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Craneware delivers robust results for 2011 financial year

Published: 02:25 31 Aug 2011 AEST

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Software developer Craneware (LON:CRW) this morning announced increased revenues and profits for the year to the end of June. The firm also reported that 1,500 US hospitals now use its software.

Craneware – whose software helps healthcare organisations manage their revenue cycle through better information, workflow, pricing strategy, lost revenue capture and best practice modelling – reported that revenues during the 12 months to June 30 increased 34 per cent to US$38.1 million, while its operating profit (on an adjusted EBITDA basis) improved 27 per cent to US$9.3 million.

Pre-tax profit increased 19 per cent to US$8.7 million, while adjusted earnings per share came in 17 per cent greater than in 2010 at 25.6 US cents.

Craneware also delivered cash flow of US$10.1 million (2010: US$8.9 million) and had balance sheet cash of US$24.2 million at the end of June, compared with US$29.4 million a year earlier, following its US$9 million payment when it acquired ClaimTrust in February this year.

ClaimTrust is a software-as-a-service (SaaS) business that provides tools to analyse the revenue cycle. Craneware said that the first 90-day integration plan of ClaimTrust, which brought a new product family to the enlarged business as well as adding 250-plus hospitals to its list of customers, had been successfully completed. Speaking to Proactive Investors, Keith Neilson, Craneware’s chief executive officer, described the addition of ClaimTrust as “very positive” for the company.

However, Neilson said that the “headline message” was the strong organic growth in order intake by the company. 

This has, in part, been driven by changes to the US healthcare market, which has continued to be affected by new legislation and increased regulation as the US government seeks to reduce the burden of healthcare on the state. At the same time “there continues to be a greater population looking for access to better quality healthcare,” said Neilson.

Cuts to Medicaid state budgets – the means-tested programme for individuals and families with low incomes and resources – have been as high as 20 per cent across the US, but the number of people enrolling in the Medicaid programme continues to increase by an additional one per cent, along with a 1.1 per cent increase, in the uninsured for every one per cent increase in the national unemployment rate.

According to Craneware, these factors mean a growing number of hospitals are seeking technology-based solutions to help improve accuracy of billing and reduce regulatory burdens, so protecting their slim profit margins.

Meanwhile, Recovery Audit Contractors have been tasked by the US Congress to detect and correct past improper payments to hospitals, whether these are overpayments that need to be recouped or underpayments that need to be reimbursed. RACs are paid according to performance, partly through fines levied on hospitals, according to Neilson, so while they are well motivated to find discrepancies in healthcare payments the hospitals themselves are keen not to be found to have overcharged.

RACs identified and recoupled US$92.3 million of corrections from hospitals during the first 12 months of the RAC programme, but this increased significantly to US£592.5 million in the subsequent nine months. “We believe that this is going to be a continuing trend,” said Neilson.

Broker Evolution Securities noted today that the company has visibility of US$37 million of 2012 revenue, which accounts for 67 per cent of the forecast revenue, including a US$5.9 million contribution from ClaimTrust. Evolution estimates that 2012 sales at Craneware will be US$55 million, while pre-tax profit should by US$13.1 million (translating to earnings per share of 35.8 cents).

Shares in Craneware closed down three pence at 446.5 pence each today.

 

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