Centric Health Closes Two Significant Transactions on the Heels of Strong Third Quarter Results
This morning, Centric Health Corporation (TSX: CHH), announced the successful closing of two previously announced transactions --- a private placement of common shares and convertible debentures, and the sale of its Surgical and Medical Centres business --- bringing in aggregate gross proceeds of $70.24 million. The closing of these transactions comes just over two weeks after the company announced strong third quarter results highlighted by revenue growth of 12.4% and adjusted EBITDA growth of 204.1% in their Specialty Pharmacy business.
Centric Health sold its Surgical and Medical Centres business to Clearpoint Health Network Inc. for gross proceeds of $35 million. Centric Health announced last year that it was focusing on the seniors healthcare market in Canada, primarily on institutional pharmacy operations.
The company raised gross proceeds of $35.24 million through the private placement of common shares and convertible debentures. Pursuant to the private placement, the company issued 64,500,000 common shares at $0.12 per share for gross proceeds of $7.74 million and 8.25% unsecured debentures convertible into common shares in the aggregate principal amount of $27.5 million.
The investors in the private placement included Yorkville Asset Management Inc. for and on behalf of certain managed funds (“Yorkville”), and certain existing major shareholders of the Company, including Ewing Morris & Co. Investment Partners Ltd., for and on behalf of certain funds and accounts managed by it ( “Ewing Morris”) and Dr. Jack Shevel and certain entities over which Dr. Shevel exercises control or direction, together with certain related parties and joint actors (“Dr. Shevel”), and the company’s President and Chief Executive Officer, David Murphy.
Contemporaneously with the closing of the private placement, the company also exchanged 30,000,000 convertible preferred shares of the company for $12.54 million of 8% unsecured convertible debentures held by Ewing Morris.
The net proceeds from both transactions are expected to be used to reduce bank debt and for working capital purposes.
Akumin Inc. (TSX: AKU, AKU.U) ("Akumin" or the "Corporation") announced today its financial results for the quarter ended September 30, 2019 ("Q3 Fiscal 2019").
Commenting on the Q3 Fiscal 2019 financial results, Riadh Zine, President and Chief Executive Officer of the Corporation, said, "The quarter ending September 30, 2019 represents another fiscal quarter of growth and financial performance in-line with management's expectation, including revenue of $68.9 million and Adjusted EBITDA of $18.0 million.
"Akumin's volume in Q3 Fiscal 2019 was approximately 1,435,000 RVUs, compared to approximately 850,000 RVUs in Q3 Fiscal 2018, an increase of 69%. On an organic volume basis, RVUs increased by 10% compared to Q3 Fiscal 2018. The Corporation reports the volume of procedures performed in its diagnostic imaging centers based on relative-value units, or RVUs, instead of the number of procedures. RVUs are a standardized measure of value used in the U.S. Medicare reimbursement formula for physician services which provides weighting to distinguish the complexity of different procedures.
"Q3 Fiscal 2019 includes partial contribution of the recently announced acquisition in El Paso, Texas, completed on August 16, 2019. In early October 2019, the Corporation also completed a tuck-in acquisition in West Palm Beach, Florida, which is not reflected in the quarter."
Akumin would like to remind interested parties of the Corporation's Third Quarter Fiscal 2019 Financial Results Call, to be held today from 8:30 a.m. to 9:00 a.m. Eastern Time. To access the conference call, dial toll-free in Canada or the U.S. 888-231-8191 or, for international callers, 647-427-7450. A related presentation will be available for download on Akumin's website at https://akum.in/Q3-presentation. Participants are asked to connect at least 10 minutes prior to the beginning of the call to ensure participation.
The Corporation has retained the services of Hinge Markets Inc., led by Jeffrey White, to provide investor relations services and to increase awareness of the Corporation and its activities with its existing and potential shareholders. Mr. White, founder of Hinge Markets Inc., and a lawyer by training, has spent more than 20 years in the capital markets as a professional and a senior executive in both corporate finance and institutional equity sales.
Unless otherwise indicated, all amounts are expressed in U.S. dollars. Certain metrics, including those expressed on an adjusted or comparable basis, are non-IFRS measures. See "Non-IFRS Measures" and "Selected Consolidated Financial Information" of this press release for further details. The Corporation's consolidated financial statements for Fiscal 2018 and related management's discussion and analysis are available under Akumin's profile on SEDAR (www.sedar.com).
Akumin is a leading provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States with a network of owned and/or operated imaging centers located in Florida, Texas, Pennsylvania, Delaware, Illinois, Kansas and Georgia. By combining our clinical expertise with the latest advances in technology and information systems, our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, minimizing the cost and amount of care for patients. Our imaging procedures include MRI, CT, positron emission tomography (PET), ultrasound, diagnostic radiology (X-ray), mammography, and other interventional procedures.
This press release makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under the International Financial Reporting Standards ("IFRS") and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these non-IFRS measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these non-IFRS measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS financial measures, including "EBITDA", "Adjusted EBITDA", "Adjusted EBITDA Margin" , "Adjusted net income (loss) attributable to shareholders of Akumin" and "Adjusted EPS – Diluted". These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts, and to determine components of management compensation. Definitions and reconciliations of non-IFRS measures to the relevant reported measures can be found in our Management's Discussion and Analysis dated November 13, 2019 available at www.sedar.com.
We define such non-IFRS measures as follows:
"EBITDA" means net income (loss) attributable to shareholders of the Corporation before interest expense (net), income tax expense (recovery) and depreciation and amortization.
"Adjusted EBITDA" means EBITDA, as further adjusted for stock-based compensation, impairment of property and equipment, provisions for certain credit losses, settlement costs, provisions, acquisition-related and public offering costs, gains (losses) in the period, one-time adjustments and IFRS 16 impact on leases.
"Adjusted EBITDA Margin" means Adjusted EBITDA divided by the revenue in the period.
"Adjusted net income (loss) attributable to shareholders of Akumin" means Adjusted EBITDA less depreciation and amortization and interest expense (excluding IFRS 16 impact on depreciation and interest expense), taxed at Akumin's estimated effective tax rate, which is a blend of U.S. federal and state statutory tax rates for Akumin for the period.
Source: Akumin Inc.
Centric Health more than triples adjusted EBITDA from Specialty Pharmacy in Q3
Centric Health Corporation (“Centric Health” or “the Company”) (TSX: CHH), one of Canada’s leading healthcare services companies, reported its financial results for the third quarter ended September 30, 2019.
Highlights for the Third Quarter
“Our momentum continued in the third quarter, with strong growth in revenue and beds serviced, and significant growth in Adjusted EBITDA for our core Specialty Pharmacy business,” said David Murphy, President and Chief Executive Officer of Centric Health. “The quarter was also an eventful and successful one as it relates to strengthening our balance sheet, as we announced both the sale of our Surgical and Medical Centres division and a large private placement. With these milestones and our strategic transformation substantially completed, we have significantly improved our ability to capitalize on organic growth and acquisition opportunities in the Canadian institutional pharmacy sector.”
Revenue from Specialty Pharmacy for the third quarter increased 12.4% to $31.4 million compared to the same period in the prior year as a result of continued growth in the average number of beds serviced during the quarter and the impact of revenue initiatives from the 2018 Business Re-Engineering Plan.
Adjusted EBITDA from Specialty Pharmacy increased 204.1% to $4.0 million for the third quarter compared to the same period in the prior year. The increase was due to higher revenue, the impact of the Business Re-Engineering Plan, and operational efficiencies resulting from increased scale as a higher average number of beds were serviced compared to the prior period. The impact of IFRS 16 for the quarter was an increase to Adjusted EBITDA from Specialty Pharmacy of $0.5 million. Adjusted EBITDA margin from Specialty Pharmacy was 12.9% for the quarter (11.3% excluding the impact of IFRS 16).
The Company’s 2019 financial results include the impact of IFRS 16, a substantial change to lease accounting standards, effective January 1, 2019. Centric Health adopted IFRS 16 using the modified retrospective approach and the Company’s comparative information was not restated. As a result, the comparability of the Company's 2019 Adjusted EBITDA to periods prior to January 1, 2019 is impacted.
Corporate office expenses were lower for the quarter by 10.1% at $1.2 million compared to the same period in the prior year, with the variance being primarily due to labour savings realized in the current year.
Adjusted EBITDA from continuing operations was $2.8 million for the third quarter compared to a loss of $42 thousand for the same period in the prior year. The overall impact to Adjusted EBITDA from continuing operations from the adoption of IFRS 16 was an increase of $0.5 million for the quarter.
During the three and nine month periods ended September 30, 2019, the Company disposed of the operating assets of its retail pharmacy operations in Grande Prairie, AB and Medicine Hat, AB. The results of these operations have been included as part of discontinued operations on the consolidated statement of income and comprehensive income. As required under IFRS, the Company classified its former Surgical and Medical Centres segment as assets held for sale and have presented its current and prior year results as discontinued operations. Revenue and Adjusted EBITDA from discontinued operations were $8.9 million and a loss of $0.1 million, for the third quarter, respectively. The impact of the transition to IFRS 16 in discontinued operations was an increase to Adjusted EBITDA of $0.4 million for the quarter.
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 the leading provider of pharmacy and other healthcare services to Canadian seniors. The Company is one of Canada's leading, and most trusted providers of comprehensive Specialty Pharmacy services and solutions to seniors. We operate a large national network of pharmacy fulfilment centres that deliver high-volume solutions for the cost-effective supply of chronic medication and other specialty clinical pharmacy services, serving more than 31,000 residents in over 460 seniors communities (long-term care, retirement homes, and assisted living facilities) nationally.
With services that address the growing demand within the Canadian healthcare system, Centric Health's unparalleled national care delivery platform provides significant potential for future expansion and growth.
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 the Company’s business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the Company’s liquidity and capital requirements, government regulation and funding, the highly competitive nature of the Company’s industry, reliance on contracts with key customers and other risk factors described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change.
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 EBITDA 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 EBITDA as a key component of the covenant calculations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.