March 5, 2018
CRH Medical Corp
Q4/17: quarter above expectations; awaiting 2018 outlook on call
Impact: Positive
First impression
Q4/17 revenue of $32.3MM, well above our and consensus estimates.
CRH reported its Q4/17 results after-market-close (AMC) today. Total revenues were $32.3MM, ~15.0% above our estimate of $28.2MM and consensus of $28.1MM. Anesthesia Management (CRH-AM) revenues were $29.2MM, ~15.4% ahead of our $25.3MM forecast. Product Sales revenues were in line at $3.0MM vs. our $2.9MM forecast.
CRH-AM sees sequential improvement in payor mix. Anesthesiology revenue increased to $29.2MM in Q4, from $20.5MM in Q3 and $23.0MM in Q4/16. The YoY increase in Q4/17 benefited by $9.6MM from acquisitions while changes in payor mix and rates within commercial payors contributed to a $3.4MM decline. In terms of payor mix, commercial payors were 65.5% of cases, while government payors made up the remaining 34.5%. In our view, the beat relative to our forecasts was likely driven by a: (i) more favourable case mix, (ii) greater number of procedures, and (iii) higher commercial rate per unit.
64.7k procedures performed vs. 60.1k forecast. CRH-AM performed 64.7k procedures in Q4/17 vs. our 60.1k forecast. We also forecast average rev/procedure of $422/procedure, with the actual print reported at $452/ procedure. CRH-AM revenues were $3.9MM ahead of our forecasts, and we estimate procedures accounted for $1.9MM of this beat, with rev/ procedure comprising the remaining $2.0MM.
EBITDA to SH of $11.5MM vs. our $9.7MM forecast and consensus of $9.3MM. CRH reported EBITDA to SH of $11.5MM, ~18.6% above our estimate ($9.7MM) and ~23.7% ahead of consensus ($9.3MM). Total EBITDA margins in the quarter were 52.5%.
Key focus areas on CC - March 6th, at 11am ET. Dial-in is 1-800-319-4610.
We will be looking for more colour on management's outlook for 2018 as it relates to the payor mix, CMS headwinds and organic procedure growth. On the former, we believe investors will look to assess whether the unfavourable shift towards government payors in 2017 (which appeared to turn more positive in the quarter) will continue, subside or reverse in 2018. Additionally, we will look for any commentary on commercial rates per unit. While management has already guided towards the financial impact of CMS changes from November, we will now look to assess any ramifications the changes may have on the pace of potential acquisitions and procedures in 2018 (i.e. were Q4/17 procedures pushed higher ahead of changes effective Jan 1st?)