CRH Medical Corporation Announces Results for the Three and Six Months Ended June 30, 2017

VANCOUVER, Aug. 2, 2017

This news release should be read in conjunction with the Company's unaudited interim financial statements and management discussion and analysis for the quarters and Year-to-Date ended June 30, 2017 and 2016 that have been filed on SEDAR and are available at www.sedar.com and on the Company's website at www.crhmedcorp.com

Edward Wright, Chief Executive Officer of CRH commented, "Yesterday's acquisition is expected to be the first in a series of acquisitions we will complete through the remainder of the year. During the past quarter, we expanded our credit facility from $55 million to $100 million with a current rate of approximately 3.25%. The credit facility, along with our strong free cash flow which was $5.8 million in our most recently completed quarter, will continue to fund future acquisitions."

Except where otherwise indicated, all financial information discussed in this document is expressed in USD, represents 100% of the consolidated results of the Company, and includes both the Company's interest in subsidiaries, as well as non-controlling interests in non-wholly owned subsidiaries of the Company.

Consolidated Financial Highlights

		Three Months Ended June 30, ARIVA.DE Börsen-Geflüster Kurse CRH Medical -   0,00%			Year-to-Date June 30,
		2017	2016	Change	2017	2016	Change
Anesthesia services revenue		19,267,771	13,930,346	38%	39,030,203	25,367,087	54%
Product revenue		2,787,678	2,657,195	5%	5,563,993	5,057,305	10%
Total revenue		22,055,449	16,587,541	33%	44,594,196	30,424,392	47%
Operating expenses – adjusted 1
	Anesthesia services	9,839,546	6,158,205	60%	19,308,970	11,481,050	68%
	Product	1,141,976	1,003,886	14%	2,178,954	2,002,120	9%
	Corporate	843,890	853,273	-1%	1,828,425	1,606,824	14%
Total operating expenses – adjusted1		11,825,412	8,015,364	48%	23,316,349	15,089,994	55%
Total adjusted operating EBITDA1		10,230,037	8,572,177	19%	21,277,847	15,334,398	39%
Shareholders of the Company		7,352,134	7,053,675	4%	15,071,441	12,967,453	16%

Results of Operations – Three and Six Months Ended June 30, 2017

Revenues for the quarter ended June 30, 2017 were $22,055,449 compared to $16,587,541 for the quarter ended June 30, 2016. The increase is mainly attributable to revenue contributions from the anesthesia businesses acquired by the Company in the second quarter of 2016 in addition to the acquisitions completed in February and March of 2017. Revenues for the six months ended June 30, 2017 were $44,594,196, an increase of $14,169,804 when compared to the six months ended June 30, 2016.

Revenues from anesthesia services for the quarter ended June 30, 2017 were $19,267,771 compared to $13,930,346 for the second quarter of 2016. The increase was due to the Company's anesthesia acquisitions throughout 2016 and 2017. The Company expects revenue from anesthesia services to continue to increase through organic growth in patient cases and deployment of available capital for future acquisitions. Anesthesia revenues for the six months ended June 30, 2017 were $39,030,203 compared to $25,367,087 for the six months ended June 30, 2016.

During the three and six months ended June 30, 2017, there were the following factors that impacted revenue which also impacted operating income and adjusted operating EBITDA when compared to both the previous year and previous quarter:

• As a result of the annual process that insured individuals and companies go through when renewing their health insurance policies, our commercial payor mix may change each year. Changes in payor mix could have a positive or negative impact on revenues. Recent payor mix changes from entities acquired prior to 2016, primarily GAA, resulted in a decrease in average payor revenue per case of 18% compared to the second quarter of 2016 and average revenue per case decreased by 13% for the six months ending June 30, 2017. The decline in average revenue per case was partially offset by an increase in patient cases of 6% for the second quarter of 2017 and 5% for the year to date. These changes reduced anesthesia revenue for entities acquired prior to 2016 by 13% for the three months ending June 30, 2017 and by 9% for the six months ending June 30, 2017. The payor mix changes primarily relate to a single payor at GAA. Any future payor mix changes related to this payor are expected to not be material;
  
  
• Estimates are required in the determination of anesthesia services revenue. Each quarter we review our estimated revenue assumptions and make changes in estimates as required based on actual revenue collected. In the first quarter of 2017, our revenues, operating income and adjusted operating EBITDA were positively impacted by changes in revenue estimates totaling approximately $900,000. The majority of the change in estimates occurred in our partially owned joint venture businesses. In the second quarter of 2017, we had a small negative adjustment of $200,000 related to changes in revenue estimates; this relatively small adjustment is reflective of the Company's stable platform of entities and our growing experience in estimating revenue rates per unit. This change in revenue estimates is a factor causing anesthesia services revenue to decline when comparing the first quarter of 2017 to the second quarter of 2017; and
  
  
• For the three and six months ending June 30, 2017 our newly acquired entities, DDAB and OGAA contributed $1,369,550 and $2,043,686 respectfully to total anesthesia revenue.

In the quarter ended June 30, 2017, the anesthesia services segment serviced 46,188 patient cases compared to 29,336 patient cases during the quarter ended June 30, 2016. Year to date patient cases total 88,551 compared to 53,776 cases in the six months ended June 30, 2016.

Revenues from product sales for the quarter ended June 30, 2017 were $2,787,678 compared to $2,657,195 for the second quarter of 2016. The increase in product sales is the result of the continuing successful execution of the Company's direct to physician program that allows physicians to purchase our hemorrhoid banding technology, treatment protocols, marketing and operational experience. Revenues from product sales for the six months ended June 30, 2017 were $5,563,993 compared to $5,057,305 for the six months ended June 30, 2016. As of June 30, 2017, the Company has trained 2,653 physicians to use the O'Regan System, representing 985 clinical practices. This compares to 2,290 physicians trained, representing 870 clinical practices, as of June 30, 2016.

For the three months ended June 30, 2017, total adjusted operating expenses were $11,825,412 compared to $8,015,364 for the quarter ended June 30, 2016. For the six months ended June 30, 2017, total adjusted operating expenses were $23,316,349 compared to $15,089,994 for the six months ended June 30, 2016. Increases in adjusted operating expenses are primarily related to adjusted operating expenses in the anesthesia services business. Factors impacting the fluctuation of total adjusted operating expenses are consistent with those impacting operating expenses.

Anesthesia services adjusted operating expenses for the quarter ended June 30, 2017 were $9,839,456, compared to $6,158,205 for the three months ended June 30, 2016. Anesthesia services adjusted operating expenses primarily include labor related costs for Certified Registered Nurse Anesthetists and MD anesthesiologists, medical drugs and supplies, and billing and management related expenses. The Company's first anesthesia acquisition was in the fourth quarter of 2014, with ten further acquisitions completed in 2015, 2016 and in the six months ended June 30, 2017. As a result, the second quarter of 2017 is not directly comparable to 2016, with the majority of the increase relating to operating expenses for acquired companies. Though quarterly revenue may fluctuate significantly, quarterly adjusted operating expenses which are primarily employee related costs, due to their fixed nature, are not expected to fluctuate materially. These expenses are primarily impacted by the Company's acquisition strategy. Anesthesia services adjusted operating expenses for the six months ended June 30, 2017 were $19,308,970 compared to $11,481,050 for the six months ended June 30, 2016. Similar to the second quarter of 2017, the first half of 2017 is not comparable to the first half of 2016 due to the timing of acquisitions.

Product sales adjusted operating expenses for the quarter ended June 30, 2017 were $1,141,976 compared to $1,003,886 for the quarter ended June 30, 2016. The increase in product sales adjusted operating expenses compared to 2016 is a reflection of higher employee related costs as a result of increased sales activity as well as an increase in professional fees related to continuing efforts to distribute our product in China. Product sales expenses primarily include employee wages, product cost and support, marketing programs, office expenses, professional fees, and insurance. In the future, the Company expects adjusted operating expenses to increase as the Company continues to invest in activities aimed at increasing demand for training and use of the CRH O'Regan System. Product sales adjusted operating expenses for the six months ended June 30, 2017 were $2,178,954 compared to $2,002,120 for the six months ended June 30, 2016.

Corporate adjusted operating expenses for the quarter ended June 30, 2017 were consistent with the second quarter of 2016 at $843,890. Corporate adjusted operating expenses for the six months ended June 30, 2017 were $1,828,425 compared to $1,606,824 for the six months ended June 30, 2016. The increase in corporate adjusted operating expenses from 2016 is primarily due to higher professional fees and employee related costs, and, in general, is reflective of the increasing complexity of our business which is increasing our compliance costs.

Adjusted operating EBITDA attributable to shareholders of the Company for the quarter ended June 30, 2017 was $7,352,134, an increase of $298,459 from the quarter ended June 30, 2016. The increase in adjusted operating EBITDA attributable to shareholders is primarily a reflection of the adjusted operating EBITDA contribution from the Company's anesthesia services providers acquired in 2016 and most recently in 2017. Adjusted operating EBITDA attributable to shareholders of the Company for the six months ended June 30, 2017 was $15,071,441, an increase of $2,103,988 from the same period in 2016.

Total adjusted operating EBITDA was $10,230,037 for the quarter ended June 30, 2017, an increase of $1,657,860 from the same period in 2016. Total adjusted operating EBITDA was $21,277,847 for the six months ended June 30, 2017, an increase of $5,943,449 from the same period in 2016.

At June 30, 2017, the Company had $7,834,472 in cash and cash equivalents compared to $9,507,004 at the end of 2016. The decrease in cash and cash equivalents is primarily a reflection of cash generated from operations less cash used to finance acquisitions during the first quarter of 2017, less repayment of debt in the period.

Working capital was $11,339,624 compared to working capital of $9,657,303 at December 31, 2016. The Company expects to meet its short-term obligations, including short-term obligations in respect of its notes payable and deferred consideration through cash earned through operating activities. The average number of days receivables were outstanding at June 30, 2017 was 39 days. At December 31, 2016, the average number of days receivables were outstanding was 34 days.

Conference Call

CRH will host a conference call to discuss its results on Thursday, August 3, 2017, at 11:00 am EST (08:00 am PST). To participate in the conference, please dial 1-800-319-4610, or 1-604-638-5340.

An audio replay of the conference will be available shortly after the call by dialing 1-855-669-9658, or (604) 674-8052 and access code 1514. The replay will be available until August 17, 2017.

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