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Summary

  • MTBC is a roll-up of money losing companies in the healthcare revenue cycle management business.
  • The growth strategy is to acquire more companies in the business, but MTBC is too small to be able to acquire larger healthier companies.
  • Also, the underwriters don't have a particularly good track record.

Based in Somerset, NJ, Medical Transcription Billing (NASDAQ:MTBC) scheduled a $30 million IPO on the Nasdaq with a market capitalization of $96 million at a price range midpoint of $10 for Thursday, July 10, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Chardan Capital Markets, Aegis Capital Corp., Summer Street Research Partners

Joint Managers: None

End of lockup (180 days): Tuesday, January 6, 2015

End of 25-day quiet period: Monday, August 4, 2014

Summary
MTBC is a roll-up by acquisition of smaller companies in the healthcare revenue cycle management services business.

Pro forma acquisitions
Include the following:

Acquisition of the assets of Metro Medical Management Services, Inc. ("Metro Medical") on June 30, 2013,

Planned acquisition of the assets of the subsidiaries of Omni Medical Billing Services, LLC (collectively, "Omni"),

Planned acquisition of the assets of Practicare Medical Management, Inc. ("Practicare"),

Planned acquisition of the assets of the subsidiaries of CastleRock Solutions, Inc. (collectively, "CastleRock"),

Valuation

Glossary

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

.

Medical Transcription Billing

$98

3.3

-10.2

2.4

17.5

31%

Conclusion
MTBC is a roll-up of money losing companies in the healthcare revenue cycle management business.

The growth strategy is to acquire more companies in the business, but MTBC is too small to be able to acquire larger healthier companies.

Also, the underwriters don't have a particularly good track record.

The rating is neutral-

Business

MTBC is a healthcare information technology company that provides a fully integrated suite of proprietary web-based solutions, together with related business services, to healthcare providers practicing in ambulatory care settings.

MTBC's integrated Software-as-a-Service (or SaaS) platform helps its customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs.

In addition to its experienced team in the United States, MTBC employs a highly educated workforce of more than 1,000 people in Pakistan, where MTBC believes labor costs are approximately one-half the cost of comparable India-based employees, thus enabling it to deliver its solutions at competitive prices.

MTBC's flagship offering, PracticePro, empowers healthcare practices with the core software and business services they need to address industry challenges, including the Patient Protection and Affordable Care Act ("Affordable Care Act"), on one unified SaaS platform. MTBC delivers powerful, integrated and easy-to-use 'big practice solutions' to small and medium practices, which enable them to efficiently operate their businesses, manage clinical workflows and receive timely payment for their services. PracticePro includes:

•Practice management solutions and related tools, which facilitate the day-to-day operation of a medical practice;

Electronic health records (or EHR), which is easy to use, highly ranked, and allows MTBC's customers to reduce paperwork and qualify for government incentives;

Revenue cycle management (or RCM) services, which include end-to-end medical billing, analytics, and related services; and

•Mobile Health (or mHealth) solutions, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services.

Cost of solution adoption
Adoption of solutions requires only a modest upfront expenditure by a provider.

Additionally, financial performance is linked directly to the financial performance of clients because the vast majority of revenues is based on a percentage of clients' collections.

The standard fee for our complete, integrated, end-to-end solution is 5% of a practice's healthcare-related revenues plus a one-time setup fee, and is among the lowest in the industry.

Growth strategy

MTBC's growth strategy involves two approaches: acquiring smaller RCM (revenue cycle management) companies and then migrating the customers of those companies to solutions, as well as partnering with EHR and other vendors that lack an integrated solution and integrating our solutions with their offerings.

The RCM service industry is highly fragmented, with many local and regional RCM companies serving small medical practices.

MTBC believes that the industry is ripe for consolidation and that MTBC can achieve significant growth through acquisitions.

MTBC further believes that it is becoming increasingly difficult for traditional RCM companies to meet the growing technology and business service needs of healthcare providers without a significant investment in information technology infrastructure.

MTBC believes it will also be able to accelerate organic growth by partnering with industry participants, utilizing them as channel partners to offer integrated solutions to their customers.

MTBC recently entered into arrangements with industry participants from which MTBC expects to begin to derive revenue starting in the mid-2014, including emerging EHR providers and other healthcare vendors that lack a full suite of solutions.

Seasonality
There is moderate seasonality in revenues caused by fluctuations in discretionary patient visits to medical practices.

The number of patients visiting our customers during the summer and winter holiday seasons is generally lower as compared to other times of the year, which reduces collections one to two months later.

In addition, at the start of every year revenues decrease due to patients' insurance deductibles, which typically reset in January.

The rate of insurance reimbursements offset by deductibles is typically higher in the first three months of every year.

Deductibles are typically 8% of billings in the first quarter of the year, and 4% during the remainder of the year.

Customer concentration

None of the customers accounted for more than 7% of revenues for the 12 months ended December 31, 2012, and none of the customers accounted for more than 5% of revenues for the 12 months ended December 31, 2013 or in the three months ended March 31, 2014.

Dividend Policy

No dividends are planned.

Intellectual Property

As of December, 2013, MTBC had one U.S. patent pending relating to its automated patient reminder call service, and three U.S. registered trademarks and service marks for "MTBC," "MTBC.com" and "A Unique Healthcare IT Company". MTBC is also the registered holder of more than 100 domestic and international domain names.

Competition

MTBC competes with other providers of both integrated and stand-alone practice management, EHR and RCM solutions, including providers who utilize a Web-based platform and providers of locally installed software systems.

MTBC's competitors include larger healthcare IT companies such as athenahealth, Allscripts Healthcare Solutions, eClinical Works, Practice Fusion, Kareo, Amazing Charts, and Greenway Medical Technologies. MTBC also competes with regional RCM companies.

5% stockholders

Mahmud Haq 94.1%

Use of proceeds

MTBC expects to net $24 million from its IPO. Proceeds are allocated as follows:

to fund the cash portion of the purchase price for the Target Sellers in the amount of approximately $17.5 million (assuming an initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of the prospectus),

to pay brokerage fees in the amount of approximately $1.0 million in connection with the acquisition of the Target Sellers, and to pay the legal, accounting and other fees associated with this offering.

MTBC will use the remaining proceeds for working capital and other general corporate purposes, including the expansion of MTBC's sales and marketing team, and the enhancement of MTBC's products and services. In addition, MTBC may also use a portion of the net proceeds for the acquisition of or investment in the businesses or assets of other medical billing companies that MTBC believes are complementary to its present business.

Disclaimer: This MTBC IPO report is based on a reading and analysis of MTBC's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Medical Transcription Billing