CRH Medical Corp Stock Slides as Q2 Revenue Jumps

CRH Medical Corporation (TSX: CRH) saw its second-quarter revenue climb 33% yet its operating expenses for the period rose 48%

SmallCapPower | August 3, 2017: CRH Medical Corporation (TSX: CRH) late Wednesday reported a 33% YoY growth in total revenues to US$22.1 million, primarily due to the anesthesia businesses acquired in the second quarter of 2016. Despite this, its stock price sank 26% in early Thursday trading to $3.40. CRH Medical shares are down more than 70% from its April 2017 high of $12.35.

Related: CRH Medical Corporation Shares Get Whacked By Proposed CMS Fee Schedule

Revenues from the anesthesia services surged 38% YoY to US$19.3 million compared to US$13.9 million for the second quarter of 2016. The Company expects revenue from anesthesia services to continue to increase through organic growth in patient cases and deployment of available capital for future acquisitions.

Revenues from product sales were 5% higher to US$2.8 million, attributed to an increase in product sales owing to the successful execution of the Company’s direct to physician program.

Anesthesia services were impacted by the changes in payor mix, which resulted in 13% lower revenues and revenue estimates totaling approximately US$200,000.

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Anesthesia services segment serviced 46,188 patient cases compared to 29,336 patient cases during the second quarter 2016.

Total adjusted operating expenses came in 48% higher to US$11.8 million, mainly due to the expenses related to acquisitions. The Anesthesia operating expenses, which increased 58% YoY should not be directly compared to 2016 quarter due to the timing of acquisitions as costs tend to be fixed as they include employee related costs. The operating expenses for Product segment were 14% higher, due to increasing employee costs due to the surge in sales activity and an increase in professional fees related to product distribution in China.

Total adjusted operating EBITDA surged 19% to US$10.2 million for the quarter. Cash and Cash equivalents stood at US$7.8 million compared to US$9.5 million at the end of 2016.

Additionally, CRH Medical Corporation announced on August 1, 2017, that it has completed a transaction to acquire a 55% interest in a gastroenterology anesthesia practice in West Florida. The transaction was financed through a combination of CRH’s credit facility and cash on hand. The acquisition is expected to increase total annual estimated revenue by US$3.0 million.

Edward Wright, Chief Executive Officer of CRH Medical said, “The acquisition is expected to be the first in a series of acquisitions we will complete through the remainder of the year. During the past quarter, we expanded our credit facility from US$55 million to US$100 million with a current rate of approximately 3.25%. The credit facility, along with our strong free cash flow which was US$5.8 million in our most recently completed quarter, will continue to fund future acquisitions.”

CRH Medical Corporation trades at a trailing P/E of 37.7x and TTM price to sales of 3.91x.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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