Everything That Went Down in CareCloud’s Fourth Quarter and Full Year 2022 Earnings Call

This guide will provide a comprehensive overview of the fourth quarter and full year 2022 earnings call. But that’s not all. To give you a clearer insight into how the company achieved these numbers, it is essential that you take a dive into CareCloud’s key achievements and prominent client acquisitions in the fourth quarter, along with other efforts that positioned it for a better future ahead. 

So, without further ado, let’s get started! 

Kimberly Blanche, CareCloud’s General Counsel and Vice President of Compliance, commenced the call and gave a brief introduction about the other hosts. She then handed the call to A. Hadi Chaudhry, CareCloud’s Chief Executive Officer and President.  

Mr. Chaudhry welcomed everyone in the fourth quarter and full-year 2022 earnings call. He said 2022 was a big year for the company on several fronts, including recurring bookings and redefining technology-enabled Revenue Cycle Management (RCM) solutions.  

Besides, the CareCloud Wellness suite, which includes Chronic Care Management (CCM) and Remote Patient Monitoring (RPM), is rapidly gaining traction in the company’s user base, showing another record recurred booking in the fourth quarter of 2022, ending the year with $8 million bookings. 

A First Full Year of medSR Operations 

2022 was also the first full year operating the medSR division, and it delivered a strong performance from a revenue and margin contribution perspective. 

One of the key considerations of the acquisition was leveraging medSR’s 200+ hospital relationships into cross-sale RCM-related services. 

“We acquired medSR in 2021, which generated an annualized revenue of $27 million during that year, while last year, it recorded $30 million in revenue.” 

A. Hadi Chaudhry, CEO & President

But that’s not the full story. The company has redeveloped and re-strengthened its relationship with several leading health system software vendors in the last year. It confirmed the cross-selling by increasing medSR RCM-related revenue by approximately 300%.  

The leadership team plans on continuing to leverage the relationship for recurring revenue tech-enabled RCM, which will help overall growth. 

“Shareholders will appreciate the improvement in medSR’s contribution margin, increasing from 3% in 2021, the year we acquired it, to 14% in 2022, ending 2022 with a 24% run rate directly resulting from cross-selling and realizing anticipated cost synergies.” 

A. Hadi Chaudhry, CEO & President

Revolutionized Revenue Cycle Management with CareCloud’s Tech-Enabled Solution 

Mr. Chaudhry highlighted the impact of CareCloud’s Revenue Cycle Solution over the company’s revenue and how this one solution alone is vendor agnostic, as well as caters to the specific administrative and financial needs of physicians. 

CareCloud Hosted Its First Virtual Analyst and Investor Day 2022 

The company held its first Virtual Analyst and Investor day during the fourth quarter on Monday, December 12th, 2022. During this event, the leadership team shared details about robust solutions, the value they provide, the depth and experience of the leadership team, and the perks of having a global workforce. Moreover, participants were also able to hear from two of its clients.   

This event was very beneficial in educating the investor community and the potential user base about the company’s comprehensive capabilities.  

“We also used this event as an opportunity to announce that we were changing our common stock ticker symbol from MTBC to CCLD to better align with our corporate brand.” 

A. Hadi Chaudhry, CEO & President

CareCloud started trading as CCLD on January 10th this year.   

Driving Business Strategy- Successful Execution of Organic Growth Strategy  

Moving forward, Mr. Chaudhry discussed the success of the organic growth strategy, initiated in 2020, which resulted in the record highest organic growth bookings of 94% over the past two years.  

Moreover, the company has expanded its sales team from 13 to 50 employees, a significant factor driving this growth.  

By taking a closer look, it can be realized that the company has nearly doubled the level of bookings from the recurring revenue opportunities from 2021 to 2022.  

Besides, new sales and marketing leadership was appointed in 2022 to better capitalize on the opportunities ahead, while the leadership anticipates these trends will continue into 2023.  

Envisioning the Future- A Positive Outlook for 2023 and Beyond 

CareCloud is laser-focused on converting its 2022 bookings success into revenue in 2023, excluding revenue from two large healthcare system customers that were acquired and migrated to their acquirer systems, forecasting 12% organic growth in 2023.  

The goal is to produce double-digit organic growth revenue, and the team is confident they have a path to achieve that.   

The 2023 outlook is driven exclusively by organic growth, and any acquisitions will be incremental to the forecast. 

therapyEHR – Tapping into the Matured Rehabilitation Market with Innovation 

 At the American Physical Therapy Association (APTA) annual meeting, CareCloud’s therapy-specific solution, CareCloud Remote, was launched, which is tailored specifically to meet the demanding needs of the rehabilitation market.  

It includes comprehensive, easy-to-use, end-to-end tools for managing patient information and tracking progress.  

In terms of the market dynamics in software solutions, the rehabilitation market is fairly mature and dominated by a couple of vendors. But innovation has not been at the forefront for some time. Identifying the biggest opportunity, CareCloud introduced therapyEHR.  

The therapyEHR, named Remote, has already been used by a leading rehab practice of over 2,500 clinicians.  

It is an example of CareCloud challenging the sharks in the healthcare industry with a solution that it believes to be technologically superior. 

Emerging Opportunities – A Path Leading to Scalability 

Looking into 2023, the current industry has set up CareCloud incredibly well to capitalize on the new era of growth, as they identify an abundance of emerging opportunities in the future, including its first non-US customers.   

With the government making EHR mandatory in UAE, the adoption of EHR solutions poses an exceptional opportunity for CareCloud to penetrate the UAE healthcare industry, going into 2023. It parallels the US meaningful use (MU) initiative that the company benefited from a decade ago.   

Besides, CareCloud realizes these opportunities in the healthcare space through its medSR division. Its propriety ambulatory EHR for the private practice space will need to be certified with the ministry of health and prevention in technology-enabled RCM space and various other digital health initiatives. 

The leadership team hopes to enter this new market in the coming year and assures to update on their progress.  

The company’s solid operational results in 2022 can be attributed largely to its powerful combination of technology and services, redefining the next generation of RCM solutions for the ambulatory setting.   

To summarize, CareCloud is optimistic about its organic growth initiative that is starting to take hold.  

Its Wellness Digital Health offering; medSR hospital offering; workforce augmentation offering, CareCloud Force; and expansion to the non-US market where it feels to have a distinct competitive advantage are all playing a role in garnering this confidence in the future. 

Secondly, one of its top priorities in 2023 is onboarding new clients, and converting record bookings into revenue; its work in 2022 has left it well-positioned in the industry to deliver continuous growth moving forward.   

Mr. Chaudhry then turned the call over to Bill Korn, Chief Financial Officer, to offer a closer look at the fourth quarter and full year 2022 results.  

But before we dive into the technicalities of the company’s financial side, let’s first take a quick tour of all the key milestones and prominent client acquisitions in the fourth quarter of 2022. 

Celebrating Success: A Preview of CareCloud’s Fourth-Quarter Achievements  

• As a result of its superior electronic health record (EHR) system and practice management (PM) software, CareCloud has been named 2022 Best in KLAS Small Practice Ambulatory EMR/PM. 

• In their Summer 2022 Medical Practice Management Software Customer Success Report, FeaturedCustomers recognized CareCloud as the best Revenue Cycle Management (RCM) software. Furthermore, FeaturedCustomers have praised CareCloud Central as a top-notch choice for running a medical practice. 
• It has received 21st Century Cures Act Final Rule compliance certification from the Office of the National Coordinator for Health Information Technology (ONC) for its CareCloud Charts, VertexDR, and talkEHR Electronic Health Record (EHR) systems. 
• Business News Daily’s Best Medical Software of 2022 list included CareCloud Charts and CareCloud Central for their superior workflow, encouraging effective data and patient information utilization. 
• For his work in implementing an IT strategy created by CareCloud’s medSR division, King’s Daughters Medical Center (Mississippi) CIO, Carl Smith, has been selected as a winner of the 2022 Info-Tech CIO Award. 

Key Client Acquisitions in Q42022 That Will Boost CareCloud’s Future Prospects 

For improving supply chain operations in terms of cost-effectiveness, patient experience, and care quality, East Tennessee Children’s Hospital (ETCH) has teamed with CareCloud’s medSR division. 

To better manage the health of its patients, Rocky Mountain Internal Medicine (RMIM) has partnered with CareCloud to employ its remote patient monitoring (RPM) service. RMIM utilizes several cutting-edge CareCloud solutions, including RPM, to deliver first-rate healthcare to rural areas of central Colorado. 

Cornerstone Specialty Hospitals West Monroe has collaborated with CareCloud to handle their revenue cycle management (RCM) services in an effort to expand their capabilities and generate better financial outcomes. 

Medical staff at Russell Medical Center in East Central Alabama opted for Meditech as a Service EHR solution, and CareCloud’s medSR division helped them do it. Among the three hospitals in Alabama to receive the maximum possible rating of five stars from the Centers for Medicare & Medicaid Services is Russell Medical Center, which was initially recognized in 1959. With medSR, Russell Medical Center can prioritize its needs and select the most cost-effective platforms to achieve its goals. 

Alpine Ear, Nose, and Throat PC in Colorado has selected CareCloud’s Meridian division’s revenue cycle management system to improve operational efficiency and cash flow. 

Overview of CareCloud’s Q4 2022 and FY 2022 Financial Performance 

Fourth Quarter 2022 Highlights	Full Year 2022 Highlights
Reported revenue of $32.5 million    GAAP net income of $0.5 million   Adjusted EBITDA of $5.7 million   Adjusted net income of $3.9 million	Reported revenue of $138.8 million   GAAP net income of $5.4 million   Adjusted EBITDA of $22.2 million   Adjusted net income of $16.3 million

These results were in line with expectations, as stated by Mr. Korn. At the same time, initiating a detailed discussion on financial performance. 

Revenue by Products and Services 

• Approximately 88% of its full year 2022 revenue is from technology-enabled business solutions.  
• Clients using technology-enabled revenue cycle management (RCM) solutions represent approximately 52% of annual revenue. Around 90% of this revenue comes from clients also using EHR/practice management software and services.  
• 24% of revenue is from medSR professional services and CareCloud Force workforce augmentation. 

• 12% of revenue is from cloud-based software without a service component. 
• 10% of the revenue is from managing the entire medical practice for clients. 
• And 2% of revenue is from other services. 

Fourth Quarter 2022 Financial Results 

The loss of two significant clients contributed heavily to a 13% drop in revenue to $32.5 million in the fourth quarter of 2022, compared to the same period in 2021. 

The GAAP net income in Q4 2022 was $499,000. Achieving positive GAAP profitability for six consecutive quarters is an extraordinary feat, as noted by Mr. Korn, even though the management team primarily looks at adjusted EBITDA and cash flow from operations to determine whether or not the firm is growing sustainably.  

According to the net income attributable to common shareholders, the quarterly GAAP net loss per share was $0.22 in the fourth quarter of 2022. 

Based on the number of common shares outstanding at the end of the period, the non-GAAP adjusted net income for the fourth quarter of 2022 was $3.9 million. The quarterly dividend paid to preferred shareholders exceeded the non-GAAP adjusted net income. 

Fourth quarter 2022 adjusted EBITDA was $5.7 million, or 17% of revenue, down from $6.1 million in the same period the previous year. 

“When we acquired Meridian Medical Management in mid-2020, their two largest clients were health systems, which had each been acquired in 2016 and 2018 and were in the process of migrating away from Meridian onto the platforms utilized by their acquirers.” 

Bill Korn, CFO 

Since a sizable investment had already been made in this move, the company knew it would eventually lose this revenue, although it couldn’t predict exactly when that would occur.   

Without these customers, the revenue in 2021 would have been $118.1 million, and in 2022, it would have been $126.7 million. If CareCloud had not had these clients in either year, its revenue would have increased by 7% in 2022. 

These were unique instances, and looking at them in detail is important. In 2022, both clients finally completed migration onto their acquirers’ software platforms.   

The company knew this was a likely outcome when it bought Meridian Medical Management and adjusted the purchase price accordingly.  

The time the clients took to migrate meant CareCloud earned some extra revenue in these two years. But the end of this additional revenue because of these two extra customers means that reported results will look less favorable.   

Normalizing the impact of these two customers, our revenue increased by $8.6 million or 7% from 2021 to 2022 due to a combination of our medSR acquisition in mid-2021 and organic growth strategy. 

Full Year 2022 Financial Results 

The GAAP net income for CareCloud in 2022 was $5.4 million, up from $2.8 million in 2021. After its IPO in 2014, CareCloud has seen positive GAAP net income for two consecutive years, an increase of over 92% from the previous year.  

Accounting for preferred stock dividends paid out throughout the year, the net loss attributable to common shareholders was $0.67 per share. 

In 2022, the company earned $16.3 million, or $1.07 per share, after adjusting for non-GAAP factors. Non-cash expenses like depreciation and amortization, as well as the gain from the change in contingent consideration, are not included in the adjusted net income reported in accordance with non-GAAP financial reporting standards. 

Despite losing income from two significant clients that were bought and were very profitable, and despite increasing sales and marketing expenses by almost $1 million, Adjusted EBITDA was $22.2 million, an increase of $129,000 from $22.1 million last year. 

 Cash Balances and Capital Structure 

• On December 31, 2022, CareCloud had roughly $12.3 million in cash.  
• Around $6 million was generated in the fourth quarter of 2022, thanks to positive cash flow from operations.  
• At the end of 2022, net working capital was nearly $12.3 million. 
• As of the end of the fiscal year 2022, 4,526,231 shares of non-convertible Series A Preferred Stock and 1,344,128 shares of non-convertible Series B Preferred Stock were outstanding. 
• The liquidation preference of $25 per share on the Series A shares is reinvested at 11% each year, or $2.75 per share, in the form of cash dividends, and the shares are fully redeemable at the discretion of the company at $25 per share.  
• The company offered over 1.3 million shares of non-convertible Series B Preferred Stock in 2022. These shares are similar to Series A Preferred Stock but pay an annual cash dividend of 8.75% instead of 8%.  
• On March 18, 2022, CareCloud redeemed 800,000 Series A Preferred Stock shares using $20 million in proceeds from the Series B issue.  

“As we continue to focus on lowering our cost, we are forecasting improvement in our margins throughout 2023; despite the loss of two big customers, we generated higher than average gross margins by the time they exited.”  

Bill Korn, CFO 

CareCloud has built solutions to meet the changing needs of its physician partners, while sticking to its true roots as a world-class RCM provider.   

Mr. Korn further reiterated that he believes 2023 will be a tipping point for business where organic growth really begins to accelerate.  

While CareCloud’s overarching goal is to deliver double-digit organic growth, Mr. Korn believes that the company has built the foundation to achieve it in the future with a combination of new customers and cross-selling.   

Mahmud Haq, founder and Executive Chairman of CareCloud, concluded the fourth quarter of 2022 and full year 2022 earnings call.  

 “2022 gave us our strongest year in organic sales activity. We are proud of this accomplishment and look forward to seeing this new business turn into revenue during 2023. I would like to thank our customers, shareholders, and all our associates for their trust, loyalty, and support of CareCloud’s mission.” 

Mahmud Haq, Founder & Executive Chairman 

However, we conclude this guide on the 2022 performance; a few important things should be addressed to help you understand why the leadership team of CareCloud is positive about the company’s growth in the coming years. 

CareCloud’s Automated Solutions Gain Traction in the Market 

Carinda Cox, CareCloud’s Vice President of Sales Operations, stated that, since 2020, especially in the past few months, they’ve fielded numerous inquiries from medical facilities eager to use process automation. 

More than 90 percent of the medical practices they’ve spoken with are experiencing a staff shortage. As a result, they are interested in exploring automation options that could free up their time to focus on patient care, as reported by Ms. Cox. 

The medical community is aggressively seeking solutions to these critical issues. Technology-enabled solutions that strengthen the healthcare workforce by enhancing workflows are the key to solving the healthcare business’s problems. The three types of services offered by CareCloud are all geared toward increasing productivity in a physician’s office: 

• Solutions that address all aspects of the system since they are fully integrated, including EHR, practice management software, and RCM. 
• Our digital health wellness suite includes CCM and RPM. 
• CareCloud Force workforce extension for tasks that cannot be automated and robotic process automation for everything else. 

Ms. Cox added that using CareCloud’s services can increase output, simplify procedures, and improve the quality of the patient’s experience. When solutions are implemented in the areas where they are most needed, they provide the greatest return on investment and set the road for the practice’s continuing success. 

“We’re constantly upgrading and adding to our list of solutions to provide technology that supports the needs of the industry.” 

A. Hadi Chaudhry, CEO & President

Making an Impact: CareCloud’s Presence at Key Events in Q4 2022  

CareCloud presented at the 22nd Annual National Medical Billing Conference, held by the American Medical Billing Association (AMBA), on October 20 and 21, 2022 in Las Vegas, Nevada. In addition, the company served as the event’s gold sponsor. 

CareCloud’s Chief Financial Officer, Bill Korn, spent some of his time in the fourth quarter attending two conferences, the Sidoti Virtual Micro-Cap Conference and the BTIG Digital Health Forum, to share information on the company’s latest releases and commercial plans, including its remote patient monitoring and chronic care management services. 

The company’s medSR division exhibited at the Radiological Society of North America’s Scientific Assembly and Annual Conference, which took place from November 27-30, 2022, at Chicago’s McCormick Place Convention Center. medSR’s representative spoke about how the company’s healthcare IT and operational consulting services may aid providers in skillfully navigating the increasing demands of the healthcare industry. 

CareCloud sponsored the 2022 Winter Conference of the Association of Physicians of Pakistani Descent (APPNA), which took place at Nishtar Medical University in Multan, Pakistan, from December 22-25, 2022. Almost 150 physicians of Pakistani descent living in the United States attended this year’s winter meeting in Pakistan. They participated in continuing medical education (CME) workshops, a young professionals council seminar, a research competition, and several networking opportunities. There are four local and international conferences held annually by APPNA, and this was one of them. 

Capitalization As of February 17, 2023 

 

What We Expect to Achieve In 2023 

According to the company, revenue is expected to increase for the full year of 2023 and beyond. Management’s projections for incoming cash flow are based on their anticipation of recurring revenue from current and future customers and the uptake of 2022’s new service, CareCloud Wellness.  

The leadership team has made assumptions about the timing of new customers going live and the adoption rates of new services and has omitted the effects of any future acquisitions or tuck-ins.  

This amounts to 12% net organic growth between 2022 and 2023, without counting revenue from two significant clients who were acquired and migrated to their acquirers’ software in mid-2022. 

Meet the Hosts of Q4 2022 and FY 2022 Earnings Call 

	MAHMUD HAQ  FOUNDER AND EXECUTIVE CHAIRMAN  CareCloud was established by Mahmud Haq, who also serves as its Executive Chairman. Mr. Haq was the CEO and President of Compass International Services Corporation (NASDAQ:CMPS) from 1997 to 1999 before he founded CareCloud (then known as MTBC). Mr. Haq was Vice President of Global Risk Management at American Express from 1985 to 1996. (NYSE: AXP).
	A. HADI CHAUDHRY   CEO AND PRESIDENT   A. Hadi Chaudhry joined CareCloud in October 2002 as an IT Manager. He later served as General Manager and Chief Information Officer through his appointment as Vice President of Global Operations in October 2016 and President in 2018. Now, he works as CareCloud’s CEO and President.
	BILL KORN  CHIEF FINANCIAL OFFICER   Before CareCloud, Bill Korn served six other companies and saw one of them achieve an annualized growth rate of 87% thanks to a combination of strategic acquisitions and internal development. He also worked with IBM for a decade, contributing to the company’s upper management and helping to develop the company’s groundbreaking service strategy of the 1990s.
	KIMBERLY BLANCHE  GENERAL COUNSEL AND VICE PRESIDENT OF COMPLIANCE   Kimberly Blanche is CareCloud’s General Counsel and Vice President of Compliance. As such, she oversees the company’s legal, compliance, and regulatory affairs and provides strategic advice on commercial, legal, and M&A topics. Ms. Blanche has worked as a Corporate Attorney for CareCloud since 2018.