- Significant growth and expansion, announcing seven acquisitions during the quarter and adding approximately $19 million to revenue
- Gross margin of 42% as a result of higher margin verticals and increase in telehealth usage
- Closed oversubscribed $20.8 million bought deal during Q3 and $37.3 million bought deal subsequent to the quarter
- Strong balance sheet with current cash position of approximately $60 million; fully-funded to continue executing on robust pipeline of acquisition targets
- On track to achieve (i) annualized revenue run rate exceeding $35 million, (ii) gross margin exceeding 50%, and (iii) improved Adjusted EBITDA performance
VANCOUVER, British Columbia, Nov. 30, 2020 — CloudMD Software & Services Inc. (TSXV: DOC, OTCQB: DOCRF, Frankfurt: 6PH) (the “Company” or “CloudMD”), a telehealth company revolutionizing the delivery of healthcare to patients, announced its financial results for the third quarter ending September 30, 2020. All financial information is presented in Canadian dollars unless otherwise indicated.
Dr. Essam Hamza, CEO of CloudMD commented, “I am very pleased with our third quarter results, which have provided us a strong foundation for continued aggressive growth. We are well-funded after raising almost $60 million over the last few months, which will allow us to deploy capital on a robust pipeline of acquisition targets. Based on our Q3 results, combined with recently completed and announced acquisitions, we currently have a solid annualized revenue run rate of $35 million; through planned accretive acquisitions and organic growth, we are confident that this run rate will continue to grow in 2021. We recently closed a number of key acquisitions in Q4 including Snapclarity, iMD, Benchmark and Re:Function which will provide meaningful revenue and are fundamental to our new Enterprise Health Solutions Division. These acquisitions were transformational for us as we are now one of the only healthcare technology companies to provide comprehensive primary and specialist care, mental health support, and educational resources on our proprietary platforms to healthcare practitioners, patients and enterprise clients. We are extremely proud that CloudMD has positioned itself as a leader in this space. Our focus on engaging patients and empowering practitioners has created a transformational shift on how healthcare is delivered and proven to have better outcomes for all members involved. We’d like to thank our loyal shareholders and look forward to the next phase of this exciting journey.”
Q3 2020 Financial Highlights
- Q3 2020 total revenue was $3.4 million, compared to $2.2 million in Q3 2019, an increase of 55%. The revenue generated from Software-as-a-Service (“SaaS”) model digital services was $0.5 million compared to $0.4 million in Q3 2019, an increase of 22% primarily attributable to organic growth. The revenue generated from clinic services and pharmacies was $2.9 million compared to $1.8 million in Q3 2019, an increase of 62%.
- Q3 2020 gross margin was 42%, compared to 46% in Q3 2019. Gross margin for the underlying businesses remained stable, and overall gross margin decreased due to the revenue mix. In the past year, the business acquisitions completed were primarily clinic services and pharmacies, which attracts a lower margin as compared to SaaS model digital services. Subsequent acquisitions have been more focused on SaaS model digital services and Enterprise Health Solutions which should have a positive impact on overall margins.
- Net loss and comprehensive loss in Q3 2020 was $2.7 million or $0.02 per share, compared to $0.8 million or $0.01 per share in Q3 2019. In the quarter, the Company made strategic investments in numerous marketing initiatives to build awareness of the Company and its products and services, which it expects to result in strong future organic growth.
- Adjusted EBITDA was a loss of $1.3 million for Q3 2020, compared to a loss of $0.1 million in Q3 2019. The Adjusted EBITDA calculation was refined in the quarter to adjust for costs related to financing, acquisitions and litigation including associated loss provisions, for management to better evaluate its cash operating performance. A complete definition and calculation are provided further below, and the calculation has been retroactively applied.
- Cash and cash equivalents as at September 30, 2020 were $33.9 million.
Third Quarter Business Highlights
- On August 5, 2020, the Company announced it closed the acquisition of South Surrey Medical Inc., an integrated medical clinic based in Metro Vancouver, BC.
- On August 11, 2020, the Company appointed Patrick Lo, a leading expert on data protection and regulatory privacy matters for the healthcare sector in North America, as a Strategic Advisor.
- On August 13, 2020, the Company signed a share purchase agreement to acquire majority interest in West Mississauga Medical Ltd., a comprehensive family medicine and specialist medical clinic.
- On September 9, 2020, the Company announced it has appointed experienced healthcare executive, Karen Adams as Chief Health Innovation Officer.
- On September 16, 2020, the Company announced it has appointed experienced industry leaders to its newly formed Chairman’s Advisory Board, all with records of building successful high growth organizations with an international outlook.
- On September 22, 2020, the Company closed a $20.8 million oversubscribed, bought deal financing.
Highlights Subsequent to Third Quarter
- On October 8, 2020, the Company launched CloudMD on Demand, an online, virtual care service for companies, insurers and pharmacies to offer their customers easier, more convenient access to virtual telemedicine.
- On October 15, 2020, the Company announced it has closed the acquisition of Snapclarity Inc., an on demand, digital platform that provides an assessment for mental health disorders which includes a personalized care plan, access to online resources, a clinical healthcare team and the ability to match to the right therapists.
- On October 19, 2020, the Company announced it has appointed Mena Beshay to a newly created, more focused role of Global Head, Corporate Development, and Daniel Lee, an experienced capital markets and technology financial executive, as Chief Financial Officer.
- On October 21, 2020, the Company announced it has signed a binding term sheet to acquire Canadian Medical Directory, Canada’s largest, most trusted, directory of medical professionals including 91,000 practicing physicians and 10,000 residents and nurse practitioners across the country.
- On October 22, 2020, the Company announced it has signed a binding term sheet to acquire Medical Confidence Inc., a revolutionary healthcare navigation platform with proven results in wait time reduction and patient satisfaction.
- On October 26, 2020, the Company announced it has closed the acquisition of an 87.5% interest in Benchmark Systems Inc., a leading cloud-based provider of fully integrated solutions that automate healthcare workflow processes including revenue management, practice management and electronic records management.
- On October 26, 2020, the Company announced it has closed the acquisition of a US-based medical clinic as part of a comprehensive strategy to provide end to end healthcare services for chronic care patients.
- On October 28, 2020, the Company announced it has signed a binding term sheet to acquire HumanaCare Inc., an integrated, Employee Assistance Program (“EAP”) solution which provides holistic, physical and mental health support for employees and their family members.
- On November 9, 2020, the Company announced that it closed a $37.3 million oversubscribed, bought deal financing.
- On November 12, 2020, the Company launched a new Enterprise Health Solutions division, which provides a one-stop-shop for corporations, insurers and advisors to address the comprehensive health and wellness of their employees and their families.
- On November 18, 2020, the Company announced it has closed the acquisition of iMD Health Group Corp., a novel award winning platform designed for healthcare professionals at every level of care to better engage, inform and educate patients about their conditions and treatment plans.
- On November 19, 2020, the Company announced that it has closed the acquisition of Re:Function Health Group Inc., a profitable rehabilitation clinic network of 8 clinics and 37 specialists and allied health professionals across British Columbia.
Outlook
The Company is focused on revolutionizing the healthcare industry by leveraging technology to digitalize its delivery to provide both better access to care which leads to better health outcomes. CloudMD has a strong balance sheet with approximately $60 million in cash, which will allow it to continue deploying capital on a robust pipeline of accretive, synergistic acquisitions. Subsequent to the quarter, the Company completed five strategic acquisitions which enhances its portfolio of SaaS model digital services and clinic services offering. The Company also announced another four acquisitions, primarily focused on its newly created Enterprise Health Solutions Division, which are expected to close by December 31, 2020.
CloudMD’s organic growth will be largely driven by its network of hybrid clinics, pharmacy partnerships, SaaS solutions and enterprise partnerships. Through its recent acquisitions, there are opportunities for cross-functional synergies and cross selling that will drive further organic growth.
With our Q3 2020 financial performance, combined with organic growth, and completed and announced acquisitions, CloudMD is on track to achieve (i) annualized revenue run rate exceeding $35 million, (ii) gross margin exceeding 50%, and (iii) improved Adjusted EBITDA performance.
CloudMD will continue to focus on delivering meaningful shareholder value by executing on its growth strategy through accretive acquisitions, strategic capital allocation and continuing to achieve organic growth across all divisions.
Selected Financial Information
All results were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
| Three months ended | Nine months ended | |||||||||||||||
| Selected Financial Information | September 30, | September 30, | ||||||||||||||
| 2020 | 2019 | (%) | 2020 | 2019 | (%) | |||||||||||
| Revenue | $ | 3,358,955 | $ | 2,165,217 | 55 | % | $ | 9,205,671 | $ | 4,327,116 | 113 | % | ||||
| Physician fees | (1,086,731 | ) | (494,340 | ) | 120 | % | (2,812,916 | ) | (1,677,598 | ) | 68 | % | ||||
| Cost of goods sold | (857,573 | ) | (671,929 | ) | 28 | % | (2,552,531 | ) | (671,929 | ) | 280 | % | ||||
| Gross profit (1) | 1,414,651 | 998,948 | 42 | % | 3,840,224 | 1,977,589 | 94 | % | ||||||||
| Gross profit % | 42.1 | % | 46.1 | % | 41.7 | % | 45.7 | % | ||||||||
| Expenses | 4,094,284 | 1,752,735 | 134 | % | 10,561,582 | 4,924,384 | 114 | % | ||||||||
| Loss before other items | (2,679,633 | ) | (753,787 | ) | 255 | % | (6,721,358 | ) | (2,946,795 | ) | 128 | % | ||||
| Other items and taxes | (44,440 | ) | (55,888 | ) | -20 | % | (393,826 | ) | (296,725 | ) | 33 | % | ||||
| Net and comprehensive loss | (2,724,073 | ) | (809,675 | ) | 236 | % | (7,115,184 | ) | (3,243,520 | ) | 119 | % | ||||
| Loss per share, basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | 100 | % | $ | (0.02 | ) | $ | (0.05 | ) | -66 | % |
(1) Gross profit is a non-GAAP measure as described in the Non-GAAP Financial Measures section of this News Release.
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | (%) | 2020 | 2019 | (%) | |||||||||||
| Net loss for the period | $ | (2,724,073 | ) | $ | (809,675 | ) | 236 | % | $ | (7,115,184 | ) | $ | (3,243,520 | ) | 119 | % |
| Add: | ||||||||||||||||
| Interest and accretion expense | 63,001 | 49,841 | 26 | % | 189,557 | 152,555 | 24 | % | ||||||||
| Income taxes | 18,964 | – | 100 | % | 18,964 | – | 100 | % | ||||||||
| Depreciation and amortization | 262,128 | 134,373 | 95 | % | 673,468 | 249,305 | 170 | % | ||||||||
| EBITDA(1) for the period | (2,379,980 | ) | (625,461 | ) | 281 | % | (6,233,195 | ) | (2,841,660 | ) | 119 | % | ||||
| Stock-based compensation | 558,603 | 459,934 | 21 | % | 1,507,930 | 1,225,841 | 23 | % | ||||||||
| Financing-related costs | 245,123 | – | 100 | % | 504,637 | – | 100 | % | ||||||||
| Acquisition-related costs | 191,380 | 29,083 | 558 | % | 308,899 | 108,093 | 186 | % | ||||||||
| Litigation costs and loss provision | 63,154 | 482 | 12992 | % | 466,632 | 20,932 | 2129 | % | ||||||||
| Loss from discontinued operations | – | – | 0 | % | – | (22,967 | ) | -100 | % | |||||||
| Adjusted EBITDA(1) for the period | $ | (1,321,720 | ) | $ | (135,962 | ) | 872 | % | $ | (3,445,097 | ) | $ | (1,509,761 | ) | 128 | % |
(1) EBITDA and Adjusted EBITDA are non-GAAP measures as described in the Non-GAAP Financial Measures section of this News Release. The calculation of Adjusted EBITDA has been amended this quarter to exclude financing-related costs, acquisition-related costs, litigation costs and loss provision, which are not operational in nature.
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 for the three and nine months ended September 30, 2020 and 2019, copies of which can be found 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, 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 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 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 unaudited condensed interim consolidated financial statements and the accompanying notes for the three and nine months ended September 30, 2020 and 2019, and the consolidated financial statements and the accompanying notes for years ended December 31, 2019 and 2018.
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 manage and evaluate the cash operating income (loss) of the business. Please refer to section on EBITDA for reconciliation.
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, stock-based compensation, financing-related costs, acquisition-related costs, litigation costs and loss provision, and loss from discontinued operations. This measure does not have a comparable IFRS measure and is used by the Company to evaluate its cash operating income (loss) of the business, adjusted for factors that are unusual in nature or factors that are not indicative of the operating performance of the Company. Please refer to section on Adjusted EBITDA for reconciliation.
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 relates to revenues less physician fees and cost of goods sold. 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.
About CloudMD Software & Services
CloudMD is digitizing the delivery of healthcare by providing a patient centric approach, with an emphasis on continuity of care. The Company offers SAAS based health technology solutions to healthcare providers across North America and has developed proprietary technology that 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 currently services a combined ecosystem of over 500 clinics, almost 4000 licensed practitioners and 8 million patient charts across North America.
ON BEHALF OF THE BOARD OF DIRECTORS
“Dr. Essam Hamza, MD”
Chief Executive Officer