outstanding is 2,900,000 at June 30, 2017. Should all outstanding options and warrants that were exercisable at June 30, 2017 be exercised, the Company would receive proceeds of $2.6 million.
As at the date of this press release, August 9, 2017, the Company had total shares outstanding of 204,817,136 which include 5,521,025 shares which are restricted or held in escrow. The number of options outstanding is 2,597,500; the number of warrants outstanding is 2,900,000; and the number of restricted share units outstanding is 4,246,997.
1NON-IFRS MEASURES
This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share. These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.
The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (recovery). Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs, changes in the fair value of the contingent consideration liability, impairments, stock based compensation expense, change in fair value of derivative financial instruments and gain on disposal of property and equipment recognized in the statement of income. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDA divided by the weighted outstanding shares on both a basic and diluted basis. The Company believes that Adjusted EBITDA1 is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives. The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA1 as a key component of the covenant calculations. EBITDA and Adjusted EBITDA1 are not recognized measures under IFRS.
Reconciliation of Non-IFRS Measures
| For the three month |
For the six month |
|||
| 2017 |
2016 |
2017 |
2016 |
|
| (in $000) |
$ |
$ |
$ |
$ |
| Loss from continuing operations |
(59) |
(11,405) |
(3,388) |
(20,281) |
| Depreciation and amortization |
1,884 |
3,057 |
3,732 |
6,054 |
| Interest expense |
3,129 |
3,652 |
6,950 |
11,863 |
| Amortization of lease incentives |
(17) |
(105) |
(82) |
(164) |
| Income tax expense (recovery) |
(492) |
878 |
493 |
202 |
| EBITDA from continuing operations |
4,445 |
(3,923) |
7,705 |
(2,326) |
| Transaction and restructuring costs |
1,439 |
3,699 |
3,095 |
4,478 |
| Change in fair value of contingent consideration liability |
(586) |
4,223 |
(1,544) |
4,510 |
| Stock-based compensation expense |
8 |
167 |
332 |
428 |
| Change in fair value of derivative financial instruments |
(403) |
(20) |
(254) |
(66) |
| Gain (loss) on disposal of property and equipment |
12 |
— |
37 |
(1) |
| Adjusted EBITDA from continuing operations |
4,915 |
4,146 |
9,371 |
7,023 |
| Adjusted EBITDA from discontinued operations |
— |
(64) |
— |
(121) |
| Adjusted EBITDA |
4,915 |
4,082 |
9,371 |
6,902 |
| Basic and diluted weighted average number of shares |
198,917 |
162,741 |
189,358 |
162,357 |
| Adjusted EBITDA per share from continuing operations (basic and diluted) |
$0.02 |
$0.03 |
$0.05 |
$0.04 |
| Adjusted EBITDA per share (basic and diluted) |
$0.02 |
$0.03 |
$0.05 |
$0.04 |
PRESENTATION OF FINANCIAL RESULTS
The Company presents two reportable operating segments as follows: Specialty Pharmacy and Surgical and Medical Centres. The financial results of the Company's Performance Medical Group, are included as part of the Surgical and Medical Centres segment.
CONFERENCE CALL
Centric Health will host a conference call, including a slide presentation, to discuss its second quarter financial results on Thursday, August 10, 2017 at 8:30 a.m. (ET).
Telephone Dial-In Access Information
To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. Those participating in the conference call by telephone can view the slide presentation by accessing the online webcast (see instructions below) and choosing the Non-Streaming Audio option.
Webcast Access Information
A live webcast of the conference call, including the slide presentation, will be available on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html). Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. To view the webcast presentation with slides, please choose either the Real Streaming Audio or Windows Streaming Audio option.
Archive Access Information
The conference call will be archived for replay by telephone until Thursday, August 17, 2017 at midnight. To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 8564256.
The webcast with slide presentation will be archived for 90 days on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html).
For further information please refer to the Company's complete filings at www.sedar.com.
About Centric Health
Centric Health's vision is to be Canada's most respected and recognized provider in the independent healthcare sectors in which it operates, world renowned for delivering the highest levels of quality care and outcomes, innovative solutions and value to patients, clients and stakeholders. To this end, Centric Health primarily focuses on two core healthcare businesses:
- The Specialty Pharmacy division is a "Patient First" model composed of a growing national network of fulfilment centres that deliver high-volume solutions for the cost effective supply of chronic medication and other specialty clinical care services, serving more than 29,000 residents in over 425 seniors communities (long term care facilities, retirement homes and assisted living facilities) nationally. The Specialty Pharmacy division also provides pharmaceutical dispensing services for employees insured by corporate health plans.
- The Surgical & Medical Centres division is Canada's largest independent surgical provider operating five facilities across four provinces. It serves a diversified customer base with private paid non-insured surgeries and diagnostics, government outsourcing of insured surgeries and diagnostics and other procedures funded by third-party payors (including Workers Compensation) and is the proud owner of Canada's first Centre of Excellence in Metabolic and Bariatric Surgery.
With national networks of facilities in each of its businesses, deep knowledge and experience of healthcare delivery and extensive, trusted relationships with payers, physicians, and government agencies, the Company is uniquely positioned to address current and future healthcare needs in growing markets as the Canadian healthcare industry goes through a major transformation over the medium to long term.
This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive there-from.
SOURCE Centric Health Corporation
David Cutler, Chief Executive Officer, Centric Health Corporate, 416-619-9401, [email protected]; Leslie Cho, Chief Financial Officer, Centric Health Corporate, 416-619-9488, [email protected]
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