LOS ANGELES, CALIFORNIA–(Marketwired – June 29, 2017) –
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
BLVD Centers Corporation (“BLVD” or the “Company“) (TSX VENTURE:CXV), a leading company in the United States addiction recovery industry, today announced that it has posted its financial results for the quarter ended May 31, 2017, as well as audited financial results for the year ending February 28, 2017.
“I am pleased to finally be releasing our first quarter numbers reflecting the financial impact of our new model and an enterprise net profit for the quarter,” said Chris Heath, CEO of BLVD. “I chose to release our first quarter alongside last year’s financials to provide our shareholders with a comparison of our new business model to our old one. While the business held its own in terms of revenue in the last fiscal year, expenses and capital investments were far too high, and arguably unsustainable under the old centralized model of managing these centers. The new model, which I initiated in late February to start fresh in the new fiscal year, has begun to yield results quite quickly. Just in this quarter, we have seen a nice increase in our current assets of just over $650,000.”
Highlights:
- Revenue Growth: Revenues for the quarter ended May 31, 2017 were $9,033,000, as compared to $7,814,000 for the previously reported quarter ending November 30, 2017, an increase of 16%. This was the first quarter of revenue growth in a year, since May 31, 2016.
- Improved Profitability: Adjusted EBITDA (adjusted for share-based compensation) for the quarter was $596,000, as compared to a loss of $116,000 in the previously reported quarter, an absolute increase of 614%. This is the first reported quarter of positive Adjusted EBITDA since November 2015.
- Generated net profit on an enterprise level, including all non-cash costs such as stock-based compensation. The last quarter with net profit was more than a year prior for the quarter ending November 30, 2015.
The interim financial statements of the Company for the three months ended May 31, 2017 and 2016 and accompanying Management’s Discussion & Analysis (MD&A) are available at www.sedar.com. Additionally, the Audited Fiscal Year 2017 financial statements and accompanying MD&A have been posted on www.sedar.com.
“In looking to next quarter, I am targeting additional profit growth,” continued Mr. Heath. “We have decentralized hiring and marketing, reduced corporate overhead and focused our corporate team on tapping into market growth rather than operations and direct marketing. The immediate effect will be a bottom line impact in the quarter ending August 30, 2017. I am targeting top line revenue growth later in the year, which should drive additional profit growth during those quarters. We have a strong and growing balance sheet and we are laser focused on delivering both revenue and profit growth as we deliver on our strategy.”
“It is worth taking a look at the year end as a standard to compare the old model to the new. Clearly, we have pivoted this company away from that centralized business model and eliminated the factors in the business that drove the losses last year. One note that I might highlight is the provision for doubtful accounts for older receivables. When BLVD adopted the new model, the previous management team left the Company. While operations and our financial position improved as a result of their departure, we did lose some institutional knowledge that would have been helpful to chase down the old billings. I therefore made a decision to create a large provision of doubtful accounts from last fiscal year, specifically for services performed between March and August of 2016, which were also billed by a different billing vendor. We will work to collect that amount irrespective of our accounting policies, and should collect a portion of it in my opinion. But it was prudent to take a conservative approach with regard to our financials.”
“Also, I continue to look for ways to better communicate with shareholders. For the first time in two years, I will be leading an earnings call shortly after the release of the materials to highlight our revenue and profit growth in the first quarter. During that call, I will be providing more detailed guidance on the next few quarters as well.”
Mr. Heath, CEO of BLVD, will hold an investor conference call to review the quarter results at 4:15 p.m. (EST) on Thursday, July 6, 2017.
Conference Call Details
| The details of the call are: | Thursday, July 6, 2017 at 4:15 p.m. (EST) |
| US & Canada Toll Free Dial In: | (844) 369-0801 |
| Meeting ID Number: | 7899 |
Financial professionals are invited to call in to register in advance to ask questions. To pre-register as a qualified caller, please e-mail blvdir@blvdcenters.com by 12:00 p.m. (EST) on July 3, 2017.
Review of New BLVD Centers Model and Ongoing Efforts To Resolve Past Billings
BLVD Centers has shifted the clinical and operational staff management and hiring at each individual center, as well as the majority of the sales and marketing responsibilities of the clinics, to the local general managers and outreach leaders through an MSA, enabling these leaders to make cost decisions independently. The model allows local operators to keep some of the annual cash flow generated from their operations and aligns incentives between the Company and the operators. These leaders have been established at the current seven sites, in some cases for as long as two years. Because of the previous “centralized” management model, they were restricted from hiring local staff and managing the center as a “stand alone” or decentralized model. Further, they were not incentivized to use local marketing techniques, which are often a fraction of the cost of national advertising. The previous management team attempted to centralize all aspects of the centers, from staffing and back office to sales and marketing, resulting in expenditure of a tremendous amount of time, energy and money without commensurate rewards in revenue growth. Under the new model, BLVD Centers will continue to own or lease its existing facilities (depending on the market) and provide branding support, facilities (real estate, furniture, fixtures and equipment) management and upkeep, call center services, clinical protocols, and documentation support to all centers. BLVD Centers will continue to maintain control of these facilities in the event a change in local management is someday needed. For new facilities, BLVD Centers will have the flexibility to decide whether to own or lease, and management will focus upon speed to profitability and return on equity in deciding upon the proper structure. BLVD Center has shifted corporate ownership costs to the local operational and outreach leaders, incentivizing them like partners instead of employees. In terms of the accounts receivable for previous claims submitted to insurers in California, the Company continues to work to resolve these issues with regard to claims generated in the previous fiscal years, including last year. These issues range from disputing lack of payments from specific insurance companies for services performed to responding to regulatory demands for specific information regarding the way the Company operates. The Company is working with the auditor to accurately value the accounts receivable for the year-end balance, for the 12 months ending February 28th, 2017 (last fiscal year), for bills generated under the old management team.
As part of incentives for the new team, the Board issued 500,000 options to Mr. Chris Heath, 250,000 options to Mr. Edward Allera, and 200,000 options to Mr. Nitin Kaushal In addition, the Board issued and additional 1,700,000 options to parties at Convalo that are key to the success of the new business model. All options have a strike price of $0.17, vest 1/3 each in June 2018, 2019 and 2020 respectively, and have a 10-year exercise provision.
Non-GAAP Measures
This press release refers to “Adjusted EBITDA” which is a non-GAAP and non-IFRS financial measure that does not have a standardized meaning prescribed by GAAP or IFRS. The Company’s presentation of this financial measure may not be comparable to similarly titled measures used by other companies. This financial measure is intended to provide additional information to investors concerning the Company’s performance. Adjusted EBITDA is defined as EBITDA excluding stock based compensation and gains/losses on financial derivatives. Adjusted EBITDA is a Non-IFRS measure the Company uses as an indicator of financial health, and excludes several items which may be useful in the consideration of the financial condition of the Company, including interest expense, taxes, depreciation, amortization, stock based compensation, good will impairment and gain/losses on financial derivatives. The following table shows our Non-IFRS measure (Adjusted EBITDA) reconciled to our net income for the indicated periods:
| Quarter Ended May 31, 2017 |
||
| Net income | $ | 51 |
| Add back: | ||
| Depreciation and amortization | 179 | |
| Interest expense (net of interest income) | 49 | |
| Provision for income taxes | 20 | |
| EBITDA | 298 | |
| Stock-based compensation | 210 | |
| Facility Set Up | 87 | |
| Adjusted EBITDA | $ | 596 |
Management uses these non-GAAP measures as key metrics in the evaluation of the Company’s performance and the consolidated financial results. The Company believes these non-GAAP measures are useful to investors in their assessment of the operating performance and the valuation of the Company. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data, the Company has determined that it is appropriate to make this data available to all investors. However, non-GAAP financial measures are not prepared in accordance with GAAP, and the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Forward-Looking Statements
Certain statements contained in this press release constitute “forward-looking information” as such term is defined in applicable Canadian securities legislation. The words “may”, “would”, “could”, “should”, “potential”, “will”, “seek”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” and similar expressions as they relate to the Company, the Company expecting the next quarter to have profit growth, the immediate effect of decentralizing hiring and marketing, reducing corporate overhead and focusing the corporate team on tapping into market growth rather than operations and direct marketing will be a bottom line impact next quarter with the top line finding momentum in the Company’s third and fourth quarters, are intended to identify forward-looking information. All statements other than statements of historical fact may be forward-looking information. Such statements reflect the Company’s current views and intentions with respect to future events, and current information available to the Company, and are subject to certain risks, uncertainties and assumptions. Material factors or assumptions were applied in providing forward-looking information, including: insurance reimbursement remains at levels similar to today, census levels and patient demand remains strong, partners operate their locations profitably, partners reimburse the Company for any and all working capital loans, additional corporate overhead is not needed).
Many factors could cause the actual results, performance or achievements that may be expressed or implied by such forward-looking information to vary from those described herein should one or more of these risks or uncertainties materialize. These factors include, without limitation, changes in law, the ability to implement business strategies and pursue business opportunities, state of the capital markets, the availability of funds and resources to pursue operations, decline of reimbursement rates, dependence on few payors, possible new drug discoveries, a novel business model, dependence on key suppliers, granting of permits and licenses in a highly regulated business, competition, changes in healthcare regulations or insurance coverage, particularly those relating to mental health or younger citizens, difficulty integrating newly acquired businesses, the time, outcome and cost of any inquiries, audits or litigation with insurance providers, or federal, state or local regulators, low profit market segments, as well as general economic, market and business conditions, as well as those risk factors discussed or referred to in the Company’s annual Management’s Discussion and Analysis for the year ended February 28, 2017, filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. Should any factor affect the Company in an unexpected manner, or should assumptions underlying the forward looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, the Company does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward -looking information included in this press release is made as of the date of this press release and the Company undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law. The Company’s results and forward-looking information and calculations may be affected by fluctuations in exchange rates. All figures are in Canadian dollars unless otherwise indicated.
Neither 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.
Chris Heath
Chief Executive Officer
(424) 372-1123
investorinfo@BLVDcenters.com
www.BLVDir.com