CloudMD Software & Services Inc

CloudMD Software & Services Inc (TSX: 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 

• Acquired Oncidium Inc: Oncidium Inc., one of Canada's premier health management firms, was recently acquired by the company, which has a devoted customer base of over 500 corporate and public sector clients across numerous industries. We believe the purchase would allow the company to evolve its healthcare ecosystem while also allowing it to extend its reach. In addition, the purchased company earned CAD 17 million in revenue and had a positive EBITDA, which is a significant plus.

• Planning to grow aggressively: Across North America, the company presently serves a combined ecosystem of over 500 clinics, almost 4,000 licensed practitioners, and 8 million patient charts. Furthermore, over the next 12 months, it intends to aggressively expand its patient base through acquisition and organic growth, as well as acquire and/or partner with other firms and technologies that complement its business plan, which is commendable.
  

• Increase in Cash and cash equivalents: The Company managed to improve its cash and cash equivalents to CAD 99.2 million as of March 31, 2021, compared to CAD 59.7 million on December 31, 2020. In Q1 2021, the Company raised gross proceeds of CAD 58.2 million in a bought deal short form prospectus offering in March 2021, and its current cash balance is approximately CAD 95 million. We believe this Cash would support the Company’s aim to grow aggressively.
  

Financial overview of Q1 2021 (in thousands of Canadian Dollars)

Source: Company

• In Q1 2021, the Company reported healthy revenue of CAD 8.7 million, an increase of 187% compared to CAD 3.0 million in the previous corresponding period. The increase was primarily attributable to acquisition growth, with five acquisitions completed in the quarter and 11 acquisitions completed in the last twelve months.
• The gross profit increased to CAD 3.5 million in the reported period against CAD 1.1 million in pcp. The increase is 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 9.1 million against CAD 2.7 million in pcp. The rise in expenses was mainly due to higher G&A expenses, higher sales and marketing expenses, and share-based compensation.
• On the back of higher operating expenses, as discussed above, the Company’s net loss increased to CAD 5.2 million in Q1 2021, compared to CAD 1.6 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 is committed to transforming the healthcare sector by utilizing technology to digitalize healthcare delivery, resulting in improved access to treatment and improved health outcomes. Its growth strategy is multi-pronged, focusing on organic growth, accretive mergers and acquisitions. Q1 FY21 was also a watershed moment for the firm, as it completed five acquisitions, bringing in CAD 13 million in annualized revenue and laying the groundwork for its Enterprise Health Solutions segment. It also has a solid financial sheet, which will allow it to continue investing in a promising pipeline of accretive, synergistic acquisitions. Therefore, based on the rationale discussed above and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 1.88 on July 27, 2021. We have considered WELL Health Technologies Corp, 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 Price Chart (as on July 27, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.