CareCloud, Inc. Q4 FY2022 Earnings Call

Welcome to the CareCloud, 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 Blanche, CareCloud's General Counsel. Ms. Blanche, you may begin.

Good morning, everyone, and welcome to CareCloud's fourth quarter and full-year 2022 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer, President and Director; and Bill Korn, our Chief Financial Officer. Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts made during this conference call are forward-looking statements including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook, and potential organic growth and acquisitions. Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as of the date of this presentation, and we undertake no 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, 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 2022 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, click on News and Events, then click 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 to our GAAP financial results. And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

Thank you, Kim, and thanks to all of you for joining us for our fourth quarter and full-year earnings call. 2022 was a big year for our company on several fronts, including record bookings, redefining the tech-enabled revenue cycle solutions. Our Wellness brand, which includes our chronic care management and remote patient monitoring, is rapidly gaining traction in our user base. Our Wellness offering ended the year with approximately $8 million of bookings. Please note that revenue recognized may differ from our bookings due to timing of go-lives, patient adoption ramps, or other factors. 2022 was also the first full year of operating medSR under CareCloud's umbrella, and it delivered strong performance from both a revenue and margin contribution perspective. We acquired them in 2021, and during that year, they generated an annualized revenue of $27 million. Last year, they recorded $30 million, a 9% increase; but that's not the full story. Over the last year, we reestablished and strengthened our relationships with several leading health system software vendors and confirmed our cross-selling thesis by increasing medSR RCM-related revenue by approximately 300%. We will continue to leverage our relationships for recurring revenue tech-enabled RCM deals, which will help overall growth. Shareholders will appreciate the improvement in its contribution margin increasing from 3% in 2021 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 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. It is not only an end-to-end solution for our physicians but also vendor agnostic. During the fourth quarter, we hosted our first Analyst and Investor Day, where we shared details around our robust solutions, the value we provide to our clients, and the benefits of our global workforce. I thought it was very beneficial, not only in educating the investor community but also for the potential user base of our comprehensive capabilities. I'm pleased so many of you could join us for the informative event. We also used this event as an opportunity to announce that we were changing our common stock ticker symbol from MTBC to CCLD to better align with our corporate brand. We started trading as CCLD on January 10th of this year. In 2022, we recorded our highest organic bookings growth of 94%. Over the past two years, we expanded our sales team from 13 people to over 50, which is a significant factor driving this growth. We are laser-focused on converting our 2022 booking success into revenue in 2023. We believe we have a path to achieve double-digit organic revenue growth, and our 2023 outlook is driven exclusively by organic growth. Let's turn now to our physical therapy EHR solution. Just last week, at the American Physical Therapy Association's Annual Meeting, we launched a version of CareCloud's EHR specifically tailored to meet the demands of the rehabilitation market. This is where we see the biggest opportunity for us. Our remote product is being used by a leading rehab practice of over 2,500 clinicians. As we look to 2023, we feel our 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, including our first non-U.S. customers. The first area of focus for 2023 is entering the UAE market, which represents a particularly attractive opportunity for CareCloud as the government will be mandating EHR adoption over the next few years. We see these opportunities in the health system space through our medSR division and our proprietary ambulatory EHR for the private practice space. To summarize, we are optimistic about our organic growth initiatives. Our Wellness digital health offering, our medSR hospital offering, workforce augmentation, and our expansion into non-U.S. markets where we feel we have a distinctive competitive advantage are key. We feel that our work in 2022 has left us well positioned 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, Hadi, and thank you all for joining today's call. In the fourth quarter, we reported revenue of $32.5 million, GAAP net income of $499,000, 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 revenue cycle management services represented approximately 52% of our annual revenue. When looking at a same-store basis, our revenue increased by $8.6 million or 7% from 2021 to 2022, driven by a combination of our medSR acquisition in mid-2021 and organic growth. Our GAAP net income of $5.4 million in 2022 was almost double our net income of $2.8 million in 2021, and our adjusted EBITDA of $22.2 million was also a record. Our fourth quarter revenue of $32.5 million was down year-over-year, but excluding those two customers, revenue from our core business was essentially flat from the fourth quarter of last year. During 2023, we expect our revenue growth on a like-for-like basis to be around 12%. We are reiterating our guidance for 2023, expecting revenue of $142 million to $146 million, which represents 12% organic growth. Our profitability will also be impacted by the seasonality of our business as first-quarter revenue is typically hurt due to deductibles in most medical insurance plans, depressing revenue by 5% to 8%. To conclude, I believe 2023 will be a pivot point for our business, where organic growth really begins to accelerate, and that we have built the foundation to achieve it with a combination of new customers and cross-selling.

Thank you, Bill. 2022 gave 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 this new business turn into revenue during 2023. I would like to thank our customers, shareholders, and all our associates for their trust and support of CareCloud's mission. Let's open the call to questions.

Thank you. We will now begin our question-and-answer session. Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Please proceed.

Hello Hadi, Bill, and Mahmud. How are you?

Good morning, Jeff.

So just to clarify, Bill, the two customers' contribution to 2022 revenue was that $8.6 million I heard you call out?

Jeff, I think we said that $8.6 million was the revenue growth that we would have had if you exclude those customers. Their contribution was actually, in total, a little closer to $10 million.

Okay. Got it. Perfect. And could you talk about bookings and trends on that front or perhaps any backlog related to your funnel? Do you anticipate that the growth you'll see in '23 is going to come from new customers, new accounts, new territories? Or will that be amped up by increased offerings on EHR practice management and Wellness?

Great question, Jeff. For 2022, we grew our booking numbers by roughly 94%. One-third of those were approximately $8 million closed under the Wellness offering during 2022. We foresee similar trends going forward, with at least one-third of the bookings coming from Wellness. Overall, the bookings will come from various places, including different EHR offerings, our tech-enabled RCM services, and leveraging medSR relationships. We aim for bookings higher than the total figures from 2022.

Got it. That's helpful, Hadi. Lastly, we understand your points about cadence and seasonality. Could you discuss whether you're adjusting any prices out there? Additionally, can you elaborate on the inflationary pressures you're experiencing, particularly regarding labor costs? Thank you.

Certainly, Jeff. From a pricing perspective, we are looking at various factors, including currency conversions and inflation. While short-term fluctuations in currency can benefit us, we don't see any long-term effects on pricing. As for labor costs, we are fortunate to be in a favorable labor market where we have a steady supply of qualified applicants.

We're treating our employees well and helping them keep pace with inflation, but we aren't seeing dollar-denominated costs rising significantly, nor are we struggling to fill positions.

Okay. Got it. That's helpful. Thanks for taking the questions.

Thank you, Jeff.

Thanks, Jeff.

Thank you. We take the next question from the line of Allen Klee with Maxim Group. Please go ahead.

Sounds good morning. You talked about one of your goals for this year is translating your bookings into revenues. Can you give some specifics on what you're planning to do to execute on that?

Yes, good morning, Allen. For non-Wellness bookings, we typically see a six-month go-live timeframe, but for Wellness offerings, patient adoption adds complexity. We anticipate around 25% of the $8 million in Wellness bookings will generate revenue in the first half of this year, with the rest in the second half. We believe patient adoption rates will improve with awareness of value-based care models. This is our current forecast.

Thank you. And my last question is you talked about expanding internationally. Could you just educate us a little bit on what the regulatory environment or incentives are in those countries to adopt what you're offering? Thank you.

Thanks, Allen. In UAE, the government is pushing for EHR adoption, much like the U.S. meaningful use initiatives we benefited from in the past. We see three opportunities: leveraging our medSR division, offering our ambulatory EHR, and revenue cycle services. We're optimistic about our position and the initiatives from the government to promote health technology adoption.

That's very helpful. Thank you so much.

Thanks, Allen.

Thank you. We take the next question from the line of Michael Donovan with H.C. Wainwright. Please go ahead.

Thank you, Bill, Hadi, and Mahmud. Hadi, you mentioned leveraging relationships to drive recurring revenue. Can you talk more to recurring revenue and how customers expand services with CareCloud once they're onboarded?

Thank you, Michael. One key driver of recurring revenue is our medSR division's relationships with over 200 health systems. They enable us to introduce RCM recurring revenue deals. This year, we saw RCM-related revenue from medSR grow by over 300%. We believe this growth will continue.

Many clients start with technology system selection and then expand to include staffing or take over RCM components, resulting in true recurring revenue.

Okay, great. Appreciate it. And to better understand international expansion, UAE's trying to position itself to also be a medical tourism hub. Is this something you take into consideration when looking for new markets?

Absolutely, Michael. The growth potential in the digital health space is significant, expected to grow at a 25% CAGR. We are planning to connect doctors and patients through our platform in the UAE and are looking at opportunities in medical tourism.

Okay. Thank you. I appreciate all the colors.

Thank you.

Thank you, ladies and gentlemen. We have reached the end of the question-and-answer session. I would now like to turn the call back over to Kim Blanche for closing remarks.

We'd like to thank everyone who's 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.