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Medical Transcription Billing Is An Acquisition Machine

Feb. 06, 2019 1:51 PM ETCareCloud, Inc. (CCLD)26 Comments


  • The company seems to have managed the art of acquiring companies and integrate them quickly and profitably.
  • They have a long leeway as the industry is very fragmented, so we think the company can rinse and repeat.
  • All the while, they are generating substantial cost and revenue synergies and are becoming a more valuable platform in the process.
  • The only thing to watch out for is the substantial dividend on the preferred shares which they use as a way of financing the acquisitions.

Medical Transcription Billing (MTBC) is a fairly small player in the so-called RCM (Revenue Cycle Management) market, you can find a fine introduction to this written by fellow SA contributor Adrián Hernández.

MTBC has been doing pretty well, it has four-folded revenues, although it hasn't yet moved to GAAP profitability, at least not consistently. But it is close:

ChartData by YCharts

The main reason for this is that the company thrives on acquisitions and these have a habit of throwing GAAP figures off with reorganization cost and the amortization of intangibles as the main culprits.

They have plenty of targets, it's a fragmented market and the company has become really good at these acquisitions. Their latest acquisition is that of Orion, which they managed to get out of bankruptcy, with the following elements of interest:

  • Purchased for just 0.5x revenues.
  • Purchased out of bankruptcy with favorable terms like not assuming any accounts payable obligations (but including accounts receivables!).
  • Paid entirely out of cash ($12.6M), no additional debt or equity.
  • Revenues will almost double as a result (Q3 revenues reached $17M versus $8.68M in Q2). Management argues the acquisition will generate roughly $30M on an annualized basis.
  • Cost synergies: multiple cost-cutting leading to higher margins (see below).
  • Broadening the service offering ('revenue synergies').
  • There were 28 other companies interested in acquiring Orion.

From the earnings deck:

Let's expand on the latter point because the reader might wonder how MTBC was able to beat so many other suitors. Management provided several reasons:

  • Quick DD capabilities.
  • Scale with more than 200 team members worldwide and the experience with acquisitions, having done it many times before.
  • Technological expertise, which management believes is a key differentiator for the company.

On the latter (Q3CC):

We've developed one of the most comprehensive proprietary platforms in

This article was written by

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Finding the next Roku while navigating the high-risk, high reward landscape.

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