Q3 2021 CareCloud Inc Earnings Call
Welcome to the Kerry cloud 10 o'clock, there's 2021 results come from skull, it's no disciplines as beings cause I have no lights on the conference call over to Kim Blench cloud.
Cloud General Counsel Misplant stories dealers.
Thank you and good morning, everyone welcome to the Carecloud third quarter of 2021 conference call on today's call our <unk> our.
Our founder and executive Chairman.
Howdy Chowdhry, our Chief Executive Officer, prejudice and a director.
Steven Snyder, our Chief strategy Officer, and a director and Bill Horn, 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 27, a of the Securities Act of 1933 as amended and section 21 E.
Of the Securities Exchange Act of 1934 as amended.
All statements other than statements of historical fact made during the 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 acquisition.
Forward looking statements may sometimes be identified with words, such as well 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 obligation to revise these forward looking statements in light of new information or future events.
Please refer to our press release in our reports filed with the Securities and Exchange Commission, where you'll 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 of 2021 earnings presentation.
Please visit our Investor Relations site I R Dot carecloud dot com click on events and download the earnings presentation.
And 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 of 2021 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results.
And with that said I will now turn the call over to our CEO how these charges.
Thank you Kim.
Good morning, and welcome to over third quarter 2021 earnings call.
I am delighted to be here this morning, and I'm excited to share with you. Okay cloud continues to thrive in this large and dynamic healthcare marketplace.
Tony joining one is certainly turning out to be another breakout year for us and remains incredibly excited and optimistic for what the future holds for us.
In terms of the third quarter of 2021 I'm pleased to report that we had another record breaking quarter.
As you step into this year, we set out to accomplish a variety of important initiatives and execute against you some lofty goals.
Number one we set out to continue to achieve record revenue and profitability, while maintaining over historically disciplined fiscal look towards.
Number two we committed to expanding over addressable market and the types of customers we could ultimately serve.
Number three we set out to launch new and innovative products and number four it was important for us to reinforce our position as a tech company and healthcare, but also a crystallizing of a brand and market position.
I'm excited to see that we have already accomplished many of these and are on track to execute against all four of them by the end of this year.
This is an exceptional accomplishment and I would like to take a moment to think of our customers and our employees worldwide for your incredible work in helping us achieve what we have so far.
I would like to take a few minutes to provide some additional color and insights into some of these for Ya.
In terms of revenue growth, we have achieved another record quarter with $38 million in revenue.
We continue to accelerate over growth and haven't been able to add revenue to a variety of means it is important to maintain a fiscally disciplined approach that has allowed us to drive adjusted EBITDA growth quarter over quarter I am happy to report that we again that'd be once again achieve the record breaking.
Did EBITDA $6.7 million for the third quarter of 2021.
Our approach of constantly evaluating different revenue levers and seeking way to expanded addressable market is key to over strategy.
Through the addition of new innovative software products the ability for us to pursue additional markers through partnership, but truly proven competence to source and execute on acquisitions.
This combination continues to place us in a great position to succeed as an organization.
This year, we had the opportunity to compete in acquisition that has done just that.
It has expanded over addressable market by allowing us to provide healthcare consulting an on demand technical and revenue cycle staffing services and given us a far better position in the health system in hospital space.
We continue to be encouraged by the great progress over Mendes, our team is making the manner in which over integration efforts are progressing and the leadership that continue to exhibit.
In terms of leadership recently announced executive leadership appointments Admetus R. As well as the edition of dedicated resources and support of the changing and growing needs of over health system times in this new normal they find themselves in.
<unk> has appointed additional season meters that sounds of the executive team and helps us all execute across every aspect of the business.
You have appointed a season's Carecloud Wilson as Chief operating officer, and the New Chief revenue Officer tremendous who brings a vast amount of knowledge in the healthcare industry as seasoned executives having worked at organizations like Athena Health Center Center order consulting and Deloitte consulting.
These new appointments are important as we continue to integrate helped bring additional capabilities towards Douglas.
Promote the cross-pollination of ideas and should pool transformational sort of a combined businesses, while bringing additionally, depth and breadth as we look to further escape.
Our companies combined integrated offerings are beginning to gain traction with clients and prospects of light and both the small hospital setting two large multi region health systems. These.
These organizations are turning to care cloud to extend the workforce and integrated EHR and RCM platforms to optimize performance as a strive to improve access to care and the patient experience, while facing an industrywide workforce shortage and increased pressure on revenue.
As I have mentioned in the past. These deals takes time look we believe that it would combines trent leadership position and robust value propositions position us to execute rail against that were strategy.
As you've expanded over a universal solutions to the Medisoft acquisition, we made a conscious and strategic effort to focus on these nonrecurring revenue deals as you believe they can provide significant upsized downstream.
We are excited about these deals as we believe they set the foundation, we need to have a war footing the door so to speak and allow us to later can work a portion of these new clients into longterm recurring revenue contract.
This gives us great confidence that it is an incredibly cost effective to bring on these types of customers on board and then focused on expanding the relationship to up sales and cross selling opportunities.
Settling into this market takes time and is incredibly difficult, but nevertheless over history have we had such a prominent seat at the table. These types of expansion deals current gain a a pipeline are transformative in nature and could presents significant.
Television contracts in due time, our sales team on hard at four and making this a reality.
In fact over sales team across all segments and business units continue to push hard and win in the <unk> in terms of overall spend in 2019, we spent about $1.5 million in sales and marketing compete $266 million in 2000 2006 $5 million in first nine months.
Of 2021.
As we have said, we will continue to spend in sales and marketing so long as we can maintain a healthy client acquisition cost.
Let's not focus on some additional exciting news.
I've mentioned before that addressable market expansion and continuing to launch new and innovative products remain an important focus of ours too.
To that end I'm excited to announce today that later this quarter, we will be rolling out a new technology platform that does just that it expands over market reach an edge significant technology assets to over portfolio.
This new and innovative platform, we will soon release give us even more capabilities in the enterprise market segments, but also as significant it expands the type of customer and we can serve.
With this new project Sweet, we will be able to provide technology solutions and service capabilities to healthcare IP vendors large system integrators, and other healthcare and digital health ecosystem partners potentially even including those interfere space.
Earlier this year, we discussed how we had been working on a new technology solution recall conductor, we talked about Hollywood R&D teams have been working on the problem of unifying healthcare data across multiple systems partners and platforms not only are not only crossover internal systems, but across.
The vast network of partners in integrations.
This technology will help us as we continue to scale our current business. While also assisting US and then we acquired companies as it relates to over integration needs.
As we continued to develop this new solution and think about it's real word usage of we're thinking and strategy Award. We now see care cloud conductor as a family of technologies or in other words, a product suite of tools for interoperability data exchange transformation and connectivity rather than as a.
Single product.
It is a suite of solutions that are designed to work well together or as Standalone solutions.
Later this quarter, we will be bringing to market. The first of these solutions within the care cloud conductor Sweet we call. This new product here cloud connector here.
Cloud connector as a platform that connects organizations two are ready to use integration library for healthcare systems.
Improving data management, increasing visibility and control of these interfaces and providing more robust vendor libraries sort of clients and partners to manage on their own.
For example to Dan and for enterprise client or healthcare ITT vendor may be required to host on manage dozens of interfaces with third party systems labs proprietary software connectivity partners.
And the light using several software tools, and making centralized management incredibly cumbersome and expensive.
With Carecloud connector, there is one centralized management console and hundreds of interfaith luxuries to choose from.
Making significantly easier for these new customers to manage and scale.
We know this to be true as the solution was built for their own needs internally in order to effectively manage the multiples the multitude of complex systems, we need to integrate with over on business.
We have that advantage versus some other competitors and that we have lived these problems and have needed to look for ways to solve it over ourselves.
This work is the culmination of decades of knowledge and investment and we now have an opportunity to package these offerings and bring it to market.
As part of the care cloud conductor Sweet, we will be incorporating the new and improved care cloud collective IQ rules engine.
Collective iqs of a standalone ghouls engine that brings an advanced collection of automated billing ruled and there were proprietary algorithm that help healthcare organizations improve collections and cash flow reduce administrative costs and stay ahead of changing healthcare regulations.
Later next year, we will introduce other products within the care cloud conductors product suite, including a powerful wonderful kind semantic translation engines and schema builder and a standalone evi transactions transmission solution.
Sure cloud conductor sets the stage further will fall right into a new market.
We are very excited about these new capabilities as it relates to ensure stability data exchange and transformation and the boundless opportunities. We see as we believe it was unlocked new markets for us to pursue and and the revenue opportunities they represent while giving us an advantage during over system integration face.
With companies we may acquire.
Lastly, I have continued to meet with investors analyst employees and customers across the country and truly humbled by the incredible opportunity we have as a company in the real impact we are making forever clients nationwide and see a admission come to life. Most recently I had the opportunity to see first hand, however, rpm's.
March a proprietary workflow technology solution and a team of our seems specialist has been able to significantly improve.
Sizable customer's experience with us post as recent transition and drive better metrics towards their bottom line. It is always great for me when I receive communications from clients in this case, a large enterprise customers CEO tango routine learned the hard work they perform on the daily basis.
It's interactions like this one I just mentioned that energizes us to continue to deliver leading technology Newburgh solutions.
To the more than $4 $40 provided in medical practices and health systems focused on delivering quality patient care nationwide.
Our mission remains to deliver comprehensive end to end solutions needed in order for our customers and prospects subscribing today's highly complex changing healthcare environment and of course, we accomplish this purpose to Wilbur mastery of software platforms and services, we have as part of a product portfolio as well.
Is.
With additional capability to design and buried customized solutions required to meet the unique needs of our customers.
In terms of crystallizing of market position I will continue to ensure.
At least that we strive to emphasize entresto over leading market presence.
I would truly distinct position as a leading technology company in the healthcare and work hard to discourage notions that lump us together with other companies that may look like us on the surface, but are vastly different deform, taking the deeper look.
We are fortunate to be amongst just a small two leading technology companies in the healthcare market entrusted with deploying proprietary software solutions, including certified electronic Health Records and practice management product patient experience management platforms, and a host of other software and services to a host of health.
Care organization of all sizes we.
We do not take this for granted and will continue to forge ahead, great new bonds and continue the legacy of making boys moves one.
Once again it is my pleasure to report that cloud is in a stronger position ever and I'm excited for what the future holds for us.
Will know turnover look forward to Steve Snyder of achieve strategy Officer, Steve.
Great. Thanks, Audi and thank you everyone again for joining us on today's call.
The third quarter, we were very excited to celebrate our company's 20 year anniversary.
With two decades behind us it's truly a privilege to still have a growing universe of people, who are new to our story and interested in learning more about us.
With that in mind, we'd like to take a few short minutes to step back and provide some background regarding three areas that often generate questions amongst new investors individuals interested in our story.
Namely our founding purpose, our heritage of technological innovation and our entry into the public markets. After that will turn to do a deeper dive into our financial performance for the third quarter.
First let's discuss our origin story for a moment for those who are new to our company. We were founded in September 2001, as a direct outgrowth of our founder and move Hawks exhaustive search for a healthcare iced tea and revenue cycle management Parker for his wife's new medical practice.
This search revealed that unmet need in the market and my moods wife became our first customer.
Our mission from day, one has been to empower healthcare providers to achieve their full potential by equipping them with innovative critical financial and patient experience software together with integrated powerful business solutions.
Over the last 20 years. This approach has enabled us to grow from serving one internal medicine provider in new Jersey to serving more than 40000 healthcare providers across 50 states practicing and more than seven unique specialties and sub specialties.
For our entire team it's been a really exciting journey and were even more enthusiastic about the past that lies ahead.
Next let's talk for a moment regarding our history of innovation as a company from.
From the start technological innovation has been our core focus in fact within our first three years in business we.
We had already launched the earliest versions of our integrated electronic Health Records application practice management and revenue cycle management platforms at.
That over the last 17 years this integrated product and service portfolio evolve to include industry, leading cloud based tools that support providers across the entire spectrum of care delivery together with software tools that optimize the patient experience and solutions that enable health sister.
<unk> to gain actionable insights and drive growth.
As highly explained we believe that we are still in the early earnings with our site set squarely on continuing to lead with innovation in the years to come.
We have been a leading edge innovator for two decades and will continue to launch new Tech enabled solutions that are designed to empower our users to achieve their full potential and this in turn we believe will drive continued growth.
Finally for the benefit of those who are new to our story, let's briefly discuss our entry into the public markets and also explain the history of our preferred stock.
We conclude or IPO in 2014 and were listed on that is that under the symbol MTBC.
It may not be readily apparent as you view, our current five year common stock returns, which handily outperformed the major indexes, but as a young Navajo cap company at the time due to the public markets. It took some time to find our footing.
And as we saw growth capital in 2015, our stock lingered blower IPO price. So we saw the less dilutive alternative to raising capital through our common stock.
This gave birth to our 11% sure is a cumulative redeemable perpetual preferred stock, which was first issued in November 2015 trades under the symbol MTBC P and is presently redeemable at par value of $25 per share.
The initial and other follow all issuances of this series a preferred stock where key elements that enabled us to continue to invest in growth at what we consider to be a very attractive cost of capital in relative terms.
The Sears a preferred stock has played a critical role supporting our historic and rapid growth.
However, a current intention which of course is subject to change this stupid overtime toward a capital structure that reduces the role of our Sears a preferred stock through exercising a redemption rights when as appropriate.
While the timing and manner of achieving redemption is obviously still to be determined. This sure made one of our key areas of focus as we continue to move forward.
Returning to where we started the conversation this has been quite a journey.
And we're privileged to have an amazing 20 years of innovation and growth as a company.
Moreover, we believe that we are very well positioned to continue to be a disruptive innovator and market leader for many decades to come and.
And we are absolutely convinced that our best days lie ahead, let's now turn our attention to our financial performance from the third quarter of 2021.
And turn the floor over to our CFO Bill Court.
Thank you Steve.
As Heidi mentioned third quarter of 2021 was carecloud best quarter ever with record revenue.
Record adjusted EBITDA record adjusted that income record GAAP net income and even record cash flow from operations.
Revenue for the third quarter of 2021 was was 38 $3 million, an increase of six $7 million or 21% from the third quarter of 2020.
Revenue was 12% above our previous all time high set last quarter.
Our annualized revenue run rate is now $150 million, which is 43% above or 2028 revenue and 133% above or 2019 revenue.
This is proof that our strategy of growing through a combination of organic and strategic growth continues to allow us to grow revenue significantly faster than the industry.
Third quarter of 2021, GAAP net income was $1.5 million as compared to a net loss of $1.7 million in the same period last year.
And a net loss of $227 and second quarter of 2021.
While we as a management team look at adjusted EBITDA in cash flow from operations as the primary indications of whether our business is growing in a sustainable way.
Achieving positive gap profitability of well over $1 million this quarter.
Even after including over three and a half million dollars of non-cash depreciation and amortization expenses, it's a great milestone showing our progress.
Our GAAP net loss was 15 cents per share based on the net loss attributable to common shareholders, which takes into account the preferred stock dividends declared during the quarter.
Non-GAAP adjusted net income for third quarter of 2021 was a record $6.1 million or 41 cents per share and is calculated using the end period common shares outstanding.
Are non-GAAP adjusted net income.
Exceeds the quarterly dividend that we pay to preferred shareholders.
Which is a metric many investors pay attention to.
Non-GAAP adjusted net income excludes non-cash expenses like depreciation and amortization.
It is a good indicator that are steady state operating cash flow exceeds our dividend payments.
Our third quarter hour adjusted EBITDA for the third quarter of 2021 was six $7 million or 17% of revenue compared to $4.2 million in the same period last year.
Our adjusted EBITDA increased by approximately $2.5 million from Q3 2020.
In large part due to cost savings, resulting for integrating the businesses we acquired during 2020.
Just did EBITDA set a new record growing by 58% from third quarter last year.
18% from our last quarter and 17% from our previous record.
Revenue for the first nine months of 2021 was $102.1 million, an increase of 40% compared to the first nine months of 2020.
Revenue for the nine months of 2021 was just $3 million less than full year revenue for all of 2020, and it was $37.7 million greater than full year revenue for 2019.
For the first nine months of 2021, our GAAP net loss was $686000 compared to a gap net loss of $9 million in the first nine months of 2020.
Net loss per share with 77 based on the net loss attributable to common shareholders.
Non-GAAP adjusted net income for the first nine months of 2021 was $13.5 million.
491 cents per share.
During this period are adjusted EBITDA was $16 million, an increase of $10.8 million or 210% from $5 $2 million in the same period last year.
Adjusted EBITDA for the nine months of 2021 is $5.1 million greater that full year of 2020.
And seven $9 million greater at full year 2019, reflecting the cost savings from previous acquisitions.
With our first full quarter of revenue for <unk> fraction of clients directly utilizing our technology continues to grow.
The vast majority of our revenue approximately 82% for the first nine months of 2021 was driven by the use of our technology assets.
Including 50% of our revenue, which comes from clients using our electronic health record in practice management software, which is our core technology sweet.
42% of our year to date revenue is from clients using one component of our technology, such as our business intelligence software or robotic process automation.
And 10% of our year to date revenue came from clients, where we are providing professional services utilizing our technology processes and knowhow.
Another 7% of our year to date revenue came from clients, where we are providing just revenue cycle management services, where we are using our technology ourselves, but our clients or not.
9% of our year to date revenue is from clients, where we're managing their entire medical practice in approximately 2% of our year to date revenue comes from other services.
You'll see this revenue breakdown when you read our 10-Q and we believe this will better assist the market and understanding who we actually are a technology company and the healthcare space.
<unk>, a diverse group of clients and an incredibly large addressable market.
As of September 30th 2021, and the company had approximately $9.3 million of cash including restricted cash.
During the third quarter of 2021 cash flow from operations was approximately $5.1 million or net working capital on September 30th 2021 was approximately $9 $9 million.
We are proud of the way we have consistently grown our revenue year after year, achieving a 44% compound annual rate growth rate over.
Over the last four years.
Our preferred stock was a great vehicle to finance this growth without restrictive covenants, achieving a track record few public companies can achieve.
On September 30th 2021, we had approximately five 3 million shares of Non-convertible series, a preferred stock outstanding.
These shares pay a monthly cash dividend approximately 23 per share.
But now that is redeemable, we're evaluating several options to start redeeming the preferred stock.
Ways that are accretive to common stockholders and prepare us for the next stage of our growth.
Finally, no matter how impressed of our track record of growing revenue appears our track record of consistently growing profitability is the real metric investors should pay attention to.
We've grown our adjusted EBITDA at a 79% compound annual growth rate over the last four years.
At the market begins to reflect this growing level of profitability. We are confident we will have opportunities to start redeeming, our preferred stock, which will reduce our dividends and increase the earnings available to our common stockholders.
We appreciate your patience, while we wait for the right time.
I will now turn the floor over to our chairman Mahmood for a concluding comments.
Thank you Bill it truly is a pleasure to see how we continue to evolve and provide unique technology business solutions to healthcare organizations across the country.
We are fortunate to continue to be poised for a record breaking growth and profitability.
I would like to thank our investors customers and employees for their continued support.
We will now open the call to question.
Operator.
Thank you if you would like to ask a question. Please signify pressing star one on your telephone keypad.
Limit your questions too too.
You can go back into the queue. If you have additional questions again please.
One to ask a question.
And our first question comes to put on Jeffrey Cohen in button birth, Tom and please go ahead.
Hello, I'm, a mood Hardy Steven June Kim how are you.
Good morning.
Good morning, Jeff.
So.
There are limits to so I guess first sleep for how old are you could you talk a little bit about this conductor sweet.
And some of which elements and talk specifically.
About the the new markets and new term your discussing earlier in the call. Please clear to us exactly what new market and jam that's incremental.
Or separate from current marketing term.
Sure no. Thank you. Thank you for the question.
Good just to first of all to summarize this kid cloud conductor you can consider that to be a family of technologies for in software ability data exchange and transformation and connectivity 10 commodity like the <unk>.
I'll go work space of Microsoft Office lately.
Sweda Friday, then they are small other elements such as Microsoft word Microsoft Excel you can even buy the entire suite in order to gain by one piece of it. So this is the same.
Holds sweet also a technology for under conductor and we keep on launching the product and the first one is the is the connector.
Do from the Golden market perspective, we are still working on some of the to finalize the strategy in terms of the pricing and the website large and the communication and we'll be doing later later in this quarter.
But what it does is NFL I can share a simple example, with you maybe that can help you understand what this award motivated the vendor and AVC EHR company they need to create an interface with lab on one side with for example, Labcorp that quest at the same time have to connect and create another interface and another billing system.
Another different vendor so in the two days, where they need to be developing individually Midland Corp, a bit quest different specifications and requirements with labcorp different specification requirement for the first question and so on.
So with conductor based on on the last 20 years of experience. We have we have created a lot of interfaces that different labs, we have created a lot of interfaces with many of their software vendors all of those we have created and packaged in the library and Cindy and created an application with blue, which will give our user interface.
They can go not only monitored interface Monday get setup. All would you need to do is create an interface with us with connector and then just keep turning on the interfaces that you need and then the whole time of the development will get eliminated it already knows what's specification as needed if it's.
The nature of the salmon, if it's a proprietary editors that are needed or it's a fire that's needed. So it cuts the time significantly to establish those interfaces and integrate is just one example.
It can be an another edited coupon, adding other pieces of it that would be.
<unk> based system collectively Q that will come with a similar context and concepts. So that's the whole rasher into pieces behind it over experience.
The things that which we used it succeeded overtime and internally have optimize the processes and helped us and.
In acquiring and integrating companies all those now have been converted into a library and we're going to begin to make it available for other healthcare Mendes in this industry.
That's very helpful. So it sounds like a whole lot of software comes associated with.
The offering so which is would that be focused on.
Your current customers or do you see.
So.
And all of your insurance, Here's force larger for soldiers or more pronounced platforms.
And the absolute key and just to give you for which we will be.
From the existing customers flag.
To you it can be useful for some enterprise level clients, who have their own software they focus on creating the on some piece of the software internally.
More focus towards the other healthcare vendors, which can include the EHR companies the practice management companies and in some cases, even the RCM company and if you think about even the large system integrators companies, such as cognizant and process and many many many many others in that space and.
Digital held to ecosystem partners, new healthcare or digital startup or solution that don't want to build all of this connectivity by Dale. So then so so this this is changing the addressable market for us completely and and sustained still in the healthcare healthcare space with a different audience of different.
Of prospects that we will be shooting for.
Super fresh to take care of our questions.
Thank you thanks.
Our next question comes from Alan Clean in Mexico. Please go ahead.
Yeah.
Yes, Hi can you talk a little about uhm with your revenue growth this quarter, how to think about how much was organic and how bookings are going.
Great. Thank you thanks for the question and and good morning.
Good question Allen.
In terms of as you normally do not specifically disclosed the number on the quarter to quarter basis from the sales organic or the booking perspective, but it is a combination of over organic growth and the and.
And the regular revenue from over clients from the Kid Cloud group of companies that we kept quieting and integrating.
The Bill would you like to give some more color.
Sure Hottie.
So yeah Allen.
We had a great quarter and I thank God.
As you'll start you out to sea as you guys you read the 10-Q that comes out this afternoon.
We've got a full quarter of.
Revenue from from Mehta saw which was certainly a contributor to wedge of gross but I think we saw increases in revenue throughout.
General perspective is that that in the in the first quarter of two of the the year, we all saw that.
That practices were seeing a few less patient than usual we.
We saw a lot of practices back.
Back to full strength, even achieving.
A record record volumes of patient billings. So that's that's been an important aspect of the revenue growth in the quarter.
Okay and then the third one quick small thing to a small fraction. Good also potentially be a catch up for those some of the practices as well led to some of the <unk> that were on board now do surgeries are conducted have been performed now so in this quarter. The number of practices. The sea have seen additional revenue in this quarter due to.
Part of it an infection of it is even catch up there.
Thank you and my second question is how do you feel about your.
Pipeline of potential M&A.
Thanks Alan.
Okay.
Go ahead, Steve fleet, Okay, sorry about that how to think selling for the question.
We if we if we step back and think about the thesis that initially drove us to begin focusing on M&A 15, 16 years ago. We think that thesis really holds true which is that the market the healthcare.
And also revenue cycle management markets.
Are both highly fragmented they continued to be right for <unk> for consolidation today, just like they work 15 years ago and and of course, we've been on the leading edge is one of the most active requires in this space. So from an overall kind of positioning perspective in terms of our approach it could.
You used to be a very proactive approach. So as always were we reviewed dozens with companies before we select one that we look forward with but by the same token. We continue to also be patient and disciplined and our approach we really do our very best to avoid.
Overpaying for acquisitions, which I think is a key reason, we've been able to to really identify accretive acquisitions and been able to acquire that really attractive valuations. So while we of course, continuing not publicly disclosed the acquisition pipeline details.
And while we continue to really remain focused on the tech innovation integrating copies, we've acquired and continuing to improve overall efficiencies and profitability. We continue to be focused proactively on identifying those acquisitions.
From the perspective, as we think about the market today, we really feel really good about what we're seeing in the market in terms of overall opportunities, but again.
We'll wait for the right opportunity, we don't have one that's at that point in time, where we will disclose it today and and will continue to be patient diligent as we're looking for.
Thank you.
Our pleasure.
Mmk or.
Next question comes put Mark Westenburg in Securities.
Curious teens.
Thank you good morning.
Can you talk about some of the dynamics of the U S labor market in physician and other clinical personnel burn out and then the opportunity with your overseas workforce to address that.
Great place them on good morning.
And then the call with Us do who works.
Mostly with the.
The booking when it comes to the end of force the care Cloud force deals and I was kind of blown away in a minute, but giovanni as we do see the more and more opportunities in that space to expect should leave it in the health system space. After the <unk> acquisition SBF stock it toward with more opportunities there we do see.
Not only from the burn out perspective, England. This.
During the Covid era in the postcode at the lack offloaded a shortage of some of the resources that has opened up more doors for us and this force deals where we can plug in Alberta, a great combination of onshore and offshore offshore resources two ways to provide the services on the FTE basis.
The call would you like to add some more details earpiece.
Thank you hardly happy to add a little more color here. So certainly what we've seen in large integrated delivery systems is people are looking for employees to return back to the office physically hospitals are requiring across the board vaccinations. Many people are truly.
Not to be vaccinated, and thus not returning to work.
Thing that's played into it is just an increased opportunity for people to work remotely.
And where where hospitals large organizations that are looking for people could be on site has created a big interest in force. So we've already been picking up a number of opportunities, where we were able to come in and backfill we're.
We're able to number one work on People's host systems and that can be everything from epic on the high end E clinical works on the lower end to our own systems.
On top of that we can provide that work force the can start <unk>.
30 days the last deal we did the started in less than 10 days and so we were able to provide FTE sort of already trained or working in their system and unable to provide to us. So we think that that has been a big plus for force, but I would also take it a step further and say that it's it's.
Similar problem in smaller and medium sized practices, who are unable to find revenue cycle people medical bills and that's created an increase the interest.
See them back office services both.
In the care cloud product line and other People's systems. Thank you hope that helps.
Very helpful. Thank you and then bill I didn't hear any commentary on kind of an updated.
Revenue guide to think about for the back or for the fourth quarter.
With the real strong performance in the third quarter, how should we think about the fourth quarter and relative to what you'd previously provided as the topline range. Thank you.
Good question.
We decided at this point not to not to specifically talk about the Ah the.
Updated revenue guidance.
I would say we feel we feel really strong we had we had a great great set of results for the for the quarter.
We're confident we're going to have a a blow out year, but.
But we felt like this close to the end of the year, we didn't really need to to adjust specific numbers.
Got it. Thank you congrats on a good quarter.
Okay. Thank you.
Okay next question from Richard Powertrain Roth capital.
Thanks, I'm sort of curious I'm not sure if I mistyped in my model or not credit looked like R&D spending was.
Dramatically lower than it had been some short curious that.
The driver behind that if there is some sort of reverse or pool or if this is a new sustainable level with certain projects completed or something like that.
There are no reason yet.
Sure rich the.
The R&D number that they're I think one of the things as we continue to integrate care cloud in in Meridian.
As you know, we we picked up a great talented.
Team of developers, who continue to to be putting a lot of work into into new products. Now you probably know sort of the gap accounting rules for what gets counted as as capitalized R&D expense versus numbers that hit the P&L. So we had some things it's sort of cross that boundary which chain.
The accounting definition.
There was also some.
Some hosting of systems that have now gone into production and so some of that cost actually moved from the R&D line into the direct operating crossed the line.
And I think that that is your is your forecasting going forward.
I would say that.
You could probably look at third quarter and assume that that future quarters. The R&D expense is going to be more in line with third quarter than it was with with first and second and sort of the opposite side of that is with some of that hosting costs moved into direct operating costs, you'll see some of that additional expense in the.
The cross the line as opposed to the R&D line.
Yeah, good good observation there.
Okay.
Maybe a broader question.
How how old are your sales motion sort of alter or how are you fine tuning it given you've got a much broader set of products and services now really sort of a tech versus services sides with RCM and your and your services outsource ability.
Abilities that do you have to revamp sort of how you go to market.
Which products for which target customers.
Is there any meaningful changes to that that could spark faster growth as we go forward on an organic basis. Thanks.
Yeah.
Great and I. Thank you for the question Richard.
If you think about it and that that is a very good question and the point we started for the first time aggressively focusing towards a organic sales initiatives and market initiative last year sometime in the last year and maybe keep one and wallowing in re adjusting and making changes to the overall strategy and if you.
If you think about and more recently when required made US are there was also the whole rationale of the pieces behind that acquisition walls. Yes, one was that nonrecurring revenue that we will be able to add but more importantly is and I alluded to earlier.
Giving us a seat at the table and these health system. There neither made us out of business in deposition before to go in go after those opportunities for recurring revenue RCM deals neither reload into position to be.
To be reaching out to those opportunity and fight and fight for it I think now has been that acquisition with the team did and with the recent promotion.
Ed.
We made earlier this year, whether it's the new head of the.
Sales on the <unk> side this new edition Nonpolar, Chief operating officer.
<unk> this new team together those moves are exactly to your point keeping in view, the new addressable market and the more opportunities.
We have known that he wants to capture and then in addition to that we have.
We have a number of our internal promotions and the changes we keep on making new team members that have been that they have been working in this healthcare. These faithful 15 20 years. They have been moved into the more senior positions and the team has been distributed 15, focusing on each area or different areas of product in the service.
We have we have to offer now.
And we are very excited especially with this.
A system opportunities.
Possible opportunities coming we are already fighting.
Fighting for participating and number of the Rfps multi million dollar deals and we are very optimistic about it.
Thanks.
Thank you.
Thank you our our next question comes from Joseph Downing in temporary term will hate.
Hey, guys. Good morning. Thank you for taking my question just sitting in for Steve help her today and yeah. Just broadly speaking I was wondering if you can give an update how normalized used to be operating environment is with regard to COVID-19 anything on patient volumes on how normal everyday basis is for these practices and then ultimately how much from the <unk>.
And it affects here I'm in an environment, where people more willing to sell any color that would be helpful. Thanks.
Great. Thank you Joseph further question and good morning.
In terms of the <unk> the volumes are pretty much back to the pre COVID-19 levels, even as as Bill mentioned earlier to the Bcc's. Some uptake in this third quarter, which was a sort of the catch up and I mentioned it earlier as well catch it from the some of the previous visits that we're sort of on board.
It's back to the almost as a prequel would levels. It can keeps moving up and down slightly on the month to month basis, but we see that to be back to a normal normal situation.
And when it comes to some the M&A perspective I will.
The glow over to Steve if you want to add some color CVR. Please.
Sure I'd be happy to and Joseph Thanks for the question. So again from an M&A perspective.
Our perspective relative to Covid driven dynamics really is that there is a bit of a dichotomy in the market from from our vantage point on the one side. If you think about healthy healthy growing profitable companies in the private market and also public companies.
At scale there are obviously seeing historically high valuations so there's trough from that market for sure. It seems.
Now on the other side, if you think about the companies that are really our core focus has been historically continue to be today companies that have some element of distress. So they are good companies with good leadership teams, but nevertheless.
There is something in their existing model that we believe we could enhance through an acquisition from our vantage point valuations of companies that would fall into that category. Those valuations appear to be relatively flat, albeit deal flow relative to the distress companies that may be.
Temporarily a little slower and just use it as a reference point if you think about.
One end of the spectrum, new commercial bankruptcy filings for.
For the 12 months through the end of the second quarter of this year at historic lows. So it might be somewhat counterintuitive thinking about being in the midst of COVID-19, but the reality is they hit lows not that haven't been seen since Ronald Reagan was president so.
Clearly the the governmental initiatives Forgivable P. P P loans.
Predators, taking a more pragmatic and flexible view.
View.
That is cheap that is available all of those factors have enabled companies that would have otherwise solve the exit sooner to remain in business. So what does all that mean, obviously COVID-19 probably is humbled all of us in terms of making.
Real bold predictions about the future, but but we really view that as being a bit transitory and believe that will lead to a buyer's market over time, having said that we continue to review many opportunities continue to be very proactive in terms of reviewing those opportunities continue to feel good about.
Where the market is but again from from our company's perspective will nevertheless be patient will be disappointed in our approach and really wait for the right acquisition target before we pull the trigger and move forward.
Great. Thanks, a lot guys.
Thank you.
Next question.
Kevin <unk> H C total Leo.
Hi, guys, Kevin deviates UW.
Steve May I have your two cents. Please on how to rationalize cannibalization here.
Got your core.
Tear cloud you've got give you products that hobbies, introducing you got care cloud force. It just seems like you got a lot of.
Angles in what I would consider a pretty.
Broad market M. It just seems difficult for me to rationalize how would you prioritize each of them when you're looking at.
Customer growth.
Sure Yeah, I'd be happy to get US started and then that would love to hear how these thoughts of that as well and if we kind of step back for a minute to your point Kevin.
The reality is in terms of the.
The brass and the depth.
Of our overall solutions, it's pretty unique in this space to go the hymns can walk down.
When it's in person you can walk down the aisle. It ends and you can find 30 companies and those companies individually are just providing one individual aspect of her overall solution. So we have this kind of this really this rich.
Deep blue.
<unk> solution.
But if we think about now the market for just a moment, even though we were talking about before even though we couldn't be more excited.
One provider 20 years ago surfing 40000 providers today.
That still means we're only working with maybe one out of every 25 healthcare providers in the us So we're still such significant.
Addressable market and opportunities there, which I think kind of leads to your question, which is really a question in some respects of of excess of opportunities and how do we prioritize obviously fine tuning that priority.
Is something that as a team will all very focused on so if you think about now if you think about conductor we think about some of these other solution for coming back to this concept is one cannibalizing. The other I think maybe we look at it a little bit differently. Instead, our call is there is an opportunity with regard to cross selling a up selling that's really good.
As we add additional solutions. So that so you just <unk> set an example, so as we're working with clients on the better side, providing the traditional types of.
I T consultation and other related solutions and services now there's an opportunity to say well is there an opportunity for business intelligence is there an opportunity for revenue cycle management solutions, how about conductor, how 'bout something else that I can add value to that relationships were.
See it as an opportunity to be able to upsell on cross sell and if we think about the overall sales team a big part of the reason for.
That scaling of that expansion and having individuals focus on different areas of the market is really should be able to meet that need head on recognizing that it's important to have folks who really know force focused on force like Carl individuals, who really understand selling into a net S. R. Hence the chi.
<unk> revenue officer focus only on the Mets are opportunities and other individuals focused on the discrete products and opportunities that we see in the market and maybe I'll throw the floor of a cluster of all over two hobbies court there to fill in some of those gaps.
Thank you, Steve just to add some more.
Just adding a couple of things to your point I think Kevin the way we are looking at this space as opposed to fall restarted from so the thing that real small declines and then continue started to move towards the bigger than the large enterprise level clients and even think about it if if you from from an enterprise client.
Standpoint, you need one product for let's say a practice management and EMR then you need some company to help you with interfaces then you need to know that company to provide support in terms of the resources that enterprise on the large client Holly absolutely need a business intelligence solution, which can help you.
The big debate business decisions. So all of these.
Of the projects and the solution that you are looking for you end up going to many different companies and then tried to interrupt right between all of that data. So I think ours pieces of other one one thing is net is trying to be a one stop shop for for for these groups as we are starting to hit the larger and larger.
Mcdonald industry.
And because we.
We are creating the solution in most of the Bard and integrated way. It also adds another efficiency levels by providing a consolidated integrated solution versus.
Separate disintegrated system solutions. So this will be probably another way to locate it and I think it's.
Yo Yo question is the right one but believe we are looking at it as a good problem to have and so I had to just can be more creative and the teams. We have I think we are confident that began.
Can make it work and just another aspect that I mentioned earlier there are many things that we have developed and used internally Mitch became public one of Lee believes the differentiator over the last 20 years, such as we started working on creating the direct connect with government fears from there so.
Mission standpoint, early 18 years ago, 19 years ago, and that's one of the very that puts us in a very unique position when it comes to the direct connection with many of the other vendors out there to now since you already had that had library why not just package it and start giving between the other in helping to other.
Healthcare and the ventures out there, which ultimately will also generate a good amount of revenue for us.
Sure.
Yeah.
Yes, yes.
Bill.
Just.
Maybe your insight. Please I appreciated that the graphic you offered on slide 12, but I was wondering if you could drive in from a hospital service perspective, it might Santa Rosa Mathematic I'd met S. R.
Yeah, I wonder whether.
Jerry who is with us from from Modesto arc can actually.
Helping and talk to you a little bit about what what he's seeing because because there's lots of exciting stuff. That's that's going on there.
Jerry.
Sure so as far as.
Met S R.
We've done.
It'll all of our expectations for this year and are looking forward to continued growth we have been.
Investing in and growth we've added sales people we have.
Kicked off a new brand awareness campaign and have also developed some enhanced service offerings, all all with the idea of of going to market listening to our clients and bringing them the services that they need.
Increased revenues.
<unk> that we that we hope to see will be primarily as a result of the evolving cross selling capabilities between net S. R and care cloud traditional care cloud services, we've already signed two hospitals, where we're providing revenue cycle management services to them.
We've got a new behavioral health organization that we've done a total revenue cycle management outsource as well as a handful of at least two or three new physician groups that are using a variety of care cloud services. So we expect to continue to evolve our service off.
<unk> increased our revenue as a combination of.
Organic growth with our hospital clients, but also increasing the amount of recurring revenue that we're able to that we're able to put on the books through revenue cycle services that we're now offering our clients. So we've gotten very good a very good traction.
How do you mentioned earlier.
We do have a couple of very significant.
Proposal opportunities that we are responding to now and hopefully we should hear by the end of the year.
Which.
It was really proof that the.
The cross pollination between the two service areas is working because that's how he said I need to emphasize this that neither care cloud nor met ESR would've been at the table with some of these large deals if it wasn't for our combined synergies.
So bill when I look at slide 12.
So bill I'm sorry.
When I look at Slide 12, then the revenue allocation is break is broken down on technology and service and not client.
I guess, that's really sort of where I was going.
Yeah, that's right and yeah. The you you see that the 10% of the revenue year to date come from professional services and a lot of those.
And sort of by definition, you're not seeing a a doctor in solo practice.
Hey, I want I want these technology resources, you're seeing bigger practices and.
Now most of that 10% relates to to met S. R and most of it relates to the ER to the larger enterprise clients and and hospitals.
Perfect perfect. Thank you Steve. Thank you Heidi Thanks, Bill and thank you to Jerry.
Thanks, Kevin.
Thank you just a reminder to ask a question. Please press star one.
I'd like to just pause for a moment.
And we'll take our next question.
Michael Golan panel in tapping Davis.
Good morning, everybody.
Congratulations sounds great great quarter.
For a little more color either from Hardie, Okay, Steve on.
Claire Cao collective IQ in the connector.
On the conductor slide that you guys talked about where do you see that business headed and what kind of growth do we expect to shareholders out of that segment of your company.
Great Good morning, Michael and thank you for your question.
So as I mentioned to.
Couple of aspect I think if I go back again to explain the rationale. The these are some of our specialty areas that we have been able to develop over the last 20 years close to fall. We proved it internally that these areas can work successful EMEA resolve those problems for a for us internally and then help us.
And many many.
Integration of the emerging and integration of the companies that we have acquired so those libraries are the result of the 20 years of work, which is the biggest differentiator. They mentioned the biggest differentiator. So I think now we have package that together and made this package available if they can to force first of all I'll talk.
About.
The connected product.
This connector will be available for other software vendors out there you understand let's say in Florida for a company who may have started three years back and you'll come in on a five years back and be a introduce an EHR as an EHR EMEA started by creating interfaces that for labs for example, but there are another 20 labs.
Out there and for them it will take a tremendous amount of time to be able to develop and create interfaces of work over the next couple of years, probably so all that time gets sharpened if they sign up for other product and when it comes to the pricing when it comes to override the go to market strategy as I mentioned, we are.
We're still finalizing some of those details and we will do.
Proper launch later in this in this quarter.
Some time getting December and then we will be communicating again talk about it further on the on the next earning call. This now, but we do see from the shareholders' advantage perspective this isn't in India.
The other big and again add submitted such as an alky, who specializes in and the interfaces the into the data export import and the interoperability so.
We will be competing landlords start to compete.
With those companies as well because of over 20 years of experience package together and now the same tools will be available for other vendors to utilize collective IQ as it were.
All based primarily a rules based engine that rule based system that we have established developed for the first time, probably 15 years back and that has helped us generate IND.
<unk>, leading first time pass rate in <unk>, and then keeping and making sure that we submit the clean claims now the same database. The same the library can be used and can be leveraged by other software vendors, who do not have.
Such a rule based scrubbing systems available again, that's a price points will be different it will be it could be.
For instance basis it could be for a client bases. There are a number of different ways. We are looking at to price the whole product together, which will be communicated.
Alright, thank you.
Okay.
Thank you thanks for the question Michael.
Sure.
Thank you and I'd like to hand, the call back to the speaker today Kim Blanch.
We'd like to thank everyone, who is joining us on today's call. We truly appreciate your participation and your interest in us as a company and we look forward to speaking to you again next quarter. Thank you all and have a great day.
Thank you.
Thank you. This will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
Okay.