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Healthcare Tech Firm Grows Revenue 10% YOY in Q1/23

Source: Rob Goff


June 6, 2023 ( Newswire) This positive start to 2023 bodes well for the company turning EBITDA positive later this year, which is expected, noted an Echelon Capital Markets report.

CloudMD Software & Services Inc. (DOC:TSX.V; DOCRF:OTCQB; 6PH:FSE) announced solid Q1/23 results that "highlight emerging double-digit baseline growth," reported Echelon Capital Markets analyst Rob Goff in a May 30 research note.

"We are encouraged to see Q4/22 and now Q1/23 results support baseline organic revenue growth of about 10% with expanding gross margins," Goff wrote. "We remain bullish toward a more focused and efficient CloudMD emerging."

CloudMD offers health technology solutions on a software-as-a-service basis to North American medical practices; operates a network of interconnected medical clinics and two pharmacies; and provides cloud-based software for electronic medical records, medical billing, and practice management.

122% Possible Return

Goff noted this Canadian healthcare services firm offers investors a significant potential gain of about 122%. This is based on the difference between Echelon's CA$0.40 per share target price on CloudMD and its current CA$0.18 share price.

The company is a Speculative Buy.

Quarter Results at a Glance

Echelon calculated that in Q1/23, CloudMD achieved about 10.8% year-over-year (YOY) organic revenue growth, Goff highlighted. This figure accounts for one-time COVID-related revenues of US$4.1 million (US$4.1M) in Q1/22 and YOY reductions related to the lost Ontario iCBT program (US$2.6M) and VisionPros challenges (US$0.6M).

Because in Q1/23, CloudMD continued integrating acquisitions, including networks and back-end systems, its topline results for the quarter were largely in line with those of Q4/22. The exception was gross profit, which came in about US$0.4M higher.

Goff presented CloudMD's key Q1/23 numbers. Revenue was US$26.1M, ahead of Echelon's US$25.9M forecast but below the consensus US$27M estimate.

Gross profit was US$9.4M, above Echelon's US$9M estimate and in line with consensus expectations.

EBITDA was (US$1.6M), better than both Echelon's (US$2.4M) estimate and consensus (US$2M) projection.

Positive EBITDA on Horizon

Goff pointed out that Echelon expects the company will turn EBITDA positive in Q4/23 and cash flow positive in 2024, both potential catalysts for its stock.

"As CloudMD approaches EBITDA-positive results, we believe the company will hold considerable potential for a significant valuation rerating either organically or via takeout," Goff commented.

Echelon also forecasts that by year-end 2023, CloudMD will achieve quarterly run-rate revenues that exceed US$30M and an annually recurring revenue of US$40M. Echelon forecasts annually recurring and reoccurring, or high-quality, revenues will increase to comprise a larger share, about 90%, of the mix, and gross margins to reach 36% or higher.

Echelon also anticipates CloudMD will gain material refinancing flexibility throughout 2023, noted Goff, to end the year with about US$9.5M in cash.

Estimates Raised, Upside Exists

Goff wrote that Echelon revised its full-year 2023 (FY23) gross profit and EBITDA forecasts for CloudMD, increasing the former by US$0.6M and the latter by US$1.4M.

For FY23, Echelon now estimates revenue of US$111.7M, gross profit of US$40.4M, and EBITDA of (US$3.1M).

For FY24, Echelon projects revenue of US$126.6M, gross profit of US$46.6M, and EBITDA of US$2.6M.

In addition to these expectations, wrote Goff, "We see potential upside to our baseline forecasts where CloudMD's sales pipeline stands at over US$55M in annual recurring revenue and where management indicated on its Q4/22 call (approximately one month ago) that its communicated pipeline does not consider a few potential larger deals with more nuanced procurement processes and longer sales cycles."

More Info: Newswire

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