CloudMD Software and Services Inc. (DOCRF)

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CloudMD Reports Third Quarter 2022 Financial Performance.

Source
https://finance.yahoo.com/news/cloudmd-reports-third-quarter-2022-221200015.html

November 14, 2022

- Q3 2022 revenue from continuing operations of $27.5 million, which does not include revenue from its Clinics & Pharmacies Division or Cloud Practice which are classified as discontinuing operations.

- Q3 2022 gross margin of 34.5% compared to 31% in Q2 2022, reflective of the higher margins of CloudMD’s continuing operations.

- Q3 2022 Adjusted EBITDA loss of $3.0 million.

- Cash and cash equivalents were $27.5 million at the end of the quarter which does not include proceeds from divestitures announced subsequent to quarter end.

- Through Q3 2022 CloudMD has signed multi-year contracts contributing to its organic growth and annual recurring revenue of $8.8 million, representing continued progress in growing its base of high-quality recurring revenue.

- During the third quarter the Company identified and actioned approximately $4 million of cost savings, a significant portion being recognized in the quarter. Subsequent to quarter end, CloudMD identified an additional $6 million of annualized cost optimization and savings with full run-rate to be recognized in early 2023.

- Recorded a non-cash impairment charge of $83.9 million.

CloudMD Software & Services Inc. announced its financial results for the third quarter ended September 30, 2022. All financial information is presented in Canadian dollars unless otherwise indicated.

Karen Adams, CEO of CloudMD commented,
“We are strengthening the business by focusing on profitability through sales of higher gross margin, recurring revenue, multi-product contracts. We are restructuring our business resulting in the ability to deliver prudent expense and cash management. We are pleased with our increasing customer base, specifically in Mental Health Support Solutions. Our business model across EHS and DHS is focused on our ability to support individuals where they are on their health journey. Our continued organic growth in our mental and physical health services reinforces this model and the need for managing health through navigation and coaching. Our financial performance in the period was impacted by the end of one-time mandates and COVID related government contracts. This overshadowed the growth and resilience of our recurring revenue core business. The Management team is committed to new client adoption and improved financial controls.”

John Plunkett, CFO of CloudMD commented,
“We’ve set multiple strategic priorities for the Company to reach profitability. We are driving organic revenue growth while eliminating costs from the business. In the third quarter, we saw our use of cash reduce significantly compared to the previous quarter. We’ve identified an additional $6 million in total cost savings that we will begin to realize in the fourth quarter, with the full run-rate expected in early 2023. Subsequent to quarter end, we have improved our balance sheet from our divestiture activities and are working hard to move CloudMD to profitability. This demonstrates our disciplined and focused approach to growth within our core businesses.”

Third Quarter 2022 Financial Highlights
- Q3 2022 revenue from continuing operations was $27.5 million, compared to $28.9 million in Q3 2021. Third quarter revenue does not include revenue generated from the Clinics & Pharmacies division as well as Cloud Practice, which are classified as discontinuing operations. Including discontinued operations, revenue in the third quarter would be $38.2 million, which was impacted by the end of one-time Covid-19 testing contracts, changes to the Ontario Health contract, as well as lower Vision Pros revenue.

- Q3 2022 gross profit margin1 was 34.5% compared to 31.0% in Q2 2022 and 36.1% in the third quarter of 2021. The margin improvement from Q2 to Q3 reflects the Company’s strategy to divest non-core assets, which have lower overall gross profit margins.

- Net comprehensive loss attributable to equity holders of the Company in Q3 2022 was $94.8 million or $0.32 per share, compared to a loss of $5.8 million or $0.02 per share in Q3 2021. The larger loss per share was driven by an $84 million impairment of goodwill.

- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)2 was negative $3.0 million Q3 2022, compared to negative $3.2 million in Q2 2022 and Adjusted EBITDA of $0.9 million in Q3 2021. The lower revenues were offset by an improving overall cost structure.

- Cash and cash equivalents were $27.5 million as of September 30, 2022, compared to $45.1 million on December 31, 2021. Use of cash in the third quarter was $2.2 million, a significant improvement from the use of cash in the second quarter of 2022.

- During the third quarter, CloudMD experienced a triggering event due to sustained decreases in the Company’s share price, prompting an accounting related impairment assessment of goodwill and long-lived intangible assets. As a result of the assessment, the Company recorded a non-cash accounting impairment charge of $83.9 million in the third quarter of 2022. The assumptions used in the impairment analysis included discount rates that reflect higher interest rates, market volatility and the company risk premium compared to our valuation as at December 31, 2021. The impairment does not reflect a change in the Company’s outlook which is focused on growth, expanding profitability and cash flow.

Third Quarter & Subsequent Corporate Highlights
- On July 13, 2022, the Company added telemedicine services for primary care health navigation to Kii personalized & connected care offering. The services are led by nurses and nurse practitioners which provide fast access to a wide variety of primary care services and treatments and overall health and wellness support for employees and their family members, all from one connected offering.

- On July 22, 2022, the Company announced that it finalized the review and settlement of VisionPros, its online vision care platform. The settlement was reached with the former owners of VisionPros and reduces the purchase consideration paid for VisionPros by $12.6 million and also removes any future earnout payments.

- On July 25, 2022, the Company sold its 51% share ownership in West Mississauga Medical Ltd. (“West Mississauga”), which was acquired in February 2021.

- On August 11, 2022, the Company appointed Karen Adams as Chief Executive Officer and John Plunkett as Chief Financial Officer.

- On August 17, 2022, the Company provided a business update on customer momentum and the TAiCBT Ontario Government contract.

- On October 11, 2022, the Company announced the divestment of its primary care clinics and Cloud Practice to WELL Health for approximately $5.75 million in cash. CloudMD will retain ownership of its online patient portal, MyHealthAccess, and will retain the right (under a license granted by WELL at closing of the Transaction) to use Juno EMR, which have both been integrated into its Kii Personalized & Connected Care offering. The transaction subsequently closed on November 2, 2022.

- On October 31, 2022, the Company announced the sale of its two brick and mortar Pharmacies to Neighbourly Pharmacy Inc. for approximately $3.8 million in cash. The transaction is subject to satisfying closing conditions, and closing is expected to occur in the fourth quarter of 2022.

Outlook
The Company continues to deliver on the value proposition of offering comprehensive solutions that create access to care, leading to better health outcomes. Through its team-based, patient-centric approach, CloudMD provides a connected platform for patients, healthcare practitioners, and enterprise clients to address whole-person, coordinated care.

CloudMD remains focused on its strategic priorities for the remainder of the year
- (1) through its strong sales pipeline, continuing to diversify and grow its client base within its EHS and DHS divisions by direct sales to new customers, enhancing relationships with channel partners and cross selling its established suite of products
(2) driving continuous operational excellence and improvement across the organization to improve productivity, product quality and consistency, and lower customer acquisition costs;
(3) delivering a diligent path to profitable financial sustainability and focus on delivering consistent financial performance across all divisions of the organization; and
(4) continuing to develop corporate governance to support the Company’s growth.

Selected Financial Information
Please read the FULL REPORT at:
https://finance.yahoo.com/news/cloudmd-reports-third-quarter-2022-221200015.html