CareCloud, Inc.

Welcome to the CareCloud, Inc. Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to your host, Kim Blanche, CareCloud's General Counsel. Ms. Blanche, you may begin.

Good morning, everyone. Welcome to the CareCloud Second Quarter 2023 Conference Call. On today's call are Mahmoud Haque, our founder and executive chairman, Hadi Chaudhry, our chief executive officer, president, and a director, and Larry Steenborden, our chief financial officer. In addition, Bill Korn, our chief strategy officer, will be available for the Q&A portion of the call. 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 Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts 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 to 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 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 second quarter 2023 earnings presentation. Please visit our investor relations site, ir.carecloud.com, click on News and Events, then click IR Calendar, click on second quarter 2023 results conference call and download the earnings presentation. Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our second quarter 2023 results for a 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. Hadi?

Thank you, Kim, and thanks to all of you for joining our second quarter 2023 earnings call. Before I jump in, I would like to take a minute to introduce Larry Steenwarden, who joined us in July as our new chief financial officer. Larry brings with him extensive experience. He has spent time as a CFO in several different areas of the healthcare space. Our team is looking forward to working with him as Bill transitions into his new role as Chief Strategy Officer. He will be working closely with Larry to get him quickly up to the speed. We have several meaningful developments that will contribute to our long-term success to discuss today. But first, I will start by providing a quick overview of our quarterly results. The second quarter, revenue came in at $29.4 million, and adjusted EBITDA came in at $3.8 million. This compares to revenues of $37.2 million and adjusted EBITDA of $7 million in second quarter last year. Taking a step back and looking at the quarter as a whole, there were a few main areas that contributed to these numbers coming in lower than the prior year period. which include softness in Med-SR professional services, a slower conversion ramp for wellness revenue, and the loss of revenue from two large customers due to health system mergers, as previously announced. Larry will go into further details on these developments and provide insight to the results. Despite these short-term challenges, our core tech-enabled RCM offering is performing well and meeting the evolving needs of our providers. We believe that we have taken the necessary actions to address the near-term issues we are facing and, over the long term, focus on several emerging avenues of growth that include our generative AI offering powered by our relationship with Google, our wellness solution, which is gaining more attention in the market, and what could be a meaningful opportunity in the Middle East. Turning now to the launch of our new generative AI product, I want to provide more detail on our recently announced partnership with Google Cloud with the goal of making it easier for doctors and clinicians to access essential information. We are actively working on integrating Google Cloud's advanced generative AI and enterprise search technology into care cloud solutions. Once launched, our AI model will assist the physicians with data-informed, personalized treatment decisions. One of the major advantages of this collaboration in the nearly 20 years of CareCloud's de-identified clinical data and financial information, which will be used in a HIPAA compliant fashion to train Google's generative AI models within CareCloud solutions. This valuable data includes insights from small and medium sized medical practices that haven't previously been used for generative AI. Current healthcare AI models have been trained primarily with health system data. Our partnership allows us to fill an important gap in the industry and create more comprehensive AI-generated information for our target market. The first CareCloud solution using generative AI will focus on clinical applications and is set to launch in the coming months. We will start by training Google's generative AI models with our clinical data. This will enable our solutions to use a patient's current and past clinical data to create personalized care plans for that specific patient, enabling the physician to make more informed decisions for that patient. These plans will be tailored to each patient's medical history and current symptoms, including medication recommendations, lab orders, diagnosis, and procedures. Eventually, the offering will also enable the system to give patients personalized estimates of their insurance coverage and out-of-pocket expenses, helping them make informed decisions about their healthcare. We plan to charge a reasonable license fee for this Smart Assistant Edition and are exploring different licensing models or user fees, similar to Microsoft's recent launch of Copilot. The overarching goal of this partnership with Google Cloud is to transform healthcare delivery through generative AI technology for the broader market beyond just CareCloud's ecosystem. I now want to provide you an update on our UAE opportunity. As we discussed last quarter, we are continuing to explore opportunities for expansion in the Middle East. We previously mentioned that we were close to completing the establishment of an entity in the UAE to capitalize on the opportunities in this market. I am pleased to report that we have successfully established a branch office in Dubai and received our license to conduct business in UAE. In May, we attended the PrecisionMed Conference at Dubai World Trade Center and then the MENA Hospital Project Conference in June to start building relationships with our partners. We are now in the process of recruiting the best local talent for our business development team with the primary goal of developing new business relationships within the Gulf Cooperation Council, which is comprised of six countries. A Cloud is uniquely aligned to take advantage of the opportunities in this market. I also want to highlight that on the marketing front, we recently revamped our entire corporate website. We updated the site to not only include all of our brands, solutions, and services, but also optimize it by end market and category to make it easier for our customers and partners to navigate. We believe this will make for a more enhanced user experience. Next, I would like to provide an update on the progress we have made on Bookings conversions and new customer go-lives. For our core tech enabled RCM, we have gone live with 95% of the potential revenue we booked last year, compared to 88% last quarter. On an annualized run rate, we have recognized 94% of those potential revenue from the live clients. In our wellness solution, we have gone live with 93% of the potential revenue, also in line with last quarter, while the percentage of annualized run rate revenue increased from 7% to 23%. We still believe this is a meaningful opportunity for us, but the ramp is taking significantly longer than we initially anticipated. Our wellness offering represented a paradigm shift on how people treat chronic illnesses, getting them into a monthly virtual checkup routine in order to proactively manage their illness. Lastly, Enforce, which is our staffing augmentation solution, we have gone live with 96% of the potential revenue, same as last quarter. But the percentage of annualized run rate revenue has increased from 4% to 65% at the end of the second quarter. The increase was driven by one of the contracts we noted last quarter going live, a new client starting to ramp. Overall, Out of the total recurring bookings we signed in 2022, 95% of the potential revenue has gone live with us in some form or fashion, up from 92% last quarter. In the second quarter, on an annualized basis, we recognized 62% of the potential revenue opportunity from those clients that have gone live, compared to 44% last quarter. Turning to 2023 bookings, we are experiencing further bookings growth with a meaningful increase in first half 2023 bookings compared to the first half of last year. Notably, we are signing that new business more efficiently as we have seen a measurable decline in our customer acquisition cost. In summary, during the quarter, our core tech-enabled RCM business is performing well, but we did experience some softness in two of our newer innovative business lines, Wellness and MedSR Professional Services. As we look to the second half of the year, we face some continued headwinds in those businesses and have adjusted our 2023 guidance accordingly. We believe that we are past the low point and I believe that we have taken the right steps to stabilize those business lines in the second half. Now I will turn the call over to Larry for a deeper look into our second quarter results and annual guidance. Larry?