Jun 1, 2022 CloudMD Software & Services Inc.

CloudMD Reports First Quarter 2022 Financial Performance with Clear Path to Profitability and Strong Roadmap for Growth

 
CloudMD
  • Q1 2022 revenue of $41.4 million, compared to $8.8 million in Q1 2021, reflecting a year over year increase of 372%
  • Enterprise Health Solutions delivered revenue of $26.0 million; reflecting the first quarter of revenue recognition from MindBeacon
  • Q1 2022 gross margin of 32.5%; improvement of 250 basis points compared to the previous quarter

VANCOUVER, British Columbia, May 30, 2022 – CloudMD Software & Services Inc. (TSXV:DOC)(OTCQB:DOCRF) (“CloudMD” or the “Company”), a healthcare technology company revolutionizing the delivery of care, announced its financial results for the first quarter ended March 31, 2022. All financial information is presented in Canadian dollars unless otherwise indicated.

“In Q1 we delivered strong performance aligned with a company commitment to generating synergies, profitable execution, and continued growth. Innovation remains a key Company focus with the launch of our newly branded integrated personalized connected health platform, Kii. This is a milestone as we transform the way individuals receive healthcare. We are seeing momentum in client acquisition as Employers recognize the positive impact of our connected health ecosystem, starting with our unique nurse-led in-take. We are providing measurable improvements in employees’ health and wellness and reductions in absenteeism, driving significant return on investment,” said Karen Adams, Interim CEO and President of CloudMD Software & Services Inc. (TSXV:DOC)(OTCQB:DOCRF) . “As you’ve heard from us repeatedly, we remain focused on cost control, realizing synergies, and profitable execution. We have a strategic plan that focuses on leveraging our core assets, maximizing returns for our clients and shareholders, and achieving sustained profitability.”

First Quarter 2022 Financial Highlights

  • Q1 2022 revenue was $41.4 million, compared to $38.7 million in Q4 2021 and $8.8 million in Q1 2021. The growth compared to Q4 2021 is primarily attributable to the consolidation of MindBeacon into CloudMD’s results, organic growth from the Employee Health Solutions (“EHS”) division offset by a decline in Digital Health Solutions (“DHS”) due to Vision Pros supplier issues. The increase compared to Q1 2021 is primarily attributable to organic and acquisition growth from the acquisitions completed in the last 12 months.
  • Q1 2022 gross profit margin1 was 32.5%, compared to 30.0% in Q4 2021 and 40.9% in Q1 2021. The lower year over year gross profit margin was primarily due to revenue mix in the periods. The Company’s online vision care platform and patient support programs are lower-margin businesses and were not in the comparative period. The Company expects its gross profit margin to increase over the course of 2022 with the ongoing efforts to integrate its acquisitions and increase its operational efficiency.
  • Net loss in Q1 2022 was $5.6 million or $0.02 per share, compared to a loss of $15.1 million or $0.06 per share in Q4 2021 and a loss of $5.3 million or $0.03 per share in Q1 2021. The year over year increase in net loss was primarily due to additional expenses incurred to support the Company’s growth strategy, including acquisition integration costs. The Company is highly focused on profitable growth and generating positive net profit is a key objective for the Company.
  • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was a loss of $1.6 million in Q1 2022, compared to a gain of $0.6 million in Q4 2021 and a loss of $1.6 million in Q1 2021. The Company had a step back in the quarter due to the slightly higher run rate costs of MindBeacon which was acquired in January 2022; however, it has have made significant progress towards exceeding the planned acquisition synergies.
  • Cash and cash equivalents were $46.9 million as of March 31, 2022, compared to $45.1 million on December 31, 2021. The increase is related to the completion of the MindBeacon acquisition and net cash acquired.

First Quarter and Subsequent Corporate Highlights

  • On January 14, 2022, the Company announced the closing of the MindBeacon acquisition, creating one of North America’s most comprehensive integrated health offerings.
  • In Q1 2022, CloudMD Software & Services Inc. (TSXV:DOC)(OTCQB:DOCRF) announced Daniel Lee resigned as CFO and Sean Carr was appointed as Interim CFO. Subsequently, the Company announced Dr. Essam Hamza was resigning effective May 2, 2022, and Karen Adams would be appointed interim CEO. The Board has initiated a process to identify the permanent CEO and CFO.
  • On March 3, 2022, the Company announced its new Public Sector division. Operating within EHS, this division will focus on the investments being made in navigation of healthcare, an important part of our organic growth strategy across North America. In addition, this division will manage recently acquired customer contracts awarded from various state, local, and public sector organizations across North America.
  • On March 31, 2022, the Company announced its cost optimization and operational integration activities. In a desire to simplify operations and improve execution, the Company eliminated $7.5 million of annualized run-rate costs from its business. This is aligned with the Company’s focus on driving sustainable profitability.
  • On May 26, 2022, the Company announced the launch of Kii, Personalized & Connected Care, the new brand identity for its integrated, health services offering. Kii, is the company’s flagship offering which integrates several of its best-in-class technologies and services into one exceptional, connected, and personalized experience for employees that will continue to disrupt the traditional employer healthcare industry.

Outlook

The Company continues to deliver on the value proposition of offering comprehensive solutions that create access to care, leading to better health outcomes. Through its team-based, personalized care approach, CloudMD provides comprehensive solutions to patients, healthcare practitioners, individuals, and enterprise clients through our call center, digitally or in person. The Company has a multi-pronged growth strategy which focuses on organic growth, cost optimization, leveraging of our core assets and accretive mergers and acquisitions.

The Company remains focused on a number of key priorities in 2022 including: (1) Organic growth by continuing to diversify and grow its client base within its EHS and DHS divisions through cross selling capabilities, geographic expansion and providing innovative and best-in-class customer service; (2) Driving continuous operational excellence across the organization to improve productivity, product quality and consistency, and lower customer acquisition costs; (3) delivering a diligent path to profitable financial sustainability and focus on delivering consistent financial performance across all divisions of the organization; and (4) continuing to develop corporate governance to support the Company’s growth.

The Company has a near-term focus on streamlining operations, with a plan to profit from the core and leverage its strength as a leader in the employer health markets. CloudMD is focused on driving profitable growth in the markets where we have scale, and strong differentiators in proven service delivery and that have the most attractive growth and profit potential. As such, the Company will undertake a strategic review of some smaller, non-core assets to determine how best to maximize shareholder value.

The Company will continue to deploy its capital prudently and will make investments that support growth in core areas of the business.

_____________
1 Gross profit margin is a non-GAAP ratio. Refer to the “Non-GAAP Financial Measures” section of this news release for further information.

Selected Financial Information

All results were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

(In thousands of Canadian dollars, except per share amounts)   Three months ended  
  March 31,  
  2022     2021   (%)
Revenue $ 41,378   $ 8,775   372 %
Cost of sales   (27,912 )   (5,184 ) 438 %
Gross profit (1)   13,466     3,591   275 %
Gross margin   32.5 %   40.9 %  
           
Expenses   21,310     9,132   133 %
Loss before other items   (7,844 )   (5,541 ) 42 %
Other items, taxes   2,196     251   775 %
Net loss   (5,648 )   (5,290 ) 7 %
Loss per share, basic and diluted $ (0.02 ) $ (0.03 ) (33 %)

(1) Gross profit is a non-GAAP measure as described in the Non-GAAP Financial Measures section of this news release.

(In thousands of Canadian dollars)    Three months ended  
  March 31,  
  2022     2021   (%)
Net loss $ (5,648 ) $ (5,290 ) 7 %
Add:          
Finance costs   497     88   465 %
Income taxes   85     40   113 %
Depreciation and amortization   3,012     689   337 %
EBITDA(1) for the period   (2,054 )   (4,473 ) 54 %
Share-based compensation   490     1,595   (69 %)
Financing-related costs   –     749   (100 %)
Acquisition-related and integration costs, net   2,524     812   211 %
Litigation costs and loss provision   2     81   (98 %)
Change in fair value of liability to non-controlling interests   129     –   100 %
Change in fair value of contingent consideration   (2,735 )   (315 ) 768 %
Adjusted EBITDA for the period (1) $ (1,644 ) $ (1,551 ) (6 %)

(1) EBITDA and Adjusted EBITDA are non-GAAP measures as described in the Non-GAAP Financial Measures section of this news release.

Non-GAAP Financial Measures

In addition to the results reported in accordance with IFRS, the Company uses various non-GAAP financial measures and ratios which are not recognized under IFRS, as supplemental indicators of the Company’s operating performance and financial position. These non-GAAP financial measures and ratios are provided to enhance the user’s understanding of the Company’s historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of the Company’s core operating results and ongoing operations and provide a more consistent basis for comparison between quarters and years. Details of such non-GAAP financial measures and ratios and how they are derived are provided below as well as in conjunction with the discussion of the financial information reported.

Since non-GAAP financial measures do not have any standardized meanings prescribed by IFRS, other companies may calculate these non-IFRS measures differently, and our non-GAAP financial measures may not be comparable to similar titled measures of other companies. Accordingly, investors are cautioned not to place undue reliance on them and are also urged to read all IFRS accounting disclosures presented in the audited consolidated financial statements and the related notes for the year ended December 31, 2021 and 2020.

EBITDA

EBITDA is a non-GAAP financial measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. EBITDA referenced herein relates to earnings before interest, taxes, impairment, and depreciation and amortization. This measure does not have a comparable IFRS measure and is used by the Company to assess its capacity to generate profit from operations before taking into account management’s financing decisions and costs of consuming intangible and tangible capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life. 

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Adjusted EBITDA referenced herein relates to earnings before interest; taxes; depreciation; amortization; share-based compensation; financing-related costs; acquisition-related and integration costs, net; litigation costs and loss provision; loss on sale of subsidiary; and change in fair value of contingent consideration. This measure does not have a comparable IFRS measure and is used by the Company to assess its capacity to generate profit from operations before taking into account management’s financing decisions and costs of consuming intangible and tangible capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life, adjusted for factors that are unusual in nature or factors that are not indicative of the operating performance of the Company. 

Gross Profit

Gross Profit is a non-GAAP financial measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Gross Profit referenced herein relates to revenues less cost sales. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the operating performance of the business.

Gross Margin

Gross Margin is a non-GAAP financial ratio that has Gross Profit, which is a non-GAAP financial measure as a component. Gross Margin referenced herein is defined as gross profit as a percent of total revenue. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the operating performance of the business.

The following table provides a reconciliation of net loss for the periods to EBITDA and Adjusted EBITDA for the three months March 31, 2022 and 2021:

(In thousands of Canadian dollars)   Three months ended  
  March 31,  
  2022     2021   (%)
Net loss $ (5,648 ) $ (5,290 ) 7 %
Add:          
Finance costs   497     88   465 %
Income taxes   85     40   113 %
Depreciation and amortization   3,012     689   337 %
EBITDA(1) for the period   (2,054 )   (4,473 ) 54 %
Share-based compensation   490     1,595   (69 %)
Financing-related costs   –     749   (100 %)
Acquisition-related and integration costs, net   2,524     812   211 %
Litigation costs and loss provision   2     81   (98 %)
Change in fair value of liability to non-controlling interests   129     –   100 %
Change in fair value of contingent consideration   (2,735 )   (315 ) 768 %
Adjusted EBITDA for the period (1) $ (1,644 ) $ (1,551 ) (6 %)

(1) EBITDA and Adjusted EBITDA are non-GAAP measures as described in the Non-GAAP Financial Measures section of this news release.

Stock Options and Restricted Share Units Grant

CloudMD granted 550,000 stock options to acquire 550,000 common shares of the Company to certain officers and directors pursuant to the Company’s stock option plan effective as of market close on June 6, 2022, at an exercise price equal to the 5-day VWAP as of June 6, 2022, for a period of 10 years, subject to vesting requirements and any necessary regulatory approvals. CloudMD also granted 250,000 restricted share units (“RSUs”), plus that number of RSUs equal to $265,375 divided by the greater of the 5-day VWAP and the closing price as of June 6, 2022, to certain directors and officers of the Company pursuant to the Company’s RSU plan effective as of market close on June 6, 2022, each RSU entitling the holder to acquire one common share the Company in certain circumstances, subject to vesting requirements and any necessary regulatory approvals.

About CloudMD Software & Services

CloudMD is transforming the delivery of healthcare using technology and by providing a patient-centric approach, with an emphasis on continuity of care. By leveraging healthcare technology, the Company is building one, connected platform that addresses all points of a patient’s healthcare journey and provides better access to care and improved outcomes. Through CloudMD’s proprietary technology, the Company delivers quality healthcare through a holistic offering including hybrid primary care clinics, specialist care, telemedicine, mental health support, healthcare navigation, educational resources, and artificial intelligence (AI). CloudMD’s business is separated into three main divisions: Clinics and Pharmacies, Digital Solution and Enterprise Health Solutions, the Company’s fastest growing division. CloudMD’s Enterprise Health Solutions Division has built a leading employer healthcare solutions, including its Comprehensive Integrated Health Services Platform, which offers one comprehensive, digitally connected platform for educational institutions, corporations, insurers, and advisors to better manage the health and wellness of their students, employees, and customers.

CloudMD currently services a direct ecosystem of over 5,700 clinicians including, 1,800+ mental health practitioners, 1,600+ allied health professionals, 1,400+ doctors and nurses and covers 12 million individual lives across North America. For more information visit: https://investors.cloudmd.ca.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

This news release contains “forward-looking statements” and “forward-looking information” within the meaning of Canadian securities laws. Forward-looking statements in this news release include, but are not limited to, statements regarding: the new Public Sector division; key focuses in 2022; deployment of strategic capital and the impact of integration of its acquisitions; and options to recover amounts owed to the Company in connection with the acquisition of VisionPros. These statements are based upon information currently available to CloudMD’s management. All information that is not clearly historical in nature may constitute forward‐looking statements. In some cases, forward‐looking statements may be identified by the use of terms such as “forecast”, “assumption” and other similar expressions or future or conditional terms such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and “should”. Forward-looking statements contained in this news release are based on certain factors and assumptions made by management of CloudMD based on their current expectations, estimates, projections, assumptions and beliefs regarding their business and CloudMD does not provide any assurance that actual results will meet management’s expectations. While management considers these assumptions to be reasonable based on information currently available to them, they may prove to be incorrect. Such forward‐looking statements are not guarantees of future events or performance and by their nature involve known and unknown risks, uncertainties and other factors, including those risks described in the Company’s MD&A (which is filed under the Company’s issuer profile on SEDAR and can be accessed at www.sedar.com), that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward‐looking statements. Although CloudMD has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‐looking statements, other factors may cause actions, events or results to be different than anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such forward‐looking statements. Accordingly, readers should not place undue reliance on forward‐looking information. CloudMD does not undertake to update any forward-looking information, whether as a result of new information or future events or otherwise, except as may be required by applicable securities laws.

SOURCE CloudMD Software & Services Inc. (TSXV:DOC)(OTCQB:DOCRF)

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6) This document contains forward-looking information and forward-looking statements, within the meaning of applicable Canadian securities legislation, (collectively, “forward-looking statements”), which reflect management's expectations regarding CloudMD Software & Services Inc.’s future growth, future business plans and opportunities, expected activities, and other statements about future events, results or performance. Wherever possible, words such as “predicts”, “projects”, “targets”, “plans”, “expects”, “does not expect”, “budget”, “scheduled”, “estimates”, “forecasts”, “anticipate” or “does not anticipate”, “believe”, “intend” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative or grammatical variation thereof or other variations thereof, or comparable terminology have been used to identify forward-looking statements. These forward-looking statements include, among other things, statements relating to: (a) revenue generating potential with respect to CloudMD Software & Services Inc.’s industry; (b) market opportunity; (c) CloudMD Software & Services Inc.’s business plans and strategies; (d) services that CloudMD Software & Services Inc. intends to offer; (e) CloudMD Software & Services Inc.’s milestone projections and targets; (f) CloudMD Software & Services Inc.’s expectations regarding receipt of approval for regulatory applications; (g) CloudMD Software & Services Inc.’s intentions to expand into other jurisdictions including the timeline expectations relating to those expansion plans; and (h) CloudMD Software & Services Inc.’s expectations with regarding its ability to deliver shareholder value. Forward-looking statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this document including, without limitation, assumptions about: (a) the ability to raise any necessary additional capital on reasonable terms to execute CloudMD Software & Services Inc.’s business plan; (b) that general business and economic conditions will not change in a material adverse manner; (c) CloudMD Software & Services Inc.’s ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; (d) CloudMD Software & Services Inc.’s ability to enter into contractual arrangements with additional Pharmacies; (e) the accuracy of budgeted costs and expenditures; (f) CloudMD Software & Services Inc.’s ability to attract and retain skilled personnel; (g) political and regulatory stability; (h) the receipt of governmental, regulatory and third-party approvals, licenses and permits on favorable terms; (i) changes in applicable legislation; (j) stability in financial and capital markets; and (k) expectations regarding the level of disruption to as a result of CV-19. Such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of CloudMD Software & Services Inc. to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking statements. Such risks include, without limitation: (a) CloudMD Software & Services Inc.’s operations could be adversely affected by possible future government legislation, policies and controls or by changes in applicable laws and regulations; (b) public health crises such as CV-19 may adversely impact CloudMD Software & Services Inc.’s business; (c) the volatility of global capital markets; (d) political instability and changes to the regulations governing CloudMD Software & Services Inc.’s business operations (e) CloudMD Software & Services Inc. may be unable to implement its growth strategy; and (f) increased competition.

Except as required by law, CloudMD Software & Services Inc. undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future event or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Neither does CloudMD Software & Services Inc. nor any of its representatives make any representation or warranty, express or implied, as to the accuracy, sufficiency or completeness of the information in this document. Neither CloudMD Software & Services Inc. nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this document by you or any of your representatives or for omissions from the information in this document.

7) Any graphs, tables or other information demonstrating the historical performance or current or historical attributes of CloudMD Software & Services Inc. or any other entity contained in this document are intended only to illustrate historical performance or current or historical attributes of CloudMD Software & Services Inc. or such entities and are not necessarily indicative of future performance of CloudMD Software & Services Inc. or such entities.