Monday, May 8, 2017

Medical Transcription Billing, Corp. (NASDAQ: MTBC) Set to Increase Revenues Substantially in 2017 with New Acquisition

The hiatus after its initial public offering (IPO) in 2014 has come to an end, and Medical Transcription Billing, Corp. (NASDAQ: MTBC; MTBCP) has rebooted its acquisition strategy by bringing two new businesses under its wing. In late 2016, the company completed its acquisition of MediGain, LLC, a Texas-based medical billing specialist, and its subsidiary, Millennium Practice Management Associates, LLC, a New Jersey-based medical billing company. Now, with its bottom line enhanced as costs are spread over the larger organizational structure, MTBC is also set to see its top line improve substantially.

The MediGain acquisition will expand MTBC’s revenue base significantly, adding approximately 200 customers and $10 million in annualized revenues. As a result, for the first quarter of 2017, with an earnings report due on Wednesday, May 10, revenues are expected to rise by approximately 60% year-over-year to $8.2 million with “significantly improved” net loss and adjusted EBITDA. Overall revenue growth of over 20 percent is forecast for 2017, up from 2016 revenues of $24.5 million, and the top line is expected to hit $30 million.

The MediGain acquisition is a real feather in MTBC’s cap, bringing a number of advantages to the company. For starters, the purchase price of $7 million for $10 million worth of revenue represents a 30% discount on the industry norm multiple of 1x. As Warren Buffet famously said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

Net present value of the acquisition is positive, as the discounted cash flows from the acquisitions exceed MTBC’s cost of capital, already noted by the market and reflected by a rise in the share price, and MTBC has gained talented team members in North America and expanded its Asia-based team to additional countries with talented, cost-effective workforces.

With these acquisitions, MTBC continues its focus on smaller one- to 10-doctor practices. The company provides software-as-a-service (SaaS) solutions to assist health care providers generate invoices, prepare and mail statements to their patients and submit insurance claims. It also provides electronic health record (EHR) software that allows providers to record notes of a visit and practice management software for the front office staff to schedule appointments, check insurance eligibility, send out automated reminder calls and text messages about flu shots, etc.

In addition to these services, practitioners and patients have access to a suite of mobile applications, including apps that the doctors can use to refill prescriptions and apps that the patients can use to look up their records, set up appointments, request prescription refills and check in when they arrive at the practice. Doctors who do not want to type their notes into the EHR can dictate into an app on their iPhone or Android device, which will be sent automatically to MTBC personnel, who will listen to it and type the notes into the electronic health record software.

MTBC’s main competitive advantage is its ability to deliver these services at a cost far less than any competitor. This is partly because MTBC has bought or established a number of overseas subsidiaries, sourcing expertise and talent for much less than is obtainable in the U.S. MTBC’s two largest offices are in Pakistan, where it employs 1,500 people at salaries of approximately one-tenth what you would pay in the United States for similarly skilled and educated labor.

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