CareCloud, Inc. Q2 FY2024 earnings call

• Cost transformation: Achieved more than $26 million in annualized cost savings over the last three quarters, expecting to realize a reduction to 2024 in-year expenses of approximately $20 million through deploying proprietary technology, reducing reliance on third-party contractors, and leveraging the global business model.
• CirrusAI Notes progress: Deployed at a small subset of existing clients, pilot users reported significant improvements in clinical documentation efficiency and accuracy. Offered a 30-day risk-free trial, with feedback positive, and will be available at $199 per provider per month. Recognizing revenues from this product in Q3 2024 with anticipation of growth as adoption increases.
• Revenue growth: Capitalized on diversified client base, with cross-sell and upsell initiatives doubling compared to the same period last year, expecting recognized revenue from these bookings to be approximately 50% higher in 2024 than last year. CareCloud Wellness program saw 154% Y/Y revenue increase in Q2.
• Cash flow and profitability: Achieved significantly improved year-over-year free cash flow and large increase in cash provided from operations in the first half of 2024, turning GAAP net income from negative to positive for the first time in two years. Repaid $7.5 million on credit facility to date.
• Shareholder matters: Distributed special proxy to Series A preferred shareholders recommending approval of changes to Series A preferred stock terms, with over 85% of proxies returned in favor, but need at least two-thirds of outstanding shares for approval.

In the second quarter of 2024, CareCloud reported revenues of $28.1 million. While down $1.3 million year-over-year, $1 million of the decline was due to medSR, a project-based professional services business. However, the CareCloud Wellness program, including chronic care management and remote patient monitoring, saw a remarkable 154% year-over-year revenue increase, exceeding $1 million in recognized revenue for the first time in a quarter. For the first six months of 2024, revenue was $54.1 million compared to $59.4 million in the first six months of 2023, with $3.3 million of the $5.3 million decline attributable to medSR. Direct operating costs continued to decline, down nearly $2.2 million from Q2 2023. Operating expenses, including G&A, R&D and sales and marketing expenses, decreased by $2.9 million. The company reported positive GAAP operating income of $2.3 million and GAAP net income of $1.7 million in the second quarter, both the highest since Q2 2022. Adjusted EBITDA was $6.4 million in the second quarter compared to $3.8 million in the same period last year.

• 2025 focus: Shift back towards driving growth, aiming to deliver consistent year-over-year revenue increases while enhancing profitability. Growth to be fueled by multiple channels including new sales, cross-sell and upsell opportunities, continued innovation of fully integrated AI solutions, expansion of CareCloud Wellness program, leveraging strategic partnerships, and utilizing high-quality health care data set to support life sciences companies.

• Forward-looking statements are subject to variety of risks and uncertainties beyond control, which could cause actual results to differ materially from contemplated in forward-looking statements. - Challenge of obtaining at least two-thirds of outstanding shares for approval of Series A preferred stock terms amendment due to fragmented retail ownership base. - Competitive market risks in the adoption and expansion of AI solutions.

Q: Stephanie [ph] from Ladenburg Thalmann asked about the percentage of operations through contractors versus in-house.

A: Hadi Chaudhry stated that the overwhelming majority of work is performed by employees, with a very minute portion by contractors, and Steve Snyder added that contractors were holdovers from prior acquisitions and the majority of work is now done in-house.

Q: Stephanie asked about industry partners and pipeline value.

A: Hadi Chaudhry said the pipeline is about 16 million plus, but focused more on recognized revenue from bookings, with cross-sell and upsell opportunities doubling year-over-year and expected recognized revenue 50% higher in 2024 than last year.

Q: Stephanie inquired about CirrusAI's initial users and next AI deployments.

A: Hadi Chaudhry said there are a couple dozen initial users with 30-day risk-free trials, and the next product in development merges capabilities to extract information from patient-doctor conversations and recommend diagnosis and procedure codes.

Q: Allen Klee from Maxim Group asked about medSR's state and market.

A: Hadi Chaudhry said the health system is dominated by a few stakeholders, working to expand relationships with second and third players and leveraging technology-enabled RCM solutions to grow in the medSR space.

Q: Allen Klee asked about remote patient monitoring wellness growth.

A: Hadi Chaudhry said it's a combination of expanding existing customer adoption through improved engagement methods and expanding the client base by offering the full technology-enabled solution including chronic care management.

Q: Allen Klee asked about expanding CirrusAI to broader customers and competitive market.

A: Hadi Chaudhry said there's a tremendous opportunity in the existing client base, and AI solutions improve workflows and indirectly drive revenue, differentiating from competitors by being integrated into existing platforms