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First Quarter Revenue Increased 16.1% to a Record $18.9 Million
HANOVER, Md.--(BUSINESS WIRE)-- Conmed Healthcare Management, Inc. (NYSE Amex: CONM) today announced financial results for its first quarter ended March 31, 2012.
First Quarter Financial Highlights
“Conmed has again generated record net revenues for the quarter,” said Richard Turner, Chairman and Chief Executive Officer. “We continue to execute our growth strategy on all fronts, including expanding our geographic footprints, approaching it with vigor and passion.”
Dr. Turner concluded, “As of March 31, 2012, Conmed has 69 agreements with county governments, many of them renewals from within our current client base, as well as new contracts with new jurisdictions. Our continued growth and success stem, we believe from our commitment to excellence in the delivery of healthcare as well as the soundness of our business model.
We are working hard to win new contracts, penetrate new markets, and enter new states, and we are confident that the ongoing consistency of Conmed’s product offering and a robust new business pipeline fortify these efforts.”
First Quarter Financial Results
Net revenue for the three months ended March 31, 2012, increased 16.1% to $18.9 million as compared to $16.3 million in the first quarter of 2011. The revenue improvement resulted primarily from the addition of service contracts signed with new jurisdictions since January 1, 2011. Revenues also increased as a result of the expansion of services under existing contracts as well as price increases related to existing services and an increase associated with higher inmate populations at certain facilities partially offset by lower stop/loss reimbursements.
Total healthcare expenses for the quarter ended March 31, 2012, were $15.8 million compared to $13.3 million in the year-ago period. The increase primarily reflects increased salaries and benefits for healthcare employees related to new contracts, as well as cost-of-living and wage and benefit adjustments for existing employees plus the addition of an extra day of wages in the quarter due to leap year.
Gross profit increased to $3.2 million from $3.0 million in the prior year period, while gross margin declined to 16.8% from 18.3% in the first quarter of 2011 due to lower initial margins associated with the new contract wins.
Selling and administrative expenses for the first quarter were $2.5 million, or 13.3% of revenue, compared to $2.0 million, or 12.4% of revenue, for the 2011 quarter. The increase reflects investments in additional management and administrative personnel required to support the new contracts and services added since January 2011, partially offset by lower travel expense, consulting and accounting fees.
Depreciation and amortization was $0.12 million in the first quarter of 2012 compared to $0.17 million in the 2011 period. The approximately $50,000 decrease primarily reflects lower amortization expense related to acquired contracts that have become fully amortized offset, in part, by an increase of approximately $10,000 in depreciation costs related to additional property and equipment.
As a result, total operating expenses were $2.6 million in the first quarter of 2012 compared to $2.2 million in the first quarter of 2011. Operating expenses as a percentage of revenue increased 40 basis points to 13.9% from 13.5% in the year-ago period.
Conmed reported operating income of $0.5 million in the first quarter of 2012 compared to $0.8 million in the first quarter last year. Net income was approximately $0.1 million, or $0.01 per basic and diluted share, compared to net income of $0.4 million, or $0.03 per basic and diluted share, in the year-ago period.
For the first quarter of 2012, adjusted EBITDA*, a non-GAAP measure, was approximately $0.86 million compared to approximately $1.07 million in the prior year first quarter.
Cash and Equivalents
The Company generated approximately $1.3 million in operating cash flow in the quarter ended March 31, 2012. Cash and cash equivalents were $16.9 million at March 31, 2012, compared to $16.4 million at December 31, 2011. Stockholders’ equity increased to $22.1 million at March 31, 2012, compared to $19.3 million at December 31, 2011. Days Sales Outstanding (DSO) as of March 31, 2012, was approximately 19 days. The Company remains debt-free.
During the three months ended March 31, 2012, warrants to purchase 31,763 shares of common stock were exercised generating $22,362 of net proceeds, and warrants to purchase 1,011,320 shares of common stock were exercised by cashless exercise. As a result, a total of 749,281 shares of common stock were issued. As of March 31, 2012, we had outstanding warrants subject to derivative accounting to purchase an aggregate of 80,000 shares of common stock. In addition, stock options to purchase 27,553 shares of common stock were exercised generating $61,182 net proceeds during the three months ended March 31, 2012.
*Use of Non-GAAP Measures
In addition to containing results that are determined in accordance with accounting principles generally accepted in the United States of America (GAAP), this press release also contains non-GAAP financial measures. Adjusted EBITDA, as used in this press release, represents net income (loss) from continuing operations before interest, taxes, depreciation and amortization, adjusted for stock-based compensation and gains or losses on fair value of derivative financial instruments. Adjusted EBITDA is a key indicator used by management to evaluate operating performance. While adjusted EBITDA is not intended to replace any presentation included in the consolidated financial statements under GAAP and should not be considered an alternative to operating performance or an alternative to cash flow as a measure of liquidity, the Company believes this measure is useful to investors in assessing the Company’s capital expenditures and working capital requirements. This calculation may differ in method of calculation from similarly titled measures used by other companies. A reconciliation of adjusted EBITDA to the nearest comparable GAAP financial measure is included in the financial schedules accompanying this press release. The adjusted financial measure, as well as other information inthis press release, should be read in conjunction with the Company’s financial statements filed with the Securities and Exchange Commission.
As previously announced, Conmed will host a conference call as follows:
www.conmedinc.com or directly at http://viavid.net/dce.aspx?sid=0000976B
A replay of the conference call will be available by telephone until May 28, 2012, by dialing 1-877-870-5176 if calling within the United States or 1-858-384-5517 if calling internationally. Please use pass code 4537435 to access the replay.
Conmed has provided correctional healthcare services since 1984, beginning in the State of Maryland, and currently serves county and municipal correctional facilities in ten states: Arizona, Kansas, Kentucky, Maryland, New Jersey, Oregon, Tennessee, Texas, Virginia and Washington. For more information, visit us at www.conmedinc.com.
This press release may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements with respect to the Company's plans, objectives, expectations and intentions; and (ii) other statements that are not historical facts including statements which may be identified by words such as "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "projects," "potentially," or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control) including, without limitation, the Company's ability to increase revenue and to continue to obtain new contracts, contract renewals and extensions; inflation exceeding the Company’s projection of the inflation rate of cost of services under multi-year contracts; the ability to obtain bonds; decreases in occupancy levels or disturbances at detention centers; malpractice litigation; the ability to utilize third party administrators for out-of-facility care; compliance with laws and government regulations, including those relating to healthcare; competition; investigation and auditing of our contracts by government agencies; termination of contracts due to lack of government appropriations; material adverse changes in economic and industry conditions in the healthcare market; negative publicity regarding the provision of correctional healthcare services; dependence on key personnel and the ability to hire skilled personnel; influences of certain stockholders; increases in healthcare costs; insurance; completion and integration of future acquisitions; public company obligations; limited liability of directors and officers; the Company’s ability to meet the NYSE Amex continued listing standards; and stock price volatility. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2011. Investors and security holders are urged to read this document free of charge on the SEC's web site at www.sec.gov. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
CONMED HEALTHCARE MANAGEMENT, INC.
March 31, 2012
See Notes to Unaudited Financial Statements
Conmed Healthcare Management, Inc.
Thomas W. Fry, 410-567-5529
Chief Financial Officer
In-Site Communications, Inc.
Lisa Wilson, 212-452-2793
Source: Conmed Healthcare Management, Inc.