Cloud DX Inc.

Welcome. We're very pleased to have you here at our third quarter 2022 earnings call presentation. And so we're going to get started now.

And Andrew, can we advance the slides?

Please everyone make note that we'll be discussing some forward-looking statements during our presentation today. This is the forward-looking statement disclaimer that's currently in both this and our most recent investor presentation, which you can find on the IR section of our website.

Go ahead, Andrew. Next slide. There we go.

So we're very pleased to announce some very positive results for the third quarter of 2022, starting with revenue, which has increased nearly 300%. And that increase in revenue is made up of substantial increases across the board. Subscription revenues increased by 77%. Product revenue, which is the sale of our connected health kits and related hardware, increased by 380%. And services revenue increased by over 1,000%. services revenue, to remind everybody, is revenue made up of customizations, integrations, and additional software development work that we do on behalf of our clients. We also saw a 57% increase in government funding for the quarter. That's reflected in the grant funding that flows in for R&D activities and some of the government contracts that we engage in that are considered government funding rather than revenue by IFRS rules. Gross profit was recorded at $82,000 or a 32% increase over the safe trade in 2021. Gross profit was actually impacted by the acquisition of more connected health kit inventory. So as we ramp up our inventory, those cost of goods sold purchases impact the line item of gross profit. But the reality is that selling the connected health kits up front is also a big generator of revenue for us. So it all comes, goes around, comes around. So what we did see over the course of the quarter is a very small increase in operating expenses, 3.7%. In general, our expenses are flat or dropping, and if you refer to the consolidated financial statements that you'll find on CDAR, you'll note that there was a small increase in salaries and commissions, partly reflected to a change in the mix of our employees, weighted more towards us and technology workers, but also because of inflation. But finally, the very good news is that our net loss has been dropping. And of course, in the quarter, our net loss dropped by 4.8%. So this growth, of course, is reflected in the announcements we've made throughout the year and the increase in the contracts that we've signed. And so now we're seeing those contracts come through. We're seeing that revenue increase, and that's exactly the trajectory we've all been counting on. Please go ahead. Next slide. For the nine months ending September 30th, Revenue is over a million dollars now, a 38% increase over the previous period in 2021. And again, we have announced 24 contracts so far this year, 20 in the period to September 30th and an additional four since then. for a 200% increased year on year versus the entire year last year. And that trajectory is continuing to grow. And just to remind everybody, I mean, this is what you're going to see as an investor in CloudVX. You're going to see an increase in contract sign. And then in subsequent quarters, those contracts begin to deliver their connected health kits on board patients. And both the product revenue, the subscription revenue, and the services revenue all continue to climb. Overall, for the period of nine months, operating expenses are down 6.2%, reflecting our economization and our attention, paying attention, very close attention to every penny we spend. And, of course, as we sprint towards cash flow positive, an overall double-digit drop in net loss of just under 21%. And that continues from a double digit loss in the last quarter we announced as well. So reductions in net loss are continuing as expected and as planned as we sprint towards that cashflow positive position. Next slide. So to reflect on the accomplishments so far in 2022, I wanna emphasize two of the most important announcements we made throughout the year. One of course is our partnership with Teladoc Health. Teladoc Health is the largest telemedicine company in the world. 51,000 employees delivers care to 55 million people all over the world. And CloudDx is a closely aligned and closely integrated partner with Teladoc Health. Our partnership includes integration of Teladoc Health software into the connected health technology ecosystem. That began in the summer in August when we signed our partnership deal and is now coming to market during this quarter, Q4 of 2022. We also see the other way around, integration of CloudDX activities and integration of CloudDX services into Teladoc's offerings. So in the coming quarters, you're going to hear more and more about the work we're doing with Teladoc Health, not just in Canada, but also in the United States and in other parts of the world. And our other partner is Medtronic. Medtronic is the largest medical technology company in the world, both by employees and by revenue. And our partnership with Medtronic is also a very tightly integrated partnership. We announced the first contract with Medtronic through that relationship in the first quarter of 2022. And additional contracts, of course, have been in the works and more announcements are coming. And then just recently, we announced one of the most important contracts in our history so far. Please, next slide. And that is the Continuous Connected Patient Care Project, CCPC. So there's three important things to note about this project. The first is that this is a contract and an agreement and a partnership, not with Medtronic Canada, who we're very, very closely partnered with, but with Medtronic USA, Medtronic Global, if you will. And so the CCPC project is a project that's being managed out of the larger Medtronic Global project. company and is designed for global distribution. The second point is that this is a fully funded project to integrate CloudDx technology and Medtronic technology on the same platform. Medtronic is bringing new types of medical devices to the market. CloudDx and CloudDx Connected Health will be the operating system, if you will, that those devices are distributed under. That means our mobile apps, the other parts of our connected health kit, our clinician portal and our integration services into electronic medical records are all the backbone of this new, amazing, combined, continuous patient monitoring infrastructure. So the project launches has launched immediately. In fact, the project launched some time ago because the announcements took time to go through all the different government hurdles. Funding for the project comes from Medtronic and the consortium, a $5.2 million co-investment from the digital supercluster, and of that, $560,000 in non-dilutive funding for CloudDX during the first phase when we integrate the products together and the integrated platform is approved by Health Canada and the FDA. So this, again, is a global distribution arrangement with Medtronic for a new platform, including Medtronic technology and cloud technology, going out across the world starting in 2024. I can't imagine a more exciting prospect, and we're very, very thrilled to be part of this project. It's, I think, going to be revolutionary, both for patient outcomes and for the growth of virtual care across the world. Next slide. So continuing on the accomplishments, I've already mentioned 24 new contracts, a 200% increase so far in the year versus all of last year. I'll also point out a few important differentiators for CloudDX that investors need to know about. One of those differentiators and one of the reasons why we are partners with some of these enormous companies is that we have published peer-reviewed proof of very, very high patient and provider satisfaction. And we added to that proof on this last couple of quarters with a new peer-reviewed paper that came out in the prestigious Journal of Medical Internet Research. That paper measured satisfaction with the CloudDx technology both by users, patients, and by providers. And that satisfaction rate was over 89%. We also saw 100% utilization of the product, which is essentially meaning our ease of use couldn't be better. We also saw regulatory audit success. CloudDX has passed multiple regulatory audits this year, including a new type of Health Canada audit, our annual ISO 1345 MDSAP audit. And of course, we're also involved in upgrading our security and privacy to the SOC 2 standard, which is a year-long audit. And we've received additional patents on our intellectual property now with eight patents across the IP portfolio and more patents pending. Next slide, please. Then, of course, the most recent news from yesterday, we're very, very proud and excited to say that in addition to the partnerships we have and in addition to all the growth we're planning, We've welcomed the outgoing president of Medtronic Canada, Neil Fraser, to our board of directors, bringing the number of directors at CloudDx to seven. Neil is one of the most accomplished executives in the medical tech business in the entire world. His career at Medtronic was legendary over 38 years, and he brings experience and talent and connections and just an incredible mentorship to me personally and to the CloudDx enterprise. We're honored to have Neil join us as the board director and independent board director, helping the company grow in the next several quarters, along with our partnerships with Medtronic. Next slide, please. So just to refresh everyone's memory, I'd like to point out again what exactly we're talking about when we talk about Connected Health. And again, there are three parts of the Connected Health platform, three ways that CloudDx makes money, the Connected Health kits themselves, the clinical portal that clinicians use, and our integration services. Next slide. The Connected Health Kit is made up of medical devices that are both off the shelf in some cases and are also made by Cloud Yags. In fact, the weight scale, pulse oximeter, we have new technologies coming for the Connected Health Kit as well. So the kit also includes a tablet computer and the mobile app on that computer continues to improve. In fact, we just released a new version of the mobile app for testing that is now modified to be in all the three main languages in North America, French, English, and Spanish. The clinician portal is the nerve center, literally where one clinician can monitor hundreds of patients simultaneously. with smart software in the background, supporting them and improving efficiency of care. That software is detecting changes in symptoms or changes in vital signs and then surfacing those changes by exception to make sure the care team is dealing with those folks who need help the most. It also includes document handling, wound care. It includes the ability to do two-way telehealth visits with both Teladoc Health on their solo platform and Zoom, the HIPAA compliant version of Zoom. And this entire platform is verified by Canada Health Infoway and Ontario MD for synchronous, asynchronous telemedicine, and also for remote patient monitoring. The services and integrations we offer include integration to different and varied devices. So the devices that we typically ship, we also have other devices that we can select. and also electronic medical record integration using the FHIR standard, which is the global standard for medical information data transfer. Next slide, please. The value proposition for remote patient monitoring has become more and more clear. Every quarter that goes by, remote patient monitoring becomes more standard of care across North America and, in fact, the world. The reason is because it improves outcomes for patients. Time and again, this has been proven in published peer-reviewed studies. Patients get better faster when they're monitored at home versus having no monitoring at all. It also means we avoid medication errors and other peer-reviewed published results. Providers see their work getting more efficient. They can care for more people with the same number of staff and patients get better faster. We also reduce the chances of readmissions to hospital or the emergency room. All of this drives an enormous ROI. It saves enormous amounts of money for the payers in the system, in the Canadian context, the provincial governments, the American context, insurance companies, Medicare, Medicaid, and private individuals. Because of that, across Canada so far this year, there have been five, six, maybe six or seven RFPs and just very recently for, in some cases, province-wide remote patient monitoring contracts. CloudDx is proud to be the only company in the space we know of that has two provincial contracts already. And we're optimistic that these RFPs are going to position the entire industry for growth in the next several quarters. and we are participating in that growth. Next slide. Another factor that shows the flexibility of gladiators-connected health is the increase in use cases. Prior to the pandemic in 2019 and early 2020, we were really taking care of two types of patients, congestive heart failure patients and patients with chronic obstructive pulmonary disease. These were complex chronic patients. Since that time, we've added 10 more use cases to the CloudDx technology delivery, including diabetes, most importantly, post-surgical monitoring, pulmonary and cardiac rehabilitation, neurological disorders, mental health support, and even complex pediatric care. And then one of the most important success stories so far this year has been the community paramedic program for caring for frail elderly across Ontario. This is a program that was funded in 2021 by the Ontario Government Ministry of Long-Term Care. Paramedic services across Ontario are caring for folks on the long-term care waiting list by deploying CloudDx Connected Health to monitor them at home. This dramatically reduces the workload, of course, because the paramedics don't have to come to the home to check up on the patients. It's all now done remotely. CloudDx has signed six contracts in that space so far this year, by far the largest at any vendor. And there are more paramedic services across Ontario that are considering adding virtual care to their program. So this program has $82 million in funding. It continues to grow. CloudDx so far is absolutely the leader in delivering this kind of care, which is making a huge difference to seniors across Ontario. Next slide. Andrew, thank you. And that just focuses on the available markets for connected health across North America. And really, we're talking about complex chronic care, we're talking about post-surgical monitoring, and then we're talking about some of these other interesting cases around care to get people out of the hospital sooner. Go ahead, next slide. Because of that, we're now addressing millions of patients through our partnerships with Medtronic and Teladoc. We have access under these partnerships to the largest group of patients of any company in our space. We continue to grow. But of course, the point we want to make is that there's a point where just on the monitoring fees alone, just for a minute, not looking at the equipment and services revenue, the company starts to break even at about 10 to 12,000 patients on system. Every quarter, we get closer to that milestone. And that is reflected in the financial results we've reported today, including in the revenue numbers and the reduction in net loss.

Next slide, please.

So again, to focus on go-to-market in Canada includes hospital systems across the country. It includes the provincial governments themselves and through our partnerships. Each one of these areas is growing. And as I mentioned earlier, the provincial government section is growing the fastest right now. In the United States, next slide. Our path to market is similar in the sense that we're working with hospital systems, including the ones listed here, but also focused on clinics that deal with patients who benefit most from remote patient monitoring. And in the course of 2022, we've identified the perfect clinic, if you will, the avatar clinic, a clinic with the right number of physicians, the right patient base, and the right mix to be able to deploy quickly. We're now adding those clinics to our system. And we're doing that through a program called Patient First, which is a proprietary methodology we've invented at CloudDX to maximize and make as efficient as possible the onboarding of patients and to ensure the highest possible patient compliance. Those two things go together in a way that's very important. It's critical for US growth because in the United States, reimbursement is not available if your patients do not meet a minimum level of compliance. CloudDx patients are over 90% compliant on system as proven by the statistics that we gather. And that compliance reassures, of course, reassures our customers that not only are they going to onboard the correct patients to benefit most from RPM, but they're going to get paid. So that growth is something we're excited about. And we're going to be talking about more in the coming quarters as well. Next slide. Last but not least, I want to touch on our technology pipeline. CloudDX is famous as innovators. We are one of the most awarded innovative companies in Canada. And there are three different technologies that are getting closer and closer to the market as 2022 has gone on. The first is our PulseWave. wrist cuff, vital sign monitor. Pulse Wave is unique in the world. It's the only cuff of its kind that measures precise, accurate clinical blood pressure and respiration rate and cardiac functions all in the same 60-second reading. That device is in the middle of its validation in FDA and Health Canada trials and is expected to complete those trials in Q1 of next year. So it's very close. The second product is our Vitality product. Many investors know that we, as part of our XPRIZE, bold, epic, innovator-winning tricorder, created a wearable device that monitors all the vital signs continuously, including clinical-grade blood pressure and five leads of ECG. And then the final product we've discussed recently is our cough analysis technology. We announced about a year ago that our cough analysis technology had been involved in a large-scale clinical study funded by the Roddenberry Foundation and Qualcomm Life and managed by the University of California, San Diego. Study finished in the early part of 2022 and results are now on their way to being peer reviewed. The cough analysis technology is a smartphone app that's capable of diagnosing respiratory diseases simply based on the sound of a person coughing. Next slide. And we want to emphasize that these products are on their way to regulatory clearance right now. But even prior to regulatory clearance, in some cases, we're able to do some business development and we're able to grow the impact of these products. For example, Pulse Wave 2 is included in our contract with Teladoc. Teladoc is phase two of our agreement. It's going to work with CloudDx to integrate the PulseWave 2 system, not only into our connected health kits, but also into Teladoc offerings, actually all over the world. The Vitality Wearable has already been chosen by McMaster University and the Population Health Research Institute for a fully funded, massive clinical study. Up to 20,000 patients who have just had surgeries in multiple sites all over North America. That agreement carries with it $400,000 in net non-diluted funding for CloudDX in 2023. And the third point I want to make is that cough analysis has recently become quite, I think, the talk of the news services because a major pharma company, Pfizer, acquired an Australian cough analysis company just a few weeks ago for $120 million U.S. dollars. That gives us a benchmark for what that technology might be worth. And that technology is not that much further ahead than CloudDX. Okay, next slide. So beginning to wrap up, the three things that set CloudDX apart from all of our competitors in this space. One is the innovations I've just discussed. the awards that come from that innovation and the non-dilutive funding that comes from that innovation so we're very proud to be named one of the top innovators in canada but that innovation is also bringing concrete benefits to the bottom line and to investors we're also known across north america with the highest patient satisfaction that satisfaction already i mentioned is key to reimbursement It also is key to our sales and marketing activities. And of course, the third point is that we're the only company of our kind that's partners with both Teladoc Health and Medtronic and seven other entities across Canada and the U.S., including Equitable Life of Canada, CBI Health, the logistics company Medio, which was recently announced, and several more. We are growing our business through these partnerships, and these partnerships are very important to the CloudDX results we're seeing right now. Final slide. So second to last slide. And just again, referring back to the fact that we are not just saying this ourselves, the things that I'm reporting to you today are backed up by published peer reviewed studies by independent third party sources. And we continue to add to our list of published papers as we've done throughout 2022. Now, next slide. And we've also discussed the awards we've won. And the next slide. There we go. So we want to again reiterate, CloudDx is meeting real needs. One in three adults across North America has a chronic illness that's reimbursable for remote patient monitoring. One in six has a neurological disorder, which is remarkable. Over 29% of surgeries have complications that lead to poor outcomes. have the studies we have the proof that proves we are changing those outcomes we have the user satisfaction and we have the footprint to grow very quickly now as you see in the accelerated growth the contracts we signed so far this year so at that point i'm going to wrap up and say thank you very much for your attention today um And we're ready to take questions. And Andrew, are we doing that? How are we doing that? We're doing that in the question section? Yes. Please use the built-in Q&A functionality in Zoom here. And Robert will be able to select questions and answer them as they come through. Once again, I'll just reiterate that this recording will be posted on our YouTube channel and will be available for review and to share with your networks within the next 60 minutes or so. I want to say that we're very, very proud of the CloudDx team for the performance that we've seen over the course of the last few months. This is a team that is relatively small, but is nevertheless delivering virtual care at the highest level. And again, part of the reason why Teladoc Health and Medtronic and CBI and Vital Air Canada and Equitable Life and Medeo and all of our partners choose to work with CloudDX is because of the teams we have. So we have a question regarding the expectation of where our stock price will be next year. And that is a great question. Thank you. It's hard to say, of course, because the markets are not currently reacting very rationally. And I mean, when you look at the performance even of CloudDx or a number of other companies in the MedTech Canadian public market space, the there's a bit of a disconnect between performance and both volume and share price part of that of course has to do with macro economic stuff inflation u.s elections the war in ukraine trade wars with china and so on and so forth we believe at cloudbx that as we continue to deliver growth quarter by quarter, as we continue to basically do what we say we're going to do, that there's no question that our share price will begin to reflect more of the value of both our current revenues, our current pipeline, but also the intellectual property and the technologies that we've created that are now on the verge of coming to market. Each one of those new technologies generates new income streams, new reimbursement codes apply to Pulse Wave 2, vitality, and cough analysis. All three of those will create will actually create new sources of revenue as each one comes to market, allowing us to grow faster. So I think when you look at the trajectory of stocks in other companies like us, and you look at where they were with the numbers we have, I think that you could make a strong case that CloudBX is potentially quite oversold.

Next question.

A question that comes up quite often in my discussions is, with all of these partnerships, is there any possibility of merger and acquisition activity? And I don't have anything reported at all on that front at this time. I think that as we begin to really make a difference, both to our clients and to our partners, a deeper partnership with some of the folks we work with is something that will naturally come to light. And whether that partnership includes an investment in CloudDX, an acquisition of CloudDX, or joint ventures, or IP licensing, all of those things are possible when you see companies like us making a difference as quickly as we plan to. I would say stay tuned for that, but I don't think it's a coincidence that a person like Mr. Fraser, for example, Neil Fraser, has joined our board. Our relationship with our partners is much more than you would think when you hear the word partner normally. We're not just sort of arm's length and buying from each other. We are very much coming to market together. very much integrating our technologies and actually cloud dx is proud to be to a certain extent the bridge between some of the largest companies in the world and we believe that role will be profitable no matter how our relationships change with those companies And, you know, again, I mean, so that's two questions on that front. You know, what would happen if I think that when we see companies that have similar technologies to ours that are at similar stage to us exiting or being acquired in one hundred and twenty million dollar US range. And we have intellectual property that we own or license around that technology. We have published data to prove efficacy of that technology. I think that it puts us in a strong position to have those kind of conversations, because the way you get that technology out to the world fastest is through the largest possible partnerships. Cough analysis in particular is... validated right now to detect tuberculosis. The preliminary results announced last year at the Union Conference on Lung Health showed our technology detecting tuberculosis with a smartphone at 91% accuracy, which is higher than a chest x-ray. Tuberculosis affects 2 billion people around the world. 10 million people a year get sick. 1.5 million people die of tuberculosis every year. It's a scourge. We have a tool that can reduce that number dramatically. Hundreds of millions of dollars is invested every year by public health agencies, NGOs, the World Health Organization, and the UN to fight tuberculosis. We will become part of that fight. That technology is potentially worth it. almost unlimited amount of money it's hard to imagine how much that could make a difference around the world it's one of the most important things we're working on so when we see that activity and when we see what we have to bring to market and the relationships we're building around that i think it's only a matter of time before investors recognize that and that will have we hope a positive impact on both our share price and our market cap So we'll give it another minute or two to see if there's any further questions. And obviously, if you thought of a question after we're finished, you can always email it in. Again, we'll just reiterate, CloudDX has had, I think, an excellent quarter. We're having an excellent year. And the year is meeting expectations that we have mentioned in previous earnings calls and in previous announcements. One more question, I think, and then we'll begin to wrap up. Are we going a platform route? And I think that's a great question and a great point. When you're a platform, in my understanding of the term platform, it means that you fulfill multiple functions for multiple parties. It means that a customer can come to the table and use your toolkit to accomplish something that they weren't able to do before. It may not even be the same thing as your other customers are doing. And when we see the inflation from two use cases to 12 use cases so far in 2022, I think it absolutely justifies that we are becoming a platform. We integrate with more technologies. We're able to integrate with electronic health medical records. We integrate with partners systems at Meditronic and telehealth. And so being a platform gives us maximum flexibility. And it means that customers can use CloudDX for their use case. And that, of course, increases our opportunities to grow. I have been reminded that we are in the middle of closing the first tranche of a private placement financing that was announced just under a month ago. And so that financing is a convertible note. It's a secured convertible debenture. It's an 18 month note. There's a four month hold after closing and it's expected to close any day now. The debenture note is secured by the assets of the company, including the intellectual property we've just been discussing. It pays 18% interest and it converts at 16 cents a share Canadian. Now, I want to point out, I get a question all the time about the 18% interest and what prompted that particular relatively high interest rate. And the good news is that we're able to do that because it's a non-brokered raise that most of the investors in are existing investors and insiders board members founders that means that on the vast majority of the funds raised in this private place but we're not paying commissions to brokers it's not we have anything against brokers and brokers are participating but so much insider interest we reduce the amount of commissions we have to spend dramatically and that means we can pass some of that on to investors in the form of a higher return on the coupon rate that's the reason that number was chosen And it's proven to be very popular. That raise will close in the next few days. And you may have seen emails regarding that raise. If you're interested, please reach out and contact our investor relations team. They'll be able to answer your questions or refer you to me. And it is still possible to participate in that raise until it closes.

All right. If there's no more questions. Oh, one moment.

Well here's the question last question, what is Neil Fraser the former President of Medtronic looking forward to most about CloudDx growth? I don't know for sure how to answer that, that might be a question I can refer to Neil in fact, but I can say that. As mentioned in the press release that we announced yesterday announcing Neil's appointment. Neil had a chance to participate in very, very thorough due diligence of CloudDx prior to announcing the partnership with Medtronic Canada. We went through seven months of due diligence with Medtronic at the most minute level, site visits, customer referrals, security reviews, you name it. We really had a chance to show Medtronic Canada what we could do. And that led to a very strong interest in working with CloudDx on our mission, which is to make healthcare better for everyone. Neil announced his retirement from Medtronic in July. And then he had to work out the last period of his work with Medtronic, but he literally joined our board the first minute he had a chance to, because we totally aligned on our goals together, which are also aligned with Medtronics, which is to bring the benefits of virtual care to as many Canadians, and again, as many people around the world as possible. And I think that our performance in the last quarter shows that we're absolutely accomplishing that. I think with that, we're gonna wrap up today. Thank you again for your time and interest in CloudDx. I want to, again, Thank the team at CloudDX for their incredible hard work and all the success we're seeing so far this year in 2022. Again, if there's any other questions, please refer them to our investment relations team and have a great afternoon. Thank you very much.