Q4 2021 CareCloud Inc Earnings Call
Please standby were about to begin.
Good day, everyone and welcome to the Coeur crowd, Inc. Fourth quarter 2021 results call. At this time all participants are in a listen only mode.
We'll conduct a question and answer session and if you'd like to ask a question. Please signal by pressing star one on your Touchtone phone.
Please note. This event is being recorded I would now like to turn the call over to Kim branch care crowds General counsel mismatched the floor is yours.
Good morning, everyone and welcome to the Coeur cloud fourth quarter 2021 conference call.
On todays call are Mahmud Haq, our founder and executive Chairman <unk>, <unk>, our Chief Executive Officer, President and a director.
Bill Korn, our Chief Financial Officer.
Stephen Snyder, our Chief strategy Officer, and a director.
And Carl Johnson President of care platform.
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 934 as amended.
All statements other than statements of historical fact made during this conference call are forward looking statements, including without limitation.
Regarding our expectations guidance.
Items for future future financial and operational performance.
<unk> growth.
This outlook and potential organic growth and acquisition.
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 Easter.
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 and reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward looking statements.
For anyone who dialed into the call by telephone you may want to download our fourth quarter 2021 earnings presentation.
Please visit our Investor Relations site, IR Dot care cloud Dot com.
Scroll down two upcoming events click on fourth quarter 2021 results conference call 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 fourth quarter 2021 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 hottie charges.
Thank you.
Thank you Jim.
And thank everyone for joining us this morning to discuss our fourth quarter and full year 2021 results.
And because I will cover over 2021 results.
Other emerging organic growth opportunity.
We view the strategic acquisition of mandates are and conclude by talking about the evolution of our company.
I would like to begin by highlighting some of your cloud financial accomplishments for last year were very pleased to report another year of strong financial results with record level of revenue EBITDA non-GAAP net income and free cash flow.
Revenues were approximately $140 million.
An increase of 33% year over year.
Adjusted EBITDA was $22 1 billion.
Which was more than double of 2020 levels.
And we delivered adjusted net income of $18 $5 million or dollar in 2004 cents per share compared to $8 5 million.
Our 63 cents per share in 2003.
Turning to our operational highlights for the full year, we made one strategic acquisition headlined by the June acquisition of certain assets of mathematics, and Santa Rosa considerably. We subsequently re branded it as mandates.
This acquisition gives us new service offerings, and staffing capabilities and expanded our footprint into the health systems market.
This provides us with greenfield opportunities to cross sell but RCM and technology solutions, such as business intelligence and robotic process automation.
We continued on the back of innovation as we introduced several new products during the year like cloud conductor our family of technology solutions reached with interoperability and data exchange capabilities to accommodate more and bigger customers.
We integrated that with various acquired platforms with <unk> proprietary rule based claims coming engine collective IQ that includes custom rules are over 80 medical specialties.
This integration of collective IQ with these acquired platforms enables our clients to achieve an industry leading towards fast speed of up to 97 per se.
And we are planning to launch this platform for healthcare industry very soon.
Pleased with the uptake and continued high utilization of virtual care visits on our platform.
During the quarter Telehealth visits were 26 times that of pre pandemic levels and at the peak of the pandemic 44 times increase versus pre COVID-19 .
We also took steps to strengthen our management team, particularly in the area of operations and sales and marketing.
Today, we announced the appointment of Steve Link as Chief operating officer of care cloud in this role he will be leading the company's revenue cycle management operations, including all functional components of service delivery and client success.
He was previously senior Vice President of client operations at <unk> and brings to the company 30 years of operations strategy and process improvement experience, including leading multiple business units at a penile.
Additionally, we hired Brian Zynga.
As vice President of marketing, who joined scale cloud with greater than 25 years of healthcare and technology experience building and leading high performing teams.
He has an impressive track record of implementing data driven marketing strategies that accelerate growth and profitability.
With respect to sales and operations, we appointed Betty peaks as senior Vice President of sales to lead the company in sales growth and market expansion strategy and execution.
MS speeds joined <unk> in 2014 and was previously vice President of client solutions.
She has 30 years of sales consulting and health care experience, including Sage and Nextgen healthcare.
Last but not least we appointed Kane Dr. Cox as lease Vice President of sales operations. She has 17 years of experience, including managing sales team at change healthcare <unk> exceeded both growth and bookings strategies in the ambulatory small practice channel.
I would like to point out that our sales team is now roughly 30 people up from one or two employees at the time of the IPO.
As I will discuss shortly we look to continue to expand our sales resources over the course of the year, our focus will be signing new clients as well as leveraging other vast customer base to the cross sell and upsell of care cloud solutions.
Okay.
We would now like to take a deeper dive into our organic growth strategy, which has evolved over time from other private history as a pure consolidator on billing companies going filing with a diverse portfolio of products and services that we have amassed over the years, we have increased our sales and marketing efforts to fully capitalize on.
The addressable market opportunity that exists across all of our family of products.
As an illustration of our increasing focus on organic growth, we invested just 2% of revenue on sales and marketing in 2019, while in 2021 with triple net spend to north of 6%.
Further we intend to increase our sales and marketing investment by 20 to 25, 25% this year.
Positioning us to execute on the marketing opportunities ahead.
To help manage this increased sales and marketing effort, we have Ed mentioned expanded over sales leadership team with extensive digital health experience. We believe that this stepped up effort in sales and marketing been redone higher level of organic growth versus what we have achieved in the past, namely.
Namely new incremental business frequently carries with it higher margin than existing contracts on the acquired businesses contributing to a higher margin profile moving forward.
Turning to our recent acquisition of Medisoft via now more than six months into the acquisition since it closed in June of 2021 and are pleased to provide an update of our progress.
To review the acquisition of Medisoft provides strategic value to care cloud on at least two fronts scale and expertise.
Over the last two years alone Medisoft has worked with greater than 100 hospitals.
Riding the solid foundation upon which kids love can cross sell products and services.
Okay.
Medisoft has entrenched relationships with the C suites of these customers providing care cloud a warm introduction that we believe will bear fruit versus a pure cold calling effort. The medisoft acquisition is unique for us as it helps explain Q cloud footprint in the hospital and health system space, an area in which until now.
<unk> had only a small presence the current labor shortage and Wadlington hospitals combined with increased inflation, providing a solid backdrop of bond with medisoft can thrive given the company's value proposition of staffing high level Ftes for short and long term consulting engagements.
Six months and we have completed most of the integration and training of employees setting us up for a cross sell of products and services into the <unk> base and vice versa.
We continue to expect the transition to be accretive to our 2022 financial performance.
The transaction is consistent with <unk> cloud strategy of targeting high quality undervalued companies, whose IOP human capital and our financial profile is something that can that we can leverage a crossover vast platform.
Our acquisition pipeline remains robust and we feel that we are an invaluable position to be a consolidator in the industry as many companies with less solid footing had been victim to increasingly stringent regulations COVID-19 related fallout labor shortages and inflation.
This month marks my one year anniversary as CEO of carrier cloud and I couldnt be prouder of over accomplishment this year and throughout our history I believe the company truly sits at an inflection infliction point S Award over the last 20 years since I joined the company.
We began as a pure play revenue cycle management company became the leading consolidator of the industry and evolved into a fully diversified provider of digital health and technology solutions and services.
As slide four debates, we now offer leading solutions in.
In practice management, and RCM Electronic Health Records project management staffing and digital health solutions, improving the patient experience, including telemedicine and digital trend or tools.
This burst of overall capabilities is a key differentiator of ours and continues to attract prospects seeking a single partner to accommodate their digital health requirements.
Our clients tell us that they prefer to work with vendors. They can offer a wide variety of solutions to meet their ever changing needs. They face as they navigate through the complex health care environment.
Okay.
I would like to take a moment to illustrate how <unk> diversified portfolio positively impacts the outcomes of our customers. As just one example, we have been working with the Hutchinson clinic in Kansas across a variety of initiatives since 2020 to address collection challenges among other issues.
During a recent interview be reminded by their CEO and CFO of the Great word Boulevard gains had been doing together over the past several months, we have been deploying additional workforce software and automation that has delivered a dramatic impact to the bottom line.
While this increase in revenue and proper reimbursement is important it is crucial to remember that the business of medicine is not just about bottom line results, but rather it Ted has the opportunity to make an even broader impact on the community and those near and around Central Kansas.
Yes.
And as shown on slide five we have expanded our customer base from initially small physician practices to large practices and clinics hospitals and health systems spanning from hundred beds to 1000 base specialists labs spares and vendor partners.
With this backdrop exiting 2021, we are very excited about our prospects for 2022 as bill will share later in our outlook.
Other newly issued 2022 guidance implies 10% revenue growth at the midpoint and low teens EBITDA growth, which is a combination of organic growth and tuck in acquisitions.
We plan to increase wallet share within our vast client base and introduce new solutions added burden on innovation, we have forged in the area of digital health and patient experience by looking opportunistically at acquisitions.
We note that our guidance does not contemplate any large transformative acquisitions.
Before turning over the call to Bill I want to reiterate care clouds, three pillars of growth as outlined on slide six.
Organic growth through adding new customers products and the cross sell of products and services into our client base.
Acquisitions, which have always been part of care clouds of DNA to drive long term shareholder value.
And partnerships, namely through a force initiatives in which we work with partners by leveraging Overstaffing RCM and technology capabilities. In fact, we have seen increased interest enforced to help mitigate labor shortages that are rapidly becoming more prevalent across the hospital settings.
We are well positioned in the market to deliver positive outcomes and help drive the success of our 2600 strong customer base of medical practices and health care institutions.
Our 2021 performance in these unprecedented times gives us confidence in our ability to achieve over 2020 do outlook and emerge from this year, even stronger than that.
I will now turn the call over to Bill Korn, Our Chief Financial Officer to provide an update on company's full year and fourth quarter financials as well as comment on our 2022 outlook Bill.
Okay.
Thank you for joining us on the call. This morning.
I want to reiterate how do you sentiment that we are really proud of our fourth quarter results and what we achieved in 2021.
On today's call I'm going to share some 2021 financial highlights review, our fourth quarter results.
Those by providing some color on our initial 2022 outlook.
First I want to cover some of our financial accomplishments from last year.
I feel strongly that our performance reflects continued traction in the marketplace.
Revenue increased 33% year over year.
$139 $6 billion and technology solutions represented 83% of the total.
Thinking back three years ago prior to our acquisition of Kerr cloud at midway through our pivot to become a more technology driven company.
Technology enabled solutions only accounted for 58% of our total revenue.
Taking a close look at the technology enabled revenue.
49% of revenue was from clients using our core technology suite of electronic Health Records and practice management solutions.
21% with some clients using one or more components of our technology.
13% with some clients for whom we are providing it services using our technology processes and knowhow.
Of the remaining revenue 6% of revenue is from pure revenue cycle management and as a quick comparison.
Your RCM represented 26% of our total revenue three years ago, and 75% of revenue at the time of our IPO in 2014.
Clients, where we provide comprehensive medical practice management services were 9% of revenue and other services accounted for the last 2%.
All of these breakouts can be found in our earnings press release and our 10-K.
Now, while our revenue growth was impressive improvements in profitability or even more noteworthy.
GAAP net income a positive $2 $8 million for the year compared very favorably to a net loss of $8 $8 million last year.
I wanted to call out that 2021 includes $2 $5 million related to a gain in the change of fair value of the contingent consideration from the <unk> acquisition.
This $2 $5 million has been excluded from our non-GAAP adjusted results.
However, even without this noncash gain we delivered positive GAAP net income for the year for the first time since going public in 2014.
For non-GAAP adjusted net income, we generated $18 $5 million or $1 24 per share an increase of $10 million over adjusted net income of $8 5 million in 2020.
Adjusted EBITDA of $22 $1 billion more than doubled in 2021.
Adjusted EBITDA margins increased 550 basis points to 15, 8%.
During the year, we completed the strategic acquisition of Med ESR that hard you mentioned, which added professional services to our offering and gave us a sizable footprint in new markets, including health systems, and hospitals, and which we believe there is a meaningful opportunity to cross sell some of our technology solutions.
As you can see we are.
Making progress on all fronts.
Now turning to fourth quarter highlights.
Revenue of $37 $5 million increased 17% compared to a year ago.
From a revenue standpoint.
This quarter, we saw a patient volumes return to a more normal cadence continuing our pattern of normal organic growth.
GAAP net income of $3 $5 million compared favorably to $155000 last year.
Please note that this includes the $2 $5 million gain in the change of fair value related to the <unk> acquisition that I mentioned a moment ago.
Even without the change in the estimated value of the earn out we would've reported.
Our GAAP net income in excess of <unk>.
Bill I think there are some some technical glitch, maybe we stopped.
Hearing you.
Okay.
Thank you.
How do you can you hear me.
Yes, we can hear you now okay.
Now turning to the fourth quarter results.
Revenue of $37 $5 billion increased 17% compared to a year ago.
From a revenue standpoint this quarter, we saw our patient volume has returned to a more normal cadence continuing our pattern of organic growth.
GAAP net income of $3 $5 million compared favorably to $155000 last year.
Please note that this includes the $2 5 million dollar gain in the change of fair value related to the <unk> acquisition that I mentioned a moment ago.
Even without the change in the estimated value of the earn out we would've reported a GAAP net income in excess of $1 million in the quarter.
non-GAAP adjusted net income of $5 million was flat with last year.
Adjusted EBITDA of $6 $1 million increased 7% compared to $5 $7 million last year.
This increase was primarily driven by the realization of synergies from our prior acquisitions.
Adjusted EBITDA margins came in at 16, 3% compared to 17, 8% a year ago.
The fourth quarter adjusted EBITDA margins were slightly impacted by the addition of professional services revenue from our mid year acquisition of bed ESR.
Turning to our balance sheet and cash flow, we ended the year with $10 $3 million in cash.
<unk>, a $1 million in restricted cash from the <unk> transaction and generated $6 $1 million in cash flows from operations in the quarter.
And we ended the year with net working capital of $6 million.
Finally guidance for the full year 2022, we expect revenue to be in the range of 152, and $155 million, which represents 10% growth at the midpoint.
And adjusted EBITDA to be between 24, and $26 million, reflecting 13% annual growth at the midpoint, even after the incremental sales and marketing investments.
Now let me provide some additional color that is underpinning our guidance.
As always our annual guidance is based on a combination of organic growth and growth from tuck ins and excludes major acquisitions.
While we don't normally guide to quarters I wanted to provide a reminder of the fourth quarter to first quarter seasonality in our industry.
We typically see a sequential decline in revenue from Q4 to Q1 due to patient deductibles resetting on January one.
This has historically been partially offset by flu driven visits in Q1.
But we're seeing very mild flu season, as we did in Q1 2021, given the social distancing and increase in people working from home.
Given the puts and takes we were expecting a roughly 10% sequential step down in revenue and a similar dollar decline in adjusted EBITDA since our costs are related to the volumes of activity and not to payments.
Looking over the course of 2022, our third quarter is typically the high point of the year as physician visits related to the start of the school year pickup in flu shots being administered adjusted EBITDA generally follows the same seasonal pattern.
I'd like to close by talking about our capital structure.
Earlier this year, we took our first small step towards reducing our cost of capital by launching a series B preferred stock with an eight and three quarter percent dividend rate.
As of the end of February .
Raised approximately $27 million on a net basis and are using the proceeds to retire $20 million of our higher dividend series a preferred.
We are grateful to our series a investors. This was an important financial instrument that allowed us to fund our growth strategy and reached the point, where we're at today.
Our goal is to reduce our exposure to series, a and lean on more cost effective sources of capital in the future.
We're considering several paths forward depending on market conditions.
Including offering in exchange to allow series a shareholders to exchange for series B shares.
Selling more series B and using the proceeds to redeem more series a.
Considering that options to allow us to redeem more series a.
And selling common equity to retire series.
We are fortunate to have multiple options and are cognizant of potential shareholder impacts of our choices.
Rest assured we will choose the best combination of actions that we anticipate will produce the highest expected return at the lowest risk for common shareholders.
Look out for further steps to reduce our cost of capital as the year progresses.
In conclusion, we are pleased with our 2021 performance and believe we are well positioned to continue to execute our strategic initiatives.
Look forward to keeping you posted over the course of the year.
With that I'll turn the call over to Mahmud for his closing remarks.
Thank you Bill we are pleased to report another year of record financial performance and look forward to set a new record in 2022 and beyond.
I would like to thank our customers shareholders and employees for their continued support of care cloud mission.
We will now open the call to questions operator.
Thank you, Sir if you'd like to ask a question at this time. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment again Thats star one if you'd like to ask a question.
We will take our first question from Jeffrey Cohen with Ladenburg Thalmann.
Good morning, everyone. How are you.
Good morning, Dave Good how are you.
So I guess.
Just firstly.
If you could discuss in further detail your your guidance for 'twenty two.
A little later than we had previously expected.
What would.
Would it be inputs and factors that you're taking into account one.
King.
Growth rates down towards the 10% as reported.
Scott Thanks for the question Jeff.
As we as we put forward our guidance, where we're always torn between expressing.
The optimism we have to grow the business the opportunities too.
Have step function growth from from acquisitions as.
As well as setting reasonable expectations for the for the marketplace based on sort of pure organic growth and so based on that.
As we look at the volume of customers, we look at the volume of health care visits.
We think getting to that net.
Gross debt.
That you see in our.
Guidance is is a good approximation of where we'd be without doing anything major and strategic.
Rest assured we're always looking for great great opportunities for step function growth.
But it's impossible to predict and therefore, we always leave those out of the guidance.
Guidance. So we've tried to balance this and be conservative I think it's all of our goal is to exceed the <unk>.
<unk> that we've put forward.
We don't want to set unrealistically high expectations, and then run the risk that people are disappointed in the future.
Okay got it and then secondly, first could you talk a little bit about.
Your current base of customers and going forward or at least this year next year as well talk a little bit about the.
The the offerings on the platform and where you're expecting most of the growth from <unk>.
Current customers, whether it be the larger.
The larger companies or the the Onesies and Twosies on the smaller Sean.
Great. Thanks, Thank you Jeff.
As I mentioned earlier, there are three major areas for us that set of customers who use our core technology. So we still continue to see.
Revenue about roughly 50% of the revenue coming from the clients who are using our core technology platform, whether it's other EHR practice management and the like and we still see about 20% plus customers roughly who have been using at least some component doubtful where technology and he is one component of more components of the.
Technology, but may not be the core component.
Professional services that number stand somewhere around that 13%.
And this is primarily the projects that we are doing that to help fulfill that made us our division and the rest of the revenue is being generated by different either either pure RCM services over for steel and the like.
In terms of the future opportunities, we do see some increase in the divorce deals and Karl can talk about more about the the more opportunities we see here.
In terms of I think we will continue to grow in the same same way, 50% plus so our goal is to keep on increasing this 50% the revenue share using utilizing the core services and then over the next priority or the next segment is of course that 20%, which is today, which is that at least one company.
And of the after products and the services that the clients would be using.
So we see the same attraction with the help of the Medisoft hasn't been mentioned earlier, we do see more and more opportunities as we have as we have ramped up over all sales and marketing efforts.
And planning to increase it further in this coming year.
With those additional connections coming in with the help of.
The medisoft and other related opportunities, we do see that we should be signing more business into the large enterprise space.
Okay, great and anything in terms of.
Sorry, sorry, Jeff go ahead.
Go ahead Howard.
Hi, Carl would you like to talk about the other opportunities that we see on the foresight.
Yes, I'd be happy to add a little color to what you've already said, which is right on point.
Certainly overall, we compare.
They too are Q4 to where we were a year ago.
Percentage of for sales is almost triple.
Where we were and I think I attribute that to a number of factors. One is just an increased effort on the sales and marketing side with net new deals.
Two definitely there is a dramatic shortage.
Qualified workers.
In the U S at hospitals large practices.
Revenue cycle companies that we've been able to <unk>.
Tap into and to meet a need there.
And three the acquisition of <unk> has gained us a whole new setup.
<unk> at an executive level and we've already seen a number of very strong deals come into play.
That really really have enhanced what we're providing in the way of force.
Thank you Ravi.
Thank you Okay alright.
Alright, just one more quick one if I could for bill.
On the adjusted EBITDA Guide of 24 to 26, so it looks like you would expect with the adjustments would be similar to 2021.
With.
The GAAP gain being.
At or slightly larger than the $2 84 from 'twenty to 'twenty, one et cetera, the good way to phrase it.
I think so.
Terms of the adjustments between GAAP and GAAP net income and non-GAAP or adjusted EBITDA.
One of the things to take into account is that if we were to do a large scale acquisition.
That might raise the amortization of intangibles that migrated the transaction and integration cost.
But it doesn't really change the long term impacted the business itself. So in some ways. The adjusted EBITDA is a more steady state number.
You can look forward to.
Okay about the adjusted.
EBITDA growth.
Recognize that we are also increasing our investment in sales and marketing from where we were in 2021. So.
Despite increasing the sales and marketing adjust investment will still be growing the bottom line.
Perfect. Okay got it thanks for taking our questions.
Thanks, Jeff Thank you.
Next question will come from the line of Mark Weisenberger with B Riley Securities.
Thank you and good morning appreciate taking the question Bill if you could just follow along with that kind of commentary on the sales and marketing investments and when should we expect.
The revenue to flow through from those investments is that going to come more in the second half of the year.
Okay. Good good question, Mark so as CFO .
Would love to be able to hire a salesperson in the on the first day that they arrive.
Signed a 1 million dollar customer who goes live that minute sees a patient and insurance pays them within 24 hours of the visit.
But then the reality comes in which is that it does take people a little bit of time to wrap up.
Bigger clients take a little longer to decide sometimes theres a month before we were going live often because they need to give notice to a previous.
The provider.
And then they see.
But of course, we get paid at the.
Appointed the Doctor gets paid so.
Yes, I guess, that's a long winded answer to say.
When do we make those investments in the <unk>.
First quarter of the year you start to see the results in the in the second half of the year as you make the investments during second quarter, you really only see some some incremental results in Q4 now from our perspective.
The investments, we're making now really are driving.
Turning to revenue in 2000, I'm, sorry, 2023 revenue in 2023 profitability.
As why we feel it's important to increase the investment level now.
To be able to continue that growth into the future.
Very helpful. Thanks, and then just.
Just to elaborate a little more thank you to add to what Bill had said on the enterprise side, what we have seen as historically it takes roughly for us between five to seven months wondering encounter go lives because as Bill mentioned the notice period and then the basic initial integration configurations and delight than another.
Lead three more months when they get actually a fully ramped up so as we are shifting a little more focus towards the enterprise size or the large customer dead roughly five to seven months in three more months under mid size somewhere between three to five months and then you can add another towards two to three months on the undergo lifestyle.
Just to add some more color.
Go ahead David.
That was very helpful. I appreciate it Bill if you could also talk about kind of the trajectory that we saw on the gross margin.
'twenty one.
Kind of compare and contrast, the first half of the year versus second half of the year and then how do we think about that moving throughout 2022.
Okay. Good good question. So what do you think about the gross margin recognized that when we bought that.
Sure.
We picked up a revenue stream, that's a little bit different and I would say in in med ASR, because it's really sort of service driven.
The.
The direct operating cost is usually a little bit bigger percentage of revenue than it is for either our SaaS business or or or.
RCM business.
So in some respects when you think about the gross margin gross margin declined in the in the second half of 2021, primarily due to <unk>.
Due to the fact that <unk>.
<unk> was there.
So when we think about 2022, you're going to start it a little bit lower level I expect that.
Assuming we don't do any other major acquisitions.
By the end of 2022, you'll be back to the gross margin levels that you saw at the beginning of 2021, which really means improvement in.
And gross margins improvement in profitability throughout.
A combination of.
Of efficiencies and leveraging our technology and our offshore team throughout the business and of course, depending on what happens.
Were we to find another another really compelling strategic opportunity.
Pending on the on the other.
The margin profile of that business.
It might increase or it might decrease the gross margins going forward.
Understood could you shed light on the conversations you're having with them.
Mid size and large practices as well as the health systems, and how they're communicating their financial positions and does that have any impact on the outlook for med ASR and how is your expectations for that business kind of changed over the second half.
2021 into the first half of 'twenty two and then also comment on the Oracle and Cerner acquisition potential opportunities for <unk> would be helpful.
Alright.
Let me just try to answer that part of the question and Bill feel free to jump in when it comes in terms of any of these client sharing with us their financial positions of the gold not specifically that by design anyone does that but for the all the rest of the existing clients that we have we do have based on.
Their historical.
Numbers financial numbers, we do dual their own internal forecast and we understand that over the next couple of quarters, how we see the growth coming up in those growth have already been incorporated into our financial forecast in terms of stepping into this these are the larger groups.
I can't.
We have not yet seen or have not been to the point, where we want to be just because of the fact that these large deals to the health system typically takes a little more time than a typical small to medium sized closing a small practice deals.
Because of the different the board member the C level and the process that they have to go through to get the.
The date to close with any new vendor.
Since the acquisition of <unk>.
And the annualized recurring revenue side of it.
Leveraging the existing relationships, we have made as a small and some decent.
Our success in terms of closing eight to $900000 in annualized recurring revenue whatever active pipeline and when I say pipeline, where we are in active conversation with some of the deal are different stages, whether we are we are going through the RFP process.
There's some discussion that pipeline is somewhere between $4 million to $5 million and the active overall pipeline is even much bigger at this point, but again I just wanted to remind the fact with difficult these deals they.
Thank you and much more longer than compared to the smaller to medium sized practices and even in many cases, the non health system based enterprise lines. These deals face even more time to get closed.
Helpful. I appreciate it and then just a final one for me you have data from across approximately 40000 providers wondering what your plans are to potentially monetize the data that you get from patients may be in an anonymous way and leverage kind of customers that pay or is there even a life science companies. Thank you very much.
Great. Thank you very good question actually as you are saying we are in.
And at least with one opportunity with an active conversations nothing has yet been finalized.
But if that happens this will be the workforce planning towards that direction and we are seriously considering that day part.
<unk> been signed by the Nvme. We believe we are very far ahead in the conversation and if that gets materialized, we will make an announcement accordingly.
Great. Thank you very much.
And thank you for the question. Thank you.
Your next question comes from the line of Allen Klee with Maxim Group.
Okay.
Good morning.
If we look at.
On your Capex and your capitalized software in 'twenty, one I think they were around 3 million and an $8 million or so how do you think about the direction of those two numbers for 'twenty two.
All right. Good good question Allen so when we when we think about it I would say think about those numbers being fairly equivalent.
Capital expenditures in our business arent huge amounts, but as we as we continue to grow we're always adding facilities.
Adding computers, we do leverage a lot of cloud services. So.
So a lot of our compute power.
We don't actually have to go buy the servers Amazon Google does.
In terms of the capitalized software.
You know when you're developing new software there are specific rules and GAAP as to when it gets capitalized versus expense.
So basically work on new products that are not yet in production gets capitalized and so that's the investment that you see in 2021.
You should continue to expect to see that going forward into 2022 as well.
Okay. Thank you.
Alright, one more time, everyone that is star one if you'd like to ask a question, we'll pause for just one moment.
Our next question from Kevin Dede with H C. W.
Good morning, Bill how do you reference you referenced conductor, but you didn't really you didn't really tear into how you're.
Proceeding with it.
Total confusion.
The third quarter call I was just wondering if you wouldn't mind, taking some time.
To review that and and and your outlook.
Good morning, Kevin and thank you for joining and thank you for the question.
You're right about that as you as you remember that this product is for US we are stepping into a different market segment, where we have delivered two forward Barclays of the conductor one is for us.
Creating or creating a database a library of all the interfaces that we have created since the inception of the company and our debt.
Now we have the capability because of the different acquisitions, we have done. So this product by creating this product that product internally this is giving us better.
This is putting us in a better position for future acquisitions. There is another company we acquired so their platform as their weekend and much more effective we can create those interfaces. The second thing you'd been declined as when we signed a new client and we have to make the client life and it has to go to a creation of the interface even that is.
This product is helping us improve the GOR lifetime of that new time that we're signing so that's what I'm, saying.
Internal implementation is concerned we virtually has completed the incorporation of integration of this new product when it comes to the external.
We're hitting now this mid to help with this product the vendors the target market. This segment is the different vendors and whether you said moderate ph EMR vendors of practice management vendors are some of the enterprise and groups meet conducted so far.
They've been hours and have done at least one.
Campaign.
There are interest out there so far we did not have any success.
But we are still optimistic based off of just technology for hitting because all what we needed a couple of the closing a couple of designing through the through the year to get to generate a decent number in terms of the revenue.
But internal efficiencies have already kicked in because of.
The development of the launch of this product.
And how do you mentioned that you had 30 salespeople on staff now.
Where do you think that number goes this year.
Yeah.
Yeah. Good question, Kevin we do not have either have not specifically defined a number of employees to grow but we do anticipate as I mentioned, increasing marketing spend by 20% to 25%, which will be a combination of additional resources. Some.
<unk> campaign, you would invest maintain some of the other media campaigns and all of those pieces together, so keeping in view, where it will be see more results coming in we will keep on investing in the index on that site, but yes. It will be a combination of some additional resources on the enterprise sales side because of.
<unk>.
The opportunities we see now to either demand is high at over one pipeline and.
In the medium size.
Segment as well.
Okay Fair enough Hot eat now.
That expansion of budget have you.
Have you classified some of the expense for campaigns do you think most of it will be digitally focused print.
Can you give us a little insight on how we might actually see you raise the care cloud Brandon.
Through media.
No absolutely. It is a combination of all of those and one of the.
The interview that I was referring to for Hudson as well. So we are doing a campaign as an example in that area based on how good we have performed when that one health system is one of an example, their number of others after that will be moving forward to it and a couple of other states as well.
So to your question. It is a combination of it is digital campaigns are even door to door campaigns based on some of these anchor clients, where we have tremendously improve the overall performance and that created an impact in that community, but in terms of that how much of what that split is that those are the numbers.
Kevin we would like not to disclose that.
Something internally, we would like to continue and improve the overall delivery ability.
Yeah fair enough. Thank you.
Bill could you give us the count.
The series, a and the series B count at this point.
Okay.
So rather than giving us.
I will try to do this a little simpler and do it in.
<unk> terms.
We've over the over the life of our series a over the six years that we were selling it ranging from the first $5 million that we sold back in 2015, we we sold a total of about $133 million worth of series a day.
As you've seen now that we've launched series B, we are redeeming the first $20 million of series that will happen at the end of this week.
And.
We have sold so far about $27 million worth of series B.
As we think about our prospects going forward.
We don't have.
After do anything, but we will look out.
At options to date.
To either offer series a shareholders may be that you have to convert their shares to exchange their shares for series B.
That would lower their coupon a little bit, but it would have given them a couple of years of call protection.
We might decide that it makes sense to sell some more series B and use the proceeds to redeem series a.
Yes.
We've had discussions with with banks and we will look at the at weather, whether it makes sense to take on some debt to redeem series.
And finally, not not at today's share price, but maybe we will see a point where the market.
It looks at Us and says Gee.
$150 billion to $55 billion company $24 million to $26 million of adjusted EBITDA, maybe the share price is not appropriate and and maybe we will see that share price get to a level, where it makes sense for us to sell some common stock and used the proceeds to redeem series day.
So I'm not sure which of those paths will take but if I would if I had my crystal ball I'd say that 12 months from now.
You might not see a whole lot of series day left on the balance sheet, you might see lower cost of capital.
Fair enough. Thanks, Bill Thanks Heidi.
Thank you Kevin.
Alright, one more time that is star one if you'd like to ask a question, we'll pause for another moment Hello, everybody the opportunity to signal again, please make sure that your mute function is turned off to allow your signal to reach our equipment.
Pause for just another moment to allow everybody the chance to signal.
Okay. It looks like we have no further questions at this time, so I'd like to turn it back over to MS. <unk> for any additional or closing remarks.
I'd like to thank everyone, who has joined US on today's call. We appreciate your participation and your interest in us as a company and we look forward to speaking with you again next quarter.
And have a great day.
That does conclude today's conference we thank everyone again for your participation.
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