Rennova Health posted its financial report from 2016 and provided a business update.
Significant business highlights from 2016 and recent weeks include:
- Raised $12.4 million in a private placement of convertible notes, with proceeds used to pay down debt and support Rennova’s growth strategy
- Completed a purchase agreement to acquire certain assets related to Scott County Community Hospital and changed its name to Big South Fork Medical Center
- Acquired specialty pharmacogenomics laboratory Genomas, Inc.
- Entered into multiple preferred provider plans, which now total 24
- Secured additional Medicaid laboratory licensure, bringing the total number of states where we hold a Medicaid license to 30
- Continue to add new customers for our Lab services including direct bill clients for who we get paid a contracted price for services. Active customers currently stand at record levels
- Added customers in our software division for our flagship M2Select electronic health record (“EHR”) product services and M2Pro, our EHR for the ambulatory sector
- Initiated the integration of our software with a Clinical Research Organization in California that is expected to lead to the provision of contracted lab services
“The year 2016 was a challenging year by many measures,” commented Seamus Lagan, Rennova’s chief executive officer. “We are focused on a return to profitability in the coming year and have taken several steps to streamline our costs, including consolidating our clinical laboratories and cutting administrative costs. As a result, our gross margins in this segment improved substantially, to 68.1% in 2016 from 48.5% in 2015. The progress we made expanding into a wider and more varied marketplace by adding preferred provider networks, forging contracts with third-party payers, adding Medicaid contracts and increasing the number of tests we offer, combined with aggressive consolidation and cost cutting is expected to continue to narrow losses in this segment in 2017. Success in the last quarter of 2016 and 2017 to date with signing of new customers for all business segments and securing additional preferred network contracts with payers are not yet reflected in our financial results.
“We are excited about our recent acquisition of certain hospital assets and have been preparing to partially reopen Big South Fork Medical Center in the second quarter, with a return to full operations expected in the third quarter,” Mr. Lagan continued. “The acquisition of this rural hospital in Tennessee represents an important step for the overall growth of Rennova. Along with a hospital that had $12 million in revenues in 2015, the last full year it was in operation, it provides us with a reliable customer base and important preferred provider contracts to assure payment for services provided. It also allows us to solidify relationships with local physicians for all our service offerings.”
Mr. Lagan added, “We have continued to add customers for our software division, which includes our Supportive Software Solutions and Decision Support and Informatics business segments. We exceeded our goal of securing 100 customers in 2016 and ended the year with 83 performing contracts. Our focus is on combining our flagship electronic health records product with medical billing services. We believe we can capture an additional 200 customers in 2017, of which we anticipate 25% may purchase multiple services.
“Historically, we have operated our business under one management team, but beginning in 2017, the Company intends to operate four separate but synergistic divisions, each with their own specialized management. The divisions will be; 1) Clinical diagnostics through its clinical laboratories; 2) supportive software solutions to healthcare providers including Electronic Health Records (“EHR”), Laboratory Information Systems and Medical Billing services; 3) Decision support and interpretation of cancer and genomic diagnostics; and 4) the recent addition of a hospital in Tennessee.
“As previously disclosed, we expect that our operations will be cash flow positive for the year,” Mr. Lagan concluded.
Net revenues for 2016 were $5.2 million, compared with $18.4 million for 2015. The decrease is mainly due to a decline in Clinical Laboratory Operations revenue to $3.7 million for 2016, compared with $17.5 million in 2015 resulting from lower insured test volumes as a number of large third-party payers are now generally unwilling to reimburse service providers who are not part of their network, a departure from prior industry practices. In addition, the collectible portion of gross billings that should be reflected in net revenues was 11% of outgoing billings for 2016, compared with 13% for 2015.
Supportive Software Solutions billings were $0.8 million for 2016, essentially unchanged from 2015. Decision Support and Informatics net revenue increased to $0.7 million for 2016, compared with $0.1 million for 2015, as this segment was created with the acquisition of CollabRx, Inc. in November 2015.
Operating expenses for 2016 were $37.6 million, compared with $63.9 million for 2015. The reduction was primarily due to a decline of $7.6 million in direct costs of revenue, a decline of $3.7 million in general and administrative expenses and a decline of $19.1 million in impairment charges, partially offset by bad debt expense of $3.6 million and engineering expenses associated with the acquisition of CollabRx of $2.1 million, an increase of $1.6 million. The Company has transitioned a significant portion of its testing from external reference laboratories to internal processing, which resulted in a 67% decrease in direct costs per sample.
The Company’s loss from operations for 2016 was $32.4 million, compared with $45.5 million for 2015. The narrowing of our operating loss was mainly due to asset impairment charges recognized in 2015 in the amount of $20.1 million, as compared with $1.0 million of asset impairment charges in 2016, and a $7.6 million reduction in direct costs of revenue in 2016, which were largely offset by the decline in clinical laboratory revenues.
Net loss attributable to common stockholders for 2016 was $32.6 million, or $30.17 per share, compared with net income attributable to common stockholders of $37.6 million, or $90.46 per diluted share, for 2015.
The Company had cash and cash equivalents of $77,979 as of December 31, 2016, compared with $8.8 million as of December 31, 2015. Subsequent to the close of the quarter, the Company raised $12.4 million in a private placement of convertible notes.
About Rennova Health, Inc.
Rennova provides industry-leading diagnostics and supportive software solutions to healthcare providers, delivering an efficient, effective patient experience and superior clinical outcomes. Through an ever-expanding group of strategic brands that work in unison to empower customers, we are creating the next generation of healthcare. For more information, please visit www.rennovahealth.com.