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."
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- CloudMD Software & Services Inc. is an affiliate of has a consulting relationship with Streetwise Reports and has paid a consulting fee between US$8,000 and US$20,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice. *** only put this line if an article is a life science article***
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Disclosures for Echelon Capital Markets, CloudMD Software & Services Inc., May 30, 2023
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Company: CloudMD Software & Services Inc. | DOC:TSXV
I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.