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."
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Important Disclosures:
- 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.
- The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
- 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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ANALYST CERTIFICATION
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.
