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spk09: Good morning and welcome to CloudMD's Q4 2021 earnings conference call and webinar. My name is Valerie. I'll be your 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 their telephone keypad. If the covering analyst would like to withdraw their questions, please press the pound key. I would now like to turn the call over to your host, Julia Becker, Vice President of Investor Relations. Please go ahead.
spk10: Thank you, Valerie, and good morning, everyone. Thank you for joining us for our fourth quarter and full-year earnings conference call and webinar. We'll start the call with outgoing CEO and Director, Dr. Issam Hamza, followed by our interim CEO and President, Karen Adams, and our interim CFO, Sean Carr, who will provide a recap of the company's fourth quarter and full-year 2021 earnings financial results before opening up for a question and answering period with our covering analysts. A friendly reminder that today's discussion contains 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 the forward-looking information are described in the company's MD&A, which is available on CDAR. 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. Issam?
spk00: Thank you, Julia. Good afternoon, and thank you for joining us for our fourth quarter and full year 2021 earnings calls. As most of you know, this will be my last earnings call with the company. I am proud of the company that CloudMD has become and the over 800 people that dedicate their time to delivering our services every day. It's not easy to pass over the leadership of something that I was so passionate about, but now is the right time. For the last five years, I have been part of the leadership team that led CloudMD through tremendous growth, I founded the company with a vision and mission to provide a holistic, team-based approach to healthcare delivery. While this vision is still very much a part of our culture, we must continue to adapt to changing societal health needs and private and public funding models. In the last five years, we have been through a significant transformation from a connected network of four clinics to, today, a leading comprehensive and connected healthcare provider. CloudMD has completed over 15 acquisitions since the beginning of 2020, including the acquisition of MyBeacon in January of 2022, and has reached a size and sophistication where it needs a CEO with expertise and experience to manage a larger, more complex health services company with international offerings. I feel very confident. about Karen as the incoming interim CEO and the strong management team the company has established, including the talent retained from its recent acquisitions. We recognize that there has been a lot of transition over the last several months, and we understand the impact of those changes at the executive level can have on our investors, and in particular, investor confidence. We have engaged an executive search firm that is following a process to ensure the CEO and the CFO positions are filled with experienced and capable candidates. Both internal and external candidates are being considered for these roles. As the company continues to grow and focus on sustainable profitability, we recognize the importance of strong leadership within the company and on the board. We have been actively discussing board strategy and have emphasized the importance of strong governance and financial acumen at the board level. As part of this strategy, we have identified several potential board members with various skill sets that will support the company through the next growth phase. We appointed Duncan Hannay, CEO of OLG, to the board in 2021, and yesterday we announced the appointment of Gaston Tano. We are excited to welcome Gaston, whose experience as CFO at the global public company level will be a valuable addition to our board. I'm incredibly proud of the Cogni team and what we've been able to assemble from both a strategic and financial standpoint. We've built and acquired best-in-class capabilities to facilitate our connected ecosystem. As an example, some of our capabilities we've added or enhanced in the last year that plug into our ecosystem include a complete continuum of care for mental health support, one of Canada's largest return-to-work absenteeism and disability management practices with a roster of blue-chip clients, and a complete e-commerce platform. These new capabilities and many more have made CloudMD's offerings the most comprehensive in the market. While our stock price has not performed well, all comparable companies in our space have been, like us, impacted by broader market sentiment. Looking at the current revenue profile that we have built and the positive results, our stock is trading at multiples that should make us extremely attractive to the investment community in 2022 and beyond. This year, we've made significant financial improvements on both the top line and bottom line. The team has proven its ability to integrate acquisitions, generate synergies, and control costs. These actions have improved our financial performance, allowing us to reach positive adjusted EBITDA in the last two quarters. Finally, I will leave you with our belief that the company, our client base, our service offerings, and our financials have never been in a stronger position. I'd like to thank the CloudMD employees, clients, and shareholders. I remain a big and loyal supporter and shareholder of the company, and I'm excited to watch the progress of this talented team over the coming years. With that, I'll pass the call over to Karen.
spk01: Thank you, Issam. It has been a pleasure to work alongside you, and I am confident that we have laid a foundation that will enable us to build upon and disrupt the market. We have many points of pride in 2021 based on our ability to disrupt the market in providing access to health care to support individuals on their life journey. I want to review some of those points. We completed several acquisitions that have bolstered our capabilities and expanded our customer base. Many of these acquisitions were strategic and brought market differentiation and strong customer relationships. We believe we have proven industry leaders in the organization who will be leading the execution of our strategy. We've diversified revenue, both through geographies and capabilities, growing 2021 revenue to $102 million, a 581% increase over the prior year, And our growth plans include cross-health and continued geographic expansion into the United States, to name a few. Our success in 2021 and going forward is enabled by the talented teams of employees and network providers who are committed to delivering health outcomes through multi-channel access. I would now like to turn to the three focus areas that we identified last quarter driving top-line growth, profitability, and shareholder value. First, we are driving synergies and integrating capabilities with a focus on profitable execution and delivery. Two, through our enterprise health solution division, we are delivering an excellent end-user experience for our clients, which is driving successful customer acquisitions. And three, through our digital health solutions division, we are leveraging our proprietary technology that will enable the engagement of individuals in supporting health issues while at the same time empowering regulated health professionals' productivity. Let me first begin with driving synergies and integrating capabilities. Our focus in 2021 was to bolster our capabilities and expand our customer base through accretive strategic acquisitions and organic growth. We also were focused on creating positive, adjusted EBITDA. I am proud to say we delivered on both of those goals. In January 2022, we closed the MyBeacon acquisition and have been able to identify $7.5 million in annualized cost savings. This is a testament to the organizational focus on driving profitable growth. In 2021, we also focused on product integration to drive value for our customers. In 2022, we are aligning our systems, processes, and people to drive operational excellence in a shared services model for customer acquisition and management, IT, HR, and finance. Going forward, this will help us save on shared cost, increase adoption rates, lower customer acquisition costs, attract and retain talent, create a more consistent offering, and reduce the time it takes to report our quarterly financial results. We are highly focused on our product integration, including our health platform and EHS solutions. We are in the process of integrating MindBeacon's clinically proven ICBT into our larger mental health support service offering to provide a full continuum of care. By pairing our mental health capabilities with our leading disability management, return to work, and absenteeism programs, all within our comprehensive integrated health platforms, we are able to offer companies and employees a unique market differentiator that delivers ROI. We have seen momentum in winning new contracts in 2021. Since the end of Q3, we've added a significant number of new employer organizations who chose CloudMD's physical and mental health solutions. There is a large addressable market that is dissatisfied with current siloed products and focused on health risk management. We also recognize that employers and individuals who use our services are looking for solutions that address comorbidities, such as chronic pain and mental health, which significantly impact disability and absenteeism. CloudMD is able to address these issues in our mental health solutions, disability, occupational health, and other services using assessment and navigation tools, which is a first in our industry. We are disrupting the industry with our ability to be a one-solution provider, taking the responsibility for managing individuals' health risks. We continue to retain clients and maintain an over 90% retention rate. This brings me to our second focus, our Enterprise Health Solutions Division, where we are delivering an excellent end-to-end user experience for all stakeholders, which is driving successful customer acquisitions. We are proud to say our EHS division now collectively services over 7,000 customers representing millions of lives. Our comprehensive integrated services platform enables us to offer clients a diverse set of capabilities that will evolve over time. The platform will continue to gain momentum with the integration of ICBD, creating an industry-leading mental health program capable of ensuring progressive measurement and improvement of conditions. There is a growing recognition of the need for government support to address the mental health crisis in North America. The Ontario government recently supported this with their budget highlighting the need for online cognitive behavioral therapy. We believe that the ICBT, coupled with our health coaching, enables a leadership position in the market to support mental health issues. Our public sector division, focused on this unique client base, has recently won contracts for our mental health solutions from major colleges and universities. in both Ontario and the Atlantic region. We are proud that in 2021, Sun Life chose CloudMD in our proprietary health coach navigation service. This solution is the first of its kind to provide assessment care plans and coaching to support people on their mental health journey. This platform created high engagement and outcomes that earned us the ability to promote the service to Sun Life clients due to our predictive analytics and personalized mental health tools and resources. We are seeing accelerated interest in this service across all markets and distributors. We will continue to create momentum in our existing clients. Along with momentum in customer acquisition, we continue to focus on retention and introducing existing clients to our capability. We have a focus on leveraging our long-term customer relationships and knowledge of their particular issues to introduce new capabilities to solve their healthcare needs in driving outcomes and inspiring individual health journey. Looking ahead, our success in the enterprise health division will come from continuously improving our integrated platform, converting our pipeline into customer wins, expanding our client base for our mental health solutions, and increasing adoption rates by our clients in all segments. Three, through our digital health solutions, we are developing proprietary technology that enables engagement of individuals in supporting health issues while improving regulated health professionals' productivity. You may recall in 2021 received a patent for our proprietary real-time intervention platform, which is the backbone of our comprehensive health ecosystem. This technology has recently been adopted by several new contracts, including the New York City Department of Education and the state of North Carolina. It now provides services to various levels of government and public sector organizations across the United States and Canada. In addition, we finalized our remote patient monitoring program in 2021, which allows providers to help deliver better care to their patients with chronic conditions. Once a patient is onboarded to the program, an individual can take readings inside the comfort of their own home using their vital measuring device. This data is automatically shared with the patient's care team, which supports adherence to their care plan. In relation to VisionPros, the information and fact-gathering phase of the review is complete. Once the conclusions of the recommendations in connection with the review are presented to the company, it will consider its available options to recover the amount it believes it is owed and will continue to update the market accordingly. With that said, we are pleased to confirm that we have secured contracts with major suppliers and expect to be selling into the United States in late Q2 2022. The coming year's success in our digital health division will come from expanding our platform both in the United States and Canada and bringing it to Canada for the very first time. Along with the RTIP platform, we are focused on returning this platform to growth. I am extremely proud of the success of the CloudMD team and the passion everyone has for leveraging our capabilities to address the growing market need of health and well-being. We continue to attract talent and clients to the CloudMD family with our ever-evolving solution. We believe that there are multiple levers for us to drive top-line and bottom-line growth in 2022. With that, I will turn the call over to Sean to address the financials. Sean?
spk08: Thank you, Karen. Q4 total revenue was $38.7 million compared to $5.8 million in Q4 2020, which represents 567% year-over-year growth, compared to Q3 revenue of $39.2 million, as we noted in our Q3 call. The sequential decline is due to some COVID-related testing contracts that ended in Q4. In addition, we experienced the normal seasonal declines in health services in December. For full year 2021, we delivered revenue of 102.3 million, compared to 15 million in 2020, a 581% increase. 2021 revenue includes the results of acquisitions only since acquisition date. These include both Insidium and VisionPros, which were significant acquisitions acquired in June 2021. Enterprise Health Solutions contributed $18.6 million in the quarter, compared to $19.6 million in Q3. As we discussed last quarter, Q3 revenue was elevated above run rate due to short-term COVID-related workplace testing contracts. Some of these contracts expired in Q4, leading to a slight decline in revenue, offset by growth from our mental health solutions offering and the rest of enterprise health segments. Looking ahead, we closed the acquisition of MindBeacon on January 14, 2022, which will be included in our enterprise health solutions segment. Digital health solutions generated $10.2 million in revenue, compared to $10 million in Q3 2021. Historically, the largest revenue contributor within this division has been VisionPros. During the quarter, VisionPros was unable to sell into the U.S. because of distribution agreement issues with suppliers. These issues resulted in a material decrease in VisionPros revenue for the quarter. As Karen said, we now have new supplier agreements in place and we expect U.S. revenue to recommence in late Q2 2022. The rest of the DHS division performed well. Digital health solutions generated solid organic growth year over year on the back of consistent execution and new contract wins. Historically, the fourth quarter in our Idea 4 business is the strongest due to normal timing of contracts signing with U.S. government clients. Clinic services and pharmacy division continue to be a steady contributor with $10 million in revenue during the quarter. Gross profit in the quarter was approximately 30% compared to Q3 2021 margins of 34% and margins of 33% for the full year. The lower gross margin percentage was due to short-term contract in the EHS division and seasonal fluctuations. While we expect some fluctuations in gross margin quarter to quarter due to anticipated seasonality, we continue to expect a low to mid-30% gross margin in the near term, with expectations of margin expansion as we exit 2022 due to the integration work we are completing. In addition, given the size of our network, there are opportunities to operate more efficiently, which is a focus for us. This will help drive improved EBITDA, As Karen discussed, synergies, efficiencies, and cost control have been key focus areas, which will drive both gross margin and EBITDA margin expansion. We continue to make tremendous progress. For example, if you look back at last year, Q4 2020 sales and marketing, G&A, and R&D costs, excluding share-based comp and one-time expenditures, was 71% of revenue, whereas in Q4 2021, it was 29%. We are improving this metric every single quarter. While there will be a momentary setback with the consolidation of MindBeacon, we've already identified and acted on $7.5 million in annualized synergies. Our adjusted EBITDA was $0.6 million for the fourth quarter of 2021. This is our second consecutive quarter with positive adjusted EBITDA, Looking ahead, MindBeacon, which was acquired in January 2022, was in the investment stage of its growth cycle and was incurring substantial expenditures to support planned growth. We have several overlapping costs with MindBeacon due to our previous investment in mental health services, Mine beacon costs will temporarily negatively impact consolidated EBITDA during the first quarter of 2022. However, we feel confident in our ability to continue improving profitability throughout 2022 as we execute on identified synergies and planned integration. We recorded two non-recurring earnings adjustments related to certain acquisitions during the quarter. We had a non-recurring gain on the contingent consideration liability of $1.5 million. This was in part due to the change in share price from when certain acquisitions were completed up until year-end. The second adjustment we identified was $6.9 million of goodwill impairment. Most of our acquisitions were paid for using some proportion of stock during a market with low interest rates and high revenue multiples. As we review Goodwill every quarter with interest rates and other assumptions consistent with today's macro market, there may be Goodwill write-downs unrelated to how the business is performing. We ended the quarter with $45.1 million in cash on hand. We believe we have the financial resources and capital structures to continue to support our current growth plan. With respect to the uplifting to a major exchange, it is still a priority for us. We are implementing systems and governance structures to support the many acquisitions we've made and the significant growth of the company as part of the uplifting process. With that, I will pass the call back to Karen, but before I do, I would like to thank Take this opportunity to thank our world-class auditors, KPMG. They have performed above and beyond during this year and audit and successfully navigated us through the complex world of acquisition accounting. In addition, I would like to also thank the numerous external advisors that also played a critical role. And last, the internal accountants of CloudMD. You worked tirelessly through the days and nights to get this done. And the Board of Directors and Management is forever indebted to you. Thank you.
spk01: Thank you, Sean. Very well said. In closing, we are pleased with our Q4 and full year 2021 results and our ability to deliver on our defined strategy to acquire key capabilities for a comprehensive full-service healthcare offering, build an industry-leading integrated solution, and have a strong go-to-market strategy, all that we have executed on. I want to thank our employees. the healthcare providers, clients, and shareholders for supporting our growth in 2021 and our board in both 2021 and our ongoing 2022 strategy. We are all aware that the healthcare sector and macro markets are very challenging right now, but we are confident that fundamentally we are stronger than ever and well-positioned to be the leader in this industry. Off the heels of Q4, we go straight into Q1, which we are excited to report at the end of May. With that, I will ask the operator to open up the call for questions. Thank you.
spk09: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone. Again, to ask a question, please press star then 1. One moment for our first question. Our first question comes from Rob Goff of Ecoline. Your line is open.
spk03: Thank you very much. And also to start by congratulating Issam on his efforts in building such a strong foundation with such a clear vision. He's really created something special here. So our congratulations. One more congratulations there in terms of your success in bringing Karen on and the two of you working to curate and build out the EHS in particular.
spk01: Thank you.
spk03: Looking forward, you did address the momentum on the EHS. Could you perhaps dive a little bit deeper into that, Karen, in terms of how you see the traction picking up with the consolidation integration of MindBeacon and just given the pipeline that you see in terms of potential contracts?
spk01: Absolutely. So I would say that there's a couple of factors that the team is working on. The first is You know, we talked at length in these acquisitions about the strong foundational client base. So when we look at clients that go back to 1975 and are large blue-chip clients, we really believe that we are well-positioned to market our complete care and treatment plans to the solid base of disability, occupational health, independent medical business that we have, and vice versa. So that is, I would say, a huge priority for the EHS team right now to bring that value to our existing clients. The other value that I think is extremely important here is the integration of the ICBT product into the most comprehensive mental health support product in the market. The one challenge I will tell you in mental health support that is, you know, it's less now about the stigma of mental health as it is about the stigma of getting care and feeling confident that you can get the care. And the CloudMD product now has the ability to not only do an assessment for mental health through one of our acquisitions, the proprietary technology, but also the ability to navigate through a mental health coach to make sure that somebody is getting access to either ICBT, in-person clinic, or virtual mental health care. And that's really important because every person has different needs. So we really see bringing on new clients in the ability to give the confidence to those organizations that when somebody makes the decision to inquire about mental health, we'll walk the journey with them and we'll demonstrate back to the client improved outcomes for the individual. So that, I would say, is the focus right now in the organization. And the last thing I'd say about that, Rob, is we're also taking a strong stance in the United States, leveraging the Harmony acquisition and being able to bring some added benefit to those clients in the mental health space through both the SNAP clarity assessment tool, but also integrating the ICBT tool and starting to really ramp up the ability to solve the mental health issues for those clients.
spk03: Thank you, Karen. And if I may have a follow-up for perhaps Sean. Your gross profit margins were mostly below our expectations on the quarter. You've talked to the prospects of improved margins going into the new year. Can you talk to how we might profile that in terms of is it a consistent improvement? What are the impacts of both VisionPro going commercial once again in the U.S. and MindBeacon coming on board.
spk08: Yeah, you identified the two gross engines, if you will, in March, and that being MindBeacon, because that is definitely higher, as well as Vision Pros. We've just signed that new agreement, and that's really just kicking in at the beginning of June, so late into Q2. So we anticipate that both Vision Pros and MyBeacon will get us back up on that upswing. But we're very comfortable with the margins being in the low 30 range right now, and we anticipate to get steady improvement on that as both of those growth engines go forward.
spk02: Thank you.
spk09: Thank you. Our next question comes from Doug Caleb, Canaccord Genuity. Your line is open.
spk05: Hi, this is Neil Bakshi just calling on Doug's behalf. First off, I'd just like to also extend my congratulations to Issam, Karen, and Sean and their respective leaderships, CloudMD and Karen and Sean, on a go-forward basis. So I guess my first question is kind of with respect to looking at some of the goodwill impairment write-downs, you know, looking at live care, Coast Medical and HealthView, just wondering what you're seeing in terms of the performance of these assets that led to decision making around writing them down or disposition.
spk08: No, they are very, very steady contributors. And it's really an accounting exercise and an ongoing year-end analysis that drives that. And it all depends on what the stock price was at the time we purchased it because a lot of those transactions are both stock and cash. So it's almost, from my perspective, a revaluation from an accounting standpoint as opposed to a real cash or potential cash contributor. And those assets are very steady and consistent contributors to our quarterly results.
spk05: Okay. And just a question about kind of looking at, you know, we see in the sector some kind of inflation-related costs or retention costs. Just wondering if you could speak to kind of what you're seeing in the business or in the landscape around kind of employee costs over the next year, any changes from back in Q3, which feels like a lifetime ago in the markets?
spk01: I'll start, and then I'll ask Sean to add color. I think the first thing that we are seeing is in the market there is retention issues of human capital. It is across every sector. I think we have very, very low turnover in our organization. We call it regret turnover, people who leave. I think a lot of it is around the unique value proposition of what we offer, and we have a large contingency of healthcare providers. And so we've been able to reduce our dependency on some of the inflation you're seeing in some of those human capital rates just by being able to put the teams together and increasing the productivity of those teams. But I don't know if you have some additional color shown on inflation in general vis-a-vis our entire business.
spk08: Yeah, I would just say from an inflation standpoint, there's obviously two metrics in that one is our costs and the other is our profit. And we believe that we will be delivering high quality services that people will pay for. And we have the metric of being able to increase our costs and contribute to the inflation wagon, if you will. So we watch our costs very closely. And as we have to pay more than in turn, our customers and clients will have to pay more as well. Great. Thank you. I'll pass the line.
spk01: Thanks, Neal.
spk09: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. Again, to ask a question, please press star then 1. Our next question comes from Gabriel Loon of Beacon Securities. Your line is open.
spk07: Hi, everyone. Thanks for taking my questions. Karen, can you give us a quick update on how the Sunlight partnership is progressing in terms of expected launch cycles, et cetera? And I'm also curious to hear whether you've been in touch with other large payers to offer similar type services.
spk01: Great. So thank you for that question. So I'll just remind you of the journey of Sunlight. So Sunlight rolled it out to their employees, to 11,000 of their employees, That was our pilot group where we could prove the product offering. It was then intended post-pilot for them to have a period of time to sell it to their clients. So we're in that phase where they are now selling it to their clients on a case-by-case basis, and we have onboarded clients. so this would have started for the beginning of January where they started to sell it to their clients and we've onboarded clients in Q1. I don't have the number in front of me as to how many we have onboarded, but we have sold and onboarded clients through Sun Life. The mental health coach navigation product, our first client was Sun Life. We were very proud of that and are proud of that relationship as they are. We are now in the process of rolling it out to both payors and organizations directly. And the sales team has a strong pipeline of interest in the mental health coaching. And I would say that the benefit for us in the mental health coach product, Sun Life is the purchaser of the health coach navigation. And we are now looking at how we sell it as a whole product with the ICBT included and the AP. So we have a great sales strategy around that. And we are also launching it in the U.S., and that will become an accelerator for us in the U.S., the health coach navigation. So it is ready for the U.S., and the salespeople are building a pipeline in the United States for selling mental health coach.
spk07: Gotcha. Thanks for that. And as it relates to MindBeacon, you've had it under your belt for a couple of months, several months now. I'm curious to hear, as it relates to the integration, whether there's been any issues that sort of come up that were sort of unforeseen, or has the integration been largely smooth thus far?
spk01: Well, integration, as you know, focused on cost for us at the beginning. So what we were able to do with the MindBeacon acquisition, because it was a mental health product and shared a lot of similarities with our Humanicare product, and our previous acquisitions of Experian Stop Clarity that are now amalgamated into what we're referring to now as our mental health support solutions. There was huge upside and excitement from being able to look at both the provider network, management, sales team, and so we, that I felt went incredibly smoothly. So that's really where the focus was in Q1. We are now migrating to where we're looking at integrating ICBT as a fully integrated seamless experience within both the EAP and the Health Coach product. Learning the U.S. product, which is a little different than the Canadian, as mental health products are North American-wide. So I can't really pinpoint any surprises. I would say that things never move as fast as we want. I would say the market is highly interested in the product, and we're having lots of inbound around how we can put it together. So once the team has that finalized in Q2, I think we'll be in a better position to report on client wins. But so far, so good. There has not been any surprises.
spk07: Gotcha. Thanks for that. I've got a couple of questions for Sean as well. Sean? You had mentioned that the Vision Pros revenues in the U.S. should start ramping up. It's called the latter half of Q2. Just to confirm in terms of the quantum of the revenues that sort of went away in the last quarter or so, if I recall, Vision Pros is a $20 million-plus revenue business, and the majority of that would have been in the U.S. Is that correct the way I'm thinking about it? That is correct.
spk08: It's about $1.5 billion.
spk07: is the difference that went away. One and a half million per month or per quarter?
spk01: Per quarter.
spk07: Per quarter. Gotcha. So that should come back during, let's call it the Q3 timeframe then? Yeah, we anticipate that and obviously be pushing for more. Gotcha. All right, and then just moving over to the cash flow statement for a second, can you just walk through for us some of the components of the working capital drain in the quarter, which was almost a drain of about $7 million with the main contributor was there?
spk08: Yeah, it's really principally made up of two components. One are receivables, and the other was contingent consideration, which was – a decrease in payable, but the contingent consideration in a lot of our acquisitions is either stock-based or cash-based at our option. And it's contingent on the price that was at the date of transaction. So to the extent that the current share price is below that, we can issue stock and take that difference in the liability, if you will, as a reduction. So that reduction in payable went through the cash flow statement and was a contributor. But in my mind, it's kind of non-cash because we're issuing in stock. The other one was related to accounts receivable. And through the transition of one of our acquisitions of that receivable onto our books, we encountered some transitional issues which inflated that receivable. corrected that in January of 2022. All those receivables were collected, but at year-end is showing an unusually high level of receivables on our balance sheet.
spk07: Got you. And did you have that amount of receivables that sort of reversed in January?
spk08: Yeah, I think it was around $2 million for the quarter Q4 with the delta a little bit north of $2 million. And the gross amount was about that. Gotcha.
spk07: Okay, perfect. Appreciate it. Thank you.
spk01: Can I just clarify one thing? Sorry, Sean, to interrupt. But on the vision pricing, I would look at a run rate closer to $2.5 million, right, on revenue lost, right?
spk04: Okay, for Q4?
spk01: For Q1. Or for Q1. Yeah, yeah. Just so we have perspective, because it's a large percentage of the business. Yeah, and it took time for it to go away. I just wanted to clarify that. Sorry.
spk09: Thank you. Our next question comes from Nick Adesino of Lauritzen Bank. Your line is open.
spk04: Yes, good day, everybody. I guess two quick questions on my part. First, just looking at M&A, obviously you guys are still going through the process of digesting mine beacon at the same time you do have cash on the balance sheet um there are multiples coming down obviously in the public market but also in the private market and i'm just wondering as you guys are going through as we're going through the process in 2022 but also change at the at the leadership level what are the thoughts on m&a for for the rest of the year are you still going to be do you plan to be active in the short term if yes what would you be looking for? And similarly, just on a longer term, if you are going to add pieces, what sort of pieces would you be looking for and maybe what geographies would you target?
spk01: Right. So I think for us it's going to be about two things, Nick. First is about geography expansion. So there are geographies in Canada and the U.S. that we are extremely interested in, and an acquisition that brought us a significant long-term client base would be attractive to us. The second thing is capabilities. As I mentioned in my commentary, the platform is constantly evolving. And so we're going to be looking at both partnerships and acquisitions that allow us to build on the capabilities to solve the mental and physical health issues. So if I was looking, we were building out a product roadmap that enables us to look at the gaps and start to identify gaps What is the best way to use that cash for an acquisition that would create a better user experience on that platform? So we're in the evaluation stage on that right now. I would say that geography and capabilities are the two areas of significant focus for us at the moment. Does that answer your question, Nick?
spk04: Yeah, it does. That's great. Thank you. And then my second question is just Given the moving parts on the revenue side of things, the gross margins, I think you alluded to low to mid-30s. Obviously, you're going through integration again with MindBeacon and trying to drive out costs. I'm just wondering, as we look out, say, two to three years as the market's going through this re-evaluation process, how should we be looking at CloudMD both from an organic growth perspective as well as an EBITDA margin perspective? What kind of rule of what are you building, and what's the breakdown on that rule?
spk01: Boy, that's a big question. I can tell you that, you know, on the organic growth side, I'm very bullish on that because we did, through the MyBeacon acquisition, a chief revenue officer and marketing role. So their efforts are aligned to both organic growth and selling to existing clients. So double-digit organic growth is what we're targeting for. So I would say that that is something that with buying the acquisitions with a large client base, that was part of our theory of selling more things to our existing client base. I think with the project management office and John Plunkett is head of our transformation, our corporate strategy, and our mergers and acquisitions, he has a focus on assisting the organization, the management team, on a lens on profitability. And so, as you know, profitability will come from our gross margin and our cost controls. And he has a lens on really initiatives around those two areas. I mean, we are focused on the path of profitability, both through execution and delivery. And I think we've been clear about that. And I think that that is a short-term and a long-term objective of ours that we are focused on. Sean, would you add anything?
spk08: Yeah, I would say the first when you're profitable and it gives you a lot of flexibility. So bringing that stability and operating as a good, solid company with good, solid earnings, like I said, provides a tremendous amount of flexibility and self-sufficiency so that as you go through the waves that exist in the capital markets, you're not dependent on having to – go back and raise capital in a very weak market. So for us, it's about getting to profitability and getting our product offerings out into the market, which are very, very strong. There isn't a better instance of more demand for healthcare products and things. So to us, it's getting that stability.
spk01: And I just think two other comments I would say, you know, The companies we bought, I really want to hone in on this, were companies that were leaders in their sector and weren't startups. We had maybe one or two that were in the early revenue stages. But a lot of these companies, like the Oncidium acquisition, were large companies that had an ability and a focus on profitability. So we leveraged that for scale, and so we're not building as much as we are transforming companies. I think the other thing that we are particularly focused on is the mental health part of our business. It is a large component and foundational, and it is a high-growth margin business for us. So we will continue to drive revenue through products and areas that will contribute to the top line and the bottom line to create shareholder value. Okay. Thank you for that.
spk04: Appreciate it.
spk09: Thanks, Debbie. Thank you. Our next question comes from UMR of Research Capital. Your line is open.
spk06: Good morning. Thanks for taking my questions. So first, I was wondering, Karen, if you could talk about the competition in the mental health market, like how many competitors and any pricing pressure, things like that. Nick Carter would be very helpful. Thank you.
spk01: Thank you. That is a fantastic question. So, you know, the mental health market has really evolved, I would say, over the last 20 years. I can remember when we were talking about mental health when nobody wanted to talk about mental health. The mental health market has really started to diversify with what we would commonly call employee assistance programs, which are really embedded in group benefits and now, you know, I would say a core component of most companies' group benefit plans. We've also started to morph and see different offerings such as the ICBT product with MyBeacon. We're starting to look at, you know, the core of where we looked at healthcare navigation came out of companies that were doing it in disability, where they were, you know, starting to do disability but not being able to complete the disability with a care plan for mental health. And so we're starting to see organizations that are trying to do in-clinic mental health or are trying to do virtual mental health. And I think it is a fragmented industry where there are lots of competitors doing lots of different things. I think the market's at a point where they don't want to make the choice for an employee to decide what product to use. They need an integrated offering. And just before I finish on the competitors, Toby, the other piece here that's important is when I look at our business, you know, we see upwards of over 32% increase in claims for short-term disability. And in those claims, over 60% have a mental health component. It doesn't mean they lead with a mental health, but they have a mental health component. And so we really see that the market is moving from a competitive standpoint of solo competitors that are providing one aspect of service, where the market's going to demand, with health care costs rising, employee benefit costs rising, to be able to solve the employer's problem of treating the individual. So I think you're going to see consolidation. I think you're going to see the landscape changing. And I think we're going to stop talking about siloed products and start talking about an integrated care program where somebody is showing up with their mental or physical health problems, and they're being entrusted to a provider who has the credibility of years and years of experience to be able to solve that and reduce the health risk for the employer. So when we look at the market space, we're comparing ourselves to what you would say is traditional EAP companies, ICBT companies, and it becomes difficult because, you know, it's really integration of a mental health continuum of care that an individual needs. So when we talk about disrupting the market, that's how we feel we have entered the disruption to move from siloed to integrated. Does that answer your question, Toby?
spk06: Yeah, thanks, Karen. That's very insightful. Maybe just a quick question for Sean. So regarding the provision, regarding the RevisionPro update, I was wondering how that could potentially impact CloudMD's Q1 income statement.
spk08: Sorry, I missed the first part of that.
spk06: The VisionPro... The update that I think 3.73 million based on previous contracts with supplier, how that could potentially impact impact CloudMD's Q1 income statement?
spk08: Okay, we actually, because we acquired the assets and liabilities of that company, we paid the suppliers, the 3.7 million, and essentially it is now due to us from the sellers. So we will try and recoup that from that transaction, essentially.
spk06: Okay, so, okay. So would that impact the company's gross margins for Q1 or there's no impact or it's too early to tell at this time?
spk08: If it was unsuccessfully recouped from them, then... Then that will be impact on gross margin or... No, it would be just a non-recovery of a receivable.
spk06: Okay, got it. Okay, thank you.
spk08: So we're essentially claiming it back from the sellers for almost like a payment made on their behalf.
spk06: Okay, I see. Okay, thank you. That's all from me. Thank you.
spk01: Thank you, Toby.
spk09: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating, and have a great day. You may now disconnect.
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