CloudMD Software & Services Inc. (TSXV: DOC, OTCQX: DOCRF,
Frankfurt: 6PH) (the “
Company” or
“
CloudMD”), a healthcare technology company
revolutionizing the delivery of care, announced its financial
results for the third quarter ended September 30, 2022. All
financial information is presented in Canadian dollars unless
otherwise indicated.
Karen Adams, CEO of CloudMD
commented, “We are strengthening the business by focusing on
profitability through sales of higher gross margin, recurring
revenue, multi-product contracts. We are restructuring our business
resulting in the ability to deliver prudent expense and cash
management. We are pleased with our increasing customer base,
specifically in Mental Health Support Solutions. Our business model
across EHS and DHS is focused on our ability to support individuals
where they are on their health journey. Our continued organic
growth in our mental and physical health services reinforces this
model and the need for managing health through navigation and
coaching. Our financial performance in the period was impacted by
the end of one-time mandates and COVID related government
contracts. This overshadowed the growth and resilience of our
recurring revenue core business. The Management team is committed
to new client adoption and improved financial controls.”
John Plunkett, CFO of CloudMD
commented, “We’ve set multiple strategic priorities for the Company
to reach profitability. We are driving organic revenue growth while
eliminating costs from the business. In the third quarter, we saw
our use of cash reduce significantly compared to the previous
quarter. We’ve identified an additional $6 million in total cost
savings that we will begin to realize in the fourth quarter, with
the full run-rate expected in early 2023. Subsequent to quarter
end, we have improved our balance sheet from our divestiture
activities and are working hard to move CloudMD to profitability.
This demonstrates our disciplined and focused approach to growth
within our core businesses.”
Third Quarter 2022 Financial Highlights
- Q3 2022 revenue from continuing
operations was $27.5 million, compared to $28.9 million in Q3 2021.
Third quarter revenue does not include revenue generated from the
Clinics & Pharmacies division as well as Cloud Practice, which
are classified as discontinuing operations. Including discontinued
operations, revenue in the third quarter would be $38.2 million,
which was impacted by the end of one-time Covid-19 testing
contracts, changes to the Ontario Health contract, as well as lower
Vision Pros revenue.
- Q3 2022 gross profit margin1 was
34.5% compared to 31.0% in Q2 2022 and 36.1% in the third quarter
of 2021. The margin improvement from Q2 to Q3 reflects the
Company’s strategy to divest non-core assets, which have lower
overall gross profit margins.
- Net comprehensive loss attributable
to equity holders of the Company in Q3 2022 was $94.8 million or
$0.32 per share, compared to a loss of $5.8 million or $0.02 per
share in Q3 2021. The larger loss per share was driven by an $84
million impairment of goodwill.
- Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization (“Adjusted
EBITDA”)2 was negative $3.0 million Q3 2022, compared to
negative $3.2 million in Q2 2022 and Adjusted EBITDA of $0.9
million in Q3 2021. The lower revenues were offset by an improving
overall cost structure.
- Cash and cash equivalents were
$27.5 million as of September 30, 2022, compared to $45.1 million
on December 31, 2021. Use of cash in the third quarter was $2.2
million, a significant improvement from the use of cash in the
second quarter of 2022.
- During the third quarter, CloudMD
experienced a triggering event due to sustained decreases in the
Company’s share price, prompting an accounting related impairment
assessment of goodwill and long-lived intangible assets. As a
result of the assessment, the Company recorded a non-cash
accounting impairment charge of $83.9 million in the third quarter
of 2022. The assumptions used in the impairment analysis included
discount rates that reflect higher interest rates, market
volatility and the company risk premium compared to our valuation
as at December 31, 2021. The impairment does not reflect a change
in the Company’s outlook which is focused on growth, expanding
profitability and cash flow.
____________1 Gross profit margin is a non-GAAP ratio. Refer to
the “Non-GAAP Financial Measures” section of this news release for
further information.2 Adjusted EBITDA is a non-GAAP measure. Refer
to the “Non-GAAP Financial Measures” section of this news release
for further information and a detailed reconciliation to the most
directly comparable measure under IFRS.
Third Quarter & Subsequent Corporate
Highlights
- On July 13, 2022, the Company added
telemedicine services for primary care health navigation to Kii
personalized & connected care offering. The services are led by
nurses and nurse practitioners which provide fast access to a wide
variety of primary care services and treatments and overall health
and wellness support for employees and their family members, all
from one connected offering.
- On July 22, 2022, the Company
announced that it finalized the review and settlement of
VisionPros, its online vision care platform. The settlement was
reached with the former owners of VisionPros and reduces the
purchase consideration paid for VisionPros by $12.6 million and
also removes any future earnout payments.
- On July 25, 2022, the Company sold
its 51% share ownership in West Mississauga Medical Ltd. (“West
Mississauga”), which was acquired in February 2021.
- On August 11, 2022, the Company appointed Karen Adams as Chief
Executive Officer and John Plunkett as Chief Financial
Officer.
- On August 17, 2022, the Company provided a business update on
customer momentum and the TAiCBT Ontario Government contract.
- On October 11, 2022, the Company announced the divestment of
its primary care clinics and Cloud Practice to WELL Health for
approximately $5.75 million in cash. CloudMD will retain ownership
of its online patient portal, MyHealthAccess, and will retain the
right (under a license granted by WELL at closing of the
Transaction) to use Juno EMR, which have both been integrated into
its Kii Personalized & Connected Care offering. The transaction
subsequently closed on November 2, 2022.
- On October 31, 2022, the Company
announced the sale of its two brick and mortar Pharmacies to
Neighbourly Pharmacy Inc. for approximately $3.8 million in cash.
The transaction is subject to satisfying closing conditions, and
closing is expected to occur in the fourth quarter of 2022.
Outlook
The Company continues to deliver on the value
proposition of offering comprehensive solutions that create access
to care, leading to better health outcomes. Through its team-based,
patient-centric approach, CloudMD provides a connected platform for
patients, healthcare practitioners, and enterprise clients to
address whole-person, coordinated care.
CloudMD remains focused on its strategic
priorities for the remainder of the year (1) through its strong
sales pipeline, continuing to diversify and grow its client base
within its EHS and DHS divisions by direct sales to new customers,
enhancing relationships with channel partners and cross selling its
established suite of products (2) driving continuous operational
excellence and improvement across the organization to improve
productivity, product quality and consistency, and lower customer
acquisition costs; (3) delivering a diligent path to profitable
financial sustainability and focus on delivering consistent
financial performance across all divisions of the organization; and
(4) continuing to develop corporate governance to support the
Company’s growth.
Selected 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 endedSeptember
30 |
Nine months endedSeptember
30 |
|
Figures below are unaudited |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Revenue |
$ |
27,505 |
|
$ |
28,946 |
|
$ |
88,595 |
|
$ |
41,943 |
|
|
Cost of sales |
|
18,023 |
|
|
18,483 |
|
|
57,402 |
|
|
25,628 |
|
|
Gross profit
(1) |
$ |
9,482 |
|
$ |
10,463 |
|
$ |
31,193 |
|
$ |
16,315 |
|
|
Gross profit
% |
|
34.5 |
% |
|
36.1 |
% |
|
35.2 |
% |
|
38.9 |
% |
|
Indirect Expenses |
|
|
|
|
|
Sales and marketing |
|
2,218 |
|
|
2,000 |
|
|
6,971 |
|
|
3,989 |
|
|
Research and development |
|
1,043 |
|
|
828 |
|
|
3,618 |
|
|
1,745 |
|
|
General and administrative |
|
9,638 |
|
|
6,932 |
|
|
29,725 |
|
|
12,531 |
|
|
Share-based compensation |
|
273 |
|
|
1,543 |
|
|
1,295 |
|
|
4,576 |
|
|
Depreciation and amortization |
|
3,721 |
|
|
1,991 |
|
|
10,639 |
|
|
3,410 |
|
|
Financing-related costs (1) |
|
- |
|
|
- |
|
|
- |
|
|
871 |
|
|
Acquisition and
divestiture-related, integration and restructuring costs (1) |
|
1,659 |
|
|
1,790 |
|
|
9,232 |
|
|
5,447 |
|
|
Loss before undernoted |
$ |
(9,070 |
) |
$ |
(4,621 |
) |
$ |
(30,287 |
) |
$ |
(16,254 |
) |
|
Other income |
|
282 |
|
|
162 |
|
|
483 |
|
|
336 |
|
|
Gain on fair value of
contingent consideration |
|
996 |
|
|
640 |
|
|
7,046 |
|
|
966 |
|
|
Loss on fair value of
liability to non-controlling interests |
|
(64 |
) |
|
- |
|
|
(232 |
) |
|
- |
|
|
Finance costs |
|
(621 |
) |
|
(737 |
) |
|
(1,592 |
) |
|
(855 |
) |
|
Impairment |
|
(83,910 |
) |
|
- |
|
|
(113,152 |
) |
|
- |
|
|
Loss on sale of joint
venture |
|
(221 |
) |
|
- |
|
|
(221 |
) |
|
- |
|
|
Current and deferred income
tax expense |
|
811 |
|
|
(407 |
) |
|
742 |
|
|
(549 |
) |
|
Net loss for the
period from continuing operations |
|
(91,797 |
) |
|
(4,963 |
) |
|
(137,213 |
) |
|
(16,356 |
) |
|
Net loss after tax
from discontinuing operations |
|
(3,054 |
) |
|
(824 |
) |
|
(7,500 |
) |
|
(1,353 |
) |
|
Net loss for the
period |
$ |
(94,851 |
) |
$ |
(5,787 |
) |
$ |
(144,713 |
) |
$ |
(17,709 |
) |
|
Add: |
|
|
|
|
|
Depreciation and
amortization |
|
3,721 |
|
|
1,991 |
|
|
10,639 |
|
|
3,410 |
|
|
Finance costs |
|
621 |
|
|
737 |
|
|
1,592 |
|
|
855 |
|
|
Impairment |
|
83,910 |
|
|
- |
|
|
113,152 |
|
|
- |
|
|
Current and deferred income
tax expense |
|
(811 |
) |
|
407 |
|
|
(742 |
) |
|
549 |
|
|
EBITDA
(1) |
$ |
(7,410 |
) |
$ |
(2,652 |
) |
$ |
(20,072 |
) |
$ |
(12,895 |
) |
|
Share-based compensation |
|
273 |
|
|
1,543 |
|
|
1,295 |
|
|
4,576 |
|
|
Financing-related costs |
|
- |
|
|
- |
|
|
- |
|
|
871 |
|
|
Acquisition and
divestiture-related, integration and restructuring costs (1) |
|
1,659 |
|
|
1,790 |
|
|
9,232 |
|
|
5,447 |
|
|
Litigation costs (1) |
|
101 |
|
|
37 |
|
|
555 |
|
|
83 |
|
|
Loss on fair value of
liability to non-controlling interests |
|
64 |
|
|
- |
|
|
232 |
|
|
- |
|
|
Gain on fair value of
contingent consideration |
|
(996 |
) |
|
(640 |
) |
|
(7,046 |
) |
|
(966 |
) |
|
Net loss after tax from
discontinuing operations |
|
3,054 |
|
|
824 |
|
|
7,500 |
|
|
1,353 |
|
|
Loss on sale of joint
venture |
|
221 |
|
|
- |
|
|
221 |
|
|
- |
|
|
Adjusted
EBITDA (1) |
$ |
(3,034 |
) |
$ |
902 |
|
$ |
(8,083 |
) |
$ |
(1,531 |
) |
|
Loss per share, basic and diluted |
|
(0.32 |
) |
|
(0.02 |
) |
|
(0.49 |
) |
|
(0.09 |
) |
(1) This is a non-GAAP measure. Refer to the Non-GAAP Financial
Measures section of this MD&A for further information.
Third Quarter 2022 conference call and webinar
details:Date and Time: Tuesday, November
15 at 9:30 am Eastern Time (6:30 am Pacific Time)Webcast
link: https://edge.media-server.com/mmc/p/7veqjm22
A link to the live event, as well as the
financial statements and MD&A will be available on the
Financial Statements page of the Company’s website.
Financial Statements and Management’s
Discussion and Analysis
This news release should be read in conjunction
with the Company’s condensed interim consolidated financial
statements and related notes, and management’s discussion and
analysis (“MD&A”) for the three and nine
months ended September 30, 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 and ratios which are not recognized under IFRS, as
supplemental indicators of the Company’s operating performance and
financial position. These non-GAAP financial measures and ratios
are provided to enhance the user’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 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, 2021 and 2020.
EBITDAEBITDA 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 EBITDAAdjusted 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, gain or loss on fair value of liability to
non-controlling interest, gain or loss on 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.
Gross ProfitGross 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 relates to revenues less
cost 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 MarginGross 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.
The following table provides a reconciliation of
net loss for the periods to EBITDA and Adjusted EBITDA for the
three months and year ended June 30, 2022 and 2021:
|
|
Three months endedSeptember 30, |
Variance |
Nine months endedSeptember 30, |
Variance |
|
Unaudited |
2022 |
2021 |
$ |
% |
2022 |
2021 |
$ |
% |
|
Net loss |
$ |
(94,851 |
) |
$ |
(5,787 |
) |
(89,064 |
) |
1,539 |
% |
$ |
(144,713 |
) |
$ |
(17,709 |
) |
(127,004 |
) |
717 |
% |
|
Add: |
|
|
|
|
|
|
|
|
|
Interest and accretion expense |
|
621 |
|
|
737 |
|
(116 |
) |
(16 |
%) |
|
1,592 |
|
|
855 |
|
737 |
|
86 |
% |
|
Current deferred and income tax expense |
|
(811 |
) |
|
407 |
|
(1,218 |
) |
(299 |
%) |
|
(742 |
) |
|
549 |
|
(1,291 |
) |
(235 |
%) |
|
Impairment |
|
83,910 |
|
|
- |
|
83,910 |
|
100 |
% |
|
113,152 |
|
|
- |
|
113,152 |
|
100 |
% |
|
Depreciation and amortization |
|
3,721 |
|
|
1,991 |
|
1,730 |
|
87 |
% |
|
10,639 |
|
|
3,410 |
|
7,229 |
|
212 |
% |
|
EBITDA(1)
for the period |
$ |
(7,410 |
) |
$ |
(2,652 |
) |
(4,758 |
) |
179 |
% |
$ |
(20,072 |
) |
$ |
(12,895 |
) |
(7,177 |
) |
56 |
% |
|
Share-based compensation |
|
273 |
|
|
1,543 |
|
(1,270 |
) |
(82 |
%) |
|
1,295 |
|
|
4,576 |
|
(3,281 |
) |
(72 |
%) |
|
Financing-related costs |
|
- |
|
|
- |
|
- |
|
- |
|
|
- |
|
|
871 |
|
(871 |
) |
(100 |
%) |
|
Acquisition and divestiture-related, integration and restructuring
costs |
|
1,659 |
|
|
1,790 |
|
(131 |
) |
(7 |
%) |
|
9,232 |
|
|
5,447 |
|
3,785 |
|
69 |
% |
|
Litigation costs and loss provision |
|
101 |
|
|
37 |
|
64 |
|
173 |
% |
|
555 |
|
|
83 |
|
472 |
|
569 |
% |
|
Change in fair value of liability to non-controlling interests |
|
64 |
|
|
- |
|
64 |
|
100 |
% |
|
232 |
|
|
- |
|
232 |
|
100 |
% |
|
Change in fair value of contingent consideration |
|
(996 |
) |
|
(640 |
) |
(356 |
) |
56 |
% |
|
(7,046 |
) |
|
(966 |
) |
(6,080 |
) |
629 |
% |
|
Net loss from discontinuing operations |
|
3,054 |
|
|
824 |
|
2,230 |
|
271 |
% |
|
7,500 |
|
|
1,353 |
|
6,147 |
|
454 |
% |
|
Loss on sale of joint venture |
|
221 |
|
|
- |
|
221 |
|
100 |
% |
|
221 |
|
|
- |
|
221 |
|
100 |
% |
|
Adjusted
EBITDA(1) for
the period |
$ |
(3,034 |
) |
$ |
902 |
|
(3,936 |
) |
(436 |
%) |
$ |
(8,083 |
) |
$ |
(1,531 |
) |
(6,552 |
) |
428 |
% |
(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 this MD&A for
further information.
About CloudMD Software & Services
CloudMD is transforming the delivery of
healthcare using technology and 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, healthcare navigation, educational resources, and
artificial intelligence (AI). CloudMD’s business is separated into
two main divisions: Digital Solution and Enterprise Health
Solutions, the Company’s fastest growing division. CloudMD’s
Enterprise Health Solutions Division has built a leading employer
healthcare solutions, including its Comprehensive Integrated Health
Services Platform, which offers one comprehensive, digitally
connected platform for educational institutions, corporations,
insurers, and advisors to better manage the health and wellness of
their students, employees, and customers.
CloudMD currently services a direct ecosystem of
over 5,700 clinicians including, 1,800+ mental health
practitioners, 1,600+ allied health professionals, 1,400+ doctors
and nurses and covers 12 million individual lives across North
America. For more information
visit: https://investors.cloudmd.ca.
ON BEHALF OF THE BOARD OF
DIRECTORS “Karen
Adams”Interim Chief Executive Officer
FOR ADDITIONAL INFORMATION, CONTACT:
Investor Relations investors@cloudmd.ca
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 certain statements
that may constitute forward-looking information under applicable
securities laws. All statements, other than those of historical
fact, which address activities, events, outcomes, results,
developments, performance or achievements that CloudMD anticipates
or expects may or will occur in the future (in whole or in part)
should be considered forward-looking information. Often, but not
always, forward-looking information can be identified by the use of
words such as “plans”, “expects”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or
“believes” or variations (including negative variations) of such
words and phrases, or statements formed in the future tense or
indicating that certain actions, events or results “may”, “could”,
“would”, “might” or “will” (or other variations of the forgoing) be
taken, occur, be achieved, or come to pass. Forward-looking
statements in this news release include, but are not limited to,
statements regarding trends in certain financial and operating
metrics of the Company, and expectations relating to the financial
performance and the financial results of future periods. 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.
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