WALNUT CREEK, CALIFORNIA--(Marketwired - Jan. 25, 2016) - Inspira Financial Inc. (TSX VENTURE:LND) ("Inspira") today announced results from the fiscal third quarter, ending November 30, 2015 and provided an update on operations and market strategy.
Inspira launched lending operations in February 2015 into the multi-billion marketplace of fragmented, local companies in the growing market for secured, alternative financial services offered to small healthcare providers across the United States.
Financial and Business Highlights:
- Strong Balance Sheet: Inspira's net asset backing1 is approximately $30 million or in excess of 9 cents per share (on a pre-Consolidation (defined below) basis) eliminating any need for equity financing in the near term.
- Growing Loan Book: End of January 2016 loan book2 approaching $70 million, as compared to approximately $50 million reported at the end of September 2015 and $35 million at the end of May 2015.
- Growing Revenue: Generated annualized (interest and fee) revenue3 of approximately $6.5 million for the quarter as compared to $4 million annualized (interest and fee) revenue from the last quarter, a greater than 60% increase from last quarter.
- Growing Profit: Generated net profit from operations4 of $878,000 for the quarter, a 238% increase from last quarter.
- Improved Scalability: Continued improvements to its proprietary online tool for credit line applications, due diligence and loan management.
- Increased Marketing Reach: Continued to increase origination channels, including online channels.
Inspira makes first-position, secured credit facilities available to qualified U.S. healthcare businesses based on U.S. government accounts receivable (Medicare and Medicaid) as well large U.S. healthcare insurance companies such as United Healthcare, Cigna, and others. In its first year of operations, Inspira has offered two main financing solutions for small healthcare businesses:
- 3-year revolving lines of credit and loans ranging from $250,000 to $5 million with total interest plus fees ranging from 12%-18% which is expected to comprise approximately 33% of the total loan book as of the end of January 2016.
- 90-day to 1-year revolving lines of credit and loans ranging from $5 million to $15 million with interest rates plus fees ranging from 6%-10% which is expected to comprise approximately 66% of the total loan book as of the end of January 2016.
"We are seeing very good market traction considering this is only our third full quarter of operations," said David Costine, CEO of Inspira. "In less than a year, we've built a significant loan book and achieved a quarterly operational profit approaching seven figures. We have over 9 cents in cash and net asset backing and plenty of room for more loans. Given that our loans are based primarily on U.S. government receivables, we are quite underleveraged and have plenty of room for further growth without further equity financing."
"To break down our loan book, we have two distinct types of clients," continued Mr. Costine. "We have high margin smaller lines of credit, typically in the $1 million range, with yields as high as 18% that account for most of our profit. We also have larger loans, typically larger than $10 million, which carry much lower margins, but do provide scale to our loan book. As we have developed an ever-increasing sense of the market while growing this business, we see a multi-billion dollar market of potential clients for the $250,000 to $5 million lines of credit with very little competition. Our plan for 2016 will be to focus on these smaller, higher return loans, reducing our emphasis on larger loans while increasing our emphasis on yield."
Inspira plans to continue to release loan book information on a quarterly basis along with financial results.
Inspira also announces that it intends to proceed with a consolidation of its outstanding common shares ("Common Shares") on the basis of 8.871 pre-consolidation Common Shares for one (1) post-consolidation Common Share (the "Consolidation"). The board of directors believes the Consolidation is necessary in order to provide Inspira with increased standing with potential borrowers. Each fractional share remaining after Consolidation that is less than 1/2 of a Common Share will be cancelled and each fractional Common Share that is at least 1/2 of a Common Share will be changed to one whole Common Share. Completion of the Consolidation is subject to the final approval of the TSX Venture Exchange (the "TSX-V"). The Consolidation will not materially affect shareholders' percentage ownership in Inspira even though such ownership will be represented by a smaller number of Common Shares. As at the date hereof, there are an aggregate of 330,823,923 Common Shares issued and outstanding. It is expected that upon completion of the Consolidation an aggregate of approximately 37,292,743 Common Shares will be issued and outstanding, assuming there are no other changes in the issued capital of Inspira. There is no name change in conjunction with the Consolidation, and Inspira's trading symbol will remain the same
"As we attract more and more clients, it's important to project accurately our financial strength to them," said David Costine. "We've decided to consolidate our share count as a result of this strategy. In terms of cash and net asset backing, we have over $30 million or over 80 cents in cash and assets per share on a post-Consolidation basis. This figure has grown since the last quarter, and as we grow our revenues, profits and loan book size, we expect to see an increase in net asset backing."
In connection with the pace of growth and to further incentivize a growing staff, the board of directors has approved an incentive-based option grant, subject to compliance with applicable securities laws, of 2,170,598 stock options (on a post-Consolidation basis), expiring in 10 years, to certain officers, directors, consultants and employees at an exercise price equal to the close of the Common Shares on the TSX-V on January 27, 2016.
Inspira's 2016 third quarter financial statements and accompanying Management's Discussion & Analysis (MD&A) are available at www.sedar.com. All amounts are in Canadian dollars and are based on our interim consolidated financial statements and accompanying MD&A for the nine months ended November 30, 2015 and related notes prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise noted.
About Inspira Financial and the Fast Growing Market
The healthcare market in the U.S. is a rapidly expanding industry, with spending expected to exceed $4.5 trillion by 2020. Within this industry, over 1 million businesses have annual revenues in the $1 million to $50 million range. The emerging reimbursement trend towards more usage-based procedures, along with the fact that healthcare providers are being forced to increase patient volumes to maintain or grow profit levels, creates a need for increased efficiency and greater front-end investment in technology and larger staff sizes. These factors, as well as the realities that insurance providers are taking longer to pay than before and that patients are now bearing increased financial responsibility for medical bills, contribute to significant financial pressure and net working capital challenges for the average, smaller sized healthcare practice in the U.S.
Overall, traditional banks continue to reduce their risk profiles, term lenders require personal guarantees and first security over all assets, factoring lenders charge 25%+ annual interest and equipment providers have all but eliminated financing programs. The increasingly limited number of options for obtaining revolving lines of credit and loans for smaller healthcare providers creates a supply shortage in the market. This imbalance represents an opportunity for alternative lending companies catering to this demographic to capitalize upon. By targeting the 1 million+ healthcare providers in the U.S., Inspira believes it can generate high returns on government (Medicare/Medicaid) and large healthcare insurance receivables. Inspira plans to acquire debt and increase profitability through cross selling of financial services.
Non-GAAP Measures
Inspira uses a number of financial measures to assess its performance and are intended to provide additional information to investors concerning Inspira. Some of these measures, including, net asset backing, loan book, annualized revenue and net profit from operations, are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), which are based on International Financial Reporting Standards (IFRS), are not defined by GAAP and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. These non-GAAP measures are used throughout this news release and are defined below:
1 Net asset backing is defined as total assets minus total liabilities. Net asset backing is equivalent to shareholders' equity.
2 Loan book is defined as total amount of credit available to clients estimated on January 30, 2016 rather than the total amount drawn by clients.
3 Annualized revenue is defined as quarterly revenue multiplied by four. A reconciliation of annualized revenue to total revenue is included below:
| |
Quarter ended November 30, 2015 |
| Total quarterly revenue ending November 30, 2015 |
$1,640,724 |
| |
Multiplied by 4 quarters |
|
| Annualized revenue |
$6,562,896 |
4 Net profit from operations is defined as total revenue minus general and administrative expenses, sales and marketing expenses and interest expense. A reconciliation of net profit from operations to net income is included below:
| |
Quarter ended November 30, 2015 |
| Net income |
$791,491 |
| |
ADD: One-time borrowing costs and client origination costs |
86,651 |
| Net profit from operations |
$878,142 |
Forward-Looking Statements
Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, including Inspira's ability to generate varying yields, its estimated end of January 2016 loan book and types of loans comprising the loan book, the potential increase in net asset backing, current annualized revenue of over $6.5 million, the estimated number of shares post-Consolidation, the completion of the Consolidation, the issuance of stock options, and TSX-V final approval of the Consolidation and the stock issuance. Implicit in this information, particularly in respect of the future outlook of Inspira and anticipated events or results, are assumptions based on beliefs of Inspira's senior management as well as information currently available to it. While these assumptions were considered reasonable by Inspira at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue acquisitions, dependence on debt markets and interest rates, demand for the lending products Inspira offers at interest rates higher than at which Inspira can borrow, a novel business model, default risk and ability to collect from the borrowers, risk of billing irregularities by borrowers, granting of permits and licenses in a highly regulated business, competition, low profit market segments as well as general economic, market and business conditions, and could differ materially from what is currently expected.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.