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Assure Holdings Corp.

ARHH / Other OTC / $0.58

March 30, 2020

 

Business Overview

 

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Assure Holdings Corp. (the Company) is a leading turnkey outsource provider of intraoperative neurophysiological monitoring (IONM) and professional neurologist oversight services. The use of electrophysiological methods (EEG, EMG) to observe the functional integrity of neural structures during surgery provides immediate feedback and warning to surgeons before they cause neurological deficits or permanent injuries.

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The Company has a turnkey suite of services. It employs its own technologists and uses its own monitoring equipment (a 32-channel Cadwell Cascade Pro), handles scheduling and setup, and bills for the technical services it provides. Assure is JCAHO Joint Commission accredited.

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Procedures presently targeted by IONM include spinal and neurosurgeries, vascular, ENT, orthopedic and other invasive surgeries. Management is actively looking to identify new surgical specialties.

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The Company has exclusive partnerships with surgeons in Colorado, Louisiana, Texas, Pennsylvania, Utah, Michigan, and South Carolina, and it is aggressively increasing the number of physician and hospital partners in those markets.

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A major long-term goal is to boost the number of in-network provider agreements. The first such agreement, Aetna in the State of Michigan, was completed in third-quarter 2019.

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The number of procedures is rising very rapidly, rising 91% in 2019 to 5,813 vs. 3,043 in 2018. The number of procedures excluded the February 2020 acquisition of Neuro-Pro Monitoring, serving the Dallas Ft. Worth metroplex. Neuro-Pro performed 2,551 procedures in 2019 and was cash flow positive. For Q3 2019, the Assure gross and pretax margins were 84.0% and 59.9%, respectively.

 

 

2020 Focus

 

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A key goal is to grow the number of surgeon partners by leveraging existing surgeon relationships, connections with surgical equipment distributors, and the relationships of its BoD members. Targeted acquisitions might also play a role.

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The Company has a clear path to enter new geographic markets, having recently obtained approval to expand into Georgia, Nevada, Arizona, and Oklahoma.

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With its rapidly rising scale, the Company plans to rapidly boost its in-network contracts with insurance providers.

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Days sales outstanding (DSO) runs high, particularly for out-of-network procedures, but the Company recently brought its billing and collections in house to reduce DSO, cut collection expenses, and improve its relationship with insurers.

 

 

Management and BoD Members

 

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The backgrounds of the management and directors are outlined on the Assure website and the investor deck. John A. Farlinger, CPA CA, is Executive Chairman and CEO. He has 25+ years of experience in technology, operations, and finance. The overall management team backrounds include neurophysiology, management of fast-growing microcap companies, out-of-network billing, in-network contracting, and M&A.

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The four BoD members have a broad range of relevant experience, including healthcare, commercial banking, and investment banking.

 

 

Financials

 

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Income Statement (9 months through 09/30/19 vs. 09/30/18)

 

Revenue: 22,383,591 vs. 10,564,834

Gross profit: 17,917,541 vs. 7,642,745

Operating expenses: 6,487,990 vs. 3,876,149

Earnings from equity investments (less than 50% ownership): 1,192,066 vs. 1,270,053

Other income (expense): (157,745) vs. (59,578)

Pretax income: 12,463,874 vs. 5,108,124

Income taxes: 3,022,349 vs. 1,274,315

Net income to Assure shareholders: 9,335,310 vs. 3,359,276

Earnings (loss) per diluted common share: 0.23 vs. 0.21

 

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Balance Sheet (09/30/19)

 

Cash & equivalents: 488,100

Accounts receivable, net: 37,718,971

Total current assets: 40,528,056

Equity method investments: 2,337,531

Other assets: 856,605

Total assets: 43,722,192

Accounts payable & accrued liabilities: 3,809,948

Short-term debt: 1,252,857

Total current liabilities: 16,011,500

Provision for performance share issuance: 16,011,500

Deferred tax liability, net: 4,280,706

Equity attributable to Assure shareholders: 15,485,042

 

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The Company completed the acquisition of Neuro-Pro Monitoring in February 2020. Consideration included $530,000 on February 14, $1,200,000 to be paid on March 31, monthly payments of $328,462 during each of the 13 months through April 2021, and a final cash payment of $1,700,000 on May 31, 2021. In 2019, Neuro-Pro generated approximately $6 million in cash from revenue and $3 million in net income, with approximately 80% of the Neuro-Pro procedures being paid for by commercial insurance companies. Approximately 23% of the Neuro-Pro procedures for 2019 will be included in the Assure financial statements for 2019, as these cases were performed after the acquisition agreement was announced on November 1, 2019.

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Two executives (Messrs. Parsons and Willer) received a performance share grant of 6,000,000 shares as a condition of the reverse takeover in 2016. The Company met the conditions for such grant in 2017 and has recorded a liability of approximately $16 million for the value of the shares to be issued while the agreements are modified, and the cash collected threshold achieved. Mr. Parsons has decided that once his 5,000,000 performance shares have been issued to distribute a meaningful portion of those shares to other members of the management team and key personnel.

 

 

Valuation Considerations

 

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The market for IONM is sizable and growing, and the Company is gaining market share. The overall IONM market is estimated to grow to $1.9B in 2022 (Allied Market Research, August 2018).

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Management expects the expanding scale of the Company to facilitate acceleration of in-network contracts with insurance companies.

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The February 2020 acquisition of Neuro-Pro brings important relationships with prestigious spine surgeons in the Dallas Ft. Worth area and could unlock additional business opportunities in Texas.

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The Assure cash collection cycles are protracted, primarily reflecting the out-of-network billing to private insurance payers. Claims that have aged to 24 months are reserved but not written off until they age to 36 months. A new in-house billing department is focused on reducing DSO and collection costs and strengthening relationships with insurers.

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The stock has dropped 82% from its 2019 high, despite remaining solidly profitable through the date of its last earnings release.

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The impact from COVID-19 remains an uncertainty. In addition, the Company website and Consolidated Financial Statements for the years ended 2018 and 2017 (unqualified) detail various risks and other matters, and these are hereby incorporated by reference.

 

 

Contacts

 

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Executive offices: 4600 South Ulster Street, Suite 1225, Denver, CO 80237; 720.287.3093

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Company contact: John Farlinger, Executive Chairman & CEO; John.Farlinger@assureiom.com; 604.763.7565

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Investor contact: Scott Kozak, Director of Investor & Media Relations; Scott.Kozak@assureiom.com; 720.287.3093

 

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TickerBuzz, LLC ("TickerBuzz"), a Florida limited liability company is the author of this Profile. TickerBuzz is not and does not act as a broker-dealer, investment advisor, placement agent, or crowdfunding portal. Furthermore, it does not offer any securities, nor does it provide any investment advice or analysis. The source material for this Profile is the Company presentation materials. Certain information, particularly information relating to future performance and other business matters, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. TickerBuzz cautions that these forward-looking statements are subject to numerous assumptions, risks, and uncertainties that may change over time and cause actual results to differ materially from the results discussed herein. The forward-looking statements are neither predictions nor guarantees of future events or performance. TickerBuzz has no obligation to update any forward-looking statements after they are made, except as required by applicable law. All of this information is intended for discussion purposes only, is not a solicitation to buy or sell any security, and must not be relied upon for financial, legal, tax, or any other professional advice. This company has not paid TickerBuzz any compensation for publication of this Profile. Analyst: William J. Ritger.

 

 

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Contact: William J. Ritger, writger@gmail.com, 561.891.1903

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