$RNVA showing a loss, Press Release: Rennova Health

$RNVA showing a loss,

Press Release: Rennova Health Reports Second Quarter 2016 Financial Results
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Rennova Health Reports Second Quarter 2016 Financial Results

Conference call begins at 11:00 a.m. Eastern time today

WEST PALM BEACH, Fla.--(BUSINESS WIRE)--August 15, 2016--

Rennova Health, Inc. (NASDAQ:RNVA) (NASDAQ:RNVAZ), a vertically integrated provider of industry-leading diagnostics and supportive software ("Rennova" or the "Company", reports financial results for the three and six months ended June 30, 2016, and provides a business update.

Business highlights for the second quarter of 2016 and recent weeks include:

-- Converted approximately $2.0 million of liabilities into equity in August

2016

-- Signed an agreement with Academy Medical to provide laboratory services

to U.S. federal government customers in July 2016

-- Completed a public equity raise totaling $8.6 million in gross proceeds

in July 2016

-- Acquired Hartford Healthcare Corporation's interest in Genomas, Inc., a

laboratory based in Connecticut that specializes in pharmacogenomics

-- Entered into a preferred provider network agreement with Three Rivers

Provider Network

-- Added electronic medication management functionality (eMAR) to the

Company's flagship M2Select electronic health record (EHR) product

Financial highlights for the second quarter of 2016 compared with the first quarter of 2016 include:

-- Net revenues of $3.1 million, compared with $1.9 million

-- Clinical Laboratory Operations net revenue of $2.5 million, compared with

$1.5 million

-- Supportive Software Solutions net revenues of $0.6 million, compared with

$0.5 million

-- Decision Support and Informatics net revenues of $0.2 million, compared

with $0.2 million

-- Gross margin of 87.2%, compared with 70.0%

Financial highlights for the second quarter of 2016 compared to the second quarter of 2015 include:

-- Net revenues of $3.1 million, compared with $9.4 million

-- Clinical Laboratory Operations net revenue of $2.5 million, compared with

$8.9 million

-- Supportive Software Solutions net revenues of $0.6 million, compared with

$0.9 million

-- Decision Support and Informatics net revenues of $0.2 million, compared

with no revenue

-- Gross margin of 87.2%, compared with 71.6%

Management Commentary

"Our second quarter has been in keeping with the turnaround we forecasted during our first quarter 2016 investor conference call in May, " stated Seamus Lagan, Rennova's Chief Executive Officer. "We have made significant progress in growing our core business of toxicology testing. We continue to add EHR customers to our software division and in the last few weeks we hired a professional to lead our billing services for substance abuse facilities, from which we are experiencing strong demand for integrated services."

"I am particularly pleased with the success we are having adding new payer contracts. These contracts continue to expand our target market and provide more predictable and reliable payments for diagnostic services. As an example of this success, we achieved a 63% increase in net revenues for the second quarter 2016 versus the first quarter. This increase substantiates our belief that although year-over-year results are down, we have begun to experience the turnaround forecasted," Mr. Lagan said.

"The sector in which we operate continues to be impacted by compliance matters, with many insurance companies now actively pursuing 'bad-actors' through the courts for reparation. Our focus on compliance, along with our extensive offering of testing services, which now includes pharmacogenomics tests, have resulted in a number of attractive new contracts with reliable payers over the past several months. For example, just last week we announced a contract with Academy Medical to promote the sale of our services to the U.S. federal government. We do not believe we would have obtained this contract without our exceptional focus on compliance. We expect to sign additional in-network contracts throughout the year."

"In March, we announced an alliance with Genomas to offer their revolutionary PhyzioType Systems for DNA-guided management and prescription of drugs. Subsequently, within the past month, we significantly strengthened our relationship by purchasing Hartford Healthcare Corporation's interest in Genomas. We now expect to accelerate our provision of diagnostics for DNA-guided management and prescription of drugs. These products provide guidance to physicians so that they may select the safest and most effective drugs to improve patient outcomes and enhance patient compliance. We will continue to expand this product offering in the coming weeks."

Mr. Lagan added, "During the second quarter we added eMAR functionality to our flagship M2Select EHR solution, which automates the process of monitoring patient medications, reducing the risk of medication dispensing errors. Partnering with our EHR clients is ongoing, and we have developed and improved our offerings during the second quarter. We are excited about the creation of a more sustainable relationship with our customers because of our growing ability to provide this software and integrated services."

Commenting on expectations for the remainder of the year, Mr. Lagan said, "We are securing additional customers -- June was the most active month of onboarding new customers in two years. In addition, we are confident that the growth in core toxicology diagnostics, combined with our investment in Genomas, will provide additional revenue and open new market segments over the coming months. We are continuing to explore and develop new revenue sources for diagnostics, including direct-to-consumer testing."

Mr. Lagan concluded, "We also continue to monitor our efficiency and expect that the cost-containment measures we have taken in recent months, which total $2.4 million annually, will further manifest themselves in our financial performance in the coming quarters. We anticipate that our current growth, combined with ongoing efforts to contain costs, will see us back to cash flow break even in the next few months."

Financial Results

Net revenues for the second quarter of 2016 were $3.1 million, compared with $9.4 million for the second quarter of 2015. Clinical Laboratory Operations revenues for the second quarter of 2016 were $2.5 million, compared with $8.9 million for the second quarter of 2015, a decrease of 72%. The decrease was primarily due to a decline in insured test volume, partially offset by an increase in the net revenue per insured test. During the first quarter of 2015 the Company transitioned a significant portion of its testing from external reference laboratories to internal processing, which resulted in a $0.5 million decrease in direct costs of revenues, or a 62% decrease in direct costs per sample. Total samples processed declined 68% year-over-year, resulting in a $1.8 million decrease in direct costs of revenues.

Supportive Software Solutions net revenues were $0.6 million for the second quarter of 2016, compared with $0.9 million for the second quarter of 2015, a decline of 38%. The decline was due to a reduction in the amounts charged by the Supportive Software Solutions group to the Company's Clinical Laboratory Operations group, partially offset by $0.1 million of increased revenues generated by sales of the Company's Medical Mime product, which was launched in the fourth quarter of 2015. Decision Support and Informatics net revenues were $0.2 million for the second quarter of 2016, compared with no revenues in the prior year's second quarter, as this segment was created with the acquisition of CollabRx, Inc. in November 2015.

Operating expenses for the second quarter of 2016 were $8.1 million, compared with $14.0 million for the prior-year second quarter. The decrease was primarily due to a decline in direct costs of revenue of $2.3 million, a decline in general and administrative expenses of $3.5 million and a decline in sales and marketing expenses of $0.5 million, partially offset by a $0.6 engineering expense.

The Company reported other expense of $0.8 million for the second quarter of 2016, compared with $0.5 million for the second quarter of 2015. The increase was mainly due to an increase in interest expense of $1.5 million during the quarter, largely offset by a gain on the change in the value of derivative instruments of $1.2 million. The Company recognized no income tax expense or benefit for the second quarter of 2016, compared with an income tax benefit of $0.9 million for the second quarter of 2015.

Net loss attributable to common stockholders for the second quarter of 2016 was $5.9 million, or $0.40 per basic and diluted share, compared with a net loss attributable to common stockholders for the second quarter of 2015 of $5.1 million, or $0.42 per basic and diluted share.

Net revenues for the six months ended June 30, 2016 were $4.9 million, compared with $23.0 million for the six months ended June 30, 2015. The decline was primarily due to a decline in insured test volume in the Clinical Laboratory Operations segment. Operating expenses declined to $16.8 million for the six months ended June 30, 2016, compared with $25.4 million in the prior-year period. The decrease was largely due to a $5.7 million reduction in direct costs of revenue and a $3.2 million decrease in general and administrative costs. The net loss attributable to common stockholders was $10.1 million, or $0.69 per share, for the six months ended June 30, 2016, compared with a net loss attributable to common stockholders of $4.6 million, or $0.38 per basic and diluted share, for the prior-year period.

The Company had cash and cash equivalents of $0.5 million as of June 30, 2016, compared with $8.8 million as of December 31, 2015. Subsequent to the close of the second quarter, the Company closed an underwritten offering of common stock and warrants, from which the Company raised approximately $8.6 million in gross proceeds.

Non-GAAP Measures

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August 15, 2016 08:30 ET (12:30 GMT)