CloudMD Software & Services Inc. (TSXV: DOC, OTCQB: DOCRF, Frankfurt: 6PH) (the “Company” or “CloudMD”), a healthcare technology company revolutionizing the delivery of care, is pleased to announce that it has closed the previously announced acquisition of Oncidium Inc. (“Oncidium”), one of Canada’s leading healthcare providers to employers. Oncidium has built a difficult-to-replicate ecosystem of over 500 clients servicing more than 2 million employees across Canada and more than 2,000 health care providers and medical assessors. 

The acquisition of Oncidium enables CloudMD to evolve its ecosystem of healthcare services through occupational health, medical management and assessment services. COVID-19 has accelerated the need for employers to have robust health and safety solutions resulting in increased demand for new approaches in the workplace. The new capabilities will be a key component of the Company’s Enterprise Health Solutions (“EHS”) Division and provide Oncidium’s clients with access to our new connected healthcare platform. This transformative acquisition expands CloudMD’s national footprint to include 5,500 clients and over 5 million individual lives touched. 

Since announcing the binding agreement, Oncidium acquired an organization specializing in independent medical evaluations and health-related services to employers and insurers. The strategic tuck-in is complementary to Oncidium and will provide immediate cost saving synergies through consolidation and integration. The business has also developed an award-winning technology platform that offers workflow management that will be used across CloudMD with our provider networks. The highly accretive business generated $17 million in revenue with positive earnings before interest, tax, depreciation and amortization (“EBITDA”) for the 12-month period ending April 2021.   

“With over 25 years in the employer healthcare market, Oncidium is an ideal fit with the overall CloudMD strategy for the Enterprise Health Solutions Division,” said Luciano M. Barbuto, CEO of Oncidium, “We are at a pivotal time where employers are dependent on their solution providers to support their workforce’s health and wellness issues, and to assist in providing leadership and guidance with respect to their ongoing, increasing healthcare costs.”

“It is a time of rapid innovation and accelerated adoption of digital healthcare services by employers,” commented Karen Adams, President of CloudMD. “At the core of our offering is that employers can choose to offer their employees a solution that encompasses medical management through health and safety, onsite medical management and navigation with a focus on cost-effective personalized care plans.”   

The addition of Oncidium is immediately synergistic to CloudMD with cross-selling opportunities through a combined network of 5,500 loyal corporate clients and over 5 million covered lives. Oncidium is a rapidly growing business in the fastest growing segment of the Canadian healthcare industry, providing a significant competitive advantage compared to industry peers with a comprehensive platform, addressing whole-person healthcare through assessment, triage and support services across mental health, specialist care, healthcare navigation, short-term and long-term support, and educational resources.  

The acquisition of Oncidium, which has an annualized revenue run rate of $54 million with an Adjusted EBITDA margin of 10%, is highly accretive to CloudMD. The acquisition also enables revenue and margin expansion for the Enterprise Health Solutions division1 with an annualized revenue run rate of $70 million with a healthy gross margin of 38% and Adjusted EBITDA margin of 10%. On a consolidated basis, CloudMD has an annualized revenue run rate of approximately $140 million with overall gross margin of 35% and positive Adjusted EBITDA. 

1. Enterprise Health Solutions Division plus Re:Function Health Group, a rehabilitation clinic network for enterprise clients, insurers and corporations

Terms of Acquisition

In consideration for the purchase of 100% of the outstanding securities of Oncidium, CloudMD has paid shareholders of Oncidium: (i) $30 million in cash, subject to an estimated negative net working capital adjustment of $524,279; and (ii) $38 million in common shares of the Company, at a deemed price of $2.30 per common share. In addition to the closing considerations, the Company may pay a performance-based earnout of up to an additional $32 million in common shares of the Company or cash, at the election of the Company, and is based on Oncidium meeting certain performance milestones with respect to Oncidium’s revenue and Adjusted EBITDA following closing. Specifically, the Company will pay an additional $13.5 million to the vendors if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2021, an additional $13.5 million if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2022, and an additional $5 million if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2023. The common shares will be subject to certain contractual restrictions on trading for a period of 30 months from the date of issuance.

Credit Facilities

Concurrent with the closing of the acquisition, CloudMD is pleased to announce that it has secured credit facilities of up to $62 million with Oncidium entering into a senior credit agreement with the Bank of Montreal (“BMO”).

BMO will be providing a committed senior term loan of up to $25 million to fund a portion of the initial cash consideration of the transaction with Oncidium. In addition, BMO has also provided an uncommitted senior term loan structured to fund $24 million of any performance-based earnouts over a 3-year period at the time of payment. Lastly, BMO has also provided a committed revolving facility for working capital purposes and an uncommitted accordion facility for future acquisitions in the amounts of $3 million and $10 million, respectively.

The credit facilities will have a term of 3 years and are secured by a first ranking security interest in all the present and future assets and subsidiaries of Oncidium, including a guarantee from CloudMD.

The credit agreement contains usual representations, warranties and covenants associated with a financing transaction of this nature.

After closing the acquisition of Oncidium, CloudMD will have approximately $55 million in cash, that is available to fund future growth.

Echelon Capital Markets acted as the exclusive financial advisor to CloudMD in the arrangement of their credit facilities and in connection with the acquisition.

KES 7 Capital Inc. acted as the exclusive financial advisor to Oncidium in connection with the transaction with CloudMD.

About CloudMD Software & Services

CloudMD is digitizing the delivery of healthcare by providing a patient-centric approach, with an emphasis on continuity of care. By leveraging healthcare technology, the Company is building one, connected platform that addresses all points of a patient’s healthcare journey and provides better access to care and improved outcomes. Through CloudMD’s proprietary technology, the Company delivers quality healthcare through a holistic offering including hybrid primary care clinics, specialist care, telemedicine, mental health support, educational resources and artificial intelligence (AI). CloudMD’s Enterprise Health Solutions Division includes one of the top 4 Employee Assistance Programs in Canada and offers a comprehensive, digitally connected platform for corporations, insurers and advisors to better manage the health and wellness of their employees and customers.

CloudMD currently services a combined ecosystem of over 7,000 psychiatrists, approximately 4,500 therapists and counsellors, approximately 4,000 psychologists, over 22,000 family physicians, over 34,000 medical specialists, over 1,500 allied health professionals, over 500 clinics, and over 5 million individuals across North America. For more information visit: https://investors.cloudmd.ca.

ON BEHALF OF THE BOARD OF DIRECTORS

“Dr. Essam Hamza, MD"Chief Executive Officer

FOR ADDITIONAL INFORMATION CONTACT:

Julia Becker VP, Investor Relationsjulia@cloudmd.caTel: (604) 785-0850

Forward-Looking Statements

This news release contains forward-looking statements, including statements regarding projected revenue, future business synergies and cost savings. Such forward-looking statements are based on CloudMD’s expectations, estimates and projections regarding its business and the economic environment in which it operates, including the expectations with respect to its business plans. Although CloudMD believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Therefore, actual outcomes and results, including revenue projections, may differ materially from those expressed in these forward-looking statements and readers should not place undue reliance on such statements. These forward-looking statements speak only as of the date on which they are made, and CloudMD undertakes no obligation to update them publicly to reflect new information or the occurrence of future events or circumstances, unless otherwise required to do so by law.

Non-GAAP and Non-IFRS Measures

This press release refers to “Adjusted EBITDA” and “Adjusted EBITDA margin” which are non-GAAP and non-IFRS financial measures that do not have a standardized meaning prescribed by GAAP or IFRS. The Company’s presentation of these financial measures may not be comparable to similarly titled measures used by other companies. These financial measures are intended to provide additional information to investors concerning the Company’s and Oncidium’s performance. Adjusted EBITDA is defined as earnings before interest; taxes; depreciation; amortization; share-based compensation; financing-related costs; acquisition-related and integration costs, net; litigation costs and loss provision; change in fair value of contingent consideration; loss from discontinued operations; and other non-recurring items. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percent of total revenue. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures the Company uses as an indicator of financial health and excludes several items which may be useful in the consideration of the financial condition of the Company and Oncidium, as applicable, including interest expense, income taxes, depreciation, and amortization.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release. 

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