CareCloud (NASDAQ: CLOUD) has released its second quarter 2024 financial results, highlighting a focus on profitability and cost reduction. The company introduced CareCloud CirrusAI notes, an AI-driven product aimed at improving clinical documentation, which is now available for licensing.
The company reported a 154% year-over-year increase in revenue from its CareCloud Wellness program and projected significant expense reduction for 2024, showcasing a strong financial turnaround. Despite a slight decline from the previous year, CareCloud’s second quarter revenues reached $28.1 million. The company achieved positive GAAP net income and cash flow milestones, with $8.3 million in cash from operations and $4.9 million in free cash flow.
Key takeaways from the report include CareCloud’s cost reduction efforts uncovering $26 million in annualized savings, positive reception of CareCloud CirrusAI notes among pilot users, successful cross-selling and upselling initiatives, and a repayment of 75% of its credit line balance. Additionally, the company saw positive GAAP net income for the first time since 2022 and garnered shareholder support for changes to its Series A preferred stock terms.
Looking ahead, CareCloud anticipates growth in adoption and revenue from CareCloud CirrusAI notes, aims to eliminate its credit line balance and resume preferred dividends, and plans to expand wallet share with existing customers while exploring partnerships and leveraging technology-enabled revenue cycle management solutions.
While the second quarter of 2024 saw a $1.3 million decrease in revenues year-over-year, CareCloud recorded a 154% increase in revenue from its CareCloud Wellness program, projected a $20 million reduction in expenses for 2024, and achieved an adjusted EBITDA of $6.4 million, the highest since the second quarter of 2022.
Despite some misses, such as a slight decline in quarterly revenue, CareCloud’s strategic growth trajectory, cost-saving measures, and strong cash flow point towards a promising outlook in the healthcare technology sector. Analysts are optimistic about the company’s future, with positive net income growth expected and a low revenue valuation multiple potentially signaling a buying opportunity for investors.
InvestingPro’s insights, including a Fair Value estimate of $2.81 and an analyst target of $4.5, suggest potential upside for CareCloud stock, reflecting positive sentiment around the company’s strategic initiatives and product offerings. With a focus on expanding wallet share and the recent launch of CareCloud CirrusAI notes, CareCloud is positioned for potential growth in the healthcare technology market. For more detailed information on our performance and factors affecting our results, please refer to our press release and reports filed with the Securities and Exchange Commission. If you participated in the call by phone, you can download our second quarter 2024 earnings presentation on our Investor Relations site at ir.carecloud.com. Additionally, we may mention certain non-GAAP financial measures on this call, so please refer to today’s press release for a reconciliation of these measures to our GAAP results. Now, I will pass the call over to our CEO, Hadi Chaudhry, who will provide an update on our progress towards improved profitability, debt repayment, and the growth of our new AI product, CareCloud CirrusAI notes. Thank you for joining our second quarter 2024 earnings call. Our main focus remains on increasing our positive free cash flow, which is essential for covering operating expenses, paying down our credit line, and eventually resuming preferred dividends. We have made significant progress towards these goals and are fully committed to maintaining this positive trajectory. Looking ahead to 2025, our focus will shift towards driving growth. Our aim is to achieve consistent year-over-year revenue increases while improving profitability. We are confident that this growth will be driven by various channels, including new sales, cross-sell and upsell opportunities, the continuous innovation of our fully integrated AI solutions, and the expansion of our CareCloud Wellness program. Additionally, we plan to leverage our strategic partnerships to enable industry players to utilize our white table technology solutions and our skilled global workforce. We also intend to capitalize on our extensive high-quality healthcare data set to support life sciences companies, healthcare providers, and payers. More details on our growth strategy will be shared during our next earnings call.
Stephen Snyder: Good morning, everyone. As a team, we are making great progress in transforming our cost structure to increase free cash flow, enabling us to eliminate the entire balance on our credit line and move closer to resuming dividends. We have identified over $26 million in annualized cost savings, with $20 million expected to reduce our 2024 expenses. Our three-pronged strategy includes deploying our proprietary technology, reducing reliance on third-party contractors, and leveraging our global business model. This cost transformation has been enabled by CareCloud’s technology, cost-efficient resource allocation, and reduction in third-party costs. We have seen improved free cash flow and cash provided from operations, turning our GAAP net income positive for the first time in two years. We have also proposed changes to the terms of our Series A preferred stock, with strong initial support from shareholders and a recommendation from Glass Lewis.
Norman Roth: Thank you for joining our call today. We are pleased to report positive GAAP net income and cash flow, with the second quarter of 2024 being our first quarter with positive GAAP net income since 2022. We generated $8.3 million in cash from operations and $4.9 million in free cash flow during the first six months of 2024. We have repaid 75% of the balance on our credit line, providing us with more financial flexibility. While our revenues were slightly down year-over-year, CareCloud Wellness showed growth, generating over $1 million in revenue for the first time in the quarter. Our direct operating costs have continued to decrease, with a nearly $2.2 million decline from Q2 2023. Operating expenses, including G&A, R&D, and sales and marketing expenses, have decreased by $2.9 million. On an annual run rate basis, these operating expenses have decreased by over $20 million since Q1 2023. In the second quarter, we reported positive GAAP operating income of $2.3 million and GAAP net income of $1.7 million, the highest amounts since Q2 2022. This is a significant improvement from the GAAP operating loss of $1.3 million and GAAP net loss of $1.8 million during Q2 2023. The GAAP net loss per share was $0.14, taking into account preferred stock dividends earned, whether or not they were declared or paid during the quarter.
Non-GAAP adjusted net income for the second quarter of 2024 was $3 million, or $0.18 per share. Adjusted EBITDA for the second quarter was $6.4 million, the highest since Q2 2022. Revenue for the first six months of 2024 was $54.1 million compared to $59.4 million in the same period last year. The company’s GAAP net income for the first six months of 2024 was $1.4 million, a significant improvement from the GAAP net loss of $2.2 million in the first six months of 2023.
As of June 30, 2024, the company had approximately $2.6 million in cash and $5 million drawn on its line of credit. The company is considering reducing the total size of the line of credit to $10 million to save on fees for unused portions while maintaining ample liquidity. The second quarter results have positioned the company well for the year ahead, and the company looks forward to updating shareholders later in the year.
In closing, Mahmud Haq expressed satisfaction with the company’s improved profitability and focus on creating long-term value for shareholders. The floor was then opened for questions from analysts, with a focus on operations, industry partners, and future growth strategies. So, these partners are either resellers for us or for our CareCloud Force. They leverage our employees for inbound expansion based on marketing campaigns, and we plan to invest more in outreach to find additional partners.
Regarding the pipeline value, we are focusing more on recognized revenue rather than the pipeline itself. Currently, the pipeline is around $16 million, excluding cross-sell and upsell opportunities. We have seen significant growth in cross-sell and upsell bookings this year compared to last year, with recognized revenue expected to be 50% higher than the same time last year.
For CirrusAI, we have initial users and a few dozen signed up for the 30-day trial. We have launched CirrusAI Guide and CirrusAI Notes, and are working on a new product that combines both to provide more value. This new product is being rolled out to our first provider for testing.
As for M&A, our growth strategy in 2025 will focus on expanding wallet share with existing customers and partnerships. We have 25 partnerships currently, primarily with medical billing companies, and see potential for more partnerships in the future. While traditional acquisitions may not be a focus, we see opportunities for quasi-acquisitions through enabling partners to leverage our software and team to enhance their business models. This approach can provide revenue and cash flow benefits without the need for a traditional purchase of stock. As the year progresses, we are dedicated to expanding free cash flow and focusing on growth opportunities that allow us to continue increasing cash flow. We will see how things unfold, but our primary focus will be on pursuing opportunities that align with our goal of expanding cash flow. Additionally, by enhancing the existing workflows with AI integration, time savings can be achieved. For example, using ChatGPT can reduce the time taken to write an email from 2 minutes to just 5 seconds. While this may not directly drive revenue, it can significantly improve overall workflow efficiency for the client, ultimately leading to revenue growth. Since we charge our clients based on collection fees, our revenue stands to benefit from these improvements.
In a competitive market for AI solutions, our differentiation lies in the seamless integration of our AI solutions into existing workflows. Unlike some competitors who require separate solutions running independently, our AI solutions enhance existing processes. For instance, our transcription improvement solution can seamlessly integrate with a client’s existing Electronic Health Record (EHR) system, becoming an integral part of their workflow.
This strategic approach sets us apart from competitors and positions us as a valuable partner for clients seeking AI solutions that seamlessly integrate into their existing platforms. Thank you for your attention during today’s conference call. Have a great day.