CloudMD Software & Services Inc

CloudMD Software & Services Inc (TSXV: DOC) is digitizing the delivery of healthcare by providing patients access to all points of their care from their phone, tablet or desktop computer. The company offers SAAS based health technology solutions to medical clinics across Canada and has developed proprietary technology. 

Key highlights

• Record Q2 2021 revenue: The company clocked record revenue of CAD 15.7 million, an increase of 461% compared to CAD 2.8 million in Q2 2020. The increase was primarily attributable to acquisition growth with 4 acquisitions completed in the quarter, and 14 acquisitions completed in the last twelve months. Excluding the impact of Q2 2021 business acquisitions, the Company achieved a 9% organic growth rate from its existing businesses over Q1 2021.

Source: Company

• Focused on creating innovation:  The company is dedicated to advancing healthcare delivery innovation by leveraging technology to improve access to treatment and enhance health outcomes. Organic expansion, accretive mergers and acquisitions, and asset leveraging are all part of the company's multi-pronged growth strategy. When the firm implements and adopts the Complete Health Platform in the second half of 2021, we expect breakthrough technologies to unlock the company's potential.
• Winning through proprietary platform: The company's unique technology has been integrated into its Enterprise Health Solutions Division, which now provides a full-service employer healthcare platform. Furthermore, the EHS business has evolved to become its largest and fastest-growing sector, with yearly sales surpassing CAD 70 million and profitable operations, thanks to the purchase of Oncidium. It also has a healthy sales pipeline and is committed to accelerating expansion by winning multi-year contracts with clients across North America.

Financial overview of Q2 2021 (in thousands of Canadian Dollars)

Source: Company

• In Q2 2021, the Company reported healthy revenue of CAD 15.6 million, increased by 461% compared to CAD 2.7 million in pcp.
• The gross profit increased to CAD 5.5 million in the reported period against CAD 1.0 million in pcp. The increase was primarily attributable to a revenue mix where higher margin revenues from Enterprise Health Solutions and Digital Services made up a stronger overall revenue percentage.
• The Company witnessed an increase by many folds in its total operating expenses, which stood at CAD 11.5 million against CAD 3.4 million in pcp. The rise in expenses was mainly due to higher G&A expenses, higher sales and marketing expenses, share-based compensation, and integration cost.
• On the back of higher operating expenses, as discussed above, the Company’s net loss increased to CAD 5.9 million in Q2 2021, compared to CAD 2.7 million in pcp.
  

Risks associated with investment

The company is exposed to various market risks in the ordinary course of operations that could impact its earnings and cash flows. Some important risk factors are General Healthcare Regulation, Reliance on third-party service providers, Competition, Shortage of Healthcare Professionals, Cybersecurity, etc.

Valuation Methodology Illustrative: EV to Sales 

Stock recommendation

The company had another strong quarter, demonstrating continuous growth across all segments. In Q2 2021, the company also closed three of its largest acquisitions to date and added CAD 96 million to its annualized revenue run rate, which will be fully recognized in Q3 2021. Furthermore, the company's health technology solutions are on pace to be integrated into a single comprehensive healthcare ecosystem, with strong early acceptance rates that will continue to fuel organic growth. Therefore, based on the rationales discussed above and valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of CAD 1.47 on October 18, 2021. We have considered Skylight Health Group Inc, Precipio Inc, Aleafia Health Inc, etc., as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on October 18, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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