CareCloud, Inc. Q1 FY2025 earnings call

• Series A preferred stock conversion: In March 2025, a significant portion of Series A preferred stock was converted into common stock, reducing outstanding Series A shares and strengthening the capital structure, with reduced dividend obligations.
• AI Center of Excellence: Launched with over 50 AI professionals, targeting 500 by year-end, focusing on automating coding, claims, predicting denials, enhancing patient/provider engagement, and embedding AI across platforms. Current AI solutions like cirrusAI notes, voice, and assist are making progress with adoption and feedback.
• Acquisitions: Completed MesaBilling in February and RevNu Medical Management in April, marking return to M&A, expanding into audiology and hearing health, expected to be accretive within 90 days.

Revenue for the first quarter of 2025 was $27.6 million, an increase from $26 million in the same period last year. GAAP net income was $1.9 million, a turnaround from the net loss of $241,000 in Q1 2024. Adjusted EBITDA rose to $5.6 million, up 52% year-over-year. Recurring technology-enabled business solution revenue was $17.7 million, up approximately $400,000 from Q1 2024, while non-recurring professional services revenue from medSR increased approximately $1.5 million. Revenue contribution details weren't explicitly broken down by specific product segments beyond these general categories.

• Full year 2025 revenue is anticipated to be approximately $111 million to $114 million.
• Adjusted EBITDA is expected to be between $26 million and $28 million.
• GAAP earnings per share is expected to be $0.10 to $0.13, the first positive GAAP EPS after dividends since going public in 2014.

Forward-looking statements are subject to various risks and uncertainties beyond control that could cause actual results to differ materially from contemplated in forward-looking statements. These include risks related to market conditions, competition, regulatory changes, and the success of strategic initiatives like AI and acquisitions.

Q: Congratulations on first quarter year-over-year revenue growth in over two years and medSR's year-over-year increase. Could you detail key factors for revenue growth and how the quarter did vs. expectations?

A: Revenue growth is due to up-selling existing client base, net new opportunities from specialty specific EHRs, and tuck-in acquisitions. The quarter provided evidence of pivoting back into growth after focusing on capital structure refresh. For medSR, a large project in Q1 contributed to growth, but medSR revenue isn't expected to continue year-over-year increase at that rate.

Q: Given strengthening balance sheet and free cash flow, update on capital allocation priorities between reinvesting in growth and M&A opportunities?

A: Capital allocation is balanced. Priority is reinvesting in business, particularly in AI with scaling the AI Center of Excellence. Actively pursuing tuck-in acquisitions that align with existing capabilities and client base, allowing cost-efficient customer acquisition and application of tech stack and AI tools.

Q: Comment on remote patient monitoring and chronic care management opportunity?

A: RPM and CCM show year-over-year growth of roughly 25%-30%. It's a natural fit for up-selling and new business, but currently represents a relatively small portion of revenue, less than 5%.

Q: Is the decline in cost of goods sold as a percent of revenue sustainable? And about sales and marketing and tax rate?

A: Cost of revenue decline is sustainable with ongoing efforts. Sales and marketing expense impact may not be directly tied to growth due to acquisitive growth being a core part of strategy. Tax rate is expected to stay low as there are sufficient NOLs, resulting in mostly state minimum tax.