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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