DOC CloudMD Software & Services Inc

CloudMD Software & Services Inc. (TSXV: DOC, Frankfurt: 6PH) (the “Company” or “CloudMD”), an innovative health services company transforming the delivery of care, announces its financial results for the fourth quarter and year ended December 31, 2023. All financial information is presented in Canadian dollars unless otherwise indicated.

Fourth Quarter 2023 Financial Highlights

• Q4 2023 revenue of $21.9 million, compared to $22.9 million in the prior quarter and $22.3 million in Q4 2022. Adjusting for one-time Covid-19 mandates, the Company generated 4.4% organic revenue growth year to date compared to the prior period.
• Q4 2023 gross profit margin1 was 39.7% compared to 39.8% in the prior quarter and 35.9% in Q4 2022. Gross margin was relatively flat quarter over quarter and improved 380 bps compared to the same period in 2022 due to realized efficiency gains in the cost of delivery.
• Q4 2023 Adjusted EBITDA1 was a loss of $1.4 million, compared to Adjusted EBITDA1 of $0.6 million in the prior quarter and ($1.9) million in Q4 2022. The decrease in Adjusted EBITDA1 from Q3 2023 was largely driven by one time out of period adjustments and non-cash charges taken in the fourth quarter. The improvement from the prior year was driven by continued improvements of margins across the business and continued cost control.
• Net loss from continuing operations in Q4 2023 was $60.4 million compared to a loss from continuing operations of $7.6 million in the prior year, largely driven by an impairment charge of $59.9 million in the quarter.
• Total cash used Q4 2023 was $1.7 million. Normalized cash inflow1 in Q4 2023 was $1.5 million, and Adjusted net cash provided by operating activities was $1.6 million. As of December 31, 2023, the Company had $11.4 million of cash and cash equivalents, including $2.5 of restricted cash.
• Additional annualized cost reductions of $1.0 million actioned in Q4 2023, resulting in $21.1 million in total savings captured in 2023 from all initiatives since the start of 2022.

The Company performed an impairment test and recorded a non-cash impairment charge of $59.9 million as at December 31, 2023, which includes the write-off of goodwill. The carrying value of the Company’s assets, after impairment, is consistent with the value implicit in the transaction with CPS Capital announced on May 15, 2024 (the “Transaction”). The timing of the Transaction contributed to the delay in filing its Annual Financial Filings (as defined below), which the Company announced on April 29, 2024. The failure-to-file cease trade order that was issued by the Ontario Securities Commission on May 7, 2024, is expected to be revoked following the filing of the Annual Financial Filings with trading of the Company’s common shares on the TSX Venture Exchange expected to resume thereafter.

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 ended December 31						Twelve months ended December 31
	2023			2022(2)			2023			2022(2)
Revenue	$ 21,887			$ 22,318			$ 90,905			$ 99,454
Cost of sales	13,203			14,309			55,782			64,683
Gross profit (1)	$ 8,684			$ 8,009			$ 35,123			$ 34,771
Gross profit %	39.7	%		35.9	%		38.6	%		35.0	%
Indirect Expenses
Sales and marketing	1,529			1,351			4,288			6,505
Research and development	236			258			1,536			3,612
General and administrative	8,817			8,527			33,354			35,726
Share-based compensation	367			(22	)		867			1,273
Depreciation and amortization	3,421			3,282			13,989			13,459
Acquisition and divestiture-related, integration andrestructuring costs	598			2,175			3,411			11,358
Impairment	59,888			408			59,888			81,275
Operating loss	$ (66,172	)		$ (7,970	)		$ (82,210	)		$ (118,437	)
Other income	536			142			1,142			446
Change in fair value of contingent consideration	545			(482	)		687			6,564
Change in fair value of liability to non-controlling interest	-			232			(549	)		-
Change in contingent liability	-			-			760			-
Finance costs	(60	)		(556	)		(1,713	)		(2,097	)
Loss on sale of joint venture	-			-			-			(221	)
Income tax recovery	4,800			985			5,326			1,727
Net loss for the period from continuing operations	(60,351	)		(7,649	)		(76,557	)		(112,018	)
Net loss after tax from discontinuing operations	(3,085	)		(4,643	)		(6,277	)		(45,989	)
Net loss for the period	$ (64,436	)		$ (12,292	)		$ (82,834	)		$ (158,007	)
Add:
Depreciation and amortization	3,421			3,282			13,989			13,459
Finance costs	60			556			1,713			2,097
Impairment	59,888			408			59,888			81,275
Income tax recovery	(4,800	)		(985	)		(5,326	)		(1,727	)
EBITDA (1)	$ (4,867	)		$ (9,031	)		$ (12,570	)		$  (62,903	)
Share-based compensation	367			-22			867			1,273
Acquisition and divestiture-related, integration andrestructuring costs	598			2,175			3,411			11,358
Litigation costs	-			-			-			555
Change in fair value of contingent consideration	(545	)		482			(687	)		(6,564	)
Change in fair value of liability to non-controlling interest	-			(232	)		549			-
Change in contingent liability	-			-			(760	)		-
Loss on sale of joint venture	-			-			-			221
Net loss after tax from discontinuing operations	3,085			4,643			6,277			45,989
Adjusted EBITDA (1)	$ (1,362	)		$ (1,986	)		$ (2,913	)		$ (10,071	)
Loss per share, basic and diluted	(0.20	)		(0.03	)		(0.28	)		(0.55	)
Loss per share from continuing operations, basic and diluted	(0.01	)		(0.02	)		(0.26	)		(0.39	)

 

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 months ended December 31, 2023, and 2022 (collectively, the “Annual Financial Filings”), which can be found under the Company’s profile on SEDAR+ at www.sedarplus.ca.

Officer Changes

The Company also announces that Bram Lowsky, EVP, Head, Health and Wellness Services, has resigned as an officer of CloudMD and that Dhruv Chandra, Chief Technology Officer, will depart from the Company on May 23, 2024.

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 the Company’s 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, 2023, and 2022.

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, 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, depreciation, amortization, share-based compensation, financing-related costs, acquisition, and divestiture-related, integration and restructuring costs, change in fair value of contingent consideration, change in fair value of liability to non-controlling interest, and net loss after tax from discontinuing operations. 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 ended December 31, 2023, and 2022.

	Three months endedDecember 31,				Variance					Year endedDecember 31,				Variance
	2023		2022		$		%			2023		2022		$		%
Net loss	$ (63,436	)	$ (12,292	)	$ (51,145	)	416	%		$ (85,834	)	(158,007	)	$ 75,173		(47	%)
Add:
Finance costs	60		556		(496	)	(89	%)		1,713		2,097		(384	)	(18	%)
Income tax expense/(recovery)	(4,800	)	(985	)	(3,815	)	(387	%)		(5,326	)	(1,727	)	(3,599	)	208	%
Impairment	59,888		408		59,480		-			59,888		81,275		(21,387	)	(26	%)
Depreciation and amortization	3,421		3,282		139		4	%		13,989		13,459		530		4	%
EBITDA(1) for the period	$ (4,867	)	$ (9,031	)	4,164		(46	%)		$ (12,570	)	(62,903	)	50,333		(80	%)
Share-based compensation	367		(22	)	389		(1770	%)		867		1,273		(406	)	(32	%)
Acquisition and divestiture-related,integration and restructuring costs	598		2,175		1,577		(73	%)		3,411		11,358		(7,947	)	(70	%)
Litigation costs	-		-		-		-			-		555		(555	)	(100	%)
Change in fair value of contingentconsideration	(545	)	482		(1,027	)	(213	%)		(687	)	(6,564	)	5,877		(90	%)
Change in fair value of liability to non-controlling interest	-		(232	)	232		(100	%)		549		-		549		100	%
Change in contingent liability	-		-		-		-			(760	)	-		(760	)	100	%
Share in profit of joint venture	-		-		-		-			-		221		(221	)	(100	%)
Net loss from discontinuing operations	3,085		4,643		(1,558	)	(34	%)		6,277		45,989		(38,712	)	(86	%)
Adjusted EBITDA(1) for the period	$ (1,362	)	$ (1,985	)	$ 623		(31	%)		$ (2,913	)	$ (10,071	)	$ 7,158		(71	%)
(1)    EBITDA, Adjusted EBITDA, Gross Profit, Gross Profit Margin, Cash flow, and Normalized cash outflow are non-GAAP         measures. Refer to the Non-GAAP Financial Measures section of the MD&A for further information.

Gross Profit

Gross Profit 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. Gross Profit referenced herein is defined as revenues less cost of sales. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the operating performance of the business.

Gross Margin

Gross Margin is a non-GAAP financial ratio that has Gross Profit, which is a non-GAAP financial measure as a component. Gross Margin referenced herein is defined as gross profit as a percent of total revenue. This measure does not have a comparable IFRS measure and is used by the Company to manage and evaluate the operating performance of the business.

Cash outflow and Normalized cash outflow

Normalized cash outflow 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. Cash outflow, utilized in the calculation of normalized cash outflow, is defined as the decrease in cash and cash equivalents for the applicable period. Normalized cash outflow, as referenced herein, is defined as cash outflow adjusted for expenditures that are not expected to be recurring, net of changes in non-cash working capital, discontinuing operations, payment of contingent consideration, and net proceeds from business divestitures. For the purpose of calculating Normalized cash flow, expenditures that are not expected to be recurring include cash-related adjustments to EBITDA. Management believes that normalized cash outflow, in addition to other conventional financial measures prepared in accordance with IFRS, provides information that is helpful to understand the financial condition of the Company. The objective of using normalized cash outflow is to present readers with a view of the Company from management’s perspective by interpreting the material trends and activities that affect the Company’s use of cash. These measures do not have a comparable IFRS measure and are used to ensure that we have sufficient liquidity to meet our liabilities as they become due.

Annual Recurring Revenue (“ARR”)

ARR is defined as the average annualized contract value for closed sales. This measure does not have a comparable IFRS measure and is used by the Company to assess the impact of closed sales on future period revenue projections.

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 healthcare 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 occupational health. Kii delivers superior clinical health outcomes, consistent high engagement, and measurable ROI for payers such as employers, educational institutions, associations, governments, 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

FOR ADDITIONAL INFORMATION, CONTACT:

Investor RelationsInvestors@cloudmd.ca1-647-484-1405

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 revocation of the failure-to-file cease trade order and resumption of trading on the TSX Venture Exchange. 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.sedarplus.ca), 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, future events, or otherwise, except as may be required by applicable securities laws.