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spk05: Good afternoon and welcome to the CloudMD Q3 2021 earnings conference call and webinar. My name is Valerie and I'll be a conference facilitator today. As a reminder, this conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. The company invites its covering analyst to ask questions during the conference call by pressing star then the number one on your telephone keypad. If a covering analyst would like you to draw their question, please press the pound key. Thank you. It is now my pleasure to turn the call over to Julia Becker, Vice President, Investor Relations, for the opening remarks.
spk04: Thank you, Valerie, and good afternoon, everyone. Thank you for joining us today, November 29, 2021, for our third quarter earnings conference call and webinar. We'll start the call off with our CEO, Dr. Issam Hamza, followed by our President, Karen Adams, and our Chief Financial Officer, Daniel Lee, who will provide a recap of the company's third quarter 2021 financial results before opening up for a question and answer period from our covering analysts. A friendly reminder that today's discussions contain certain forward-looking information, which involve inherent risks and uncertainties and other factors that could cause actual results to differ materially from management's current expectations. Forward-looking information should not be interpreted as assurances of future performance or results. The risks related to forward-looking information are described in the company's most recent AIF and in the management discussion and analysis for Q3 2021, which are both available on CEEDAR. We encourage you to review our public disclosure in the context of all forward-looking information that you may hear today during this earnings conference call. Investors are cautioned not to place undue reliance on such forward-looking information and that such information is considered reasonable based on information available to management as of today. However, the company disclaims any intention or obligation to update or review any forward-looking information as a result of new information, future events, or for any other reason except to the extent required by law. With that, it is my pleasure to turn the call over to Dr. Issam Hamza, CEO of CloudMD.
spk01: Thank you, Julia. Good afternoon, and thank you for joining us for our third quarter 2021 earnings call. We are delighted to share our financial results representing the first full quarter with all of our previously reported acquisitions closed and consolidated. This is the first quarter where our investors can start to see the full impact of CloudMD's strategy. Through the execution of the strategy, we generated $39.2 million in revenue, representing over 1,000% year-over-year growth and positive adjusted EBITDA. demonstrating the operating leverage inherent in our business model. We've increased our adjusted EBITDA margin for six consecutive quarters as we've successfully executed on our integration playbook to generate significant synergies. Let me now talk briefly about the underlying philosophy that guides us and has led to those outstanding results. CloudMD was born out of the frustration of dealing with the inefficiencies and ineffectiveness of the traditionally broken healthcare system. Many of you are here because, like us, you recognize the failings of that system. For example, inefficient use of resources, siloed care, outdated technology, employers or payers dealing with rising costs despite worsening outcomes, and doctors and nurses that are overwhelmed and exhausted. Our team of dedicated medical professionals understand the historical shortcomings and the different pain points of those various stakeholders, As a result, we have created a health tech company leveraging proprietary patented technology, which is focused on an integrated outcomes-based approach to healthcare delivery, and which improves efficiencies, provides better access of care, and better health outcomes. We know that payers and providers prefer integrated end-to-end solutions because it simplifies partnerships, improves return on healthcare spend, and leads to better individual health outcomes. we've carefully built a leading integrated solution through a combination of strategic acquisitions and purposeful technology innovation. All these targeted acquisitions fill an essential part of our healthcare ecosystem in either our enterprise health solutions or digital health solutions product roadmap. Most of these were not for sale on the market and were founder-led companies that, like you, align with the CloudMD vision. We are uniquely positioned to deliver a comprehensive integrated health offering based on our patented real-time intervention platform, or RTIP, which supports data interoperability, cybersecurity, and the ability to merge separate applications into a single platform. It is the backbone of our comprehensive platform and allows us to integrate various health capabilities, such as care navigation, physical health, mental health, virtual care, and health education, to name a few. This integration allows us to navigate an individual's unique health journey within one connected platform and provide outcome data back to the stakeholders. RTEP makes it much easier and more effective for us to continue adding new capabilities onto the platform, share data in real time, and operate as an end-to-end solution. It also allows us to scale rapidly and enter new geographical locations by plugging provider networks into our backend. On the call today, I'm going to have Karen talk about three key focus areas that are driving growth and shareholder value. One, we are driving synergies and integrating capabilities to improve growth and profitability. Two, through our enterprise health solutions division, we are delivering an excellent end user experience for all stakeholders, which is driving successful customer acquisition. Three, Through our Digital Health Solutions Division, we have developed proprietary technology that enables engagement of individuals in supporting health issues, while at the same time empowering regulated health professionals' productivity. I'll now pass it over to Karen to review in detail how we will execute against each one of these focus points. Karen?
spk06: Thank you, Issam. I'm very proud of our strong, solid performance in Q3 2021. The team has done an incredible job creating a growth-oriented, efficient, profitable business that provides a superior product for the markets we serve. Our business units have accelerated our ability to transform the way healthcare is provided with a focus on an engagement, proactive measurement, and health outcomes. I want to turn those to the focus areas that Issam outlined. Focus one, we are driving synergies and integrated capabilities to improve growth and profitability. In our most hyper growth phase, we completed 14 acquisitions. This is the first quarter where we can recognize the full benefits of those acquisitions. We have successfully identified and realized significant revenue expansion and cost synergies as we executed on our integration playbook. We've identified and executed on $1.5 million in annualized synergies this quarter, significantly more than we announced at the time of those acquisitions. In Q3, we continued to execute on our integration plan by bringing businesses together in our operating divisions, creating strong operational leverage. In addition to that, we drove reductions in administrative, technology, finance, and data costs through implementation of a shared services model. We also continued to reduce customer acquisition costs by increased revenue synergies a unified sales strategy, and an expanded client base from these already proven capabilities. Internally, we are tracking and focusing on attach rate, and while it is not a measure we are sharing yet, this cross-selling will be a key driver of growth going forward. We are creating client success teams that enable our ability to work with clients on their health and productivity needs, while creating multi-product solutions with measurable outcomes. We are able to demonstrate to clients for the first time evidence that the programs they implement improve symptoms and well-being using the right group benefit program. The results of our hard work are clear. We've grown annualized revenue per share every quarter, with that number more than doubling from Q2 to Q3. We've also improved adjusted EBITDA margin each and every quarter this year, as we've driven synergies and generated operating leverage. We've taken a disciplined approach to integration with well-defined processes and a dedicated team. Our mental health support services, or MHSS, is a perfect example of a focus on growth with the right cost structure. We've integrated people, process, and technology of three separate EAP and mental health companies into one solution, providing what our clients are defining as a first in-market solution. We are leading the industry in mental health coaching and navigation while seeing client adoption and annualized organic growth of 16%. The acquisition of MindBeacon is expected to solidify our position as the leading North American comprehensive mental health solution that uses a clinical, data-driven approach to engage and monitor improvement for a return to function. The proven capabilities of MindBeacon's internet-based cognitive behavioral therapy, or commonly referred to as ICBT, coupled with our employee assistance program and our industry-leading health coach and navigation solution are a powerful synergistic combination of industry-leading programs. We are confident that with MindBeacon, we will be able to replicate our integration strategies and upon close with a comprehensive product immediate cost savings and revenue expansion through our broad client base. We plan to continue to create a stronger, more profitable company by sticking to our disciplined approach to M&A, our well-defined innovative capabilities roadmap, and executing on our proven integration playbook. Focus two. Through our Enterprise Health Solutions Division, we are delivering an excellent end-to-end user experience for all stakeholders, which is driving successful customer acquisition. Our integrated health services platform continues to provide an outstanding measurable results for our clients. We're seeing a net promoter score of over 80, a 98% user satisfaction rate for our mental health support services, and increasing client adoption rates quarter over quarter. This points to the fact that we were providing a measurable return on our clients' healthcare spend, which is very important as healthcare costs are rising, and it becomes increasingly important to demonstrate value to the markets you serve. As a result of these outcomes, client adoption of our solution accelerated in Q3. Our strong sales conversion experience has resulted in an additional 154 customers adopting our enterprise health solutions offerings, up from 156 in the previous quarter. This includes new clients in such sectors as retail, transportation, financial, and two large drug companies. We now have a total of 560,000 lives on the platform, up from 260,000 lives in Q2. It is also important to note we are performing incredibly well with a win rate of 90%. based on our strong assessment, navigation, and value proposition. We have a number of proposals out with clients in our absence management and occupational health business to provide comprehensive health and wellness support. We are leveraging our assessment business to provide a more comprehensive offering with the addition of our mental health treatment, resulting in reduced disability days and higher client satisfaction. I'm also proud of our mental health support solutions team in the announcement this morning by Sun Life. Sun Life started as a paid pilot earlier this year for their employees. The pilot delivered measurable mental health results, including 89% of those suffering from depression and 91% suffering from anxiety and experiencing major improvements. It also saw a 46% increase in plan members utilizing their mental health benefits for the first time. It is my observation that during the last year, companies are clearly demonstrating their commitment to mental health by expanding EAP programs and including an increased paramedical spend to ensure access to care. Our EAP program was founded on nurse navigators to improve the plan member experience. This increased spend in paramedical benefits for mental health will only be of benefit when you pair it with a health coach to ensure the right programs with the right therapist and accountability for outcomes. This program is proving to deliver on just that. Based on the results, Sun Life converted from a pilot to a partner and will roll out our health coach product across plan sponsors throughout 2022 as part of its group benefits offering. We are appreciative of the support of Sun Life in recognizing the importance of this type of program we have developed. To compete in the future, you need to provide whole-person team-based care that produces measurable results. Our comprehensive platform is providing this to clients and their members, driving new client wins and growing share of clients' wellness. Our comprehensive platform addresses mild, moderate, acute, and chronic mental and physical health with a variety of treatment options from low-intensity to high-intensity, and most importantly, one that shares data across all treatment types to continue to improve outcomes for individuals, practitioners, and payers. Finally, focus three. Through our Digital Health Solutions Division, we are developing proprietary technology that enables engagement of individuals in supporting health issues while improving regulated health professionals' productivity. The Digital Health Solutions Division launched a new unpaid pilot program in Q3 which is a long-term care product focused on lowering risk and improving the quality of life through better digital screening, tracking, and monitoring. We've also been in user testing for our new online eye examination expected to launch in early 2022. These are just some of the examples of our team working hard on new innovations that will drive growth in the future. MindBeacon's Beacon in a Box is another development we are excited about and believe will be additive to the various tools we can provide practitioners in our clinical network. It adds a white label ICBT that they can use to augment their care. One of the other large drivers of growth in the quarter was our real-time intervention platform. While our tip is the backbone of our comprehensive health ecosystem, we also sell it on a contract basis. During the quarter, it saw strong growth from new contracts with various federal and state-level entities in the United States. Our tip is being used in the battle against substance abuse as an innovative health data integration and security technology solution, leveraging various information-sharing standards, and is already operational across 38 states and local agencies to address the opioid crisis. With that, I'll pass the call to Daniel to further discuss our financials.
spk10: Thank you, Karen. As Isam and Karen touched on, this was the first quarter with all of our previously announced acquisitions fully consolidated, providing a clear view into our business. We have built this company for sustainable growth and operating leverage, which will allow us for future tuck-in acquisitions. We are very pleased to share the early results of those efforts with you. Q3 2021 total revenue was $39.2 million compared to $15.7 million in Q2 2021 and $3.6 million in Q3 2020. The increase is attributed to having a full quarter contribution from the four acquisitions completed in Q2 2021. Excluding acquisitions, the company achieved a strong year-over-year overall organic growth rate of 11%. Enterprise Health Solutions contributed $19.6 million in the quarter, as Q3 included a full quarter contribution from Oncidium. During the quarter, Oncidium had elevated revenues above and beyond their previously announced run rate due to some short-term pandemic-related services. The pandemic has highlighted the need for mental health and a comprehensive offering can help employers improve the well-being of their employees. The Enterprise Health Solutions Division also achieved a 16% annualized growth rate from the mental health support services to business compared to Q2 2021. As Karen stated, we continue to add new customers in the quarter, and we are excited about the proposed acquisition of MyBeacon, and how its ICBT solution will augment our comprehensive offering and expand the number of treatment options for individuals. We continue to market these solutions as standalone, but are winning based on offering a variety of solutions and the option for end-to-end integration care. Digital health solutions generated $10 million in revenues as we signed and executed new customer contracts. adding to our strong recurring and reoccurring revenue base. Digital health solutions achieved a 43% annualized organic growth rate over Q2 2021. This increase was primarily due to solid execution of delivering contract services to various U.S. government agencies. Clinics and pharmacies continues to perform well with $9.6 million in revenue during the quarter. representing 229% year-over-year growth. Including the proposed acquisition of MindBeacon, which will be integrated into the Enterprise Health Solutions Division upon close, we expect approximately 55% of our revenues to be earned from the Enterprise Health Solutions Division, approximately 25% from Digital Health Solutions, and approximately 20% from clinics and pharmacies. Looking ahead to Q4, it will be a quarter of strict organic growth as we do not anticipate closing any new acquisitions during the quarter. We target 10% year-over-year organic growth, but recognize that quarter-over-quarter growth isn't as straightforward due to things like contract timing and seasonality. Gross profit in the quarter was 34%, down from 35.5% in Q2. The slight decline was due to a change in mix of revenue. Notably, our online eyewear platform, specialty drug wholesaler, and patient support programs, which are currently lower margin businesses, grew rapidly in the quarter and made up a larger proportion of total revenues. While we expect some fluctuation in gross margins going forward due to the shifting mix, we continue to target low to mid 30% gross margins. We've done an incredible job and I'll take a second to pause and commend the team on their ability to drive synergies and control costs as we've scaled. This quarter, we added an incremental $23.5 million in revenues while only increasing operating expenses by $5.6 million. To put it another way, we've decreased operating expense as a percentage of revenue from 79% in Q3 2020 to 32% a year later in Q3 2021. We believe we are proving we can integrate acquisitions, drive cost savings, and increase profitability. While there may be some momentary step-backs in this trend as we consolidate MindBeacon, I have complete confidence in our ability to once again execute and produce the same cost savings and profitability. I'm proud to say that this quarter we reached positive adjusted EBITDA for the first time. We generated $800,000 in positive adjusted EBITDA. We're at 2% adjusted EBITDA margin. We expect continued improvement into Q4 as we find additional cost savings and improve our operating leverage before a temporary step back as we consolidate and mine begin in Q1 2022. We ended Q3 with $54 million in cash. Following the closing of the mine beacon acquisition, and after all payments in respect of that transaction, we expect to have over $60 million in cash on hand. We expect that there will be more than enough to continue to execute on our strategic roadmap, integrate our capabilities, and improve profitability. I'll now pass it back to Usam for some final comments.
spk01: Thank you, Daniel. So we've outlined a vision for our shareholders of an integrated outcome-driven health tech platform. We are executing on that vision, adding capabilities through acquisition and innovation to create a full-service offering that eliminates siloed care and through our patented data interoperability platform interacts smoothly together to create better individual outcomes. Each quarter, the fundamentals of our business have improved, and we demonstrated that the plan we have in place is the correct one, and that we have the team necessary to execute on it. Over the last year, we've grown revenues over 1,000%, and even on a per-chair basis, which accounts for dilution, used to build the platform. We've grown it 485% year over year. We've improved profitability every quarter, and most importantly, the offering we present to clients today is a mile stronger than what it was a year ago. Our recently announced transaction with MyBeacon is another step on our roadmap, which will bring in another important capability by buying the leading provider in the market today. While we expect to take a short-term step back in profitability, we anticipate that we will once again drive improved profitability and per-chair revenue as we integrate and scale this new capability. To that end, we've already identified an additional $2 million in potential synergies over and above what we announced at the time of the MyBeacon announcement. I'm incredibly proud of what our team is building. Their hard work, dedication to cost control, and focus on delivering superior health care outcomes has made this possible. With that, I'd like to open the call for questions. Operator?
spk05: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star then 1 when you touch the phone telephone. Again, if you would like to ask a question, please press star then 1. One moment, please. Our first question comes from Scott Schoenhals of Stevens. Your line is open.
spk11: Hi, Isa. I'm on the team. Congrats on the strong quarter. I wanted to dig further into the pending MindBeacon acquisition you recently announced. I believe MindBeacon had us around 5,500 corporate clients currently. Just wondering if there was any client overlap there at all with any of your EHS customers and how you see the cross-selling opportunities once this pending acquisition is closed.
spk01: Yeah, thanks, Scott. That's a great question. You know, the great thing about our roadmap that we had and with each one of our acquisitions that we targeted, there are great companies on their own growing on their own, but together we saw a lot of opportunities for cross-selling. There is some competition. overlap of the customers, and I'll have Karen kind of explain a little bit in terms of our cross-selling strategies going forward.
spk06: Thanks for the question. So there are some clients that are overlapped, but the interesting thing is that as clients are looking to consolidate capability and deliver superior products to their employees, We see this as a great opportunity for the ICBT product and our mental health support solutions to come together to provide access to care and really start to align to people's preferences for how they receive treatment. So for us, this is going to be a win-win for the clients in our ability to come together with a solution that I think will provide stronger outcomes for the people using the services. And I should mention we've already had some of the clients reach out to both organizations asking to get together to start to talk about what this new product offering can look like as a cohesive platform.
spk11: Great. That's great color, Karen. Then as a follow-up, how should we think about ongoing gross and adjusted EBITDA margin expansion in the longer term? Should we expect gross margins to expand in EHS past the legacy 50% levels that MindBeacon was achieving on the gross margin side, given the larger scale, and then the cost synergies over the next several years on the EBITDA margin side. Thanks, guys.
spk01: Yeah, thank you. Dan, if you can speak a little bit to the gross margins and the plans for that.
spk10: Sure, great. Thanks for your question, Scott. So With respect to MindBeacon, they do operate at a much higher gross margin. And so we do expect that upon the completion of MindBeacon, which we anticipate will occur sometime in January, that will increase our gross margin. For Q3 2021, our gross margin for enterprise health solutions, I believe we reported on our financials 42.9%. And so we do expect that to gravitate to the mid-40%, if not even higher than that. And so we do expect that there will be significant synergies as it relates to the cost of sales within MindBeacon as well as within CloudMD. With respect to EBITDA, we did announce initially a $2 million in annualized cost synergies. In addition to what Yisong had mentioned earlier on the call, we've identified a further $2 million. And so we've begun having discussions with MyBeacon on an integration plan, and we will provide a further update to the market following that. But we do have plans to return back to profitability And, you know, what I would say is that we do expect sometime in the back half or as we exit 2022, you know, for us to be approaching back to profitability once we start executing on some of these integration efforts and start realizing these synergies.
spk11: Thanks, Steve.
spk05: Thank you. Our next question comes from Rob Goff of Ecoline. Your line is open.
spk09: Thank you for taking my question. My question would be on the Sun Life contracts. To the extent possible, can you talk to the model behind the contract in terms of the potential addressable market for benefactors? Perhaps was this a competitive win? And how might MindBeacon fit into this contract?
spk01: Thanks, Rob, and you're right, it has been pretty eventful. We're incredibly excited with our relationship with Sun Life. They're incredible leaders in their space and innovators, and they share a lot of the same values that we have, and it validates what we've been talking about in terms of measurable results for employees and showing outcome data and the value of that. So we're incredibly excited to partner with them. What I'll do is I'll hand it over to Karen to talk a little bit about the structure and the plans with Sun Life. Great. Thank you.
spk06: Thank you. Great question. So we refer to this throughout the year as the paid pilot, where Sun Life rolled it out to their employees. And we're very proud of the results. This is basically a model where employees can access a platform that and really start to get some help for mental health through a coach. And one of the biggest challenges for individuals to get help is just the whole starting treatment. And so we find that the coach is really good at reducing stigma, creating engagement, and really creating a treatment plan with objectives that people can adhere to. So that's really the product that we've created. It is an evidence-based product. I think you would have seen in the press release, we're seeing very good improvements in depression and anxiety that plan members are actually using their mental health benefits now to access for treatment. The plan with Sun Life is to roll it out for all of their plan sponsors over time. And we're just really excited that they selected CloudMD and the program, the platform is that has the health coaches that enables people to get access to care.
spk09: Thank you. And if I may, one follow-up here. Sure. With the scheme with the EHS, could you talk to your cadence for contract wins and that win rate on a quarter?
spk06: Yeah. So, I mean, you know, when we get in front of a customer, I think our big – opportunity here is just the breadth of services that we provide. And I think that where we've really seen, you know, when we do debriefs with clients when they select us and ask why they select us. And I think we're seeing quite a traction around the value proposition of the assessment and the tools and the innovation around the platform. But really what speaks to people is that all of the capabilities that we've brought to the forefront have been capabilities that have been proven for 20-plus years. And so we've taken them, consolidated them, and really created one cohesive platform for people to access the service. From the win rates, though, I would say that the largest factor for us is these nurse navigators. This whole concept of using a regulated health professional as the lead to build the trust to really ensure that people are actually accessing the right group benefit program. So it's really getting in front of the customer, and that's where that win rate is coming from.
spk09: Thank you. Again.
spk05: Thank you. Our next question comes from Nick Agostino of Lawrence Bank. Your line is open.
spk02: Yes. Good evening. I guess a couple of questions for clarification. First, for Dan, you mentioned gross margins 40% as you include MyBeacon. Can you just clarify, was that 40% on the EHS side or was that a 40% comment or 45% comment related to the overall business and what were the timelines on that?
spk10: Yeah, so Nick, just to clarify, so the comment I made was more so just with respect to EHS. So one of the things that we've now disclosed in our notes to our financial statements is the gross margin profile of our divisions. And so what you'll find is that we reported 42.9% gross margin for enterprise health solutions in Q3.
spk02: Okay, okay, that's very helpful. And then on those further $2 million of identified synergies, can you guys, can you provide commentary as to what areas, like the nature of the $2 million of additional synergies? Where is it coming from?
spk01: Yeah, I mean, first of all, when we first announced the first $2 million with the MindBeacon announcement, it was really the public market costs associated with just running the company. And since then, we've continued to work with the teams at MindBeacon and internally, and those are synergies between the two companies. I'll have Dan maybe speak a little bit more in terms of color around that, but we're also going to keep updating the market, Nick, on that. So on close, we'll update that number further. Okay.
spk10: Yeah, so, Nick, I can just expand a little bit more in terms of that additional $2 million. So that $2 million, and I just want to be clear here as well, so in addition to the initial $2 million that we announced on the announcement date for MindBeacon, and in addition to the $2 million that Issam mentioned, which is further identification of synergies that we called out In Q3 itself, we've also identified and executed on a further $1.5 million of annual cost savings that Karen had mentioned. So there's a lot of cost savings, and what that is, it's all coming from, given the fact that CloudMD has completed, I believe we completed nine acquisitions in 2021, and our integration is very, very much in progress. And through those efforts, we've identified, well, number one, I think we focused the strategy as part of being CloudMD and advancing our corporate strategy. And part of that has helped us be able to be more efficient with our dollars spent and be much more focused in terms of our product roadmap and where we want to head strategically. But there's also other costs for taking out the organization just as a result of us streamlining our systems. There's been some duplicate roles where we're now ready to have identified and we will be executing in the very near future. So the $2 million that Issam had mentioned, I would say it's a combination of our synergies from our existing acquisitions we completed in 2021 and partly also influenced by MindBeacon as we welcomed them to the organization hopefully in January.
spk02: Okay, that was helpful. Actually, just so I'm clear, is that additional $2 million, was that across, is that MindBeacon specific additional $2 million or that's MyBeacon plus all your other acquisitions, the additional $2 million?
spk10: Yes, that's a great question, Nick. So I would say it's a bit of both, to be perfectly honest, right? Because there are, let's just say, 200 employees from MyBeacon coming in. And so we have line of sight in terms of the talent, and they have a lot of great people there. And so we also did an inventory – in terms of the people and the processes and a cost base within Cloud MD as well. So that's why I'm saying it's a bit of both where we wouldn't be able to execute these $2 million in synergies without MindBeacon. So I think it's in anticipation of the people and the processes and the systems that they do have. Okay, no, that's very helpful.
spk02: And then just one last question for me. on the Sun Life, the coaching angle. Just so I'm clear with this, you guys provide a coaching service, which I understand. When it comes to if there's a therapist that's involved, is that therapist somebody that is on your... somebody internal to... to CloudMD or is that something where you are referring them to a third party group and also maybe speak to how has there been any preliminary discussions with Sun Life to provide ICBT as we move through 2022 on rollouts and adding to all that, can you maybe talk a little bit about what the gross margins are associated with the coaching service? I'll leave it there.
spk01: Yeah, no, thanks. So with regards to the therapist network, I think we got to kind of talk about two different things. First of all, our comprehensive platform that we offer, we use our own therapist network, so we have therapist networks that we can refer to. With regards to the Sun Life one, I'll have Karen speak to the way that one's structured.
spk06: So the The mental health coaching product is a product that we are offering within our Enterprise Health Solutions. We have customized it specifically for Sun Life. And I would say right now about 50% of the therapists come from a therapist network that is available on the Lumino platform that is a Sun Life platform, and 50% comes from our therapists. It really comes down to preferences, type of therapist that they're looking for, and the group benefit package that the employer will have. So that's basically where the therapist network comes from. With regards to the question on ICBT, we haven't had those discussions with Sun Life. It is brand new, the MindBeacon. MindBeacon is part of the Sun Life offering. So in due course, we will be able to open up those discussions.
spk02: Okay, and then with regards to just maybe a range on gross margins associated with the coaching service?
spk01: Yeah, we don't report on the details of the contract, unfortunately, at this time. Okay, okay. Appreciate it. Thank you.
spk02: Thanks, guys.
spk01: Thank you. Bye-bye.
spk05: Thank you. Our next question comes from Yuma of Research Capital. Yuma, it's open. Yes.
spk07: Hi, good afternoon. Thanks for taking my questions. So first, for the employer market, the company has been offering multiple solutions, for example, virtual care, mental health support, rehab, absence management, and so on. So I guess my question is, based on the current market penetration rates for those solutions, which area do you expect to generate the most cross-setting opportunities going forward?
spk01: Sorry, Toby, was it the fastest-growing opportunity?
spk07: Yeah, which area or which solution do you expect to generate the most cross-stating opportunities?
spk01: Yeah, I mean, I think Karen would agree with me, but we can confirm here. But I believe that the mental health services right now is by far what's really driving adoption and is kind of the leading product. And the great thing about it is it is something that has been – underdiagnosed, it's been underutilized, it's been underfunded, and you're seeing kind of right across the board around the world that the stigma is gone and more and more employers and government and payers are spending more money or allowing more money to be spent on mental health care. And you've seen that with a few announcements from some of the financial institutions where they've increased the funding up to, I think, $10,000 per member or per employee. And so the opportunity really is to not only navigate that patient and provide the proper diagnosis, but also provide them the right care and help them identify where to spend that money as well. Because that's been really where they, I think, they fall through the cracks where, you know, they don't know exactly what the diagnosis is a lot of times, they don't get the right therapy, and also they don't know how to spend the money, and it becomes unspent. Karen, do you have anything to add to that?
spk06: Yeah, I think you asked an interesting question. You said, what do we anticipate is going to be the highest usage product? So right now we know that over 30% of claims, number of claims for disability or for drug claims is related to mental health. And we know that it consumes more than 40% of the cost for employers. And so the mental health will continue to be an escalating issue. where people are looking for a solution to truly tackle mental health, not just superficially, but truly tackle and report outcomes. We anticipate, though, as a company, that health coaching will become our fastest growing service, because there's always a large comorbidity between mental and physical health. So things like carpal tunnel syndrome, things like There's always a comorbidity usually between, not always, but in a large number of cases, a comorbidity where we're presenting with a physical health issue, but the mental health issue is right beside. So what you're going to see, I think, from a CloudMD's perspective, is we will be expanding our enterprise health solution services to be all-encompassing, to be both a mental and physical health, and then you will only see the true impact on absenteeism and improving well-being and people reporting better health outcomes.
spk07: Okay. So now you have 560,000 covered lives. Based on what you said, mental health solutions are expected to generate the most cross-setting opportunities. Is it fair to say that the current market penetration rate of mental is mental health solutions has the lowest penetration rate when you compare to other product solutions?
spk01: I'm not sure of the question, but Karen, did you capture that question?
spk06: Yes, I think what you're asking is, I'm going to just answer it a different way. You can tell me if it answers your question. There is a large addressable market. I think what we have to be cognizant of is there are a number of solutions out there solving mental health issues. And so I think the market is asking for a more robust solution. They're willing to spend money on it. We've seen a number of organizations increase their paramedical spend. I think that organizations have offered paramedical spend for mental health. The challenge has been employees did not have the right access to care or know how do I actually access a therapist to spend those dollars. So I think the addressable market is actually increasing for us. Do we have a low penetration versus some of the larger EAP companies? Yes, but we're competing on a comprehensive solution and we're seeing that 90% win rate is the adoption rate towards our mental health solutions in enterprise health where people are seeing the benefit of the nurse navigators. So we continue to believe that that the product developments and the focus, we will continue to expand our market share in the verticals that we compete against in the capabilities, but we'll also be creating this new market sector around this comprehensive mental health solution. So does that answer your question?
spk07: Yeah, I think so. Because the way I saw it is that if the product currently has a lower market penetration rate, which means it has better cross-selling opportunities among those 560,000 covered lives. That's the point I ask. I don't know if that makes sense to you. Okay. Okay, I guess my second question is, so at a high level, can you also please talk about what we can expect for next year in terms of major milestones CloudAMD is looking to achieve as well as potential catalysts?
spk01: Yeah, no, that's a great question. We've done a lot, obviously, in the last year. We had the roadmap that we laid out and targeted the different acquisitions and brought on different capabilities to execute on what you're seeing now in terms of some of these deliverables. So we're quite excited about where we are right now, and I don't think you'll see the same acquisition growth that we had before because we got most of the capabilities that we needed to execute. And so that's important for us. I think now it's about the fact that we've created this proprietary healthcare platform. It's a health tech platform. It's patented. And now we have the ability to offer it in different locations. And so geographical kind of expansion is going to be important. but also being able to offer it and scale basically is really what we're going to be looking for kind of going forward. And the exciting thing about it is that this is a universal problem that we've kind of identified around North America and around the world. And it's easy to kind of plug and play no matter where you are with the different service providers and different provider networks. And so that's exciting for us. We have it in different languages. And now we're going to look for opportunities to expand it. So, you know, with the MindBeacon acquisition, I think it fits perfectly. We are planning on closing that, I believe, in January of this year, and we're going to take some time to make sure that we have full integration of that offering. It's very complementary to what we do. There's going to be a lot of cross-selling. We're already seeing it, as Karen mentioned, cross-selling interest from our customers, which is great. And then kind of moving forward, I do believe we mentioned earlier that we will be uplisting to a senior exchange in the new year, and that's going to be another milestone we can look forward to. And then just continue to grow and execute on our business plan, and what we've shown that we built can be scaled quite rapidly. So that would be the main major points.
spk07: Yeah, that is helpful. Thank you.
spk05: Thank you. And we do have time for one final question. Our question comes from Gabriel Lund of Beacon Securities. Your line is open.
spk03: Good afternoon, and thanks for taking my questions. Just a couple of things. First, just wondering if you guys can provide us with a glimpse of what your pipeline currently looks like on the AHS side as it relates to sort of the the composition of the potential customers that you're talking to? Are they, do you have any more, you know, potential customers, sort of the quantum of a sunlight? Number one and number two is, you know, what product are you finding that you're leading in with most of these potential prospects? Is it the mental health coaching? Is it the rehab assessments? Some of the more traditional EAP stuff. Just curious about your thoughts there.
spk01: Yeah, thanks, Gabe. Great question. I'm not sure if we'll be able to give you the full answer, but I'll hand it over to Karen to talk a little bit about the pipeline.
spk06: So we have a robust pipeline. I'm very confident with the pipeline as being able to sustain our organic growth. The pipeline has many facets to it, distribution partners, and has direct organizations involved. I would say for the mental health coach, our relationship is with Sun Life in delivering that product through a distribution insurance relationship at this time. We have insurance relationships with all of the insurers for a variety of our products, including disability assessments, businesses. We have a couple of clients in the United States, prospects in the United States, who are inquiring around the mental health coach, which would be distribution partners that we are currently engaged in talking to. So this is all net new for us, as you can imagine, going out in the marketplace with this product. And because the product, the mental health coach, is a North American product and has been translated into Spanish, it's quite high adoption rate. It's quite easy for us in the United States. We feel really confident that we have the right balance between direct to organizations, insurance partnerships, and then we call our distribution partnerships. They're also our brokers and advisors who sell our products on our behalf to the clients that they represent. And it's important to have that balance because you want to have the relationship with all three in order to create a balanced portfolio. So we monitor our pipeline and we measure it on a monthly and quarterly basis with the sales team. to ensure that the weighted averages align to our sales activities. And so far we're very confident with the sales operations that the way the pipeline flows right now matches to our sales forecast. We're very close every month and every quarter to our sales forecast, which is all based on our pipeline.
spk03: Gotcha. Thanks. Yeah, no, that's super helpful. Thank you. Um, and you know, we spend a lot of time talking about the EHS, but, uh, Can you spend a minute just talking about some of the key growth initiatives you guys focused on within digital health and perhaps even clinics and pharmacies as well? What do you see as the biggest opportunities, I guess, within those two other segments?
spk01: Yeah, another great question. So maybe I'll start with clinics and pharmacies. I mean, it's not our main focus, obviously, to go and acquire a large network of clinics. It typically is low-margin type of business. We have to be careful on managing that. But I think what's important about the clinics and pharmacies is that there's an incredible amount of patients and providers on that network but we also own the the technology aspect of it in the DHS with the EMR and so we can test everything within the clinics and so for instance now with regards to the MindBeacon acquisition you know we're looking forward to integrate that solution right into our EMR into the providers you know seeing the patients in the clinic or online and being able to refer to the ICBT program and have that patient go through the dashboard or the mental health coach even on top of it. So the integration between the three divisions, I think, is really kind of integral. With the DHS, I think, you know, Dan mentioned some of the... Actually, I think it was Karen, sorry, mentioned some of the sales that we're seeing even outside of our own products that we're offering. So this platform... that we talked about, this interoperability, the RTIP platform, has so much potential because one of the big drawbacks in healthcare is the lack of the ability to share information in real time and offer good outcomes, outcome data. And so that really translates well right outside, like right across healthcare. And so when she mentions the opioid crisis, that's a big deal. And for instance, what happens is that If a patient is seeing a doctor in one clinic, that provider can check in real time to make sure that that patient didn't get an opioid prescription from a clinic across the street or across state lines or across the country. That is something incredibly important as we start fighting the opioid addiction and a lot of the issues that we're seeing because of the misuse of these products. There's a lot of opportunity there. With regards to EHS, you're right, that is definitely our fastest growing division, but I think we've kind of made it clear that all our divisions work together as well. You know, we have the ability to use the resources from each of the others to support the other one. And so that is kind of an important strategy that we use internally.
spk03: Got you. Got you. Thanks for that. And so just one last thing for Dan, just a point of clarification. Dan, did you say – Organic revenue growth in the quarter was 10% in the quarter?
spk10: Yeah, so it was 11% year over year.
spk03: Gotcha. Okay, that's helpful. Perfect. Thanks a lot for your time, guys. Thank you.
spk05: Thank you. Ladies and gentlemen, this ends today's conference. Thank you all for participating. You may now disconnect. Have a great day.
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