Greetings, and welcome to CareCloud Inc. First Quarter 2022 Results Conference Call. . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kim Blanche, General Counsel. Thank you, and over to you.

Good morning, everyone. Welcome to the CareCloud's First Quarter 2022 Conference Call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer; President and a Director; Bill Korn, our Chief Financial Officer; and Karl Johnson, President of CareCloud Force. Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts made during this conference call are forward-looking statements, including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook, and potential organic growth and acquisitions. Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimates or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our press release and our reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements. For anyone who dialed into the call by telephone, you may want to download our first quarter 2022 earnings presentation, please visit our Investor Relations site, ir.carecloud.com; roll down to News and Events, click on First Quarter 2022 Results Conference Call and download the earnings presentation. Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our first quarter 2022 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

Thank you, Kim. Welcome, and thank you for joining us today to review our first quarter earnings call. First, to review our first quarter 2022 financial highlights. Revenue of $35.3 million was a record for the first quarter coming in slightly ahead of expectations and represented an increase of 19% year-over-year. Adjusted EBITDA of $4.7 million is tracking towards the full year guidance that we had presented in March when we offered our initial outlook. Adjusted net income was $3.5 million or $0.23 per share. On the call today, I would like to discuss a few key themes as we continue to advance CareCloud's mission of becoming the leading technology and solution supplier to health care providers. Namely, I'm going to discuss number one, innovation, specifically some of our new products that are forging new and adjacent markets; number two, cross-sell success via further white space penetration; number three, the health of our sales pipeline; and number four, partnering characteristics of our successful force initiative. To start us off, I want to highlight 2 more of our recently launched digital health solutions, CareCloud Remote and our chronic care management solution branded as CareCloud Wellness. Launched last month, CareCloud Remote gives us an Uber-like mobile clinician management solution with location services, allowing better scheduling for both clinicians and patients. The product is targeted to the home health market and extends our footprint beyond the clinic to the last mile of the health care, the home. The solution helps practice groups to streamline referral management, improve staff assignment for home case management and gives administrators and clinicians visibility and control over operational metrics. Our target market for this offering is the larger practice. At this level of scale, the complexities around credentialing, coding and revenue cycle require a disciplined approach to referral…

Thank you, Hadi. And thank you, everyone, for joining the call today and for your interest in the CareCloud story. I believe that we are off to a great start for 2022 and our first quarter results demonstrate that our solution set is meeting the needs of the market today. On today's call, I'm going to review our first quarter financial results and reiterate our 2022 outlook. For the first quarter, we generated revenue of $35.3 million, which increased 19% compared to a year ago. Taking a closer look, revenue from our technology-enabled solutions represented 85% of total revenue and consisted of 48% from clients using our core technology suite of electronic health records or practice management solutions, 15% from clients using 1 or more components of our technology like our business intelligence software and 22% from clients where we are providing IT services, utilizing our technology processes and know-how. Our remaining revenue is derived from 4% from clients using just revenue cycle management services, 9% from managing several clients' entire medical practices and the other 2% from other services. All of these breakouts can be found in our 10-Q. Revenue growth in the quarter was driven by strong results from medSR, the company we purchased in mid-2021 to give us a larger presence in the hospital space. medSR achieved record revenue during Q1 and signed more business than the revenue they recognized, increasing their backlog and positioning themselves for additional revenue growth during Q2. GAAP net income of $1.1 million, compared very favorably to a net loss of $2 million last year, despite a $500,000 increase in sales and marketing expenses. We have now reported at least $1 million of GAAP net income for 3 quarters in a row. Non-GAAP adjusted net income of $3.5 million represented a 20%…

Thank you, Bill. I am thrilled that our year is off to such a great start, setting us up for another strong year. I would like to thank our customers, shareholders, and all our associates for their trust, loyalty and support of CareCloud's mission. We will now open the call to questions. Operator?

. The first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.

So a few questions from our end. Firstly, could you talk about the size of the commercial team domestically here and any efficiencies that you're seeing there now and potentially throughout the balance of the year?

Thank you. Jeff, as we mentioned even on the last call and from the couple of last quarter that we continuously have been focusing on improving our sales and marketing team as far as we can keep seeing the success and increase in our -- not only on the pipeline, but also on the closing of the deal. So we do see that uptick. And in terms of the number right now on the U.S. side, we have about roughly 32 resources. And in addition to those, we have about 22 STRs on the digital marketing and on the offshore side, which is helping the U.S. side. There is another probably 5-or-so senior position that we are currently hiring for because we do see, as the thing has been significantly started to improve on the demand generation and on the sales pipeline.

Okay. Got it. That's helpful. And could you talk about some of the growth drivers that you anticipate from the CareCloud Force going forward? And talk about that funnel and the predictability of your estimates and those revenues from the Force program?

Sure. Let me just start this off and then I'll hand it over to Karl, and he can talk about it a little bit more detail. And as I mentioned in our -- during our call that we do see the -- if we look at the -- from the pipeline perspective, a significant increase, which is about fivefold compared to the last year when it comes to the Force, the opportunities, the pipeline that we have been able to generate. In addition to that, our booking for the first quarter has also increased proportionately in terms of the percent on the Force deal side. In the other some of the large possible anticipated opportunity we are working on and none of those have yet materialized, but we are almost at the final stages of the decision introducing with the decision-making process. With that, I'd like turn it over to Karl.

Good morning, everyone. Yes, as Hadi mentioned earlier, the initial concept of Force was to provide certain potential M&A targets where they weren't a good fit for us, but yet we could offer them something that could make their businesses healthier and provide us excellent margins. Since then, we've really evolved to become a staff augmentation solution for larger groups and hospitals and especially interesting, moving into other companies that are providing electronic health records and services to physician practices. So that's where we've seen a big shift. I think on top of that, we have seen a very close working relationship with the medSR team. And as they're into facilities with consulting and support services, a natural flow of that has been on to providing back-end services for Force either on a project basis and frequently then moving into an ongoing basis. I hope that's helpful.

Yes. And then lastly, from our end. Bill, if you could provide any commentary on the sequential pace and cadence of your anticipated top line for the years? Are we correct in assuming that it looks like sequential quarter-over-quarter for Q2 and Q3 and a softer Q4 as you read out in prior years?

Yes. Thanks, Jeff. So yes, you're correct. As you know, and I'm sure everybody knows, we always go through a period as did most of the industry in Q1, people see the doctors, but they have deductibles. And when our revenue is a percent of what the doctor collects, the revenue goes down sequentially. So Q1 is following that normal cadence. Starting with Q2, you'll see just normal visits. And by the way, last year and the year before, there had been some impacts from COVID. I'd say by now, we're really not seeing a major difference between the level of visits and what you would have seen in 2019, '18 and previous years. So -- so that means you'll see sort of the normal cadence. Q2 will be a little more activity. Q3 will be our seasonal peak. It always is our seasonal peak, especially with lots of back-to-school visits, people getting flu shots. And then in Q4, you find people when they can avoid it. They don't schedule visits with their internists week between Christmas and New Year's. So you sort of get 1 less week in the year and I would expect to see that in 2022 as well.

The next question comes from the line of Allen Klee with Maxim Group.

Could you talk a little more about CareCloud Wellness in terms of how you're positioning this product competitively? And you mentioned you've had a lot of interest in the beginning, kind of what's the feedback you're getting for why that is?

Allen, and a great question. Thanks for the question. One thing, the way we started looking at it and if you go back to the history, I think we all understand the Chronic Care management was one of the initiatives, the CMS, I think launched in around 2015 time frame and very restricted and just to get it matured over the next couple of years. So that's the backdrop. This year, just shifting the focus towards more digitization in this upcoming year, the CMS has increased the reimbursement rate by roughly about even 50% in some of the chronic care management procedures. So our unique situation in this whole equation was -- so for our clients, they are already using -- if we talk about the clients who are using the core technology components and between the core and part of the each one -- one of the technology components, the clients that are using that number is over 70% of our client base today. So those -- for those clients, all what they need to do is, is a check off a button saying, okay, yes, and sign the contract, and we will take it over from that point. Their current operational expenses will not be increased. We will be providing all the care managers and the people who will be needed, the providers who will be required helping them create the plan. And then our technology plays in by, for example, checking the eligibility of the patients who can be eligible for these chronic care management procedures. Then the outreach will be done with the help of our chronic care management team. And in the documentation or the procedure that has to be done using the telehealth documentation, the telehealth communication takes place. And then again, back to…

That's great. And then I was just looking at Page 10 of your investor presentation. I'm just curious from that, can we back into what medSR's revenue was for the quarter?

I'm not sure that -- I'm not sure that you can get the medSR revenue directly from there. I think when you look at the 10-Q, you'll see in the footnotes that it will give you some more details. But medSR had a great strong quarter in Q1. You can -- as a first plan sort of look at what it was in Q3 and Q4, and it will be pretty similar in terms of Q1.

The next question comes from the line of Marc Wiesenberger with B. Riley.

Just following up on that last question regarding kind of Page 10 in the slide deck. If we back into it, it looks like that 22% of professional IT services is about $7.8 million in sales, and that's pretty strong growth, but kind of the 65% coming from the remaining technology driven solution was maybe $22 million and that actually would be a decline year-over-year. So Bill, if you could talk to those dynamics with regards to what really was driving medSR and then the technology potential year-over-year decline?

So in terms of medSR and recognize you haven't got the Q so you haven't got all the final numbers. So I'd say taking the percentages, it gets you close, but doesn't get you exactly there. In terms of medSR, there's been a good response from clients. I think the fact that they're now part of CareCloud, and we've got a lot of capabilities and they're part of a large public company means that the clients are interested in working with us. So that business is growing really nicely. This is the third full quarter that they've been part of us and it's -- I would say that, that deal has worked out very well. In terms of the remaining core business, I'd say that it is roughly flat from where it was last year. I wouldn't say there's major increases, decreases, I wouldn't read too much into that.

Got it. Okay. And I guess based on medSR's 1Q results and maybe your expectations for the remainder of the year, does that impact your thoughts on their ability to hit any of the earn-outs?

Well, it's hard to know how they'll wind up with the earn-outs, although I'd say on a quarterly basis, we always reestimate what we'll pay in terms of the earn-out and as is required by GAAP and by our auditors, Grant Thornton, each quarter, there becomes a small adjustment to the income statement showing either an expense, if you think you're going to pay out more than originally anticipated or a credit if we think we'll pay out a little bit less. So I'd say the revenue was really strong, the earn-out criteria that we designed were pretty strict and require hitting a number of things in addition to revenue, most importantly, profitability. So I don't know whether there'll be a payout or not, I'd say whether there is or isn't, the business is doing really nicely and exceeding our expectations. And if we -- turns out if we don't have big payout as recently anticipated, strike that up to doing a good job negotiating the terms of the earn-out in order to get people enthusiastic about selling it and still keeping the cash in the bank. So I think we've done a good job in terms of structuring that.

Very helpful. Appreciate all that color. And nice to see some more university system wins. I think UNMC was your sixth RCM win in the oral pathology space. And then the one you put out this morning with the University of Tennessee was the seventh. I'm wondering how -- any of the prior wins led to broader adoption of the CareCloud platform across those health systems? And maybe why has oral pathology been an area you're getting traction in maybe relative to others?

Thank you, Marc, for the question. I think one of the reason is simply our proof that we have been able to perform really well with the combination of our technology-enabled RCM services and some technology pieces. Of course, every time the first win is a more difficult one. And if we prove to the client that we can add really the value and improve the profitability and the revenue for the client, it automatically becomes the referral for the next one. So a number of these are also the results of some of the referrals from the prior clients in the same space. And then once we go to this -- specially earlier this morning, the press release you must have looked at, we went through an RFP process, which they have literally tested us out from every single possible area with a whole list of questions and then evaluated and reviewed the numbers compared to us with other competitors. And the earlier ones, we literally after that closing and within the next week, we already actually have started working with another opportunity. Again, we yet need to see if you are able to close that or not. But this seems to have started to give us a lot of attraction and attention towards CareCloud products and services, especially in this space.

Helpful. Appreciate it. And then just a final 1 for me. With regards to CareCloud Wellness and Remote, are these incremental revenue generating offerings or are they bundled with the kind of current pricing? And how should we think about those going forward?

So for CareCloud Wellness, when it comes to the different and additional pricing on top of because in this case, if you think about it, there will not be any additional expenses for the existing client. And in order to perform these services, we are going to need care managers, providers, maybe nurses or nurse practitioners. So all that additional staffing, of course, needs more expenses at a higher rate or a higher expense versus a regular RCM services and the like. So it does come with additional expense on the -- additional fee to the collection to the revenue they will receive. But again, this will be tied to the additional revenue that they will get. So in terms of the additional expense on their existing -- the books, there won't be any additional expense. When it comes to the Remote, we typically -- similar to how we sell the rest of our packaged services, either it can come as a 1% for the entire package or in some cases, 1 or 2 products can be separately and the services can be separately priced, for example, in some cases, we price credentialing separately because the clients want that to be based on their setup. It could be that the Remote -- the app that we are -- that's part of the overall package, the client might say, okay, so I'm fine paying 5% or 6%, whatever the agreed-upon fee is for all the rest of the services, but this app, for example, we will not be using it more extensive -- we'll be using more extensively. So let's come up with a separate pricing. So just to summarize, Wellness come off with the separate additional pricing out of the revenue and the Remote is just a part of a regular -- the way we sell over rest of the technology-enabled RCM services.

Got it. Appreciate it. Congrats on a good quarter.

. The next question comes from the line of Richard Baldry with ROTH Capital Partners.

Given the volatility in the tech sector recently, I'm curious if there's -- you've seen any impact on the M&A pipeline or what people are looking for? Or has it stalled out anyone's willingness to transact in this market or waiting out maybe a better market down the road or maybe the pressures to put more people into the pipeline. Just any discussion about changes that you're seeing in that part of your business?

Good question, Rich. We continue to have great opportunities for M&A. I would say that we -- as we have since -- before we were public, we have a strong pipeline, and I'd say the pipeline of potential deals, the portfolio of companies that we might potentially do deals with is probably stronger than ever. But at the same time, we continue to have really high standards. And so at this point, we don't have another acquisition to talk about, but I'll say that we're always talking to people and just stay tuned.

You talked about sort of the front of the sales funnel growing pretty quickly of late. Can you talk about maybe looking deeper into the funnel, have you seen any changes in sales cycles at all? Or would the makeup of the front of the pipeline argue for any changes, either lengthening of durations or win rates given the end markets that are sort of filling into the front of the pipeline. So we can kind of gauge how we think that increase in the front will impact your ongoing growth rate?

Thanks, Rich, for the question. So the 1 factor that we mentioned, which was a deliberate transition, which is what we see is a higher percent towards the enterprise pipeline versus the smaller wins. So that comes with -- so there's an advantage and some temporary short-term disadvantage because the enterprise deals typically take a little longer than to close and then even to go live, compared to the small practices where the closing cycles are complete typically shorter, but then -- and the go lives are also shorter. The high the enterprise deals, they are more sticky. They are -- they come with a higher margin. So the combination of all that, we absolutely see a much better growth opportunities in the quarters to come. But yes, the closing cycles might be a little longer. And then by the time they will be completely ramped up, will be slightly higher. And if I talk about in terms of the months, what we have seen is, and in average, the closing cycle, it's about 6 months on an enterprise deal and could be another when everything completely goes up and running, fully ramped up somewhere between 3 to 6 months. For the smaller ones or small to midsize, it could easily be between 30 to 60 days in terms of the closing cycle and then between 1 to 3 months in terms of when the practice goes live and ramped up fully on the revenue side.

And two sort of quicker ones. The R&D line has been oscillating a bit lately. Could we talk about what a good run rate would be? And then what will pace the exchange process for the preferred, both seem to be trading at premiums. So it seems like demand and for the new series, demand is good. So how quickly do you think you'll run through that process? And what is the real determiner behind that?

Two good questions. So in terms of R&D, right now, what I'd say is recognize that as we're developing new products, the expense that's -- the expenditure that relates to things that are not yet in production is capitalized, and you see that in the cash flow statement. And then if the product is actually in production, then it hits the income statement. So total dollars have been about the same. There's an accounting treatment that again, we discussed with Grant Thornton as well as sort of the timing of when things go into production. I would expect the total dollars to be roughly constant over the year, although having said that it will be roughly constant, maybe it will decline a little bit quarter-over-quarter. Not a lot, but I'd say we've got a strong team. But as we get things completed, we may not be adding as many new people. So we may see a little bit of a slowing of the growth that's there. The amount that hits the income statement, last year, there were some fluctuations. I think you can sort of see where we were in Q1 and think about that as being the right run rate for the rest of the year. Now redemption is -- and the Series A and B Preferred is an interesting question because I'd say, for the life of us, we can't figure out why the Series A stock that that we initially sold at $25 a share. We've redeemed $20 million of the Series A at $25 a share. We've said that we plan to redeem more Series A, and it will be at $25 a share. People are willing to pay close to $27 for it, which I guess is that they don't believe us. So -- and probably the only rational reason there is they say, gee, we know you're not going to sell common at these prices and they're probably right about that. But we have other ways that we could potentially raise capital as we did a few months ago starting to sell a lower coupon Series B. So I can't give people guidance as to when we're going to redeem the remainder of the Series A. But rest assured that you'll see that happening bit by bit as we think about any redemption. Our first criteria is really how do we be accretive to our common shareholders. So we're not going to do this in a way that costs us more. We're not going to do this in a way that adds risk but we are going to deliberately reduce the amount of Series A that's outstanding because frankly, the market is very happy to give us money at 8.75%. So there's probably no reason to keep paying the 11% as we have on our Series A.

And then the last would be on today's announcement, you have Tennessee, you've touched on it, but was that a competitive win? Is it something that's meaningful in size? Just some sort of broad base there. It doesn't seem like there's some momentum in that university segment.

Great question. Yes, it's a competitive win. And then when it comes to the revenue because typically, we do not talk about the respective clients revenue. But I would say it's absolutely on the ARR basis on the annualized recurring revenue basis, it's a few hundred thousand dollars. But this is just -- I would say it's the first -- it's another one into the list of that oral pathology for these universities, and we are getting more momentum just because of these consecutive or the continuous win in the space.

The next question comes from the line of Bill Sutherland with Benchmark.

My questions have been largely answered. I was thinking, Hadi, about some of the product introductions you were talking about last time of the conductor suite primarily. Maybe update us on where those stand because I think there were going to be some additional modules and whatever traction that you're seeing with those?

Thank you, Bill, for the question. In terms of the other -- adding more products to the suite, yes, we will be doing over the next quarters. Each quarter, we are anticipating at least launching something. And as we get close to that, of course, we'll make an announcement, but we are on track towards those plans. In terms of the traction, again, it's part of the pipeline and the unfortunate -- not -- I shouldn't say an unfortunate part, the 1 inherent limitation is because, again, this is the kind of the deal which needs more time to sell, to mature to understand the both parties. They need to look at our -- the specification documents they need to make sure that their team understand how to do the initial integration and all that. So we are making progress in terms of the opportunities in the pipeline. We do not have a win yet, but we are still optimistic and we will share whenever we will have the next win. And we will keep on adding more products that are in the queue as part of the conductor suite. And we are on track for it.

Okay. That's all I've got.

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. And I would like to turn the call back to Kim Blanche for closing remarks.

Thank you to everyone who's joined us today. We appreciate your participation and your interest in us as a company. We look forward to speaking with you again next quarter. Thank you all, and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.