Greetings. And welcome to the CareCloud Inc. Third Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Thank you. You may begin.

Good morning, everyone. Welcome to CareCloud's third quarter 2024 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer and Director; Stephen Snyder, our President; Crystal Williams, our Chief Operating Officer; and Norman Roth, our Interim Chief Financial Officer and Corporate Controller. 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 fact made during this conference 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, approximately, upcoming, belief, 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 would 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 wish to download our third quarter 2024 earnings presentation. Please visit our Investor Relations site, click on News and Events, then click on IR calendar, click on third quarter 2024 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 third quarter 2024 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. With that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

Thank you, and good morning, everyone. Thank you for joining us today for CareCloud's third quarter 2024 earnings call. I'm pleased to start with two key updates. First, we have fully paid down our $10 million credit line, demonstrating our commitment to strong financial management and a solid balance sheet. Second, we are on track to resume monthly dividend payments on our Series A and Series B preferred shares starting in March 2025, demonstrating our confidence in CareCloud's profitability and our commitment to generating strong free cash flow to deliver value to our shareholders. In terms of our Q3 financials, we generated $6.8 million in adjusted EBITDA, a 111% increase over last year, and achieved $10.3 million in year-to-date free cash flow, a 328% improvement over 2023. Revenue for Q3 was $28.5 million, slightly down from $29.3 million in Q3 2023 due to fluctuations in non-recurring revenue from our medSR division. With these accomplishments in 2024, we have met our key financial goals, setting a strong foundation for 2025. This quarter, we remained laser-focused on advancing CareCloud CirrusAI, our flagship AI solution that streamlines administrative tasks and clinical documentation, enabling providers to prioritize patient care. CirrusAI's integrated technology reduces non-clinical workload, allowing doctors to spend more time with patients and see more of them per day. We have enhanced CirrusAI notes to generate fully structured patient charts that integrate directly into the EHR, capturing natural patient-provider conversations to improve documentation quality and reduce administrative burdens. Now the solution also provides diagnostic and procedural support, automating documentation while suggesting relevant diagnoses and procedures. Adaptable to various healthcare settings and supporting multiple languages, CareCloud CirrusAI is a powerful tool for boosting clinical efficiency and enhancing patient outcomes. A key differentiator of CareCloud CirrusAI is its seamless integration within our EHR systems, enabling users to work within a single platform without the need to toggle between different systems or manually input data. This deep integration streamlines workflows and enhances user efficiency. Additionally, CirrusAI can function as an overlay, making it compatible with various healthcare environments and systems of other vendors, allowing for flexible implementation across diverse settings. Through CareCloud CirrusAI, we are enhancing our entire product suite, including EHR, practice management, and billing systems with advanced AI functionalities. Recently, we launched an AI module that summarizes clinical documentation, helping providers review patient histories quickly and thoroughly. We also introduced a claim note summarization feature that streamlines workflows for RCM staff, significantly reducing the time spent on lengthy claim details. Our logs show these two features save approximately 70% of users' time compared to conventional methods. These tools are now enabled for over 100 of our providers. Our billing teams benefit from AI-powered denial management tools that significantly enhance accuracy and efficiency by identifying denied claims and automating resubmissions. The system not only flags denied claims but also provides specific reasons for each denial, guiding users on targeted areas to review. It recommends solutions such as verifying the use of specific modifiers and, where applicable, automatically resubmits the claim. For example, if a claim is denied due to missing documentation, the AI retrieves and uploads the necessary files to the appropriate portal. This advanced automation minimizes manual effort, accelerates resolution times, and ensures greater accuracy in denial management. Similarly, our AI-generated appeals are saving over 75% of manual appeal generation time. Our AI solutions use a hybrid pricing model based on the value we deliver. For features that improve efficiency and accuracy, directly boosting client revenue, we do not charge separately, as many of our fees are contingency-based, aligning our success with our clients. For standalone products like CareCloud CirrusAI notes, we apply specific charges. While revenue from this product is still modest, it shows promising growth potential for the future. Our unique ability to connect clinical and financial data sets us apart in the industry. Over the past two decades, we have built a robust data asset that integrates comprehensive insurance claims data with rich clinical information, enabling us to deliver highly accurate AI-driven solutions that support better decision-making for providers and offer life sciences partners valuable insights into diverse patient populations. This reflects our commitment to using technology for better health outcomes, accessibility, and sustainable value. These are just a few examples of our AI products and the value they bring to CareCloud. We have many more AI-driven solutions in active development, with several already in various stages of rollout. Looking ahead, our main goal for next year is to generate enough free cash flow to cover dividends while continuing to grow profitably. We believe our success should be made by our ability to operate profitably and remain cash flow positive. With our end-to-end solutions, skilled global workforce, and strong record of innovation, including generative AI, we are well positioned for sustainable growth, delivering value to our clients and shareholders as we advance CareCloud's mission into 2025 and beyond. I will now turn the call over to our President, Steve Snyder. Steve?

Good morning, everyone. Thank you for joining us today on CareCloud's third quarter 2024 earnings call. Today, I'll be covering three key topics, including our successful focus on free cash flow during 2024, the outcomes and significance of our recent Series A preferred shareholder proposal, and finally, the path that lies ahead for growth. Let's turn first to free cash flow. In line with the objectives we discussed during the last quarterly earnings call, expense reduction and the generation of free cash flow remain our primary goals for 2024. Our strategy remains clear. By enhancing efficiency and maintaining financial discipline, we are positioning CareCloud for long-term value creation and enabling us to resume dividends on our shares of preferred stock on March 15, 2025, a truly exciting milestone. As we discussed in our last earnings call, we are achieving these increased efficiencies in three primary ways, which are each having a direct positive impact on our generation of free cash flow. First, we have been using our proprietary technology, including our AI, which has empowered us to reduce costs while accomplishing day-to-day tasks in a more systematic, efficient, and reliable manner. Second, we have continued to reduce our reliance on third-party contractors, leveraging our lower-cost in-house team of subject matter experts instead. This approach increases our operational control and reduces the risk that comes with relying on third parties to handle critical business functions. And third, we continue to embrace the core strength of our global business model, leveraging our most effective and cost-efficient resource for each discrete process, thereby enabling us to both increase our overall bandwidth while simultaneously reducing the associated costs. During 2024, we have made meaningful progress increasing our free cash flow and expanding our margins. This progress has enabled us to fully pay off the $10 million balance on our credit facility and further strengthen our balance sheet while building cash reserves. Through the end of Q3, we generated a remarkable $10.3 million in free cash flow, representing growth of almost 330% compared to the same period in 2023. This level of free cash flow generation represents an all-time high for our company. Our refreshed expense structure will enable us to continue to produce cash and further expand margins as we scale. This gives us great confidence that we are in a solid position to resume dividend payments, accomplishing a key objective for 2024. Now let's turn to the recent Series A preferred shareholder proposal. This proposal was designed to provide protection to Series A preferred shareholders, equalize the dividend rate, and incorporate more flexibility with an exchange feature. Our special proxy vote was held on September 11, 2024, and I'm pleased to report that 89% of the shares that were affirmatively voted on the proposal cast their votes in favor of the changes. The proposal was passed with extremely strong support, which reflects the widespread investor confidence in the soundness of these changes. These approved changes are pivotal for a few reasons. First, they protect Series A shareholders in a change of control event, giving them the right to have their shares liquidated at $25 per share in the event of a change of control. This avoids the possibility that a future acquirer may purchase CareCloud and nevertheless leave shares of Series A preferred stock outstanding. In essence, this change creates parity between the rights of Series A and Series B shareholders in the event of a change of control. Second, these changes equalize the dividend treatment between Series A and Series B shareholders at 8.75%. This change translates to an annual reduction of approximately $2.5 million in our annual dividend obligation, thereby strengthening our cash flow and freeing up capital for reinvestment. Third, the new exchange feature is a strategic win for the company and for all classes of shareholders. Under the exchange feature, the company may, at an appropriate point in time, exchange shares of Series A preferred stock for common stock at the $25 redemption price for each share of preferred stock. This exchange feature empowers the company, and by extension all of our shareholders, to avoid traditional offering expenses and discounts associated with the secondary issuance of common stock, which often average 30% or more of the capital raised. Turning to growth and the path ahead, as we previously emphasized, refreshing our operational cost structure and substantially growing our free cash flow have been and continue to be our core focus in 2024. However, as we progress through 2025, our focus will expand to include strengthening our recurring revenue base and ultimately pivoting to annualized net growth. As we do this, we will pursue a disciplined approach and ensure that new growth opportunities allow us to grow our free cash flow. This growth will come from a variety of sources. First, we'll continue to heavily lean into AI in 2025 as a transformational part of our larger growth strategy. In particular, CareCloud's CirrusAI makes our integrated solutions from the EHR to the practice management system and related tools far more attractive and powerful. And it provides a significant differentiator in the market, giving us a clear competitive advantage in our space. Second, we see significant opportunity around the ramp-up of our new in-house remote patient monitoring solution, which leverages our core technology strength to generate high-margin revenue. This focus on RPM is part of our larger wallet share expansion initiative and includes upsells to other CareCloud solutions, including our full RCM and CCM solutions. Third, we'll focus on strategic partnerships and reseller relationships with revenue cycle management companies and other complementary vendors. Finally, we will explore further expanding our force offering in which we provide our customers with specialized human capital and related AI-powered tools to support their operations. To sum it up, we are achieving strong progress on the financial and operational goals outlined at the beginning of this year. From free cash flow improvements to shareholder protections and strategic growth initiatives, we are firmly positioned for a transformative 2025.

Thank you, Steve, and good morning, everyone. As Chief Operating Officer, my primary focus is on maximizing client satisfaction. Our objective is clear. We do not want to lose a single client due to performance issues or dissatisfaction. While our metrics are already best in class, we know that maintaining our competitive edge requires continuous improvement. In today's fast-evolving landscape, achieving this goal is impossible without leveraging advanced technology. AI is central to our approach. As Hadi mentioned, we have developed and deployed a range of AI-powered tools to support these objectives. I'm focused on ensuring that our AI-driven solutions, such as denial management and appeal generation, are effectively implemented and fully utilized to maximize their impact. These AI tools are critical for enhancing performance across the board. For example, our AI-driven quality monitoring system in the contact center allows us to perform QA on customer and patient support calls. This technology provides detailed scoring and sentiment analysis for every interaction, enabling us to take proactive measures and deliver a more personalized and responsive support experience, achieving results much faster and more effectively than would be possible manually. With AI at the core of our operation, we're committed to driving unmatched efficiency and setting a new standard for client satisfaction. Now we'll turn the call over to our CFO, Norman Roth. Norm?

Thanks, Crystal. And thanks, everyone, for joining our call today. As you just heard, we had a great quarter and are proceeding nicely with accomplishing the goals we laid out for ourselves this year. In particular, we are now generating record levels of free cash flow and will resume paying dividends on our preferred shares on March 15, 2025. Further, we have fully paid off our Silicon Valley Bank line of credit with internally generated profits and cash flows. We generated $10.3 million of free cash flow during the last nine months and used $10 million to repay our line of credit. Since we are not relying on our line of credit and we do not plan on using the line in the near future, we have negotiated with SVB to reduce the total capacity on the line to $10 million, thereby lowering our costs and alleviating the need to spend management time satisfying bank covenants while still providing us with some rainy day money. The key to growing our free cash flow has been reducing expenses and growing our GAAP net income. Third quarter 2024 GAAP net income was $3.1 million as compared to a net loss of $2.7 million in the same period last year. GAAP net loss was $0.04 per share based on the net loss attributable to common shareholders which takes into account the preferred stock dividends earned, whether or not they were declared or paid during the quarter. This is our second consecutive quarter returning to positive GAAP net income and our largest quarterly net income since Q4 2021. Revenue for the third quarter 2024 was $28.5 million compared to $29.3 million for the third quarter of 2023. Recurring technology-enabled business solution revenues during the third quarter 2024 were $24.2 million, potentially flat with third quarter 2023, and up approximately $200,000 from the second quarter 2024, while non-recurring professional services revenues for medSR declined from $5 million to $4.3 million. Adjusted EBITDA for the third quarter 2024 was $6.8 million or 24% of revenue compared to $3.2 million in the same period last year. This was an increase of 111% year-over-year and was the highest quarterly adjusted EBITDA we've reported in two years. On a year-to-date basis, the story is similar. With our emphasis on improving profitability, revenue for the first nine months of 2024 was $82.6 million compared to $88.6 million in the first nine months of 2023. But our GAAP operating income was $5.7 million compared to an operating loss of $3.5 million in the same period last year. And our GAAP net income was $4.6 million compared to a GAAP net loss of $5 million in the first nine months of 2023. Adjusted net income was $6.6 million or $0.41 per share, calculated using the end-of-period common shares outstanding. Year-to-date, adjusted EBITDA was $16.9 million, an increase of 50% or $5.6 million from $11.3 million in the same period last year. During the nine months ended September 30, 2024, we generated $15.4 million of cash from operations and $10.3 million of free cash flow. The free cash flow amount of $10.3 million increased by 328% compared to $2.4 million in the same period last year. As of September 30, 2024, the company had approximately $2.8 million of cash. Net working capital was $732,000. Now that we have repaid our bank debt, free cash flow during the fourth quarter will allow us to increase our cash balance and build some cushion in our working capital. I am pleased to update our forward-looking guidance for the full year. We are updating our adjusted EBITDA guidance to $23 million to $25 million for full year 2024, which is an increase from the guidance we originally provided at the start of this year, reflecting our emphasis on improving profitability and cash flow throughout the year. We are reaffirming analyst expectations for our revenue guidance of $109 million to $111 million. Revenue guidance is based on our expectations of revenues from existing clients. Our financial position has improved tremendously during the first nine months of 2024. We are happy to have returned to profitability, fully repaid our bank debt, will resume our dividends in March, and look forward to reporting strong results for the full year in a few months. Our team has really worked well together to achieve this turnaround.

Thank you, Norm. Third quarter accomplishments including substantial improvement in profitability, the full repayment of our credit line, and setting us up to resume dividends by March ‘25 demonstrates the strength of our strategy and resilience of our team. I want to extend a heartfelt thank you to our employees, shareholders, investors, and clients for their continued trust and support. As we look to the future, we remain committed to sustainable growth, continuous innovation in setting new standards in healthcare technology. Thank you for being part of this journey with us. Operator, please open the floor for questions.

The first question we have is from Jeff Cohen of Ladenburg-Hulman.

This is Destiny on for Jeff. Thank you for taking our questions. In your prepared remarks, I heard you mention life science partnerships. I'm wondering if you can give any more color or insight on what types of companies, and whatever else you're able to give us at the moment.

Good morning, Destiny, and thank you for the question. We did a recent press release with our initial partnership example with Docuread. It's a medicine adherence partnership. We look at any patient-specific information, existing medications, different demographic information, and previous symptoms. Based on that, we recommend different options to those companies through Docuread, pushing a specific ad to that provider about medicines that can be provided. At the same time, it goes to the cell phone of the patient if there are any applicable coupons available for those specific medicines, as well as confirmation when it's ready to be picked up. That's just one of the relationships we have entered into. The idea behind this is that with our extensive 20-plus year data asset, whether it's clinical or medicine-related, we can effectively leverage this information with the help of these life sciences partners, whether it's providing guidance on different medicines available or assisting them in doing their risk assessment and research. While right now the revenue is not separately identified beyond the top line item, we anticipate this revenue to start contributing to our revenue streams in the next year.

So your current partnership is putting different kinds of medicines in front of patients through an ad, if I understood correctly. Are you also able to or interested in helping these companies determine what patient groups are best for clinical trials, or are you going to stay a little further from the whole clinical and regulatory area?

This could encompass all those possibilities. Our team is working on various opportunities, and we will keep everyone updated as we move forward. The real value here comes from not only AI but also supporting the life sciences companies through monetizing the value of our 20-plus years of data. We have extensive financial and clinical data across various demographics, almost every state in the U.S., which we can effectively utilize to help these companies.

Good morning. You've spoken in the past about your strategy of rolling out your AI services, allowing your clients to trial them before transitioning to charging. Where are you on that today, and what are your early indications?

Good morning, Allen. You're right, and we continue on that strategy. We've positioned ourselves a bit differently with our competitors, working on both the front end and back end simultaneously. In terms of the front end, our application, CirrusAI notes, has been significantly enhanced after merging two applications into one. This enhanced version is capable of listening to practice provider conversations, converting them into structured patient charts, and suggesting relevant diagnoses and procedures based on current and prior histories. We launched this product initially as a 30-day trial, which we extended to 60 days. We've started converting those providers into paying clients. Some of the additional features launched this quarter, like the chart summary feature, help doctors review extensive patient histories quickly. This AI-driven application summarizes prior visits, ensuring doctors do not miss critical information while saving them time. We have added some of these features to the regular flow because they deliver overall value. For standalone products, we're charging separately, and while the revenue is modest, it shows promising growth potential.

Great, thank you. Regarding medSR, you mentioned about $4.3 million in revenue this quarter. Is there anything from what you're hearing from your pipeline that suggests this might bottom out or have the potential for growth in the future?

Let me take this opportunity to zoom out and remind everyone how we got to this point with our overall revenue and medSR. When we acquired medSR in the second quarter of 2021, it was generating about $32 million in professional services revenue. We bought medSR at about 30% to 35% multiples of revenue, a great price for the company. The objective was to leverage this relationship and try to upsell into the hospital space. However, the APIC-related professional services revenue, roughly 55% to 60%, became a challenge, as they put up roadblocks for us to supporting clients post-acquisition. We could not service APIC clients, and this lack of service resulted in a significant revenue reduction of about $20 million. While we hope to enter 2025 with a solid backlog, predicting the exact revenue for the next year may prove challenging.

We have a follow-up question from Allen Klee of Maxim Group.

Hi. I have a couple more questions about expense cuts. You've mentioned identifying $26 million in potential cuts, with $20 million to happen in 2024 and the rest in 2026. Do you still feel comfortable with that, or has anything changed?

Good morning, Allen. Great question. We still feel very comfortable with the $26 million number for overall cost rationalization. This figure relates to all expenses we've been able to cut since the beginning of this effort. We believe we will hit that $26 million number by the end of the year. While you won't see the full impact in our financials this year, you'll see it as we progress into next year.

Is there a way to estimate how much of the $26 million might be seen this year?

Yes, the right figure to consider for this year is likely the $20 million of cuts, with additional benefits coming next year. We've accomplished these reductions through three main methods: leveraging proprietary technology and AI for manual tasks, taking work from third parties in-house, and utilizing our global business model to further reduce costs. From a remote patient monitoring perspective, we recently launched our RPM solution in-house after partnering with a third party previously. We're excited by this change as it translates to better margins and an increased capability to meet client needs.

To break it up between chronic care management and RPM, we did $2.2 million just from chronic care management and then $544,000 in remote patient monitoring for the nine months in 2024. That totals approximately $2.7 million to $2.8 million.

As we've been emphasizing all year, our North Star is generating free cash flow. This has allowed us to fully repay the Silicon Valley Bank obligation, which is now zero. We have solid plans for continued growth, whether through RPM, CCM, or leveraging AI across our platform.

My last two questions are about capitalized software expenditures and the implications of reducing the line of credit to $10 million. Do you have a sense of maintenance fees, or the impact this change might have on expenses?

We can certainly provide more details on those aspects offline if that makes sense. Thank you so much, and congrats on everything you've accomplished. I was told that when companies stop paying their dividends, they almost never resume on the preferred side, but you have defied the odds. Thank you for your discipline.

That will conclude our call today. Thank you, everyone, for attending. Have a great day.

Thanks, everyone.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.