Inspira Financial Inc.
TSX VENTURE : LND

August 03, 2016 09:00 ET

Inspira Financial Inc. Releases First Quarter Results; Highlights Positive Cash Flow and Declares Regular Quarterly Dividend; Updates Market on Financial Software Revenue Strategy

SAN FRANCISCO, CALIFORNIA--(Marketwired - Aug. 3, 2016) -

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Inspira Financial Inc. (TSX VENTURE:LND) ("Inspira") a company focused on providing revolving lines of credit, as well as financial software services, to the highly fragmented U.S. mental health and addiction services market, released its unaudited condensed interim consolidated financial statements for the three months ended May 31, 2016.

On May 31, 2016, Inspira announced it was improving its operational focus to lending and providing financial software services exclusively to the U.S. mental health and addiction services market. On June 9, 2016, Inspira appointed Marc Hecksel as its Chief Executive Officer and reorganized its Board of Directors to better reflect the opportunity in financial software revenue, along with announcing the proposed acquisition of a company with revenue and expertise in the industry.

The Board also announced today that it declared a regular quarterly dividend. The Board has confidence in the company's long-term cash flow from the lending operation. As such, Inspira will issue a regular dividend of $0.02 per common share annually, paid quarterly, on outstanding common shares. The first quarterly common share dividend is payable on August 31, 2016, to shareholders of record at the close of business on August 17, 2016, and will be paid regularly every 90 days thereafter. Such quarterly dividends are only payable as and when declared by the Board and there is no entitlement to any dividend prior thereto.

Q1 Financial Overview:

  • Revenue for the quarter was $807,019, a 850% year-over-year increase and a 193% increase from the previous quarter
  • Operational profit (1) for the quarter was $327,346 from the lending operation
  • Cash (and cash equivalents) position for the quarter increased by approximately $2,000,000 as non-mental healthcare clients' lending positions were modified
  • Net assets per share (2) in excess of $0.76

"Our initiative to offer financial software services alongside our lending solutions is proceeding as planned," said Marc Hecksel, CEO of Inspira. "As of late July, we had more than $14 million in cash and we are well positioned to offer a one-stop lending, software and billing solution to companies in the mental health sector. Once established, I believe we can generate strong revenue and profit growth from our existing pipeline of prospective clients."

"Our lending operations continue to throw off positive cash flow, and we expect that to continue in the long run," continued Mr. Hecksel. "Therefore we have decided to declare a regular quarterly dividend paid from the operational profits of the lending business. We believe this dividend demonstrates the value of Inspira's lending model. We are currently in an interest rate environment where 10-year U.S. treasuries yield less than 2%, and recent yields on long term high quality bonds of U.S. health insurers are below 3.5%.(3) Yet, by owning Inspira stock at yesterday's closing price, investors can achieve an annualized yield in excess of 5.5% from a business that lends primarily on short-term receivables payable by those same governmental or private companies. And the vast majority of the eligible receivables are less than 90 days old. When this lending model is combined with a software system, we believe we can offer investors solid yield alongside strong equity growth."

"The existing cash on the balance sheet will be used to build our loan book and software capabilities in the mental health market," added Mr. Hecksel. "I am committed to ensure our investments are aimed at increasing shareholder value and increasing our quarterly dividend over time."

Inspira's unaudited condensed interim consolidated financial statements for the three months ended May 31, 2016 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 three months ended May 31, 2016 and related notes prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise noted.

About RBP Healthcare Technologies - Mental Health Billing and Practice Management Software

Due to the significant increase in demand for addiction treatment caused by health insurance coverage through the passage of the Parity Act, many growing addiction treatment companies now have difficulty with patient tracking, billing and collections from insurance companies. The large and permanently elevated volume of claims(4) has led health insurers to implement more complex reimbursement requirements for the mental health sector, similar to those imposed upon service providers in the physical healthcare sector. Treatment centers tend to use several software applications and a non-automated billing company to document services provided and bill insurance companies. This cumbersome process slows down the tracking, billing and collection process as the customer's billings increase, and was not designed to handle the volume or level of detail now required for prompt payment.

The RBP process platform incorporates every aspect of the new insurance reimbursement process to admit, diagnose, track, bill, and collect revenue specific to patients in the addiction recovery market, RBP has existing contracts in place expected to generate up to $3 million in annualized revenue.

About Inspira Financial

The mental health and substance abuse market in the U.S. is a rapidly expanding industry, with current spending exceeding $35 billion.(4) Within this industry, thousands of businesses have annual revenues in the $1 million to $50 million range.(5) Due to the significant increase in addiction treatment as a result of the Parity Act, the large and permanently elevated volumes of claims has led Payors to impose upon facilities in the mental health sector similarly complex reimbursement requirements as those imposed in the physical healthcare sector. Substance abuse facilities tend to use several software applications and a non-automated billing company to document services provided and bill insurance companies. This cumbersome process slows down the tracking, billing and collection process as the customer's billings increase, and were not designed to handle the volume, or level of detail, now required by Payors for prompt payment. As a result, across the mental health and substance abuse industry there are collection delays and consequently a need for capital.

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 operational profit and net assets per share 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) In calculating operational profit, certain items are excluded including share-based compensation and certain non-recurring expenses associated with the decision to enter software services. A reconciliation of operational profit to net income is included below:

Quarter ended May 31, 2016
Net income $ (421,827)
ADD: Share-based compensation 413,540
ADD: Non-recurring expenses associated with the decision to enter software services 335,633
Operational profit $ 327,346

(2) Net assets per share is defined as total assets minus total liabilities divided by total basic shares outstanding. Approximately $1million of reduced assets is attributed to foreign exchange costs, this is a non-cash measure

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 Inspira, Inspira achieving long-term cash flow from the lending operations, Inspira generating strong revenue and profit growth from its existing pipeline of prospective clients from its initiative to offer financial software services alongside lending solutions, lending operations continuing to throw off positive cash flow in the long run, Inspira increasing its quarterly dividend over time, the closing of the RBP acquisition, RBP's existing contracts generating up to $3 million in annualized revenue, are intended to identify forward-looking information. All figures are in Canadian dollars. All statements other than statements of historical fact may be forward-looking information. Such statements reflect Inspira's current views and intentions with respect to future events, and current information available to Inspira, and are subject to certain risks, uncertainties and assumptions, including, the continued existence of RBP's contracts, that RBP is profitable, the proposed acquisition closing as contemplated, Inspira achieving, sustaining and/or increasing profitability, Inspira being able to fund its operations with existing capital and/or raising additional capital to fund operations, the demand for addiction treatment continuing to increase, the new service line being complimentary to existing Inspira clients, Inspira generating positive cash flow from operations, Inspira expanding its revenue and profit because of the acquisition, and Inspira being successful in its integration of RBP. 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, competition, the ability to implement business strategies and pursue business opportunities, state of the capital markets, the availability of funds and resources to pursue operations, 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, granting of permits and licenses in a highly regulated business, difficulty integrating newly acquired businesses (including RBP), risks of performance by the target, new technologies, risk of billing irregularities by borrowers, low profit market segments, as well as general economic, market and business conditions, as well as those risk factors discussed or referred to in Inspira's annual Management's Discussion and Analysis for the year ended February 29, 2016, filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. Should any factor affect Inspira 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. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, Inspira 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 Inspira undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

(3) http://www.bloomberg.com/

(4) https://store.samhsa.gov/shin/content/SMA08-4326/SMA08-4326.pdf

(5) https://www.drugabuse.gov/publications/principles-drug-addiction-treatment-research-based-guide-third-edition/drug-addiction-treatment-in-united-states

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.

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