Based in Somerset, NJ Medical Transcription Billing, Corp. (NASDAQ CM: MTBC) is a healthcare information technology company that provides a fully integrated suite of web-based solutions and related business services to hospital-based and private healthcare providers. MTBC became a public company in July 2014, after several years of strong growth through both acquisitive and organic means as a private healthcare technology company. Through its flagship software-as-a-service (SAAS) platform Practice Pro, MTBC "brings big practice solutions" to over 750 small and medium sized medical practices, helping approximately 2,000 providers grow and track patient visits, streamline operations, and use data to facilitate better business and clinical decision making.
Highlights from the update are as follows:
Nice progress since our initiation; strong outlook
MTBC has made several significant developments since we initiated coverage on the company in March. These include 1Q16 results and a business update in which the company issued revenue guidance of $27mn-$30mn, solidly above our 2016E estimate for $25.1mn. MTBC also announced that it deployed a portion of its growth capital to fund the strategic acquisition of Tennessee-based Renaissance Physician Services. We see several catalysts ahead for the company, from the acquisition of Renaissance Physician Services as well as Gulf Coast Billing, particularly with the backdrop of the strong guidance outlook issued by management for the balance of the year.
Gulf Coast Billing, Renaissance latest MTBC acquisitions
On April 30, MTBC announced the acquisition of Renaissance Physician Services, a Tennessee-based company that specializes in medical billing. Renaissance should be an easy-to-integrate, accretive acquisition that had approximately $0.6mn of revenues over the last year. Texas-based Gulf Coast Billing, which was acquired during February, brings the company a base of approximately $3mn in trailing revenues and is also expected to be quickly accretive. We expect MTBC to continue to deploy capital to make accretive acquisitions to accelerate growth throughout the year.
1Q16 marks second consecutive quarter of positive EBITDA
MTBC generated EBITDA for a second consecutive quarter despite seasonal headwinds. The company reported 1Q16 revenues of $5.1mn, compared to $6.1mn in 1Q15. Revenues were down YoY due to 2015 attrition from customers acquired at the time of its IPO. The company reiterated guidance for 20%+ growth in 2016E, with sequential growth in 2Q16, which leads us to the conclusion that the company is now at a point where it is moving beyond the effects of these lost customers. Indeed, the company guided for revenue of $27mn-$30mn, well above 2015's top line of $23.1mn. Importantly, MTBC also guided to adjusted EBITDA of $1.5mn - $2.0mn, which places the company about a year ahead of the pace we expected when we initiated coverage on the company.
Raising estimates; price target for MTBC
In light of MTBC's 2016 outlook, in which the company is expecting to achieve adjusted EBITDA leverage earlier than we were expecting, as well as higher revenues, we are raising our price target and estimates for MTBC. Our new price target suggests a fair value estimate of $3.85 per share. We continue to view MTBC as an attractive company in the healthcare technology industry that offers exposure to a massive market opportunity at a compelling valuation.
