Birner Dental Management Services, Inc. Announces 2018 Second Quarter Financial Results
Revenue Increases 2.4% versus first six months 2017
New Patient Visits up 3.2% versus first six months 2017
Total Patient Visits up 3.5% versus first six months 2017
DENVER, Aug. 14, 2018 /PRNewswire/ -- Birner Dental Management Services, Inc. (OTCQX: BDMS), business services provider of PERFECT TEETH® dental practices, announced results for the quarter and six months ended June 30, 2018. For the quarter ended June 30, 2018, revenue increased $575,000, or 3.9%, to $15.4 million compared to $14.8 million for the quarter ended June 30, 2017. The Company's earnings before interest, taxes, depreciation, amortization, stock grant, stock-based compensation expense and increase in valuation of embedded derivative ("Adjusted EBITDA") increased $120,000 to $(25,000). Net loss for the quarter ended June 30, 2018 increased $128,000 to approximately $(1.0 million) compared to $(901,000) for the quarter ended June 30, 2017. Loss per share increased to $(0.55) for the quarter ended June 30, 2018 compared to $(0.48) for the quarter ended June 30, 2017.
During the quarter ended June 30, 2018, the Company had capital expenditures of $748,000 and decreased bank debt outstanding by $125,000. During the second quarter of 2018 the Company substantially completed the conversion of six of its dental practices to digital radiography.
For the six months ended June 30, 2018, revenue increased $735,000, or 2.4%, to $31.2 million. The Company's Adjusted EBITDA decreased $265,000, or 42.0%, to $366,000 for the six months ended June 30, 2018. This result includes $66,000 of one-time expenses related to accounting and valuation consulting services the Company utilized in connection with the $5 million financing of convertible senior subordinated secured notes and attached Series A convertible preferred stock by the Palm investors completed in December 2017. Net loss for the six months ended June 30, 2018 increased $381,000 to ($1.5 million) compared to $(1.1 million) for the six months ended June 30, 2017. Net loss per share increased to $(0.80) for the six months ended June 30, 2018 compared to $(0.60) for the six months ended June 30, 2017. Net loss for the quarter ended and first six months ended June 30, 2018 was negatively effected by an increase of $250,000 in the value of an embedded derivative.
The Company continues to experience strong patient flow with new patient visits up 3.2% in the first six months of 2018 compared to the first six months of 2017 and total patient visits up 3.5% in the first six months of 2018 compared to the first six months of 2017. The Company had 104 dentists at June 30, 2018 compared to 112 dentists at December 31, 2017 and 99 dentists at June 30, 2017.
The Company was unable to convert its strong patient flow to earnings due to the slow ramp in productivity from new dental professionals and decreases in hygiene and oral surgery revenues. The Company expects productivity of new dentists to increase with time and a recently hired hygiene director to assist with hygienist productivity.
The Company was not in compliance with its required EBITDA covenant under its bank loan agreement at June 30, 2018. On or before August 15, 2018 an affiliate of the Palm investors is expected to purchase $468,000 principal amount of additional notes and attached Series A preferred stock to permit the Company to regain compliance with the EBITDA covenant as permitted under the fifth amendment to the bank loan agreement.
Birner Dental Management Services, Inc. acquires, develops, and manages geographically dense dental practice networks in select markets in Colorado, New Mexico, and Arizona. As of June 30, 2018, the Company managed 68 dental offices under the PERFECT TEETH® name.
The Company previously announced it would conduct a conference call to review results for the quarter ended June 30, 2018 on Tuesday, August 14, 2018 at 9:00 a.m. MT. In addition to current operating results, the teleconference may include discussion of management's expectations of future financial and operating results. To participate in this conference call, dial in to 1-877-440-5804 and refer to Confirmation Code 7777351 approximately five minutes prior to the scheduled time. If you are unable to join the conference call on August 14, 2018, the rebroadcast number is 1-888-203-1112 with the pass code of 7777351. This rebroadcast will be available through August 28, 2018.
Non-GAAP Disclosures
This press release includes a non-GAAP financial measure with respect to Adjusted EBITDA. Please see below for more information regarding Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss.
Forward-Looking Statements
Certain of the matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These include statements regarding the Company's prospects and performance in future periods, including improvement in operating results and dentist hiring, dentist and hygienist productivity, the amount of bank debt, compliance with debt covenants, performance of de novo offices, the payment or nonpayment of dividends, dentist count, dentist turnover and recruitment, dentist productivity, new patient visits and patient flow and the impact of certain shareholder matters. These statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These and other risks and uncertainties are set forth in the reports filed by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2017. The Company disclaims any obligation to update these forward-looking statements.
For Further Information Contact:
Birner Dental Management Services, Inc.
Dennis Genty
Chief Financial Officer
(303) 691-0680
| BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES |
|||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||
| (UNAUDITED) |
|||||||||
| Quarters Ended |
Six Months Ended |
||||||||
| June 30, |
June 30, |
||||||||
| 2017 |
2018 |
2017 |
2018 |
||||||
| REVENUE: |
|||||||||
| Dental practice revenue |
$13,753,775 |
$14,405,938 |
$28,372,479 |
$29,264,013 |
|||||
| Capitation revenue |
1,025,443 |
947,941 |
2,067,419 |
1,911,334 |
|||||
| 14,779,218 |
15,353,879 |
30,439,898 |
31,175,347 |
||||||
| DIRECT EXPENSES: |
|||||||||
| Clinical salaries and benefits |
9,252,188 |
9,640,816 |
18,718,487 |
19,460,892 |
|||||
| Dental supplies |
672,187 |
693,739 |
1,300,592 |
1,390,053 |
|||||
| Laboratory fees |
931,760 |
934,006 |
1,812,901 |
1,817,381 |
|||||
| Occupancy |
1,652,889 |
1,634,467 |
3,203,149 |
3,248,488 |
|||||
| Advertising and marketing |
167,467 |
140,516 |
337,371 |
271,974 |
|||||
| Depreciation and amortization |
913,693 |
755,819 |
1,878,494 |
1,534,520 |
|||||
| General and administrative |
1,287,012 |
1,304,013 |
2,550,637 |
2,639,955 |
|||||
| 14,877,196 |
15,103,376 |
29,801,631 |
30,363,263 |
||||||
| Contribution from dental offices |
(97,978) |
250,503 |
638,267 |
812,084 |
|||||
| CORPORATE EXPENSES: |
|||||||||
| General and administrative |
1,011,917 |
(1) |
1,088,474 |
(1) |
1,971,374 |
(2) |
2,089,862 |
(2) |
|
| Stock grant |
175,000 |
(3) |
- |
175,000 |
(3) |
- |
|||
| Depreciation and amortization |
38,864 |
30,700 |
84,948 |
64,074 |
|||||
| OPERATING LOSS |
(1,323,759) |
(868,671) |
(1,593,055) |
(1,341,852) |
|||||
| OTHER EXPENSE: |
|||||||||
| Increase in fair value of embedded derivatives |
- |
250,000 |
- |
250,000 |
|||||
| Interest expense, net |
94,414 |
170,041 |
166,838 |
334,184 |
|||||
| LOSS BEFORE INCOME TAXES |
(1,418,173) |
(1,288,712) |
(1,759,893) |
(1,926,036) |
|||||
| Income tax benefit |
(516,899) |
(259,677) |
(633,561) |
(419,009) |
|||||
| NET LOSS |
$ (901,274) |
$ (1,029,035) |
$ (1,126,332) |
$ (1,507,027) |
|||||
| Net loss per share of Common Stock - Basic |
$ (0.48) |
$ (0.55) |
$ (0.60) |
$ (0.80) |
|||||
| Net loss per share of Common Stock - Diluted |
$ (0.48) |
$ (0.55) |
$ (0.60) |
$ (0.80) |
|||||
| Weighted average number of shares of |
|||||||||
| Common Stock and dilutive securities: |
|||||||||
| Basic |
1,866,580 |
1,875,245 |
1,863,746 |
1,874,971 |
|||||
| Diluted |
1,866,580 |
1,875,245 |
1,863,746 |
1,874,971 |
|||||
| (1) |
Corporate expenses - general and administrative includes $51,019 and $56,668 of stock-based compensation expense pursuant to ASC Topic 718 for the quarters ended June 30, 2017 and 2018, respectively. |
||||||||
| (2) |
Corporate expenses - general and administrative includes $86,255 and $109,644 of stock-based compensation expense pursuant to ASC Topic 718 for the six months ended June 30, 2017 and 2018, respectively. |
||||||||
| (3) |
The Company issued 12,500 shares of Common Stock under a settlement agreement with an activist shareholder group. The shares were values at $175,000 based on the closing price of the Common Stock on the date of the grant. |
||||||||
| BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES |
||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
| (UNAUDITED) |
||||
| December 31, |
June 30, |
|||
| ASSETS |
2017 |
2018 |
||
| CURRENT ASSETS: |
||||
| Cash |
$ 1,888,828 |
$ 350,419 |
||
| Accounts receivable, net of allowance for doubtful |
||||
| accounts of approximately $500,000 and $475,000, respectively |
3,772,514 |
4,205,245 |
||
| Note receivable |
33,768 |
17,309 |
||
| Deferred tax asset, net |
- |
242,657 |
||
| Prepaid expenses and other assets |
655,310 |
866,809 |
||
| Total current assets |
6,350,420 |
5,682,439 |
||
| PROPERTY AND EQUIPMENT, net |
5,016,141 |
4,713,348 |
||
| OTHER NONCURRENT ASSETS: |
||||
| Intangible assets, net |
5,876,053 |
5,453,770 |
||
| Deferred charges and other assets |
163,991 |
163,991 |
||
| Total assets |
$ 17,406,605 |
$ 16,013,548 |
||
| LIABILITIES AND SHAREHOLDERS' DEFICIT |
||||
| CURRENT LIABILITIES: |
||||
| Accounts payable |
$ 4,210,521 |
$ 3,415,887 |
||
| Accrued expenses |
777,863 |
705,831 |
||
| Accrued payroll and related expenses |
2,009,720 |
2,594,949 |
||
| Current maturities of long-term debt |
750,000 |
6,189,590 |
||
| Total current liabilities |
7,748,104 |
12,906,257 |
||
| LONG-TERM LIABILITIES: |
||||
| Deferred tax liability, net |
101,482 |
- |
||
| Bank credit facilities, net |
5,684,085 |
- |
||
| Convertible senior subordinated secured notes, net |
4,445,862 |
4,619,745 |
||
| Other long-term obligations |
1,190,811 |
1,424,059 |
||
| Total liabilities |
19,170,344 |
18,950,061 |
||
| SERIES A PREFERRED STOCK, no par value, 100 shares authorized, |
||||
| 10 shares outstanding |
10,000 |
10,000 |
||
| SERIES B PREFERRED STOCK, no par value, 2,000,000 shares |
||||
| authorized, none outstanding |
- |
- |
||
| SHAREHOLDERS' EQUITY / (DEFICIT): |
||||
| Preferred Stock, no par value, 7,999,900 shares |
||||
| authorized; none outstanding |
- |
- |
||
| Common Stock, no par value, 20,000,000 shares authorized; |
||||
| 1,872,761and 1,878,761 shares issued and outstanding, respectively |
2,060,208 |
2,169,852 |
||
| Accumulated deficit |
(3,833,947) |
(5,116,365) |
||
| Total shareholders' deficit |
(1,773,739) |
(2,946,513) |
||
| Total liabilities and shareholders' deficit |
$ 17,406,605 |
$ 16,013,548 |
||
Reconciliation of Adjusted EBITDA
Adjusted EBITDA is not a U.S. generally accepted accounting principle ("GAAP") measure of performance or liquidity. However, the Company believes that it may be useful to an investor in evaluating the Company's ability to meet future debt service, capital expenditures and working capital requirements, and the Company uses Adjusted EBITDA for this purpose. Investors should not consider Adjusted EBITDA in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. In addition, because Adjusted EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of Adjusted EBITDA to net loss can be made by adding depreciation and amortization expense - offices, depreciation and amortization expense – Corporate, stock-based compensation expense, interest expense, net, stock grant expense, increase in valuation of embedded derivative and income tax benefit to net loss as in the table below.
| Quarters |
Six Months |
||||||||
| Ended June 30, |
Ended June 30, |
||||||||
| 2017 |
2018 |
2017 |
2018 |
||||||
| RECONCILIATION OF ADJUSTED EBITDA: |
|||||||||
| Net loss |
($901,274) |
($1,029,035) |
($1,126,332) |
($1,507,027) |
|||||
| Add back: |
|||||||||
| Depreciation and amortization - Offices |
913,693 |
755,819 |
1,878,494 |
1,534,520 |
|||||
| Depreciation and amortization - Corporate |
38,864 |
30,700 |
84,948 |
64,074 |
|||||
| Stock-based compensation expense |
51,019 |
56,668 |
86,255 |
109,644 |
|||||
| Interest expense, net |
94,414 |
170,041 |
166,838 |
334,184 |
|||||
| Stock grant |
175,000 |
- |
175,000 |
- |
|||||
| Increase in valuation of embedded derivatives |
- |
250,000 |
- |
250,000 |
|||||
| Income tax benefit |
(516,899) |
(259,677) |
(633,561) |
(419,009) |
|||||
| Adjusted EBITDA |
($145,183) |
($25,484) |
$631,642 |
$366,386 |
|||||
SOURCE Birner Dental Management Services, Inc.
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