DOC CloudMD Software & Services Inc

CloudMD Software & Services Inc. (TSXV: DOC, OTCQX: DOCRF, Frankfurt: 6PH) (the “Company” or “CloudMD”), an innovative health services company transforming the delivery of care, is pleased to announce its financial results for the fourth quarter and year ended December 31, 2022. All financial information is presented in Canadian dollars unless otherwise indicated.

“2022 was a pivotal year for CloudMD as we focused on the divestment of non-core assets, cost alignment and revenue growth. Throughout the year, we had strong sales activity based on our team’s ability to strengthen the unique value proposition of our integrated health and wellness program, Kii, however it was overshadowed by the end of one-time COVID related contracts and lower revenues from the divestment of non-core assets,” said Karen Adams, CEO of CloudMD “The actions taken by the team in 2022 will accelerate organic revenue growth both in new customer acquisition and in growing wallet share with long term clients. By operating as one integrated company we have a structure that we expect will enable us to generate positive adjusted EBITDA and cash flow in the near future. We have been able to bring to market a comprehensive set of services, all connected by a common focus on empowering healthier living. The combination of the expertise of our people, our robust set of evidence-based services, and our laser focus on executing our strategic plan is what will enable sustainable revenue growth in 2023 and beyond.”

“Exiting 2022, we had established a new baseline for our business in Q4. We expect revenue growth through the adoption of our full suite of health and wellness services going forward, and on the cost side, our work streamlining the organization is resulting in reduced cash operating expenses,” said John Plunkett, CFO of CloudMD. “As we continue to streamline the business, we expect more efficiencies to be realized in 2023 and expansion of gross and operating margins. We exited the year with $24 million in cash, and we expect positive improvement in cash use in the back half of 2023.”

Fourth Quarter 2022 Financial Highlights

• Q4 2022 revenue of $25.9 million, compared to $28.1 million in Q4 2021 and $27.5 million in the previous quarter. Compared to the previous quarter, revenue was down by $1.6 million, driven by a $1.5 million impact from the Ontario Health contract and seasonality in our assessment business which tends to be higher in the first half of the year.
• Q4 2022 gross profit margin was 34.8% compared to 34.5% in Q3 2022 reflecting an improvement in service delivery costs. The improvement compared to 36.8% in Q4 2021 driven by a change in the revenue mix.
• Adjusted EBITDA2 for Q4 was ($2.6) million, compared to ($0.1) million in the prior year period. Adjusted EBITDA2 improved by $0.5 million from Q3 to Q4 2022. The improvement in Adjusted EBITDA2 from Q3 2022 is due to the continued cost optimization efforts.
• Net loss in Q4 2022 was $13.0 million, or $0.04 per share, compared to a loss of $13.0 million or $0.06 per share in Q4, 2021.
• The Company identified and actioned approximately $5.0 million of annualized cost reductions in Q4 2022, the impact of which was realized in part in Q4 with the full run-rate impact expected in Q1 2023.
• Use of cash in Q4 was $3.4 million. Normalized cash outflow Q4 was $4.6 million. As of December 31, 2022, the Company had $24.1 million of cash and cash equivalents. During the fourth quarter the Company repaid an incremental $4.4 million of debt, in part due to the divestiture of its pharmacy businesses.

Fourth Quarter & Subsequent Corporate Highlights

• On October 11, 2022, CloudMD announced the divestment of its Primary Care Clinics and Cloud Practice to Well Health Technologies Corp., with closing of this transaction announced on November 2, 2022.
• On October 31, 2022, CloudMD announced the divestment of its pharmacies to Neighbourly Pharmacy. On December 19, 2022, CloudMD announced that the transaction had closed.
• On February 13, 2023, CloudMD announced the launch of Spanish language TAiCBT in the United States.
• On March 27, 2023, CloudMD announced that Bram Lowsky had joined the Company as the new Head of Health and Wellness Services.
• On April 3, 2023, CloudMD announced the launch of its online prescription renewal in the United States.
• On April 4, 2023, CloudMD announced its partnership with Mohawk Medbuy to offer its full suite of services to hospitals across Canada.
• On April 10, 2023, CloudMD announced that Dhruv Chandra had joined the Company as the new Chief Technology Officer.
• On April 12, 2023, CloudMD announced an expanded partnership with Benefits Alliance to offer its full suite of Kii services to employee benefits plans across Canada.

Outlook

2022 was a year of transition as the Company focused on operationalizing, aligning, and rationalizing the large number of acquisitions completed over the last two years. The Company has been focused on the integration of its previous acquisitions and products to create an innovative market leadership position and deliver profitable results.

To this end, during the fourth quarter of 2022, the Company completed the sale of its BC-based primary care clinics, Cloud Practice and two pharmacy assets, all of which were considered non-core. Along with divestitures, the Company had three non-recurring headwinds during 2022; the end of contracts for COVID testing support; a change in the contract from the Ontario government for COVID-19 Mental Health Support and lower volumes from VisionPros. The Company views Q4 as a good baseline for its business, with the majority of revenue being recurring.

The Company expects low double digit revenue growth in 2023 off the fourth quarter baseline. The Company sold $12.2 million in multi-year contracts in 2022 and has a robust pipeline that will continue to drive revenue growth in 2023.

During the fourth quarter, the Company identified and actioned approximately $5.0 million in annual cost reductions to realign its cost base. After year end, during Q1 2023, the Company realized additional annualized cost reductions of $1.0 million. In addition, the Company is expecting to action another $4.0 million of annual net cost savings in Q2 2023. These synergies will come with a cost of severance, or working notice, which will impact cash flows in the first three quarters of 2023.

The cost savings achieved in the fourth quarter of 2022, in addition to the savings realized in the first quarter of 2023 and expected reductions in the second quarter of 2023, will bring the Company closer to Adjusted EBITDA breakeven. As of the date of this MD&A, the Company expects to achieve this milestone in the fourth quarter of 2023.

The Company believes its cash position of $24.1 million, will provide sufficient liquidity to fund its obligations and fund organic growth. The Company will continue to prudently manage expenditures and seek further efficiencies in its cost structure.

Select Financial Information

All results were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 

Selected Financial Information	Three months endedDecember 31						Year endedDecember 31
		2022			2021			2022			2021
Revenue	$	25,861		$	28,112		$	114,456		$	70,055
Cost of sales		16,856			17,769			74,258			43,397
Gross profit	$	9,005		$	10,343		$	40,198		$	26.658
Gross profit %		34.8	%		36.8	%		35.1	%		38.1	%
Indirect Expenses
Sales and marketing		1,971			1,507			8,942			5,496
Research and development		336			(141	)		3,954			1,604
General and administrative		9,414			9,136			39,139			21,667
Share-based compensation		(22	)		647			1,273			5,223
Depreciation and amortization		3,467			2,277			14,106			5,687
Financing-related costs		16			(12	)		16			859
Acquisition and divestiture-related, integration and restructuring costs		2,313			2,391			11,545			7,838
Impairment		6,441			2,736			119,593			2,736
Operating loss	$	(14,931	)	$	(8,198	)	$	(158,370	)	$	(24,452	)
Other income		144			75			627			411
Change in fair value of contingent consideration		(250	)		505			6,564			1,471
Finance costs		(678	)		(76	)		(2,270	)		(931	)
Loss on sale of joint venture		-			-			(221	)		-
Current and deferred income tax recovery/(expense)		4,037			194			4,779			(355	)
Net loss for the period from continuing operations		(11,678	)		(7,500	)		(148,891	)		(23,856	)
Net loss after tax from discontinuing operations		(1,300	)		(5,529	)		(8.800	)		(6,882	)
Net loss for the period	$	(12,978	)	$	(13,029	)	$	(157,691	)	$	(30,738	)
Add:
Depreciation and amortization		3,467			2,277			14,106			5,687
Finance costs		678			76			2,270			931
Impairment		6,441			2,736			119,593			2,736
Current and deferred income tax recovery/(expense)		(4,037	)		(194	)		(4,779	)		355
EBITDA (1)	$	(6,429	)	$	(8,134	)	$	(26,501	)	$	(21,029	)
Share-based compensation		(22	)		647			1,273			5,223
Financing-related costs		16			(12	)		16			859
Acquisition and divestiture-related, integration and restructuring costs		2,313			2,391			11,545			7,838
Litigation costs		-			-			555			83
Change in fair value of contingent consideration		250			(505	)		(6,564	)		(1,471	)
Net loss after tax from discontinuing operations		1,300			5,529			8,800			6,882
Loss on sale of joint venture		-			-			221			-
Adjusted EBITDA (1)	$	(2,572	)	$	(84	)	$	(10,655	)	$	(1,615	)
Loss per share, basic and diluted		(0.04	)		(0.06	)		(0.55	)		(0.15	)
Loss per share from continuing operations, basic and diluted		(0.04	)		(0.03	)		(0.52	)		(0.11	)

 

Fourth Quarter 2022 conference call and webinar details:

Date and Time: Tuesday, April 25, 2023, at 9:30 am Eastern Time (6:30 am Pacific Time)

Webcast link: https://edge.media-server.com/mmc/p/pc9ezqtm

Financial Statements and Management’s Discussion and Analysis

This news release should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes, and management’s discussion and analysis (“MD&A”) for the three months and year ended December 31, 2022, and 2021, copies of which can be found under the Company’s profile at www.sedar.com.

Non-GAAP Financial Measures

In addition to the results reported in accordance with IFRS, the Company uses various non-GAAP financial measures which are not recognized under IFRS, as supplemental indicators of the Company’s operating performance and financial position. These non-GAAP financial measures are provided to enhance the reader’s understanding of the Company’s historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of the Company’s core operating results and ongoing operations and provide a more consistent basis for comparison between quarters and years. Details of such non-GAAP financial measures and ratios and how they are derived are provided below as well as in the MD&A in conjunction with the discussion of the financial information reported.

Since non-GAAP financial measures do not have any standardized meanings prescribed by IFRS, other companies may calculate these non-IFRS measures differently, and our non-GAAP financial measures may not be comparable to similar titled measures of other companies. Accordingly, investors are cautioned not to place undue reliance on them and are also urged to read all IFRS accounting disclosures presented in the audited consolidated financial statements and the related notes for the year ended December 31, 2022 and 2021.

EBITDA

EBITDA is a non-GAAP financial measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. EBITDA referenced herein relates to earnings before interest, taxes, impairment, and depreciation and amortization. This measure does not have a comparable IFRS measure and is used by the Company to assess its capacity to generate profit from operations before taking into account management’s financing decisions and costs of consuming intangible and tangible capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Adjusted EBITDA referenced herein relates to earnings before interest, taxes, impairment, depreciation, amortization, share-based compensation, financing-related costs, acquisition and divestiture-related, integration and restructuring costs, litigation costs, change in fair value of contingent consideration, net loss after tax from discontinuing operations and loss on sale of joint venture. This measure does not have a comparable IFRS measure and is used by the Company to assess its capacity to generate profit from operations before taking into account management’s financing decisions and costs of consuming intangible and tangible capital assets, which vary according to their vintage, technological currency, and management’s estimate of their useful life, adjusted for factors that are unusual in nature or factors that are not indicative of the operating performance of the Company.

The following table provides a reconciliation of net loss for the periods to EBITDA and Adjusted EBITDA for the three months and years ended December 31, 2022 and 2021.

 

	Three months endedDecember 31,						Variance				Year endedDecember 31,						Variance
		2022			2021		$		%			2022			2021		$		%
Net loss	$	(12,978	)	$	(13,029	)	51		0	%	$	(157,691	)	$	(30,738	)	126,953		413	%
Add:
Interest and accretion expense		678			76		602		792	%		2,270			931		1,339		144	%
Current deferred and income tax expense/(recovery)		(4,037	)		(194	)	(3,843	)	1,943			(4,779	)		355		(5,134	)	(1,446	%)
Impairment		6,441			2,736		3,705		135	%		119,593			2,736		116,857		4,271	%
Depreciation and amortization		3,467			2,277		1,190		52	%		14,106			5,687		8,419		148	%
EBITDA(1) for the period	$	(6,429	)	$	(8,134	)	1,705		21	%	$	(26,501	)	$	(21,029	)	(5,472	)	(26	%)
Share-based compensation		(22	)		647		(669	)	(103	%)		1,273			5,223		(3,950	)	(76	%)
Financing-related costs		16			(12	)	28		(233	%)		16			859		(843	)	(98	%)
Acquisition and divestiture-related, integration and restructuring costs		2,313			2,391		(78	)	(3	%)		11,545			7,838		3,707		47	%
Litigation costs and loss provision		-			-		-		NM			555			83		472		569	%
Change in fair value of contingent consideration		250			(505	)	755		(150	%)		(6,564	)		(1,471	)	(5,093	)	346	%
Net loss from discontinuing operations		1,300			5,529		(4,229	)	(76	%)		8,800			6,882		1,918		28	%
Loss on sale of joint venture		-			-		-		NM			221			-		221		100	%
Adjusted EBITDA(1) for the period	$	(2,572	)	$	(84	)	(2,488	)	2962	%	$	(10,655	)	$	(1,615	)	(9,040	)	560	%

(1)

EBITDA, Adjusted EBITDA, Financing-related costs, Acquisition and divestiture-related and integration costs, litigation costs and loss provision are non-GAAP measures. Refer to the Non-GAAP Financial Measures section of the MD&A for further information.

About CloudMD Software & Services

CloudMD is an innovative North American healthcare service provider focused on empowering healthier living by combining leading edge technology with an exceptional national network of healthcare professionals. Every day, our employees and health care providers live our values of delivering excellence, collaboration, connected communication and accountability to solve complex health problems. CloudMD’s industry leading workplace health and wellbeing solution, Kii, supports members and their families with a personalized and connected healthcare experience across mental, physical and occupation health. Kii delivers superior clinical health outcomes, consistent high engagement, and measurable ROI for payers such as employers, educational institutions, associations, government, and insurers. CloudMD is also a market leader in workplace absence management through data-driven prevention, intervention and return to work programs.

In addition, the Company sells health and productivity tools to hospitals, clinics, and other healthcare service providers to empower them to deliver better care. Visit www.cloudmd.ca to learn more about the Company’s comprehensive healthcare offerings.

“Karen Adams”Chief Executive Officer

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward Looking Statements

This news release contains “forward-looking statements” and “forward-looking information” within the meaning of Canadian securities laws, including statements about the Company’s growth strategy and profitability. These statements are based upon information currently available to CloudMD’s management. All information that is not clearly historical in nature may constitute forward‐looking statements. In some cases, forward‐looking statements may be identified by the use of terms such as “forecast”, “assumption” and other similar expressions or future or conditional terms such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and “should”. Forward-looking statements contained in this news release are based on certain factors and assumptions made by management of CloudMD based on their current expectations, estimates, projections, assumptions and beliefs regarding their business and CloudMD does not provide any assurance that actual results will meet management’s expectations. While management considers these assumptions to be reasonable based on information currently available to them, they may prove to be incorrect. Such forward‐looking statements are not guarantees of future events or performance and by their nature involve known and unknown risks, uncertainties and other factors, including those risks described in the Company’s MD&A (which is filed under the Company’s issuer profile on SEDAR and can be accessed at www.sedar.com), that may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward‐looking statements. Although CloudMD has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‐looking statements, other factors may cause actions, events or results to be different than anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such forward‐looking statements. Accordingly, readers should not place undue reliance on forward‐looking information. CloudMD does not undertake to update any forward-looking information, whether as a result of new information or future events or otherwise, except as may be required by applicable securities laws.

1 Adjusted EBITDA is a non-GAAP measure. Refer to the “Non-GAAP Financial Measures” section of this news release for further information and the detailed reconciliation to the most directly comparable measure under IFRS set out above.

2 Adjusted EBITDA is a non-GAAP ratio. Refer to the “Non-GAAP Financial Measures” section of this news release for further information.

FOR ADDITIONAL INFORMATION, CONTACT:

Investor Relations

Investors@cloudmd.ca