Q4 2022 CareCloud Inc Earnings Call
Welcome to the care of Cloud, Inc fourth quarter.
And full year 2022 post results conference call.
At this time, all participants will be in a listen only mode.
Later, we will conduct a question and answer session.
I will now turn the call over to your host Kim Blanch check loud General Counsel Ms. <unk> you may begin.
Good morning, everyone and welcome to the care club fourth quarter and full year 2022 conference call on today's call are Rick Hough, our founder and executive Chairman.
Marty <unk>, our Chief Executive Officer, President and a director.
And Bill Korn, our Chief Financial Officer.
Before we begin I would like to remind you that certain statements made during this conference call are forward looking statements within the meaning of section 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 this conference call are forward looking statements.
<unk> without limitation statements regarding our expectations and guidance for future financial and operational performance.
Expected growth.
In this outlook.
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 eastern.
Forward looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward looking statements.
These statements reflect our opinions only as to the date of this presentation and we undertake no obligation to revise these forward looking statements in light of new information or future events.
Please refer to our press release, and our reports filed with the Securities and Exchange Commission.
We'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 fourth quarter 2022 earnings presentation.
Please visit our Investor Relations site IR.
<unk> Dot care class Dot com.
On news and events then.
And then quick IR calendar click on fourth quarter 2022 results conference call and download the earnings presentation.
Finally on today's call, we may refer to certain non-GAAP financial measures.
Please refer to today's press release announcing our fourth quarter 2022 results for a reconciliation of these non-GAAP performance measures for GAAP financial results.
And with that said I'll now turn the call over to our CEO hobby chartering Heidi.
Thank you Kim.
And thanks to all of you for joining us for our fourth quarter and full year earnings call.
222 was a big year for our company on several fronts, including <unk>.
Record bookings really defining the tech enabled revenue cycle solutions.
Hello, Goodness brand, which includes electronic care management and remote patient monitoring is rapidly gaining traction in our user base.
Our wellness offering and another record booking quarter in the fourth quarter, ending the year with approximately $8 million of bookings.
As a reminder, revenue recognized may differ from other bookings due to timings of go lives patient adoption ramps, but other factors.
2022 was also the first full year of operating Medisoft under the care clouds umbrella and it delivered strong performance from both a revenue and margin contribution perspective.
As a reminder, one.
One of the key considerations of the acquisition was leveraging their 200, plus hospital relationships and to cross sell <unk> services.
We acquired them in 2021 and during that year, we generated an annualized revenue of $27 million.
Last year, we recorded $30 million.
A 9% increase but that's not the whole story.
Over the last year, we re established and strengthened our relationships with several leading health systems software vendors and confirmed over cross selling thesis by increasing medisoft are seem related revenue by approximately 300%.
We will continue to leverage our relationships for recurring revenue take the neighbors RCM deals.
Which will help overall growth.
Shareholders will appreciate the improvement in contribution margin increasing from 3% in 2021, the ERP bought them to 14% for all of 2022, and ending 2022 with a 24% run rate directly as a result of cross selling and realizing the anticipated.
Anticipated cost synergies.
I also want to highlight our tech enabled revenue cycle management solution, which is truly differentiated in the market as it sits on top of our industry, leading state of the art software technology products to help us drive better revenue growth in this mature EHR and practice management market.
Not only is it an end to end solution for over to physicians, but it is also vendor agnostic.
Also during the fourth quarter, we hosted our first analyst and Investor day will be shared details around a bit.
Mobile solutions the value, we provide to our clients.
And experience of our senior leadership bench.
The benefits of our global workforce and participants we're also able to hear from two of our clients.
Project was very beneficial not only in educating the investor community, but also the potential user base of our comprehensive capabilities.
Very pleased so many of you could join us for the informative event.
We also use this event as an opportunity to announce that we were changing over common stock ticker symbol from MTBC to <unk> to better align with our corporate brand with.
We started trading at <unk> on January 10th of this year.
I will now turn to an update on the organic growth strategy that we initiated in 2020.
We're pleased to report that in 2022, we recorded our highest organic bookings growth of 94% over the past two years, we expanded over sales team from 13 people to over 50, which we believe is a significant factor driving this growth.
Taking a closer look we more than doubled the level of bookings from recurring revenue opportunities from 2021% to 2022.
We also appointed new sales and marketing leadership in 2022 to better capitalize on the opportunities ahead of us.
We anticipate that these trends will continue into 2023.
We are laser focused on converting over 2022 bookings success into revenue in 2023 <unk>.
Excluding revenue from two large health system customers that we acquired and migrated to be required systems.
We are forecasting 12% organic growth in 2023.
Bill will get into this in a more details in a minute.
One is to produce double digit organic revenue growth and we believe we have a path to achieve that.
Our 2023 outlook is driven exclusively by organic growth and any acquisitions would be incremental to over forecast.
Let's turn now to our physical therapy EHR solution subs.
Subsequent to the end of the quarter just last week in fact at the American physical therapy associations annual meeting, we launched a version of <unk> cloud.
Cloud stock EHR that is specifically tailored to meet the demanding needs of the rehabilitation market.
It includes comprehensive and easy to use and to end tools for managing patient information and tracking their progress in terms of the market dynamics for software solutions in the rehab space. It is fairly mature and dominated by a couple of vendors, but it is all about understanding that innovation has not been at the forefront for some time.
That is where we see the biggest opportunity for us our remote product is already being used by a leading rehab practice consists of over 2500 clinicians. This is an example of care cloud challenging the status quo with the solution that we believe to be technologically superior.
We're seeing strong interest in this offering and look forward to keeping you posted on our progress moving forward.
Finally, as we look to 2023, we feel over current established position in the industry has set us up incredibly well to capitalize on a new era of growth and we see an abundance of emerging opportunities in the future, including our first non U S customers.
First video focus for 2023 that we are actively exploring is entering the new market of the UAE, which represents a particularly attractive opportunity for care cloud as the government will be mandating EHR adoption over the next few years.
This is many parallels to the meaningful use initiatives in the U S that we benefited from a decade ago.
We see these opportunities in the health system space to or made us our division.
Our proprietary ambulatory EHR for the private practice space, which will need to be certified with the ministry of health and prevention in Tech enabled RCM space and with various other digital health initiatives.
Hope to enter this new market in the upcoming year and we will keep you updated on other progress.
The company's solid operational results in 2022 can be attributed largely to a powerful combination of the technology and services, which are redefining. The next generation of RCM solutions for the ambulatory setting.
To summarize.
We are optimistic about our organic growth initiatives that are starting to take hold.
Our wellness digital health offering.
Our measures are hospital offering.
Our force workforce augmentation offering.
The expansion to non U S markets, where we feel we have a distinctive competitive advantage.
Second one of our top priorities in 2023 is onboarding of new clients and turning over record bookings into revenue.
And finally, we feel that our work in 2022 has left us well positioned in the industry to deliver continued growth moving forward.
Now I will turn the call over to Bill for a closer look at our fourth quarter and full year results.
Bill.
Thanks, Patty and thank you all for joining today's call.
In the fourth quarter, we reported revenue of $32 5 million.
GAAP net income of $499000 and adjusted EBITDA of $5 $7 million.
For the full year, we reported revenue of $139 million GAAP net income of $5 4 million and adjusted EBITDA of $22 million.
These results were in line with expectations.
Approximately 88% of our 2022 revenue came from technology enabled business solutions.
Clients using our technology enabled revenue cycle management services represented approximately 52% of our annual revenue with over 90% of that revenue coming from clients, who also utilized our EHR practice management software as well as our services.
Let's look at the full year on a same store basis, which is highlighted in our earnings presentation deck.
Youll see we stripped out the contribution of two large customers to highlight our annual revenue performance on a consistent basis.
These were each unique instances and it's important to dig into the details here.
These two health systems had been acquired in 2016 and 2018 before we started servicing them. After our 2020 acquisition of Meridian Medical management.
And in 2022, they finally completed the migration onto their acquirers software platforms winding down our services.
We knew this was a likely outcome when we bought meridian and adjusted our purchase price accordingly.
While the timing was later than what we were originally led to expect this meant that we earn some extra revenue and profit margin for two years.
By the end of the extra revenue for these two large customers means that reported results overall look less favorable.
Normalizing to remove the impact of these two customers our revenue increased $8 6 million or 7% from 2021 to 2022.
Driven by a combination of our <unk> acquisition in mid 2021.
Organic growth.
2023.
Anticipating our revenue growth on a like for like basis will be around 12%.
But without eliminating the impact of these two customers that growth has clouded.
Our GAAP net income of $5 4 million in 2022 was almost double our net income of $2 $8 million in 2021 and set a new record.
Our adjusted EBITDA of $22 $2 million was also a record.
Our fourth quarter revenue of $32 $5 billion was down year over year, but excluding those two customers. The revenue from our core business would it essentially flat from the fourth quarter of last year.
Our adjusted EBITDA of $5 $7 million was down 7%, which is less than our top line decline as a result of improving margins in our med <unk> business.
Turning to the balance sheet and cash flow, we ended the year with $12 $3 million of cash.
We generated $21 million of cash flow from operations for the full year 2022, 6 million of which came from the fourth quarter.
In terms of our outlook for 2023, we are reiterating the guidance we provided at our December Investor Day.
We expect revenue of $142 million to $146 million, which represents 12% organic growth when we strip out those two large customers from both 2022 and 2023.
We have only included organic growth in our guidance. So if we complete an acquisition even a small tuck in it will bring incremental revenue.
We expect adjusted EBITDA of $24 million to $27 million, which implies 15% growth at the midpoint.
Our quarterly revenue distribution will look a little different this year for two primary reasons.
First the loss of the two customers, which contributed revenue in the first half of 2022.
Second the timing of new revenue from our wellness offering which is expected to ramp up in the back half of this year.
In 2023 revenue will be weighted with approximately 44% in the first half.
And the remaining 56% in the second half of the year.
This compares to 2022 result, with 52% generated in the first half and 48% in the back half.
Our profitability will also be impacted by the seasonality of our business.
First quarter revenue is always hurt deductibles in most medical insurance plans, which typically depresses revenue by 5% to 8%.
Without impacting our costs.
Since we process the same value of claims.
But payments are lower.
Individuals pay their deductibles much more slowly than insurance, making primary payments.
This year will be no different.
As we.
To focus on lowering our costs, we are forecasting improvement in our margins throughout 2023, despite the loss of the two customers who are generating higher than average gross margins by the time they exited.
To conclude my remarks, I'll reiterate how do your sentiment that we have built out our solution to meet the changing needs of our physician partners.
While sticking to our true roots as a world class RCM provider.
I believe 2023 will be a pivot point for our business, where organic growth really begins to accelerate.
Our overarching goal is to deliver double digit organic growth and we believe we have built the foundation to achieve it in the future.
With the combination of new customers and cross selling.
Thank you all for your participation in our call today and look forward to updating you throughout the course of the year.
I'll now turn the floor over to our chairman Mahmud for his concluding remarks.
Thank you Bill 22 into to give us our strongest year of organic sales activity, both new customers and new services for existing customers. We are proud of this accomplishment and look forward to seeing the new business turned into revenue during 2023.
I would like to thank our customers shareholders and all our associates for their trust loyalty support of care cloud submission.
Let's open the call to questions operator.
Thank you.
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One moment, please while we poll for questions.
We take our first question from the line of Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.
Oh Hello holiday.
And the Moon how are you.
Good morning, Jeff.
So just to clarify bill due to customers' contribution to 2022 revenue was eight.
<unk> six or I heard you call out.
Jeff I think I think we said that at 86 was the revenue growth.
We would have had if you exclude those.
Those customers are.
Their contribution was actually in total a little closer to the $10 million.
Okay got it perfect.
Could you talk about.
Bookings in trends on their front or perhaps any backlog related to two your funnel do you anticipate that the.
The growth from June 23 is going to come from new customers, new accounts, new territories or would that be amped up.
<unk> increased offerings on each of our practice management and wellness.
Oh, good good singer and I think if you just look at the overall booking as we mentioned that for 2020 to be our booking numbers by about roughly 94%.
One third of those proximity you're at about we mentioned $8 million, we closed on the under the wellness offering.
During 2022.
Absolutely seeing that similar trend going forward will be probably should be closing somewhere close to the same one third at least for the foreseeable future quarters in terms of the redness, but overall the growth the bookings should be coming from from all of these places whether it's the the.
Different EHR offering our tech enabled RCM services sitting on top of our technology suite of enforce offering and by leveraging tool that maintenance, our relationships and selling into that space. The recurring revenue RCM deals.
Thank you.
Really the last three quarters.
The consecutive quarter look better than the previous one and the FERC, yes, it tends to stabilize <unk>.
At a certain average it cannot just be that every other quarter can be better than the next one but overall if you look at it of our goals are for this year, even higher than the 2022 overall booking numbers.
Got it that's helpful harder than that.
I guess lastly, we hear you on cadence and seasonality could you talk about are you.
Taking any price out there and could you also talk about inflationary pressures that youre seeing anywhere any effect, particularly on your your labor cost. Thank you.
Great and I can still start the answer and Bill Please feel free to jump in and then you probably would be referring to some of the the conversion there.
It will be $2 conversion or the foreign currency conversion cost and the innovation factors. There I think it's because all of the revenue for us being generated.
So far on the website so even there is.
A devaluation of the foreign currency that goes in the short term to our favor.
Long term because as inflation starts kicking in it still goes back to a normalized at the same level. So we do not see anything in the long run short term there could be some additional benefit to us because of that change, but in the long term, which again goes back to our overall pieces of our overall model of the leveraging.
The offshore team.
Bill anything you would like to add.
Yeah. I mean, we are I think we are fortunate that we are operating in a in labor markets, where theres still lots of people who want to work.
When we look for new employees.
Fortunately as we as we look overseas, we get plenty of really qualified applicants.
Again, I don't have scientific data, but I'd say anecdotally I hear from people, who are using India for offshore.
They are under a lot of pressure and I'd say, we're doing fine.
We're treating our employees well, where we're helping them keep keep pace with inflation.
But we're not seeing overall dollar denominated costs going up and we're not seeing physicians going unfilled.
We're fortunate that we have.
We're open for business and if we get new contract win.
We're we're easily able to staff up to.
Do the work.
Okay got it that's helpful. Thanks for taking our questions.
Thank you Jeff.
Okay.
Thank you we're taking our next question from the lineup Allen Klee with Maxim Group. Please go ahead.
Yes, good morning.
You talked about one of your goals for this year is translating your bookings into revenues can you give some.
I think specifically on the.
Uh huh.
Remote patient monitoring in chronic care.
Programs of what you're planning to do to execute on that thank you.
Good morning, Adam and thank you for your question.
This includes talking about the non wellness offering bookings that's continued to be as we mentioned before six months average because large clients could be between six to eight or 10 months smaller could be within three months at an average it's about six months ago lifetime for non wind.
Net bookings for vendors book gains, whether it's the chronic care management or remote patient monitoring that adds another layer of complication, which is the adoption by the patients and I think what we are looking at right now will be close about $8 million.
Bookings in 2022, four under the wellness.
We anticipate in the first half of this year.
<unk> did roughly 70% of that already have been moved into production, but when I say moved into production. It's not that we have started to generate the revenue some of that could be that we are.
Reviewing the eligibility of the patient the EMEA have been establishing the connections with the patients two to bring them onboard Kennedy would they be interested in participating in chronic care and remote patient monitoring.
In terms of the revenue recognition, we anticipate that roughly 25% of the 17% that we have moved into production.
Be realized we will be able to realize in the first half of this year. The rest will be tour. So most of it will be towards the second half of the year and 7% probably could even be pushed into the into 2024.
Adoption, absolutely will improve as there will be more and more awareness on the patient side as to more and more value based care models pushed in I think that WNS will improve the patient adoption rates, but this is how we're forecasting. This is how we're looking at it right now.
Thank you and my last question is you talked about expanding internationally.
Could you.
Just to educate us a little bit on what.
What the.
The regulatory environment or what or what the.
Other.
Incentives are in those countries to adopt what you're offering thank you.
Alright, Thanks, Tim.
Talking about about the high level first of all this is for US a work in progress we are still in discussion and talking to England, we have a pause.
<unk> the government officials as well in that area. So it will take us couple of more months to be able to exactly understand all the different incentive look in terms of an opportunity as I mentioned during the during the <unk>.
Named remarks.
Similar to how the EMR adoption was conducted at the beginning of the first around the 2000 time after the Obama care and the meaningful use and those implementation started to take place in this UAE market and more specifically initially talking about the <unk> market. The UAE government is similar.
Literally pushing the implementation of adoption of the electronic health record systems. So we see.
The opportunity in three areas. One is leveraging that we've made in our division and providing an opportunity for implementation and activation of these health systems.
Index space UAE initially and then we anticipate expanding to the other the GCC region could be Qatar could be Saudi Arabia in that area.
And the second opportunities on ambulatory EHR, which we need to get it certified forest, but then we can start offering in that area and the third thing is the revenue cycle and we understand the revenue cycle off the debt.
The area is different than the definition of RCM is different than that.
The U S because everything the one standard platform.
The practices, we will have to log on to the same platform to create the claims the insurances and the government authorities have to log onto the same portal to pull the claim for processing.
Sure.
<unk> based Meredith are trained staff and positioning and.
Workforce, the global workforce, primarily based out of Pakistan. These two combination together, we believe set us in a very unique position there and that set us up for for success in that area.
A lot of initiatives from government.
We initially reviewing and again once we get it finalized we will communicate.
There is a city that we've traveled to meander opening an office within the healthy because that gets us connected with all the different players in the industry and the market there.
Okay.
Okay. That's very helpful. Thank you so much.
Thanks Alan.
Yeah.
Thank you we'll take our next question from the line of Michael Donovan with H C. Wainwright. Please go ahead.
Thank you Bill Hardy and Mahmud.
Calling on behalf of Kevin DBS. He's on the road Hardy you mentioned leveraging relationships to drive recurring revenue can you talk more to recurring revenue and how customers expand.
Services with care cloud once they are on boarded.
Thank you Michael good morning.
A couple of different.
We can look at it one I, specifically made that coming from the <unk> Division perspective, the one of the reasons for the acquisition of the <unk> business was because of their 200 plus relationships into the health system space into the hospitals.
<unk> connections.
With the right decision makers, the CFO or the head of the revenue cycle of the CIO is there so be there until we are able to now leverage those relationships and started to offer our cm recurring revenue deals in that space as we explained earlier and building too that this is a <unk>.
One time project based revenue most of the revenue of <unk>, but because of this connection now we are able to do.
Those relationships and start selling of our tech enabled.
Pollution and it was in the proof has already started to come in because this year in 2022, the RCM related revenue of Mega Solar Division has grown by over 300%. So that had events already have set us up for success in that area.
We anticipate even going further in 2024 initially have devices with new heads of admit it's our division the way would you like to give some more color.
Sure happy to.
So kind of highlight.
We saw several of our clients this year start out with something as simple as a.
Technology system selection process.
And then that ramps right into staffing, it's an interim CIO right into taking over a lot of their RCM components to know management.
And doing things around where we really get true recurring are seeing recurring revenue and we've seen that in several of our clients. This year.
Okay.
Okay, Great I appreciate it.
To get better understanding on international expansion so.
<unk> tried.
Trying to position itself to also be a medical tourism hub.
Is this something that you've taken to consideration when when looking for new markets.
You hit the nail on there Michael absolutely that's one off over reasons in the on the digital health space.
Because based on the different studies, we looked at many places at this one consistent number that that market is expected to grow by 25% CAGR in the digital health space over the next few years.
And the ones we did.
We started a small project to the initiative I think probably two years back for the daily held under creating creating a platform with providing a platform from which we can connect on one side the doctors and the other side of the patients. So with this introduction, albeit stepping into this the middle.
<unk> site, we are planning on or thinking about trying to get that life also coming back to your point, yes that is one of the reasons.
The medical tourism there.
Okay. Thank you I appreciate the added color.
Thank you.
Thank you.
A reminder to participants if you wish to ask a question. Please press star followed by one on your thoughts Joe on for now.
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Okay.
Thank you ladies and gentlemen, we have reached the end of the question and answer session.
I'd like to turn the call back over to Kim Blanche for closing remarks over to you.
We'd like to thank everyone, who has joined US today. We appreciate your interest in us as a company and your participation on today's call. We look forward to speaking with you again next quarter. Thank you all and have a great day.
Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Okay.
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Yeah.
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