CareCloud, Inc. (CCLD) on Q2 2022 Results - Earnings Call Transcript
Operator: Welcome to CareCloud's Second Quarter 2022 Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today's conference is being recorded [Technical Difficulty] -- now like to turn the conference over to Kim Blanche, CareCloud's General Counsel. Ms. Blanche, the floor is yours.
Kimberly Blanche: Good morning, everyone. Welcome to the CareCloud's second quarter 2022 conference call. On today's call are Mahmud Haq, our Founder and [Technical Difficulty] our Chief Executive Officer, President and the 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 [Technical Difficulty] made during this conference call 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 of the date of this presentation, and we undertake no obligations 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 [Technical Difficulty] 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. [Technical Difficulty] one who dialed into the call by telephone, you may want to download our second quarter 2022 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, scroll down to News and Events, click on second 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 second quarter 2022 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?
A. Hadi Chaudhry: Thank you, Kim and thanks to all of you for joining us for our second quarter earnings call. On today's call, I would like to discuss a deeper dive into CareCloud's record bookings that are a direct result of our newly launched products and heightened focus on organic growth; our soon-to-be launched products for remote monitoring; a revision to our outlook that is attributable solely to a delay in our acquisition playbook; and finally, an update on our sales pipeline. To start with some highlights of the quarter, annualized recurring bookings of the new contracts of $5.5 million, excluding onetime fees were the highest in the history of the company, almost double what we signed last year and compares to $1.6 million in the first quarter of 2022. Revenue of $37.2 million was up 9% year-over-year. Adjusted EBITDA of $7 million increased 24% over second quarter of last year. Adjusted net income of $5.6 million increased 23% over the prior year period. Now taking a closer look at bookings, we are especially pleased with the results this quarter, which are directly correlated with our efforts to drive the organic growth that we have been speaking about the last couple of quarters. As we have discussed, our growth strategy in recent quarters has evolved from a pure consolidation playbook to one that strikes the balance of accretive acquisitions complemented by organic growth achieved through investment in sales and [Technical Difficulty]. As mentioned, bookings from recurring sources were $5.5 million, up 97% year-over-year and a record for CareCloud. Additionally, nonrecurring professional services bookings of $6.7 million increased more than 3 times that of second quarter of 2021, due largely to the acquisition of medSR that was completed late in the second quarter of last year. Additionally, while we want to stop short of giving bookings guidance, we have a high level of confidence that third quarter recurring bookings will meet or exceed those of second quarter and may represent another record for the company. Importantly, a meaningful component of the bookings were derived from contracts for our newly introduced CareCloud Wellness that launched last quarter. Specifically, greater than [Technical Difficulty] nonprofessional services bookings came from our new Wellness product, demonstrating terrific early reception to this solution. As a refresher, Wellness, which launched in late April is an effective way for our practices to support the treatment and well-being of the chronically ill patients that they serve. Additionally, it is a great source of referral revenue with little to no upfront cost. Wellness' early results demonstrate that its value is clearly resonating with our physician's base. While it is not the norm to get too granular around our booking 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 last quarter. Most of all, it shows that our increased investment in product innovation and sales and marketing efforts are bearing fruit. Given the sensitivity around bookings and volatility by quarter, please note that investors should not expect us to provide bookings metrics every quarter. We are pleased to be launching our forthcoming remote patient monitoring program this quarter. Remote patient monitoring or RPM for short, is a digital health solution leveraging the Internet of Things, which tracks and monitors chronic conditions and potential emergent situation close to real time. CareCloud's RPM solutions, metrics like blood pressure, glucose measurements, heart rate or pulse, weight, and sleep changes in the elderly as well as fetal monitoring can all be instantly transmitted from devices to patient's EHR, capturing a longitudinal view of the patient across the care continuum. We plan to offer a full service to the physician, providing care managers, supplying the device and helping to populate the EHR with data transmitted from the cloud. At a minimum, our solution promotes connectivity to healthcare data whenever and wherever it resides. And it at best can serve [Technical Difficulty] situations and preempt them, improving outcomes and reducing costs in the process. We are excited to continue along the path of innovation by introducing this revolutionary digital health solution to the market. We sized the total market opportunity at a North of $100 billion over the next few years. Drilling down to the medical practice level, we believe a typical practice on average can drive incremental revenue of up to one third annually through a combination of chronic care management and monitoring of which we can capture a meaningful percentage. We note also that the timing of our RPM product launch may coincide with CMS's favorable treatment towards the proactive management of chronic care conditions. CMS increased reimbursement for chronic care management in 2022. We believe that following additional work by the device providers inclusive of proof points regarding adoption and improvement of outcomes, CMS may increase fees for remote monitoring in future years. These favorable rates may serve to incentivize providers to do more monitoring. With respect to our acquisition strategy and has been the case for some time, we strive to balance accretive acquisitions that integrate well with our cloud platform and deliver value to our shareholders with a reasonable level of organic growth stemming from new customers, same-store sales, and product innovation. While we are happily exceeding expectations with respect to the organic component of our strategy, our acquisition playbook took a pause through the first half of 2022. As we outlined in our outlook in March, our 2022 guidance always contemplated a small amount of acquired growth that would be required to hit our revenue and EBITDA targets. While the acquisition pipeline remains robust and we continue to evaluate a number of opportunities, none felt compelling enough to execute from either an accretive or strategic standpoint. For one thing, private valuation expectations remained lofty despite the slide in the public company valuations year-to-date. In a recent industry report, it was noted that healthcare tech M&A was down in the first half of 2022 as acquirers struggled with valuation disconnect driven by the big step-ups resulting in lofty post-money valuations of the last couple of years. Given that our criteria for doing a deal requires us to target an ROI over three to four years, this fiscal discipline and electivity left us with a gap to meeting our full year outlook. Meanwhile, we are hopeful that private company value [Technical Difficulty] in the back half of the year. In setting our guidance earlier in the year, we incorporated the anticipated [Technical Difficulty] down of revenue from two customers that came to us as part of a prior acquisition. At the [Technical Difficulty] acquisition, the client [Technical Difficulty] in the process of merging their operations with another health system, each of whom had a different EHR mandate from whatever clients were utilizing. As such, we believe there was a risk that [Technical Difficulty] and while this potential attrition was factored into our guidance, our expectation was to make up the revenue with acquired growth, which is now likely pushed out to 2023. Accordingly, we now expect revenue in the range of $140 million to $143 million versus our prior expectations of [Technical Difficulty] million to $155 million due to an expected shortfall in acquired revenue. In doing so, we are reducing our EBITDA guidance to a range of $22 million to $24 million from $24 million to $26 million previously. I want to reiterate that the fundamentals of our business remained strong, as evidenced by our record bookings. And the absence of any tuck-in acquisition is the sole driver of the guidance reduction that Bill will expand upon. Before I turn it over to Bill for his financial review, I would like to comment on the health of our sales and pipeline [Technical Difficulty] fair amount of detail last quarter about, however, increased investment in sales and marketing and product innovation would lead to an uptick in organic growth. And we are seeing early success of this in both the funnel of pipeline opportunities as well as bookings. We are pleased that our pipeline at the end of second quarter was $40 million [Technical Difficulty] increase above the $25 million we had in the prior year. Moreover, the incremental pipeline build or creation was $21 million, up 50% [Technical Difficulty] prior year period. Average contract value or deal size increased 42% over second quarter of last year, which is suggestive of two things, larger customers in the pipeline and also [Technical Difficulty], group of products and services being delivered across our platform. For example, enterprise accounts were 64% of the pipeline, while small accounts comprised of 16% and midsized practices were the remaining 20%. Further, as an illustration of increased product density, our teams are actively working with clients representing an estimated $50 million in annualized revenue from CareCloud Wellness, which we introduced in the market just last quarter. All told, though we fell shy of our required revenue targets through the first half, the health of our pipeline, our sales motion and booking strength has never been better in the history of our company. To summarize, we delivered record bookings in second quarter with an expectation for as good, if not better, in third quarter. Year-to-date, we have announced innovative digital health solutions, inclusive of wellness for chronic care management and the soon-to-be-launched remote patient monitoring solution. Our sales and marketing efforts continue to ramp and early results are encouraging as evidenced by CareCloud's record bookings. We continue to work through an active acquisition pipeline with the goal of completing one or more deals in the back half of this year or early 2023. We look forward to reporting our progress to you as we navigate through the rest of 2022. Now I will turn the call over [Technical Difficulty] a closer look at our second quarter results. Bill?
Bill Korn: Thank you, Hadi and thanks to everyone for joining us on the call today to discuss our second quarter results. The second quarter was in line with our expectations. On today's call, I'll review the quarterly and first half results and discuss our guidance revision in more detail. [Technical Difficulty] the second quarter we generated recurring booking which will produce annual recurring revenue of $5.5 million, almost double what we did in second quarter last year. As Hadi noted, we do not plan to provide bookings on a quarterly basis going forward as they can be lumpy. But given our strong second quarter results, we thought you would appreciate the insight today. It is evident that our organic growth initiatives are starting to take hold as our newer products represent a significant portion of new recurring bookings. Our second quarter revenue was $37.2 million, representing an increase of $3.2 million or 9% year-over-year. Our GAAP net income of positive $2.7 million compared [Technical Difficulty] $227,000 last year. This represents the fourth quarter in a row where we've delivered more than $1 million in positive GAAP net income. Our GAAP net loss per share was $0.07 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 $5.6 million, an increase of 23% year-over-year. Adjusted net income per share was $0.37 compared to $0.31 per share for the year ago quarter. Adjusted EBITDA of $7 million increased 24% year-over-year and set a new record. Our adjusted EBITDA margin of 19% increased 220 basis points compared to last year and increased 540 basis points sequentially to the highest level since we went public in 2014 as we continued to reduce cost and drive further efficiencies from our previous acquisitions. [Technical Difficulty] look at our results for the first half, revenue for the first six months of 2022 was $72.6 million, an increase of 14% compared to $63.8 million in the first six months of 2021, with 85% generated from our technology-enabled solutions. For the first six months of 2022, our GAAP net [Technical Difficulty] million compared to a GAAP net loss of $2.2 million in the first six months of 2021. This equates to a loss of $0.26 per share after subtracting the preferred share dividends. Our non-GAAP adjusted net income for the first six months of 2022 was $9.1 million or $0.60 per share. During the first half of 2022, our adjusted EBITDA was $11.7 million, an increase of $2.4 million or 26% from $9.3 million in the same period last year. Now, I will turn to the balance sheet and cash flow. We ended the second quarter with $10.2 million of cash and equivalents and generated $5 million of cash flow from operations during the quarter and $8.1 million year-to-date. As Hadi mentioned, we are adjusting our guidance to reflect the fact that we have not made any acquisitions yet this year. Our original guidance for the year assumed we would complete one or two tuck-in acquisitions during the year, contributing approximately $13 million of revenue, which would have offset the revenue from the two customer transitions that Hadi mentioned. Though we factored in the wind down of this revenue in our guidance, we expected to replenish the loss of these customers with acquired revenues. However, we have not yet found a deal on terms we believe, provided a compelling return to shareholders [Technical Difficulty] prefer to pass on [Technical Difficulty] close it on terms which are not as favorable as we would like. [Technical Difficulty] just five months left in the year and the current disequilibrium between public and private valuations, we think it's unlikely that any potential acquisition will meet the assumptions baked into our original [Technical Difficulty]. We are always looking for game changer deals, and we will let investors know when we have something compelling to talk about. But we have removed any impact from our 2022 guidance. With that as a backdrop, we now expect 2022 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. Going into the second half of 2022, I'm pleased that our robust product solutions are resonating in the market, and our organic growth strategy is starting to take hold. I look forward to keeping you posted on our progress in the remainder of the year. With that, I'll turn the call over to Mahmud for his closing remarks.
Mahmud Haq: Thank you, Bill. I would like to thank our employees, customers and shareholders for their continued support. As Hadi mentioned, we are very pleased with the expansion of our platform, organic growth initiatives, and resulting booking trends. We look forward to continuing to update you on our progress throughout the year. Thank you. Operator?
Operator: [Operator Instructions]. And our first question comes from Mr. Cohen with Ladenburg. Please proceed with your question.
Operator: Our next question comes from Mr. Wiesenberger with B. Riley Securities. Please proceed with your question.
Operator: Our next question comes from Mr. Klee, Maxim Group. Please proceed.
Operator: [Operator Instructions]. And our next question comes from Mr. Larsen with BTIG. Please proceed.
Operator: Our next question comes from Mr. Dede with H.C. Wainwright. Please proceed.
Operator: Ms. Blanche, I'll turn the call back to you for closing remarks.
Kimberly Blanche: We'd like to thank everyone who have 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.
A. Hadi Chaudhry: Thank you, everyone. Thanks, bye-bye.
Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
