CareCloud, Inc. (CCLD) on Q3 2022 Results - Earnings Call Transcript
Operator: Welcome to the CareCloud, Inc. Third Quarter 2022 Results Conference Call. [Operator Instructions] I will now turn the call over to your host, Nathalie Garcia. Ms. Garcia, you may begin.
Nathalie Garcia: Good morning, everyone. Welcome to the CareCloud Third Quarter 2022 Conference Call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer, President and a Director; and Bill Korn, our Chief Financial Officer. Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts made during this conference are forward-looking statements including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook, and potential organic growth and acquisitions. Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as to the date of this presentation, and we undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our press release and our reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements. For anyone who dialed into the call by telephone, you may want to download our third quarter 2022 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, click on News and Events, then click IR calendar, click on Third Quarter 2022 Results Conference Call and download the earnings presentation. Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our third quarter 2022 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. With that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?
Hadi Chaudhry: Thank you, Nathalie, and thanks to all of you for joining us today for our third quarter earnings call. First, to review some high-level financial highlights, we are very pleased to announce our second consecutive quarter of record bookings, driven by a strong initial reception to our Wellness offerings, namely chronic care management and remote patient monitoring. We see an enormous opportunity to expand our total addressable market and generate meaningful growth through these product introductions, and we'll go into more detail on that shortly. Our third quarter revenue and EBITDA of $33.7 million and $4.8 million, respectively, compared to $38 million and $6.7 million in the prior year quarter, which was expected and built into our projections. On today's call, I would like to discuss a deeper dive into CareCloud's record bookings that continue to grow due to our newly launched products and heightened focus on organic growth, our innovation and next generation of digital health, including the recent launch of remote patient monitoring, results from the recent class survey, which really put CareCloud on the map with respect to multiple digital health categories and finally, an update on our sales pipeline. First, with respect to bookings, we are pleased to report that the third quarter represented our highest ever bookings quarter in the history of the company, which we believe was directly correlated with the early strength of our suite of digital health solutions under our Wellness way. Recurring bookings for the third quarter were $7.1 million, up 3x that of a year ago and up 25% sequentially atop the prior record we set last quarter. CareCloud Wellness bookings represented close to 50% of total recurring bookings for the quarter. This metric tells us that there is an absolute market need for this category of products and gives us the confidence in our R&D strategy and the investments we are making in our solution set. Wellness, which launched a little over 6 months ago, is an effective and practical way for our practices to support the treatment and well-being of care patients with chronic conditions. It is critical that the pathways to care for these patients is as seamless as possible for both physicians and patients as nearly half or 45% of Americans live with some type of chronic condition according to the data from NIH. Additionally, it is a great source of incremental revenue for the provider with little to no upfront cost for them. Wellness' bookings momentum since our launch in April demonstrate that its value is clearly resonating with our physician base. Similar to the last couple of quarters, but not the norm to get too granular around our bookings metrics, we think it's important to share this information with you as it ties directly to the conversion of the robust pipeline activity that we provided a lot of details around the last couple of quarters. Importantly, it demonstrates that our increased investment in product innovation and sales and marketing spend are paying dividends. Importantly, for modeling purposes, we want to call out what is typically a longer than usual tail for bookings conversion to revenue in our Wellness business. We note that $1 of Wellness bookings does not translate to $1 of revenue 1 or 2 quarters later. Rather, once the bookings is confirmed, we work with customers to sign up their patients, and only once the patients are enrolled and the actual chronic care management visits or remote patient monitoring begin. The onboarding of both physicians and patients typically takes 9 to 12 months to fully ramp up. After this initial period, we do not realize the entirety of bookings as revenue, rather it is a gradual process to build up to that steady state on an annualized basis. As we mentioned last quarter, given the sensitivity around bookings and general quarterly volatility, please note that investors should not expect us to provide bookings metrics every quarter. CareCloud Wellness, which was launched last quarter, continues to generate a strong marketplace response. In later September, we announced the launch of our remote patient monitoring solution. While we detailed this solution on our earnings call last quarter, as a refresher, the RPM solution gives health care providers the ability to monitor elements of their patients' health outside the clinical setting, allowing more proactive and improved care delivery. Through collaborations with leading device makers, this program enables providers to get real-time information on their patients' health status and make proactive clinical decisions, rather than waiting for a scheduled follow-up visit. We have generated RPM bookings of $0.6 million in just the last 30 days since its launch. We are very excited about the enormous potential to leverage our existing client base and drive meaningful growth in our Wellness segment. As mentioned last quarter, we believe we can generate up to $50 million annually from our existing customer base alone. We are honored that CareCloud was recently recognized in the 2022 Best in KLAS survey in the category of small practice ambulatory EMR/PM, for offering integrated software and services to practices with 10 physicians or less. Aligning with our mission to drive innovation that creates better financial and operational outcomes for physicians and practices, we are proud that our EMR and PM solutions are being recognized by the medical providers that provide direct feedback to KLAS. For those of you not familiar, the KLAS recognition is the most reputable market research organization, specific to the health care IT market, and is compared to the consumer reports of health care. In addition to KLAS, further respected publishers have recognized CareCloud's products and services under EHR and RCM categories just over the last few months. This includes Business.com for best medical software and best medical billing services; Forbes Advisor for our comprehensive health care technology solution; TechRadar for the best electronic health record software and various others. A more detailed list is available in the presentation along with web links. We are also in the running for other reward categories of best-in-class for which results are yet to be announced. Similarly, we are currently under review by Inc. 5000 for best in business for health services and products; and Fast Company for most innovative company for our digital health suite. These accolades gave us confidence that we are innovating in the right direction and are succeeding in our goals of alleviating burnout experienced by practice physicians, streamlining their back-office processes while driving superior collections. We are pursuing this recognition as part of our business strategy to focus more aggressively on brand awareness and organic sales. We are proud that our clients and objective third parties have given us these awards and certifications. We are pleased that our pipeline of new customers at the end of Q3 was $28 million, a 40% increase above the $20 million we had in the third quarter of 2021. This amount does not include CareCloud Wellness, which represents an entirely different set of potential customers and opportunities cross-selling to our existing customer base. All told, we are thrilled with the early reception to both our wellness offerings, chronic care management and remote patient monitoring evidenced by our bookings to date. To summarize, we are thrilled to deliver our second consecutive quarter of record bookings in Q3. Our sales and marketing efforts continue to ramp and early results are encouraging as evidenced by CareCloud's booking and an all-time high in customer reception to our products. We are harnessing the power of increased brand awareness to help drive organic growth, and we look forward to reporting our progress as we close out the remainder of 2022. Now I will turn the call over to Bill for a closer look at our third quarter and year-to-date results. Bill?
Bill Korn: Thank you, Hadi, and thanks, everyone, for joining us on the call today to discuss our third quarter results. Third quarter was broadly in line with our expectations, noting the reduction in revenue from 2 clients that we discussed last quarter. On today's call, I'll review the quarterly results and discuss our year-to-date performance in greater detail. Taking a look at our results for the first 9 months of 2022, revenue year-to-date was $106.3 million, an increase of 4% compared to $102.1 million in the first 9 months of 2021, with 84% of our revenue generated from our technology-enabled solutions. Year-to-date, our GAAP net income was $4.9 million compared to a GAAP net loss of $686,000 in the first 9 months of 2021. This equates to a loss of $0.45 per share after subtracting the preferred share dividends. Our non-GAAP adjusted net income for the first 9 months of 2022 and was $12.4 million or $0.81 per share. During the first 9 months of 2022, our adjusted EBITDA was $16.6 million an increase of $546,000 or 3% from $16 million in the same period last year. Our adjusted EBITDA margin year-to-date of 16% is consistent year-over-year. Our third quarter revenue was $33.7 million, representing a decrease of $4.6 million or 12% year-over-year. The year-over-year decline was due to 2 factors. The primary factor was a reduction in recurring revenues from the 2 large customers we mentioned last quarter. These customers that came to us as part of a prior acquisition are in the process of merging their operations with other health systems, which utilize a different EHR platform. We continue to see an impact from their wind down of revenue. And since they were high-margin accounts, this impacted our third quarter profitability as well. A secondary factor was a decline in our nonrecurring professional services revenue from the second quarter. This revenue primarily from our Med SR business, is running at approximately a $30 million annual run rate. Due to completion of a large project during the second quarter of 2022, this revenue was a bit higher during the second quarter and levels off in the third quarter. This was anticipated and is part of a normal fluctuation in that business based on the timing of project starts and completions. This normal fluctuation does not impact the annual revenue run rate of that business. Our GAAP net income of $1.1 million was down from $1.5 million in the third quarter of 2021, a decrease of 30%. Our GAAP net loss was $0.18 per share based on the net loss attributable to common shareholders, which takes into account the preferred stock dividends declared during the quarter. Our non-GAAP adjusted net income was $3.3 million or $0.21 per share. Adjusted EBITDA of $4.8 million decreased 28% from last year, and our adjusted EBITDA margin was 14%. Now I'll turn to the balance sheet and cash flow. We ended the third quarter with $4.9 million of cash and equivalents and nothing drawn on our $20 million line of credit with SVB. Net working capital was $5.1 million and we generated $7 million of cash from operations during the quarter and $15.1 million year-to-date. We are reiterating our 2022 guidance with revenue to be in the range of $140 million to $143 million and adjusted EBITDA to be in the range of $22 million to $24 million. As I mentioned last quarter, we are continuously looking for game-changing deals and look forward to updating you when appropriate on that front. We are also very excited to announce that we will be hosting our first Analyst and Investor Day on Monday, December 12. This will be a virtual event to showcase our company at a depth and breadth that will be entirely new to the investor and analyst community. Purpose is to reacquaint investors with our story and go into detail on how CareCloud has evolved from a consolidator of billing companies to a leading-edge indispensable partner to physicians and hospitals as they navigate the next generation of health care technology. There will be opportunities to hear from and ask questions of members of our leadership team in sales and operations. We'll provide additional information about the new CareCloud products and our long-term strategy to harness innovation and growth to drive new business. Please look for a formal invitation to this event shortly after the Thanksgiving holiday. We are proud of our progress in 2022 and it is clear that our new product solutions are resonating. We have carved out 2 distinct pathways to organic growth, through new business development as well as leveraging our relationships with existing customers and creating value-add products to complement their existing CareCloud platforms. Our organic growth continues to increase, and we look forward to providing more details during our Analyst and Investor Day. With that, I'll turn the call over to Mahmud for his closing remarks.
Mahmud Haq: Thank you, Bill. We are very proud of our accomplishments to date, and even more with respect of what CareCloud future holds. I would like to thank our customers, shareholders and all our associates for their trust, loyalty, support of CareCloud's mission. We will now open the call to questions. Operator?
Operator: [Operator Instructions] Our first question comes from Jeff Cohen from Ladenburg Thalmann.
Operator: And our next question comes from Allen Klee from Maxim Group.
Operator: And our next question comes from Marc Wiesenberger from B. Riley Securities.
Operator: And our next question comes from Kevin Dede from H.C. Wainwright.
Operator: [Operator Instructions] And at this time, there appears to be no further questions.
Nathalie Garcia: We would like to thank everyone who's joined us today. We appreciate your interest in us as a company and your participation on today's call. We look forward to speaking with you again next quarter. Thank you all, and have a great day.
Hadi Chaudhry: Thank you.
Operator: This concludes today's conference call. Thank you for attending.
