Assure Holdings Corp. (the “
Company” or
“
Assure”) (TSXV: IOM; OTCQB: ARHH), a provider of
intraoperative neuromonitoring services (
“IONM”),
reported financial results for the second quarter ended June 30,
2020.
Second Quarter 2020 Financial Results vs. Second Quarter
2019
- Total revenue was ($10.8) million versus $8.4 million.
- Managed cases increased 35% to 1,991 versus 1,476.
- Equity method of investment in Provider Network Entities
(“PNEs”) was ($1.1) million compared to $0.7 million.
- Net loss of ($13.0) million compared to net income of $4.0
million.
- Net loss per diluted share was ($0.37) compared to net income
of $0.09 per diluted share.
- Adjusted EBITDA was ($14.6) million versus $5.7 million.
- Company recorded reserves of approximately $2.5 million for all
open accounts receivable balances aged two years.
- Assure pre-emptively recorded reserves of approximately $15
million to further reduce accrual rate and revenue per procedure
expectations to more accurately reflect what the Company expects to
collect based on current data.
Management Commentary
“I am proud of the entire Assure team for their
resilience in navigating the global pandemic and faithfully serving
our surgeon partners and patients,” said John A. Farlinger,
Assure’s executive chairman and CEO. “The Company has taken
important steps to enhance its near- and long-term stability and
growth during this challenging period by accessing more than $11
million in capital since December 2019. We strengthened our balance
sheet and secured funds needed for ongoing expansion by closing a
credit facility on favorable terms to Assure, obtaining a
potentially forgivable loan under the Paycheck Protection Program
and raising convertible debt. We are also developing an in-network
revenue stream with the signing of new agreements with First Health
and the largest commercial health insurer in Michigan. We intend to
maximize our in-network revenue by aggressively securing direct
contracts with payors as well as striking agreements with
multi-plan aggregators.”
“We made the decision to pre-emptively write-down a sizable
portion of our accounts receivable balance to minimize potential
downside risk and set us up for success later this year and beyond.
Our business model has evolved; a few years earlier, our financials
were driven by collecting larger receivables on a small number of
cases but today we are collecting smaller receivables on a much
greater proportion of the cases we cover, while at the same time
accumulating a relatively higher share of the professional revenue.
While this transition has had challenges, with our added scale we
are building what we believe will be a sustainable and profitable
model for years to come. Further, we believe that this action was
prudent as we embark on the filing of a registration statement on
Form S-1.”
“Our second quarter results were negatively impacted by a number
of factors. The majority contributor resulted from the Company’s
bi-annual review of its own collection experience for technical and
professional cases completed over the previous 13 to 24 months.
Based on current data, we made the proactive decision to reserve
some outstanding claims that have not yet aged two years at which
time they become automatic write-downs because we believe the
estimated rate of recovery was too high. Relatedly, we also
reserved for receivables against current quarter revenue that aged
two years during the period. Both issues reflect the lingering
effects of poor performance from the legacy 3rd party billing
provider that was terminated. The second contributor was the steep
COVID-19-related decline in elective procedures we experienced in
April and lingered in certain markets through the second quarter.
The third factor was the previously disclosed impact of reserving
claims from a private health insurance company that to-date has
failed to reimburse Assure. And fourth and finally, Neuro-Pro, the
IONM company we acquired in late 2019, had historically accrued and
realized a lower revenue per procedure rate compared to the main
Assure business, although that gap is narrowing, and we believe
temporary.”
“In addition, as we do every six months per our stated
accounting policies, the Company historically estimated our revenue
and accounts receivable reserves based upon collections on our
accounts that are 24 to 36 months old. Assure will be conducting
this analysis on a quarterly basis going forward to maximize
transparency in the business. Related to this analysis, we
proactively made the decision to further reduce our accrual rate
and revenue per procedure expectations to more accurately reflect
where the market is trending and what we expect to collect based on
current data. These adjustments were driven by issues associated
with the collection of 2018 claims related to our previous 3rd
party biller and downward market pressure in the average payment
per procedure from commercial insurance companies. This latter
factor is currently being experienced throughout the IONM industry.
While painful in the short-term, we believe that taking this
adjustment is in the best interest of the Company because it takes
our revenue per procedure accrual close to what our competitors are
realizing and is also at a level near the in-network insurance
rates we have been negotiating, greatly reducing down-side
risk.”
“Although multiple developments impacted second quarter results,
the Company is advancing on several important initiatives that
position Assure to have a strong second half of the year. Since
taking control of revenue cycle management from the 3rd party
billing provider terminated in the autumn of 2019, Assure has
renewed and expanded collection efforts generating positive
results. Through the first six months of 2020, excluding cash
collected from PNEs for professional IONM services which are
recorded separately, Assure collected more than $6.9 million and a
record $4.0 million in the second quarter alone. This compares to
collections of $4.5 million in the first six months of 2019 and
$2.0 million in the year-ago quarter. In addition, Assure has
generated positive monthly cash flow for five consecutive months,
from March through July 2020. We have also resumed negotiations
with the previously mentioned private health insurance company on
disputed claims that have not yet been paid, and while there is no
guarantee of reaching an agreement, we are optimistic that a
portion of these claims will ultimately be reimbursed. And finally,
for Neuro-Pro, we are successfully negotiating higher professional
fee rates on these cases and expect this improvement to be
reflected in our financials later in 2020.”
“At this stage, I believe that we have largely completed the
heavy lifting associated with our accounts receivable cleanup. I
also see potential based on our successful collections of
receivables in the first half of 2020, and the re-billing of all
outstanding 2018 claims completed earlier this year, for a
meaningful share of the receivables that we reserved this quarter
to ultimately be recovered in the current and future years. We are
confident that the Company is converting our rapidly increasing
case volume and improving cash collections to take advantage of the
substantial market opportunity in IONM and expand our platform.
Further, we are adding competencies and differentiators, including
important new organizational hires, that will accelerate our race
to scale.”
Assure has also filed its year-end financial statements and
management discussion & analysis (MD&A) with SEDAR and the
OTC. This information can be found at www.sedar.com and
www.OTCmarkets.com.
Operational Guidance
The Company has adjusted its guidance for full-year 2020 total
procedures from 10,500 to 10,000 as a result of COVID-19 related
disruptions. This record number represents a more than 55% increase
in cases compared with 2019. The guidance reflects the impact
to-date of COVID-19, but not a substantial future disruption
relating to the pandemic.
Impact of COVID-19
The adverse impact of the global pandemic on people and
businesses has been extensive and far-reaching. Beginning in March
and accelerating in April, Assure saw a decline of more than 70% in
its number of procedures performed; however, the Company’s overall
weekly case volumes in May through August exceeded average weekly
case rates in January and February. However, continued COVID-19
cases in the United States has caused disruption in certain
markets, primarily Texas, with a pullback of approximately 15% in
terms of procedures. Assure is continuing to carefully monitor the
impact of COVID-19 in all states within its operational footprint.
The Company anticipates that the majority of the procedures that
were postponed in March and April will be rescheduled for a later
date in 2020.
Assure Secures United States Small Business
Administration Loan Under CARES Act
In April 2020, Assure received a $1.2 million loan under
the United States Small Business Administration Paycheck Protection
Program (the “$1.2 million Loan”) pursuant to the
Coronavirus Aid, Relief, and Economic Security Act. Assure expects
all or a portion of the loan to be forgiven as the Company has
maintained its employment and compensation within designated
parameters.
Subsequent Event: Assure Enters into a
New Loan Facility
On August 12th, 2020 Assure Holdings signed a
new $4.0 million term loan (the “Term Loan”) and a
$2.5 million operating line of credit (the “Operating
Line” and together with the Term Loan, the “Loan
Facility”), for a total of $6.5 million with Colorado
based, Central Bank & Trust, a part of Farmers & Stockmens
Bank. The Loan Facility will be used to replace the Company’s
current $3.0 million facility with Bank of Oklahoma.
Under the conditions of the agreement governing
the Loan Facility (the “Loan Agreement”), the Term
Loan bears interest at the Wall Street Journal prime rate
(“WSJ”) plus 2.0% and matures on August 12, 2024.
In addition, the Operating Line bears interest at a rate of WSJ
plus 2.0% and matures on August 12, 2022. For more information
concerning the Loan Facility please see the Company’s news release
dated August 13, 2020, available on the Company’s profile on SEDAR
at www.sedar.com.
Conference Call
The Company will hold a conference call today, August 31, 2020,
at 5:30 p.m. Eastern time to discuss its second quarter 2020
results.
Date: Monday, August 31, 2020 Time: 5:30 p.m. Eastern time (3:30
p.m. Mountain time) Toll-free dial-in number: 1-877-407-0792
International dial-in number: 1-201-689-8263 Conference ID:
13708176
Please call the conference telephone number 5-10 minutes prior
to the start time. An operator will register your name and
organization.
The conference call will be broadcast live and available for
replay here.
A replay of the conference call will be available after 8:30
p.m. Eastern time on the same day through September 15, 2020.
Toll-free replay number: 1-844-512-2921 International replay
number: 1-412-317-6671 Replay ID: 13708176
About Assure Holdings
Assure Holdings Corp. is a Colorado-based company that works
with neurosurgeons and orthopedic spine surgeons to provide a
turnkey suite of services that support intraoperative
neuromonitoring activities during invasive surgeries. Assure
employs its own staff of technologists and uses its own
state-of-the-art monitoring equipment, handles 100% of
intraoperative neuromonitoring scheduling and setup, and bills for
all technical services provided. Assure Neuromonitoring is
recognized as providing the highest level of patient care in the
industry and has earned The Joint Commission’s Gold Seal of
Approval®. For more information, visit the Company’s website
at www.assureneuromonitoring.com.
Non-IFRS Measures
This press release includes certain measures which have not been
prepared in accordance with International Financial Reporting
Standards (“IFRS”) such as Adjusted EBITDA, equity
method of investment in PNEs, case volume, cases and managed cases.
The non-IFRS measures presented are unlikely to be comparable to
similar measures presented by other issuers. References to Adjusted
EBITDA are to net income/(loss) excluding interest, taxes,
depreciation, share-based compensation, performance share
compensation, provision for broker warrant fair value and provision
for stock option fair value. Reference to equity method of
investment in PNEs, case volume, cases and managed cases are to
procedures monitored by the Company. None of the foregoing non-IFRS
measures is an earnings measure recognized by IFRS and do not have
a standardized meaning prescribed by IFRS. Management believes that
Adjusted EBITDA, equity method of investment in PNEs, case volume,
managed cases and cases are appropriate measures in evaluating the
Company’s performance. Readers are cautioned that Adjusted EBITDA,
equity method of investment in PNEs, managed cases, case volume and
cases should not be construed as alternatives to net income (as
determined under IFRS), as indicators of financial performance or
to cash flow from operating activities (as determined under IFRS)
or as measures of liquidity and cash flow.
Forward-Looking Statements
This news release may contain “forward-looking statements”
within the meaning of applicable securities laws, including, but
not limited to: the Company’s expansion and financing plans; the
proposed use of proceeds of the Loan Facility; comments with
respect to strategies, expectations, planned operations and future
actions of the Company; the maximization of the Company’s
in-network revenue; entering of agreements with multi-plan
aggregators; filing of a registration statement on a Form S-1; the
gap in respect of accrued and realized revenue per procedure
between Assure’s main business and Neuro-Pro is narrowing and
temporary; the rescheduling of postponed procedures; the Company’s
accounting practices, including but not limited to the expected
effects of the Company’s decision to write-down a sizable portion
of its accounts receivable and to further reduce its accrual rate
and revenue per procedure expectations; the impact of COVID-19; the
total number of procedures for 2020 to exceed 10,000; collections
of accounts receivable including a meaningful share of the 2018
reserved receivables; that the Company will be positioned to have a
strong second half of the year; reimbursement of disputed claims;
higher professional fee rates on Neuro-Pro cases will be
negotiated; and all or a portion of the $1.2 million Loan will be
forgiven. Forward-looking statements may generally be identified by
the use of the words "anticipates," "expects," "intends," "plans,"
"should," "could," "would," "may," "will," "believes," "estimates,"
"potential," "target," or "continue" and variations or similar
expressions. These statements are based upon the current
expectations and beliefs of management and are subject to certain
risks and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
These risks and uncertainties include, but are not limited to: the
Company’s ability to successfully expand; the Company’s ability to
negotiate higher professional fee rates on Neuro-Pro cases;
postponed procedures may not be rescheduled in 2020 or at all; the
Company’s ability to complete 10,000 procedures in 2020; the
Company’s ability to collect past due accounts receivable; the
accuracy of the reservations made to receivables; all or a portion
of the $1.2 million Loan may not be forgiven; the Company may not
be able to maximize the Company’s in-network revenue; the Company
may not enter into agreements with multi-plan aggregators;
the gap in respect of accrued and realized revenue per procedure
between Assure’s main business and Neuro-Pro may not be temporary
and might not continue to narrow; the postponed procedures may not
be rescheduled; the Company may not be able to raise additional
capital through convertible debt financings; the Company’s decision
to write-down a sizable portion of its accounts receivable may not
result in a more sustainable and profitable model; the Company’s
decision to further reduce its accrual rate and revenue per
procedure expectations may not reduce its down-side risk; the
Company might not proceed with the filing of a Form S-1; the
uncertainty surrounding the spread of COVID-19 and the impact it
will have on the Company’s operations and economic activity in
general; and the risks and uncertainties discussed in our most
recent annual and quarterly reports filed with the Canadian
securities regulators and available on the Company’s profile on
SEDAR at www.sedar.com, which risks and uncertainties are
incorporated herein by reference. Readers are cautioned not to
place undue reliance on forward-looking statements. Except as
required by law, Assure does not intend, and undertakes no
obligation, to update any forward-looking statements to reflect, in
particular, new information or future events.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contact
Scott Kozak, Investor and Media Relations Assure Holdings Corp.
1-720-287-3093 Scott.Kozak@assureiom.com
SCHEDULE A
ASSURE
HOLDINGS CORP. |
|
|
|
CONDENSED
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
|
|
|
(in thousands of
United States Dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 (unaudited) |
|
December 31, 2019 |
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash |
|
$ |
273 |
|
|
$ |
59 |
|
|
|
Accounts
receivable, net |
|
|
15,117 |
|
|
|
30,863 |
|
|
|
Other
assets |
|
|
345 |
|
|
|
168 |
|
|
|
Due from
related parties |
|
|
3,252 |
|
|
|
2,617 |
|
|
|
Total current assets |
|
|
18,987 |
|
|
|
33,707 |
|
|
|
Equity
method investments |
|
|
856 |
|
|
|
2,360 |
|
|
|
Property,
plant and equipment, net |
|
|
1,000 |
|
|
|
871 |
|
|
|
Intangibles |
|
|
4,349 |
|
|
|
4,587 |
|
|
|
Goodwill |
|
|
2,857 |
|
|
|
2,857 |
|
|
|
Total assets |
|
$ |
28,049 |
|
|
$ |
44,382 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
2,521 |
|
|
$ |
4,365 |
|
|
|
Debt |
|
|
1,183 |
|
|
|
1,664 |
|
|
|
Current
portion of lease liability |
|
|
575 |
|
|
|
461 |
|
|
|
Current
portion of acquisition liability |
|
|
4,980 |
|
|
|
5,030 |
|
|
|
Other
current liabilities |
|
|
275 |
|
|
|
81 |
|
|
|
Total current liabilities |
|
|
9,534 |
|
|
|
11,601 |
|
|
|
Lease
liability, net of current portion |
|
|
557 |
|
|
|
500 |
|
|
|
Debt, net of
current portion |
|
|
3,446 |
|
|
|
1,160 |
|
|
|
Acquisition
debt, net of current portion |
|
|
- |
|
|
|
2,429 |
|
|
|
Provision
for acquisition share issuance |
|
|
540 |
|
|
|
540 |
|
|
|
Provision
for fair value of stock options |
|
|
13 |
|
|
|
66 |
|
|
|
Provision
for performance share issuance |
|
|
16,011 |
|
|
|
16,011 |
|
|
|
Deferred tax
liability, net |
|
|
271 |
|
|
|
2,184 |
|
|
|
Total liabilities |
|
|
30,372 |
|
|
|
34,491 |
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Capital
stock |
|
|
35 |
|
|
|
35 |
|
|
|
Additional
paid-in capital |
|
|
8,028 |
|
|
|
6,682 |
|
|
|
Retained
earnings (deficit) |
|
|
(10,386 |
) |
|
|
3,174 |
|
|
|
Total shareholders' equity
(deficit) |
|
|
(2,323 |
) |
|
|
9,891 |
|
|
|
Total
liabilities and shareholders' equity |
|
$ |
28,049 |
|
|
$ |
44,382 |
|
|
|
ASSURE
HOLDINGS CORP. |
CONDENSED INTERIM CONSOLIDATED STATEMENT OF
INCOME/(LOSS) |
(in thousands of
United States Dollars, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
Revenue |
|
|
|
|
|
|
|
|
Out-of-Network fees, net |
|
$ |
(11,653 |
) |
|
$ |
7,562 |
|
|
$ |
(9,307 |
) |
|
$ |
13,134 |
|
Contract
fees and other |
|
|
917 |
|
|
|
827 |
|
|
|
2,904 |
|
|
|
1,299 |
|
Total revenue |
|
|
(10,736 |
) |
|
|
8,389 |
|
|
|
(6,403 |
) |
|
|
14,433 |
|
Cost of
revenues |
|
|
(1,039 |
) |
|
|
(1,744 |
) |
|
|
(2,830 |
) |
|
|
(3,191 |
) |
Gross (loss) margin |
|
|
(11,775 |
) |
|
|
6,645 |
|
|
|
(9,233 |
) |
|
|
11,242 |
|
Operating expenses |
|
|
|
|
|
|
|
|
General and
administrative |
|
|
1,711 |
|
|
|
1,880 |
|
|
|
3,896 |
|
|
|
3,861 |
|
Sales and
marketing |
|
|
163 |
|
|
|
75 |
|
|
|
452 |
|
|
|
332 |
|
Depreciation
and amortization |
|
|
261 |
|
|
|
114 |
|
|
|
520 |
|
|
|
216 |
|
Total operating expenses |
|
|
2,135 |
|
|
|
2,069 |
|
|
|
4,868 |
|
|
|
4,409 |
|
Income/(loss) from
operations |
|
|
(13,910 |
) |
|
|
4,576 |
|
|
|
(14,101 |
) |
|
|
6,833 |
|
Other income/(expenses) |
|
|
|
|
|
|
|
|
Earnings/(loss) from equity method investments |
|
|
(1,110 |
) |
|
|
722 |
|
|
|
(1,217 |
) |
|
|
907 |
|
Other
income/(expense) |
|
|
(4 |
) |
|
|
89 |
|
|
|
53 |
|
|
|
61 |
|
Interest,
net |
|
|
(260 |
) |
|
|
(64 |
) |
|
|
(498 |
) |
|
|
(101 |
) |
Total other income/(expense) |
|
|
(1,374 |
) |
|
|
747 |
|
|
|
(1,662 |
) |
|
|
867 |
|
Income/(loss) before income
taxes |
|
|
(15,284 |
) |
|
|
5,323 |
|
|
|
(15,763 |
) |
|
|
7,700 |
|
Income tax
benefit (expense) |
|
|
2,307 |
|
|
|
(1,290 |
) |
|
|
2,203 |
|
|
|
(1,928 |
) |
Net
income/(loss) |
|
$ |
(12,977 |
) |
|
$ |
4,033 |
|
|
$ |
(13,560 |
) |
|
$ |
5,772 |
|
Basic
income/(loss) per common share |
|
$ |
(0.37 |
) |
|
$ |
0.12 |
|
|
$ |
(0.39 |
) |
|
$ |
0.17 |
|
Diluted
income/(loss) per common share |
|
$ |
(0.37 |
) |
|
$ |
0.09 |
|
|
$ |
(0.39 |
) |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
ASSURE
HOLDINGS CORP. |
ADJUSTED
EBITDA |
(in thousands of
United States Dollars) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
Reported net
income |
$ |
(12,977 |
) |
|
$ |
4,033 |
|
|
$ |
(13,560 |
) |
|
$ |
5,772 |
|
Interest,
net |
|
260 |
|
|
|
64 |
|
|
|
498 |
|
|
|
101 |
|
Depreciation
and amortization |
|
261 |
|
|
|
114 |
|
|
|
520 |
|
|
|
216 |
|
Share based
compensation |
|
163 |
|
|
|
271 |
|
|
|
368 |
|
|
|
748 |
|
Income tax
expense |
|
(2,307 |
) |
|
|
1,290 |
|
|
|
(2,203 |
) |
|
|
1,928 |
|
Provision
for broker warrant fair value |
|
- |
|
|
|
(7 |
) |
|
|
- |
|
|
|
14 |
|
Provision
for stock option fair value |
|
4 |
|
|
|
(82 |
) |
|
|
(53 |
) |
|
|
(75 |
) |
|
$ |
(14,596 |
) |
|
$ |
5,683 |
|
|
$ |
(14,430 |
) |
|
$ |
8,704 |
|
|
|
|
|
|
|
|
|
ASSURE
HOLDINGS CORP. |
EARNINGS PER
SHARE |
(in thousands of
United States Dollars, except per share amounts) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
Three Months Ended June 30, 2019 |
|
Six Months Ended June 30, 2020 |
|
Six Months Ended June 30, 2019 |
Income
attributable to common shareholders |
|
|
|
|
|
|
|
Basic |
$ |
(12,977 |
) |
|
$ |
4,033 |
|
$ |
(13,560 |
) |
|
$ |
5,772 |
Weighted average common share
outstanding |
|
34,795,313 |
|
|
|
34,143,944 |
|
|
34,795,313 |
|
|
|
34,145,313 |
Basic
earnings per common share |
$ |
(0.37 |
) |
|
$ |
0.12 |
|
$ |
(0.39 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Income
attributable to common shareholders |
|
|
|
|
|
|
|
Basic |
$ |
(12,977 |
) |
|
$ |
4,033 |
|
$ |
(13,560 |
) |
|
$ |
5,772 |
Weighted average common shares
outstanding |
|
34,795,313 |
|
|
|
34,143,944 |
|
|
34,795,313 |
|
|
|
34,145,313 |
Dilutive effect of stock options,
warrants, and performance shares |
|
- |
|
|
|
8,741,000 |
|
|
- |
|
|
|
8,741,000 |
Weighted average common shares
outstanding assuming dilution |
|
34,795,313 |
|
|
|
42,884,944 |
|
|
34,795,313 |
|
|
|
42,886,313 |
Fully
diluted earnings per common share |
$ |
(0.37 |
) |
|
$ |
0.09 |
|
$ |
(0.39 |
) |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
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