CloudMD Software (TSXV: DOC, OTC: DOCRF, FRA: 6PH) is a healthcare technology company that had bright days with its stock price topping $+3. Since then, the company reducing the gap between patients and doctors and sees its stock price running out of breath. With several dilutions to acquire companies and borders reopening, investors exited or sat on the sideline. Is it worth the risk of reinvesting in the company? While the stock is -87, let’s look at all the company’s assets, and then you will be the final judge.

Company Overview

CloudMD Software (TSXV: DOC, OTC: DOCRF, FRA: 6PH) is a breakthrough company redefining the traditional healthcare model. Its main objective is to connect all points of the healthcare journey through one centralized platform. Thanks to its efficient platform, users can talk to a nurse within 2 mins via phone or the web. About seeing a therapist, it takes 1 to 5 days to start digital programs. In other words, waiting for healthcare is over. The company gathers a vast network of workers, including 1,500+ mental health professionals (including psychotherapists, psychologists, and social workers), 1,600+ allied health professionals (including diagnostic specialists, specialty health providers such as dietitians), 1,400+ medical professionals (including doctors, nurses, and nurses practitioners), and 600+ rehabilitation therapists (including OTs, PTs, and Ergonomic Specialists).

The company’s solutions are efficient, and data buoy its model. 89% of those experiencing depression and 91% of those experiencing anxiety saw ‘major improvements,’ and 82% said they would recommend the service based on their own experience. The assistance doesn’t just work for non-healthcare persons. If we focus on nurses, they returned to work 101 days earlier than the health system average, resulting in a 42.4% reduction in disability duration). Moreover, in the first 35 cases, 2424 total days were saved, equivalent to hiring 10.6 full-time nurses. Talking about money, the method saved $920k and provided a 19.8 ROI.  

CloudMD made several improvements over the last quarter. Despite highlighting all of them, we can highlight a few. The company added telemedicine services for primary care health navigation to Kii personalized & connected care offering. The services are led by nurses and nurse practitioners who provide fast access to a wide variety of primary care services and treatments and overall health and wellness support for employees and their family members, all from one connected offering. Another strategic piece of information, the company announced that it finalized the review and settlement of VisionPros, its online vision care platform. The settlement was reached with the former owners of VisionPros, reduced the purchase consideration paid for VisionPros by $12.6 million, and removed any future earnout payments.

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Share Structure/ Financials

The company shared its third-quarter financial performance on November 14, 2022. Let’s focus on the harmful data first. Despite positive growth, the company generated an adjusted EBITDA loss of $3M ($3.2M in Q2 2022). CloudMD’s cash and cash equivalents were $27.5M compared to $45.1M on December 31, 2022. Let’s talk about the brighter side now. CloudMD identified and saved $4M and an additional $6M of annualized cost optimization and savings with full run-rate to be recognized in early 2023. Then, CloudMD generated $27.5M in revenue ($28.8M in Q3 2021), and this data doesn’t gather its Clinics & Pharmacies Division or Cloud Practice, classified as discontinuing operations. The company also improved its gross margin by 34.5% compared to 31% in Q2 2022. CloudMD also has signed multi-year contracts, contributing to its organic growth and annual recurring revenue of $8.8M.

The company drives organic revenue growth while eliminating costs from the business and aims to become profitable. The end of one-time mandates and COVID-related government contracts overshadowed the company’s growth and deflected on performance. Besides, the management team seeks to find new clients and improve financial controls.  

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“We are strengthening the business by focusing on profitability through sales of higher gross margin, recurring revenue, and multi-product contracts. We are restructuring our business resulting in the ability to deliver prudent expense and cash management. We are pleased with our increasing customer base, specifically Mental Health Support Solutions.”

Karen Adams, CEO

What about the fundamentals? As of November 20, 2022, the company had 304M shares fully diluted. This high number is explained because of the several dilutions effected by the management board to acquire others as fast as possible other companies and by the need to keep a high cash position. CloudMD has 293M shares issued & outstanding, 9.5M options (avg. price: $1.28), 2.5M warrants (avg. price: $2.57), and 1.1M restricted share units. The stock price flies just above the 52-week low of $0.185 and is far from its 52-week high of $1.20. Albeit the stock price lost its glimmer, analysts give a consensus TP of $0.63, representing a 200% increase in valuation.

Bottom Line

CloudMD Software (TSXV: DOC, OTC: DOCRF, FRA: 6PH) is laser-focused on profitability, and the management team is actively researching solutions to reach their target. Albeit the company was hampered by the end of Covid restrictions, it found ways to generate revenue, and the robust balance sheet prevents investors from seeing a possible dilution. What can make us say the company’s valuation is low is its stock price is traded at less than 1x its annualized revenue, and analysts covering the company give a consensus target price of $0.63.

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