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 first quarter ended March 31, 2024 (“Q1 2024”) in connection with filing its unaudited interim consolidated financial statements for Q1 2024. All financial information is presented in Canadian dollars unless otherwise indicated.

First Quarter 2024 Financial Highlights

• Q1 2024 revenue of $22.8 million, compared to $22.9 million in the prior year and $22.7 million in Q4 2023.
• Q1 2024 gross profit margin(1) was 37.0% compared to 36.9% in the prior year and 37.8% in Q4 2023. Gross margin was relatively flat quarter over quarter and improved 110 bps compared to the same period in 2023 due to realized efficiency gains in the cost of delivery.
• Q1 2024 Adjusted EBITDA(1) was a slight gain of $0.1 million, compared to Adjusted EBITDA(1) loss of $0.4 million in the prior quarter and ($1.4) million in Q1 2023. The increase in Adjusted EBITDA(1) from Q4 2023 was largely driven by continued improvements of margins across the business and continued cost control.
• Net loss from continuing operations in Q1 2024 was $4.2 million compared to a loss from continuing operations of $6.5 million in the prior year period, reflecting cost savings achieved across the business.
• Total cash used Q1 2024 was $3.7 million. Normalized cash outflow(1) in Q1 2024 was $0.8 million. As of March 31, 2024, the Company had $7.7 million of cash and cash equivalents, including $2.5 million of restricted cash
• Additional annualized cost reductions of $1.6 million actioned in Q1 2024, with expected benefits to be realized in subsequent quarters.
• Subsequent to quarter end, on May 14, 2024, the Company entered into a definitive agreement (the “Arrangement Agreement”) with an affiliate of CPS Capital, a private equity investment firm (the “Purchaser”), pursuant to which the Purchaser will acquire all of the issued and outstanding common shares of the Company for cash consideration of $0.04 per share (the “Transaction”). The Transaction is subject to, among other things, approval by the Company’s securityholders, the TSX Venture Exchange and the Supreme Court of British Columbia.

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 (unaudited)	Three months endedMarch 31
	2024		2023(2)
Revenue	$ 22,805		$ 22,895
Cost of sales	14,370		14,441
Gross profit (1)	$ 8,435		$ 8,454
Gross profit %	37.0%		36.9%
Indirect Expenses
Sales and marketing	896		1,083
Research and development	55		507
General and administrative	7,848		8,436
Share-based compensation	99		30
Depreciation and amortization	3,258		3,270
Acquisition and divestiture-related, integration and restructuring costs	379		871
Operating loss	$ (4,100)		$ (5,742)
Other income	487		158
Change in fair value of liability to non-controlling interest	-		(549)
Finance costs	(503)		(649)
Income tax recovery/(expense)	119		251
Net loss for the period from continuing operations	(4,235)		(6,531)
Net loss after tax from discontinuing operations	(611)		(615)
Net loss for the period	$ (4,846)		$ (7,146)
Add:
Depreciation and amortization	3,258		3,270
Finance costs	503		649
Income tax recovery/(expense)	119		(251)
EBITDA (1)	$ (966)		$ (3,477)
Share-based compensation	99		30
Acquisition and divestiture-related, integration and restructuring costs	379		871
Litigation costs	-		2
Change in fair value of liability to non-controlling interest	-		549
Net loss after tax from discontinuing operations	611		615
Adjusted EBITDA (1)	$ 122		$ (1,411)
Loss per share, basic and diluted	(0.02)		(0.02)
Loss per share from continuing operations, basic and diluted	(0.00)		(0.00)

(1) This is a non-GAAP measure. See the “Non-GAAP Measures” section of this news release for more information.(2) The comparative information has been re-presented due to discontinued operations

Financial Statements and Management’s Discussion and Analysis

This news release should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and accompanying notes, and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2024, and 2023, which can be found under the Company’s profile on SEDAR+ at www.sedarplus.ca.

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 March 31, 2024 and 2023.

	Three months ended March 31,				Variance
	2024		2023		$		%
Net loss	$ (4,846)		$ (7,146)		$ 2,420		(34%)
Add:					-		0%
Finance costs	503		649		(146)		(23%)
Income tax expense/(recovery)	119		(251)		251		(100%)
Depreciation and amortization	3,258		3,270		(12)		(0%)
EBITDA(1) for the period	$ (966)		$ (3,477)		2,512		(72%)
Share-based compensation	99		30		69		230%
Acquisition and divestiture-related, integration and restructuring costs	379		871		(492)		(56%)
Litigation costs	-		2		(2)		(100%)
Change in fair value of liability to non-controlling interest	-		549		(549)		(100%)
Net loss from discontinuing operations	611		615		(4)		(1%)
Adjusted EBITDA(1) for the period	$ 122		$(1,411)		1,534		109%

(1)EBITDA, Adjusted EBITDA, Gross Profit, Gross Profit Margin, Cash flow, and Normalized cash outflow are non-GAAP measures.

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 Relations

Investors@cloudmd.ca 1-647-484-1405

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 Transaction and the Company’s expectations and strategies regarding growth 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.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.