CareCloud, Inc.

Welcome to the CareCloud third quarter 2021 results conference call. Please note this event is being recorded. I will now place on the conference call over to Kim Blanche, CareCloud's general counsel. Ms. Blanche, the floor is yours.

Thank you, and good morning, everyone. Welcome to the CareCloud third quarter 2021 conference call. On today's call are Mahmud Haq, our founder and executive chairman, A. Hadi Chaudhry, our chief executive officer, president, and a director, Stephen Snyder, our chief strategy officer and a director, and Bill Korn, our chief financial officer. Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Security Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements, other than statements of historical fact, made during this conference call are forward-looking statements, including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook, and potential organic growth and acquisition. Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate, or similar terminology, and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our press release and our reports filed with the Securities and Exchange Commission where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements. For anyone who dialed into the call by telephone, you may want to download our third quarter 2021 earnings presentation. Please visit our investor relations site, ir.carecloud.com, click on events, and download the earnings presentation. And finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our third quarter 2021 results for reconciliation of these non-GAAP performance measures to our GAAP financial results. And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry.

Thank you, Kim. Good morning and welcome to our third quarter 2021 earnings call. I'm delighted to be here this morning and I'm excited to share with you how CareCloud continues to thrive in this large and dynamic healthcare marketplace. 2021 is certainly turning out to be another breakout year for us and remain incredibly excited and optimistic for what the future holds for us. In terms of the third quarter 2021, I am pleased to report that we had another record-breaking quarter. As we stepped into this year, we set out to accomplish a variety of important initiatives and execute against some lofty goals. We set out to continue to achieve record revenue and profitability while maintaining our historically disciplined fiscal approach. We committed to expanding our addressable market and the types of customers we could ultimately serve. 3. We set out to launch new and innovative products. 4. It was important for us to reinforce our position as a tech company in healthcare while also crystallizing our brand and market position. I am excited to say that we have already accomplished many of these and are on track to execute against all four of them by the end of this year. This is an exceptional accomplishment and I would like to take a moment to thank our customers and our employees worldwide for your incredible work in helping us achieve what we have thus far. I would like to take a few minutes to provide some additional color and insights into some of these for you. In terms of revenue growth, we have achieved another record quarter with $38 million in revenue. We continue to accelerate our growth and have been able to add revenue to a variety of means. It is important that we maintain a fiscally disciplined approach that has allowed us to drive adjusted EBITDA growth quarter over quarter. I am happy to report that we once again achieved record-breaking adjusted EBITDA, $6.7 million for third quarter 2021. Our approach of constantly evaluating different revenue levers and seeking ways to expand our addressable market is key to our strategy. Whether through the addition of new innovative software products, the ability for us to pursue a digital market through partnership, or through our proven competence to source and execute on acquisitions. This combination continues to place us in a great position to succeed as an organization. This year, we had the opportunity to complete an acquisition that has done just that. It has expanded our addressable market by allowing us to provide healthcare consulting and on-demand technical and revenue cycle staffing services and given us a far better position in the health system and hospital space. We continue to be encouraged by the great progress our MedSR team is making, the manner in which our integration efforts are progressing, and the leadership they continue to exhibit. In terms of leadership, we recently announced executive leadership appointments at MedSR, as well as the addition of dedicated resources in support of the changing and growing needs of our health system clients in this new normal they find themselves in. MedSR has appointed additional seasoned leaders that rounds out their executive team and helps us all execute across every aspect of the business. We have appointed a seasoned CareCloud veteran as Chief Operating Officer and a new Chief Revenue Officer for MedSR who brings a vast amount of knowledge in the healthcare industry as seasoned executives having worked at organizations like Athena Health, Cerner, Santa Rosa Consulting, and Deloitte Consulting. These new appointments are important as we continue to integrate, help bring additional capabilities, promote the cross-pollination of ideas, and should prove transformational for our combined businesses while bringing additional depth and breadth as we look to further scale. Our company's combined integrated offerings are beginning to gain traction with clients and prospects alike in both the small hospital setting to large multi-region health systems. These organizations are turning to CareCloud to extend their workforce and integrate their EHR and RCM platforms to optimize performance as they strive to improve access to care and the patient experience while facing an industry-wide workforce shortage and increased pressure on revenue. As I have mentioned in the past, these deals take time, but we believe that our combined strength, leadership position, and robust value proposition position us to execute well against our strategy. As we have expanded our universe of solutions through the MedSR acquisition, we made a conscious and strategic effort to focus on these non-recurring revenue deals as we believe they can provide significant upside downstream. We are excited about these deals as we believe they set the foundation we need to have over, put in the door, so to speak, and allow us to later convert a portion of these new clients into long-term recurring revenue contracts. This gives us great confidence that it is incredibly cost-effective to bring on these types of customers on board and then focus on expanding the relationship through upsells and cross-selling opportunities. Selling into this market takes time and is incredibly difficult, but never in our history have we had such a prominent seat at the table. These types of expansion deals currently in our pipeline are transformative in nature and could present significant ACV contracts in due time. Our sales team are hard at work in making this a reality. In fact, our sales team across all of our segments and business units continue to push hard and win in the field. In terms of overall spend, in 2019, we spent about $1.5 million in sales and marketing compared to $6.6 million in 2020 and $6.5 million in first nine months of 2021. As we have said, we will continue to spend in sales and marketing so long as we can maintain a healthy client acquisition cost. Let's now focus on some additional exciting news. I've mentioned before that addressable market expansion and continuing to notch new and innovative products remain an important focus of ours. To that end, I am excited to announce today that later this quarter, we will be rolling out a new technology platform that does just that. It expands our market reach and adds significant technology assets to our portfolio. This new and innovative platform we will soon release give us even more capabilities in our enterprise market segments, but also as significant, it expands the type of customers we can serve. With this new product suite, we will be able to provide technology solutions and service capabilities to healthcare IT vendors, large system integrators, and other healthcare and digital health ecosystem partners, potentially even including those in the peer space. Earlier this year, we discussed how we had been working on a new technology solution we call Conductor. We talked about how our R&D teams have been working on the problem of unifying healthcare data across multiple systems, partners, and platforms. Not only across our internal systems, but across our vast network of partners and integrations. This technology would help us as we continue to scale our current business while also assisting us when we acquire companies as it relates to our integration needs. As we continue to develop this new solution and think about its real-world usage, our thinking and strategy evolved. We now see CareCloud Conductor as a family of technologies or in other words a product suite of tools for interoperability, data exchange, transformation and connectivity rather than as a single product. It is a suite of solutions that are designed to work well together or as standalone solutions. Later this quarter, we will be bringing to market the first of these solutions within the CareCloud Conductor Suite. We call this new product CareCloud Connector. CareCloud Connector is a platform that connects organizations to a ready-to-use integration library for healthcare IT systems, improving data management, increasing visibility and control of these interfaces, and providing more robust vendor libraries for clients and partners to manage on their own. For example, today an enterprise client or healthcare IT vendor may be required to host or manage dozens of interfaces with third-party systems, labs, proprietary software connectivity partners, and the like using several software tools and making centralized management incredibly cumbersome and expensive. With CareCloud Connector, there is one centralized management console and hundreds of interface libraries to choose from. making significantly easier for these new customers to manage and scale. We know this to be true as this solution was built for our own needs internally in order to effectively manage the multitude of complex systems we need to integrate with our own business. We have that advantage versus some other competitors in that we have lived these problems and have needed to look for ways to solve it ourselves. This work is the culmination of decades of knowledge and investment and we now have an opportunity to package these offerings and bring it to market. As part of the CareCloud Conductor Suite, we will be incorporating the new and improved CareCloud Collective IQ Rules Engine. Collective IQ is our standalone rules engine that brings an advanced collection of automated billing rules and our proprietary algorithms that help healthcare organizations improve collections and cash flow, reduce administrative costs, and stay ahead of changing healthcare regulations. Later next year, we will introduce other products within the CareCloud Conductor product suite, including a powerful, one-of-a-kind semantic translation engine and schema builder and a standalone EDI transaction transmission solution. CareCloud Conductor sets the stage for our foray into a new market. We are very excited about these new capabilities as it relates to interoperability, data exchange and transformation, and the boundless opportunities we see as we believe it could unlock new markets for us to pursue and the revenue opportunities they represent, while giving us an advantage during our system integration phase with companies we may acquire. Lastly, I have continued to meet with investors, analysts, employees, and customers across the country. I'm truly humbled by the incredible opportunity we have as a company and the real impact we are making for our clients nationwide and see our mission come to life. Most recently, I had the opportunity to see firsthand how our RPA bots, a proprietary workflow technology solution, and our team of RCM specialists has been able to significantly improve a sizable customer's experience with us. post a recent transition and drive better metrics towards their bottom line. It is always great for me when I receive communications from clients, in this case a large enterprise customer CEO thanking our team on the hard work they perform on a daily basis. It's interactions like this one I just mentioned that energizes us to continue to deliver leading technology-enabled solutions to the more than 40,000 providers in medical practices and health systems focused on delivering quality patient care nationwide. Our mission remains to deliver comprehensive, end-to-end solutions needed in order for our customers and prospects to thrive in today's highly complex, changing healthcare environment. And of course, we accomplish this purpose through our vast array of software platforms and services we have as part of our product portfolio, as well as Our additional capability to design and build customized solutions required to meet the unique needs of our customers. In terms of crystallizing of market position, I will continue to ensure that we strive to emphasize and stress our leading market presence. Our truly distinct position as a leading technology company in the healthcare and work hard to discourage notions that lump us together with other companies that may look like us on the surface but are vastly different upon taking a deeper look. We are fortunate to be amongst just a small few leading technology companies in the healthcare IT market entrusted with deploying proprietary software solutions, including certified electronic health records and practice management products, patient experience management platforms, and a host of other software and services to a host of healthcare organizations of all sizes. We do not take this for granted and will continue to forge ahead, break new bounds, and continue the legacy of making bold moves. Once again, it is my pleasure to report that GearCloud is in its strongest position ever, and I'm excited for what the future holds for us. I will now turn over the floor to Steve Snyder, our Chief Strategy Officer. Steve? Great. Thanks, Hadi.