Cloud DX Inc.

Hello, everybody. Thank you for joining our Q3 2023 earnings call. I'm Robert Gall, the founder and CEO of CloudDx, and I'm very happy to take you through our numbers year to date and our numbers for the third quarter. Please note this disclaimer. There may be forward-looking statements during my presentation, and this disclaimer is also in our investor deck, which you can access on our website. Okay, jumping right in, the agenda for our call this morning slash afternoon we're going to obviously go through some financial results for Q3 and year to date and then we're going to talk you know about our accomplishments this year so far in the context of our financial results I'm going to mention some upcoming investor conferences that we'll be presenting at. And then we'll just go through a little bit more about our operations and what's really happening this year so far in operations and what that picture might look like for the next few quarters as well. And then time permitting, we're going to be able to take questions. Please ask your questions in the Q&A button at the bottom of the screen. That's the Zoom Q&A button. That way we can have a record of questions. And if for whatever reason we don't get to a question today on the call or on the earnings call, we will respond by email. So jumping into the highlights for the third quarter, what we really want to emphasize in the story for not just the third quarter, but the whole year is the story of increasing revenue and managing our costs very carefully and aggressively so that our adjusted EBITDA is improving very quickly. Revenue from operations across the board increased in Q3, a 26.8% increase in subscription revenue. And again, these components of our revenue, we'll touch on this in a minute again, but subscription revenue is monthly recurring revenue. from all of the patients that are deployed through the CloudDx connected health system. Product revenue is the sale of connected health hardware that's used by patients in their homes to monitor their health and their vital signs. Professional services involves a whole basket of services, including customizations, integrations into electronic medical record systems, coming up with new features for clients and so on and so forth. The good news here is that gross profit margin at CloudDX went from 69%, which is already pretty good, to 85% in Q3. So that's an outcome of the increasing percentage of subscription revenue that makes up our revenue mix. As our number of patients deployed increases over quarter after quarter after quarter after quarter, you're going to see that subscription revenue percentage of overall revenue continue to increase going forward like a big snowball rolling down the mountain. And that is very much what's happening here as well. Operating expenses were reduced compared to this time last year by over a million dollars. that is a combination of some right sizing and management of our staffing and aggressive pinching every penny when it comes to things like software subscriptions and even reducing our real estate costs, everything we can do to manage our costs aggressively and sprint as fast as we can to profitability and a positive adjusted EBITDA. And of course, the good news here is that adjusted EBITDA number is down dramatically. We've reduced our negative EBITDA by nearly half compared to this time last year. And that is also going to play out in the year to date numbers. Andrew, next slide. So here again, we see the revenue numbers increasing dramatically. And again, that subscription revenue number is now up 75% year to date. And that's the clearest possible indication that The contracts we signed in the last 12 to 18 months have led to increases in patient enrollment, which of course is driving through revenue as our subscription numbers increase. But product revenue is also up. And that's the result of some of the large contracts we signed during 2022, or sorry, 2023, and the hardware purchases that go with those contracts. And then even more professional services revenue, of course, has rolled in. And because the large government contracts that we sign with entities like Alberta Health Services and the Alberta Central Zone Primary Care Network and our master contract with Mohawk MedBuy, these are large These are contracts that cover large populations, multiple locations of hospital systems. There's almost always increased professional services revenue attached to these contracts because we're modifying our software. We're making it better for these large government clients. And that will continue going forward. Gross profit on a year-to-date basis has gone from 67% to 77%. Again, that percentage of gross profit increasing because the percentage of subscription revenue as an overall part of the revenue mix continues to increase. And so now here we see on a year-to-date basis that adjusted EBITDA is down nearly 30% versus the nearly 50% we saw in Q3. So again, that just shows you that this adjusted EBITDA number is getting better and better and better every quarter as we get closer and closer to cash flow positive. So that leads us to just a summary of our accomplishments so far in 2023. Next slide, please. And just to summarize, overall revenue for the year is up 32%. Year-to-date gross profit is up 52%. For the very first time in the history of CloudDX, our profit has exceeded 1 million Canadian dollars, which is a really great milestone we're very proud of and very excited about. Hopefully, we'll be knocking down the next milestone in that category very quickly. As you'll see in just a minute, we are now, I think, pretty much undisputed the Canadian leader in remote patient monitoring services. We've won eight out of the last eight competitive RFPs that we've entered. And that's led to the announcements of over 20 large contracts we've signed so far this year. Year-to-date subscription revenue, this highlight subscription revenue up 75% is really the big takeaway from my earnings call today. That's the trajectory that CloudDX is on. That's what we need to see in order to become profitable in the next few quarters and from there to really grow as quickly as we can. And of course, that, as I mentioned earlier, feeds through into that dramatic reduction in negative EBITDA. It's down by nearly half so far in Q3. And that also is seen in the year-to-date numbers as well. And just the last point, we have been successful this year at raising funds. In a tough market for small and micro-cap companies to raise funds, between the two private placements we've announced so far this year, we've raised over $6.5 million Canadian dollars in net capital. which is allowing us to grow as fast as we're growing now and is an important component in getting us to that profitability. Great. Excited to announce we're speaking in two upcoming investor conferences. The Maxim Group, which is a well-known investment banking firm out of New York, is holding their virtual healthcare IT conference on January 24th and 25th. I believe that I am presenting on the 24th. And we will also attend the microcap conference in Atlantic City, New Jersey this year. And I'll be presenting at that conference on the 31st of January. And we'll announce additional conference attendances coming up at the time of our next webinar. To review what exactly CogDX does for our clients, there's the three components we've discussed with regards to our revenue, connected health devices, which is tablet computers, blood pressure cuffs, weight scales, pulse oximeters, thermometers. These are the devices that are prescribed by clinicians that are sent or given to patients for use in their homes that the patient uses on a regular basis in order to manage either their chronic illness or to help them recover after surgery. and in fact for a number of other use cases now that include rehabilitation after long COVID, rehabilitation after surgery for heart conditions and cardiac surgery, pulmonary rehabilitation, even palliative care. So the hardware that we sell earns CloudDX somewhere in the neighborhood of 20% to 30% gross margin on the hardware. Some of that hardware we manufacture ourselves through a contract manufacturing relationship. Other hardware, like the tablet computer, for example, is off the shelf. The hardware connects seamlessly to our software platform, which is very robust at this point. The software is both... Assisting the clinicians to monitor the patients. So the software in the background is looking for exceptions to vital signs, exceptions to survey answers. It's looking at patient compliance behavior. And when any of that changes is then sending the clinician a notification that that patient is now offside and needs to be addressed. But also presenting that information in a way that smooths out and makes patient workflow or clinician workflow for patient care even more efficient. The highest and best example of that so far this year has been the launch of the Protect Lab. which is a command center now located in Hamilton Health Sciences in Hamilton, Ontario, where the telemetry from over 2,000 patients flows into one command center managed by six on-duty nurses 24-7 and allows those six staff members to triage the information from thousands of patients and make sure that the right clinician is informed at the right time. We're very excited about the launch of the command center. It's a model that makes virtual care as efficient as possible today. And it's the first command center of its kind in Canada, powered exclusively by CloudDX. Then I mentioned integrations, customizations. This is the work we do to make our software even more effective and even more efficient and to flow data through our software and into electronic medical record systems like Epic and Cerner. A really great example of this is a project that was launched in 2022 and press released in 2022, the Continuous Connected Patient Care Project. which is a $12 million project managed by Medtronic Canada and the Digital Technology Supercluster where CloudDx is integrating a new Medtronic continuous pulse oximetry device onto our platform and working with a partner, Accelar, is then flowing that data through to the Cerner instance of the Cerner EMR used by Providence Health in British Columbia. That project is exciting for a couple of reasons. First of all, it's a high six-figure revenue project for CloudDX. We're actually being compensated by the funding from the supercluster to do this integration. The original body of funding was approved at $560,000 and has since increased. Not only that, once this device is actually integrated into the system and the CloudDx portion, which is the patient-facing and clinician-facing portion, is complete, CloudDx and Medtronic intends to market that whole platform literally all over the world. But the third point that's important is that this is one of the most complete EMR integrations in Canada. It's a very in-depth integration into the Cerner EMR, and Cerner is the second largest EMR in the whole world. So that project ticks a lot of boxes and is a great example of how CloudDX earns additional revenue and additional funding in order to complete these projects to then take them to market, and they will then become what we hope to be large revenue centers in 2024, 2025, and onward. And that is reflected in our partnerships with both Medtronic and with Teladoc Health as well. Next slide. So just to reiterate, the reason why virtual care and remote patient monitoring is growing so quickly, not only in Canada, but also in the US and other parts of the world, is that, in fact, it has a large return on investment and benefits virtually all the parties in the healthcare ecosystem. Patients love it. We've mentioned several times in various webinars and presentations that our patient satisfaction numbers at CloudDx are virtually as high as they can be. They're over 95% in multiple third-party surveys and even in published peer-reviewed scientific papers. The patient itself Patients themselves really enjoy not only using these tools, but also enjoy the fact that they're connected to their care team through this channel. And there's a feedback loop that's helping to monitor their care and make their care better. So it's very important that it's very, very connected to the patient. coin a term providers which means clinicians doctors nurses respiratory therapists they appreciate that they're able to care for more patients with the same workload that's kind of why they're in this business in the first place but it also makes care more efficient it means their whole day is not at any time caught up with phone calls to patients it's a smart software system managing patients for them and then only allowing the patients who need care the most to be brought to the surface as far as notifications are concerned. So clinicians also really, really love our system. And that is also reflected in third-party surveys and third-party net promoter scores done by lots of our large clients. The payers, which in the Canadian context is the provincial governments, the health authorities, and in the US context is Medicare, Medicaid, private insurance, see a large return on investment from virtual care. More efficient care means less expensive care. It also means fewer hospitalizations, fewer ER visits, fewer readmissions to hospital in the U.S., which are not compensated by Medicare. So it's a chance to not only care for more patients, but also care for patients more efficiently, deliver better care. And that's ticking all the boxes in virtual care, which is, of course, why we're seeing so much growth. Next slide. What makes CloudDx different than all the other virtual care companies and the reason why we continue to win competitive RFPs over and over and over again in the face of extremely stiff competition is that we have innovations in our system that no other company can share. We have new technology coming to market in the next two years that includes continuous vital sign monitoring. It includes monitoring of multiple vital signs by one device. It includes even three-dimensional augmented reality virtual interfaces, which are at the very cutting edge of VR and AR, which meets artificial intelligence. Our satisfaction scores not only represent a very high level of customer service, they also drive compliance to care. Satisfied patients are compliant patients. Compliance to care is a cornerstone of delivering care virtually because if the patient's not compliant, you're not delivering that care. So that feedback loop of satisfaction and compliance at the highest possible level is a very strong differentiator for CloudDX and one of the reasons why we continue to win the RFPs we do. And I'll also mention that our partnerships with companies like Teladoc Health, Medtronic, and our master contract with Mohawk MedBuy, just as three examples, open stores, the due diligence that was done on CloudDX before those contracts and those partnerships were created, gives us the credibility of the market to scale as fast as we're scaling now. Next slide. And this is a representation of that scale. In 2023, we've now become The market leader in Canada with the Mohawk MedBuy contract, which was announced in June, covering the entire country. Mohawk MedBuy has over 100 hospital systems and provincial governments as members. Any one of those hospital systems or provincial governments can now simply order CloudDX from the Mohawk MedBuy master agreement at set pricing without an RFP. That streamlines the adoption of virtual care in a way that we are going to start seeing really roll out next year and the year after. It's going to be a remarkable sea change in the way Canadian care is delivered. That's covering the whole country. But then individual provinces like Alberta have chosen CloudDX after very competitive RFPs to be the sole exclusive vendor for RPM services. And in the case of Alberta, for four and a half million people. Additional RFPs like that may be coming to light in the next few quarters. But already the RFPs we've run so far cover nearly the majority of Canadians. And then the final piece is hospital and county level contracts. And a great example of that in Ontario is the extremely strong penetration from CloudDx into the community paramedic business. In Ontario, the long-term care ministry, not the health ministry, long-term care funds the a virtual care community paramedicine program. That program has renewed its budget at 175 million Canadian dollars going forward from 2024 and 2025. We have 13 contracts announced so far with community paramedic organizations in Ontario, And in fact, are really the most dominant player in that niche, if not the only player. That additional growth in that area is certainly something we're looking forward to. But already we have such a strong foothold there. The concept of using paramedics and community paramedicine to deliver remote monitoring has started and it's been proven to be very effective in Ontario. We're optimistic that additional provinces and even U.S., counties and state government will begin to use that channel for RPM. And if that's true, CloudDx and the Ontario paramedical organizations will be the thought leaders in that very exciting new vertical. So this is just an example of how things have gone so far. In addition, CloudDX continues to add to our IP portfolio. During 2023, we've announced so far two new patents were granted. Additional patents are still pending, and those patent announcements are still coming. Next slide. And I do want to mention again that CloudDX continues to be well represented as one of the most innovative companies in the world with regards to awards. And I bring this up in the context of investment and in context for investors because awards, especially awards that are competitive awards or genuine awards are not awards we pay for. they are a strong indication of cloud dx's leadership and dominance in rpm but many of them also come with non-diluted funding and that is an important aspect of cloud dx and our growth non-diluted funding from sources grant sources and awards like the ones noticed here allow us, without diluting investors, to add to our portfolio of patents, to add to our strong leadership and innovation, and bring new products to market. And those products are paid for and funded by money that we did not have to dilute investors with. Next slide, please. So that wraps up my presentation today. Just to reiterate, CloudDX is a real leader now. The dominant leader in Canada, a growing and aggressively growing leader in the U.S. with regards to RPM. All of our sales and marketing focus in 2024 will be in the U.S. context. Our growth in Canada will now be through the contracts we've already signed. We're a trusted partner with some of the largest technical companies in the world. We are growing and not only growing aggressively from the point of view of top line and sales, but also from the point of view of adjusted EBITDA, which is the trajectory that we've been focused on for the last nine months. That makes us, to this day, still an awesome opportunity for investors. Obviously, this sector in Canada, health technology microcap sector has not seen a lot of investor attention in the last little while. We are optimistic that's going to change in the next several quarters. And if it does and when it does, we plan to be at the top of everybody's list. All right. Thank you very much. At this point, I'm happy to take questions. I'm going to pull up the Q&A here. And here we go. So let's see. So, great question on regards to US strategy. From the point of view of US remote patient monitoring, during 2023, up until really the end of the summer, our focus had been on primary care clinics. We have four large primary care clinic contracts in the U.S. so far, and we are still addressing the primary care clinic level, in particular concierge medicine clinics. The type of clinic that we're looking at is a clinic that has between four and 10 doctors, between 1,000 and 3,000 patients. And that clinic can earn new reimbursement dollars from the various sources of reimbursement in the U.S., somewhere in the million to a million and a half dollar range. And each one of those contracts is worth several hundred thousand dollars a year in recurring revenue to CloudDx. We still believe that niche is very, very important. But there's been an interesting development in the US from the point of view of hospital at home. This is a growing movement that allows hospital systems in the US using virtual care to admit a patient to hospital, but then send them home so that they receive their care in the home. with a traveling nurse or a virtual nurse monitoring the patient and