CloudMD Software & Services Inc.

CloudMD Software & Services Inc. (TSXV: DOC) is a rapidly growing technology company focused on digitizing the delivery of healthcare by providing patients access to all points of their care from their phone, tablet or desktop computer.

Key Highlights

Riding inorganic expansion wave: The Company is well funded with a strong pipeline of M&A to scale and grow the business quickly. Recently they made some acquisitions, and we believe that these acquisitions made by the group would provide some extra synergies and drive further revenue with healthy EBITDA margin. Below are these acquisitions, discussed briefly.

• Aspiria Corp: Recently, the Company expanded its Virtual Mental Health Services by acquiring Aspiria Corp., a healthcare provider focused on delivering employee (EAP) and student assistance programs (SAP). Aspiria currently serves over 750 organizations, with 1 million employees, students, and their families, in Canada and internationally. It is presently generating an annual revenue of approximately CAD 3.4 million. It is expected that Aspiria would generate an EBITDA margin greater than 20%. 

• Medical Confidence Inc.: On 15th January 2021, the company announced acquisition of Medical Confidence Inc., a revolutionary healthcare navigation platform with proven results in wait time reduction and patient satisfaction. The company generated approximately CAD 2 million in revenues with EBITDA margins exceeding 26% over the last fiscal year ending March 2020.

• HumanaCare Organizational Resources Inc.: On 12th January 2021, the company announced the acquisition of HumanaCare, an Industry Leader in Employee Health Services, providing a transformational platform to over 5000 corporate clients, 1 million employees and clinical network of more than 3500. Currently, HumanaCare has multi-year agreements to service fortune 500 clients, leading corporations, and advisors and generates approximately CAD3.3 million of revenue with EBITDA margins that are greater than 19%.

• IDYA4: On 17th December 2020, the company signed an agreement to acquire IDYA4, leading data integration and cybersecurity company based in the United States at the price of USD 14.8 million. The group expects approximately USD 4.1 million revenue in the calendar year 2020 with EBITDA margins of 36% with a strong revenue pipeline and growth opportunities and forecasted to generate revenue greater than USD 6 million and USD 8.5 million in calendar years 2021 and 2022, respectively.

Healthy balance sheet: The Company has a strong balance sheet, allowing them to continue deploying capital towards a robust pipeline of accretive, synergistic acquisitions. The group had cash and cash equivalents of CAD 33.9 million as on September 30, 2020, compared to CAD 13.813 million on September 30, 2019.

Financial overview of Q3 2020 (Expressed in Canadian Dollars)

Source: Company

• In Q3 2020, the Company reported healthy revenue of CAD 3.36 million, compared to CAD 2.17 million in the previous corresponding period. The increase was primarily due to acquisitions in the Clinic services & pharmacies segment and an increase in SaaS model digital services revenue by 22%.

• The Company posted a net loss of CAD 2.7 million in Q3 2020, compared to a net loss of CAD 0.8 million in Q3 2019, primarily due to additional expenses incurred to support the Company’s growth strategy, exceeding its increased revenue and gross profit for the period.

Risks associated with investments

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

Note: All forecasted figures and peers have been taken from Thomson Reuters

Stock recommendation

The Company is focused on revolutionizing the healthcare industry by leveraging technology to digitalize healthcare delivery to provide better access to care and better health outcomes. With the Q3 2020 financial performance, combined with organic growth, and completed and announced acquisitions, we believe that the Company is on track to achieve annualized revenue run rate exceeding CAD 35 million, gross profit percentage exceeding 50%, along with improved Adjusted EBITDA performance. Therefore, based on the above rationale and valuation, we have given a “Speculative Buy” rating at the closing price of CAD 2.50 as on January 22, 2021.

Source: Refinitiv (Thomson Reuters)

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.