Convalo Health International, Corp.
TSX VENTURE : CXV

Convalo Health International, Corp.

June 28, 2016 09:00 ET

Convalo Health International Releases Audited Year-End Financials; Annual Increase in Revenues of 1,034%, Annual Increase in Adjusted EBITDA of 189%

Highlights Capacity Growth through Current Quarter; Announces Strategic Real Estate Partnership for up to 16 Additional Residential Treatment Centers; Announces Results of Warrant Meeting and Annual General Meeting

LOS ANGELES, CALIFORNIA--(Marketwired - June 28, 2016) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Convalo Health International, Corp. ("Convalo") (TSX VENTURE:CXV), a company in the addiction recovery industry in the US, released its year-end financial statement to SEDAR for the fifteen month period ending February 29th, 2016. Revenues increased over 1,034% annually and Adjusted EBITDA increased by more than 189%.

Convalo also provided comparative capacity figures for its residential and outpatient centers from September 2014, through anticipated figures in September 2016.

September,
2014
September,
2015
Target September,
2016*
Outpatient Capacity (seats) 60 108 276
Residential Treatment Capacity (beds) 0 12 36
*Assuming all facilities launched to date are operational

Audited Fifteen Month Fiscal Year-End (December 1, 2014 through February 29, 2016)

  • Audited revenue was $23,688,000 for the fifteen months ending February 29, 2016.
  • Audited gross profit was $13,130,000 for the fifteen months ending February 29 2016.
  • Adjusted EBITDA(1) was $731,000 for the fifteen months ending February 29, 2016.

Key Financial Figures for Comparing Twelve Months Ended 2015-2016

  • Revenues exceeded $22 million for the twelve months ending February 29, 2016, an increase of more than 1,034% from the previous year.
  • Gross profit exceeded $12.3 million for the twelve months ending February 29, 2016, an increase of more than 892% from the previous year.
  • Adjusted EBITDA(1) exceeded $486k for the twelve months ending February 29, 2016, an increase of more than $1 million from the previous year.
  • Total inpatient and outpatient capacity increased from 60 as of February 28, 2015 to 186 as of February 29, 2016, an increase of 210% from the previous year.
(unaudited) 12 months ending
February 29, 2016
12 months ending
February 28, 2015
Percent
Increase
Revenue $22,478,000 $1,982,000 1,034%
Gross Profit $12,334,000 $1,243,000 892%
Adjusted EBITDA(1) $486,000 ($544,000) 189%
Cash $19,417,000 $5,403,000 259%

"It is always good to have the perspective of a full year of operations," said David Costine, Chairman of Convalo. "We operate this business day-to-day, focused on revenue and profit growth and it is gratifying to review the year and see the growth we have created. Revenue increased more than 1,000% year-over-year with healthy gross margins. The operational executive team has done a good job in the last year of launching and ramping new facilities quickly. Stampp Corbin has also worked hard to improve the regulatory regime of the addiction rehabilitation market with respect to the insurers especially."

"The majority of revenue generated was weighted toward the second half of the year, where through acquisition and launches, Convalo had just four facilities in operation," continued Mr. Costine. "In the first fiscal quarter of this year, Convalo launched five additional facilities, taking our total centers to nine. I look forward to the financial results in the quarters to come as we see the impact of the investments we've made in doubling both our outpatient and detox capacity compared to the capacity at the reported fiscal year-end."

Convalo's 2016 audited year-end 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 consolidated financial statements and accompanying MD&A for the fiscal year (fifteen months) ending February 29, 2016 and related notes prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise noted.

Convalo also announced it has finalized the acquisition of the company that led to the launch of the West Los Angeles outpatient center announced March 30, 2015. Under the terms of the final agreement, the sellers have agreed to forego any cash consideration in exchange for shares. Convalo will issue a total of 4,350,000 shares to the sellers, subject to TSXV approval. The West Los Angeles outpatient center generated more than $3,275,000 in revenues since the executed purchase agreement, representing 15% of total sales for the audited year.

In order to catalyze its nationwide growth strategy and secure premier properties without impacting the balance sheet, Convalo has executed a master lease agreement with a real estate fund which compels the fund to acquire up to 16 residential properties at the sole direction of the Convalo board of directors. The total investment of the fund would be $9,600,000, but could exceed that amount with the consent of the fund if Convalo chooses more expensive properties. As part of this agreement, subject to TSXV approval, Convalo would issue an average of about 544,000 shares per property, or a total of 8,700,000 shares (even if the final purchase price exceeds $9,600,000). This compares to a prior transaction where 2,000,000 shares were issued in connection with a 5 year lease of a single commercial property involving a different real estate investment fund.

"This multi-year, nationwide real estate agreement assures Convalo can enter multiple new lucrative markets, while not tying up its own cash to acquire real estate assets that can be expected to provide a modest return on equity," said Mr. Costine.

Update on Warrant Meeting Results

Convalo announced today that at a June 24, 2016 meeting of warrantholders, holders representing 40.77% of all warrants voted in person or by proxy voted in favour of the proposed amendment described in Convalo's news release dated May 26, 2016 and meeting materials delivered to warrantholders. Accordingly, the original warrants will be automatically amended resulting in the warrants being exercisable for 21,562,500 common shares, half at $0.30 with a six month term and half at $0.38 with a nine month term. No action is required by warrantholders as their positions will be automatically adjusted by the warrant agent and CDS.

Update on Annual General Meeting Results

Convalo announced today that its shareholders approved a new 20% fixed number stock option plan (the "2016 Option Plan") at Convalo's Annual & Special Meeting of Shareholders held on June 24, 2016 (the "2016 AGM"). The 2016 Option Plan reserves 45,606,510 common shares and replaces Convalo's 10% rolling stock option plan. Convalo currently has 28,106,666 stock options outstanding (including 5,576,666 approved by shareholders at the 2016 AGM under the 2016 Option Plan).

About Convalo

Convalo Health International, operating under the brand name BLVD Centers (www.blvdcenters.com), is a leader in the highly fragmented addiction rehabilitation market. Led by a seasoned executive management team with experience in US healthcare, Convalo is well positioned for continued national expansion by launching pods in cities across the US. A pod consists of a residential, detox, and mental health facility (detox facility) and an intensive outpatient (IOP) facility. Convalo, under the BLVD brand, is focused upon becoming the largest national provider of a range of mental health services, including addictive and co-occurring disorders. In conjunction with the 12-Step approach, BLVD also offers supplemental insurance-reimbursed services catering to a variety of communities: gender specific, creatively-oriented, meditation/mindfulness, trauma and LGBT affirmative.

Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking information" as such term is defined in applicable Canadian securities legislation. The words "may", "would", "could", "should", "potential", "will", "seek", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to Convalo, the expected results of the partnership with the real estate fund, the September 2016 operational targets, as well as the approval of the issuance of shares pursuant to the West Los Angeles acquisition and the master lease agreement by the TSXV are intended to identify forward-looking information. All statements other than statements of historical fact may be forward-looking information. Such statements reflect Convalo's current views and intentions with respect to future events, and current information available to Convalo, and are subject to certain risks, uncertainties and assumptions, including, as it relates to the September 2016 operational targets assuming all facilities launched to date are in operation. Material factors or assumptions were applied in providing forward-looking information. Many factors could cause the actual results, performance or achievements that may be expressed or implied by such forward-looking information to vary from those described herein should one or more of these risks or uncertainties materialize. These factors include changes in law, the ability to implement business strategies and pursue business opportunities, state of the capital markets, the availability of funds and resources to pursue operations, decline of reimbursement rates, dependence on few payors, possible new drug discoveries, a novel business model, dependence on key suppliers, granting of permits and licenses in a highly regulated business, competition, difficulty integrating newly acquired businesses, the outcome and cost of any litigation with the sellers of Hollywood Detox, low profit market segments, as well as general economic, market and business conditions, amongst others. Should any factor affect Convalo in an unexpected manner, or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. Convalo's results and forward-looking information and calculations may be affected by fluctuations in exchange rates. All figures are in Canadian dollars. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, Convalo does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in this press release is made as of the date of this press release and Convalo undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

Non-GAAP Measures

Convalo uses a number of financial measures to assess its performance and are intended to provide additional information to investors concerning Convalo. Some of these measures, including, adjusted EBITDA and adjusted operating margin, 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) Adjusted EBITDA is defined as EBITDA plus Stock Based Compensation, excluding new facility start-up costs, transaction costs, severance costs, and stock based compensation. Adjusted EBITDA is reconciled to net income/loss as follows:
A B A-B
Fifteen months ended
February 29, 2016
Three months ended
February 28, 2015
Twelve months ended
February 29, 2016
Net income (loss) ($2,638) ($163) ($2,475)
Add back:
Depreciation and amortization 639 3 636
Interest expense/(interest income) 21 (1) 22
Provision for income taxes (406) - (406)
EBITDA ($2,384) ($161) ($2,223)
Add back:
Stock based compensation 2,353 21 2,332
Transaction costs 350 317 33
Severance costs 95 - 95
New facility start-up costs 317 68 249
Adjusted EBITDA $731 $245 $486

Neither the 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.

Contact Information