Greetings. And welcome to the CareCloud Inc. Third Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [inaudible]. Thank you. You may begin.

Good morning, everyone. Welcome to CareCloud's third quarter 2024 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer and Director; Stephen Snyder, our President; Crystal Williams, our Chief Operating Officer and Norman Roth, our Interim Chief Financial Officer and Corporate Controller. 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 fact made during this conference 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, approximately, upcoming, belief, estimate 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 would cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as to 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 wish to download our third quarter 2024 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, click on News and Events, then click IR calendar, click on third quarter 2024 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 third quarter 2024 results for a reconciliation of these non-GAAP performances measures to our GAAP financial results. With that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

Thank you, [inaudible] and good morning, everyone. Thank you for joining us today for CareCloud's third quarter 2024 earnings call. I'm pleased to start with two key updates. First, we have fully paid down our $10 million credit line demonstrating our commitment to strong financial management and a solid balance sheet. Second, we are on track to resume monthly dividend payments on our Series A and Series B preferred shares starting in March 2025, demonstrating our confidence in CareCloud's profitability and our commitment to generating strong free cash flow to deliver value to our shareholders. In terms of our Q3 financials, we generated $6.8 million in adjusted EBITDA, a 111% increase over last year, and achieved $10.3 million in year-to-date free cash flow, a 328% improvement over 2023. Revenue for Q3 was $28.5 million, slightly down from $29.3 million in Q3 2023 due to fluctuations in non-recurring revenue from over medSR division. With these accomplishments in 2024, we have met our key financial goals, setting a strong foundation for 2025. This quarter, we remained laser focused on advancing CareCloud CirrusAI, our flagship AI solution that streamlines administrative tasks and clinical documentation, enabling providers to prioritize patient care. CirrusAI's integrated technology reduces non-clinical workload, allowing doctors to spend more time with patients and see more of them per day. We have enhanced CirrusAI notes to generate fully structured patient charts that integrate directly into the EHR, capturing natural patient provider conversations to improve documentation quality and reduce administrative burdens. Now the solution also provides diagnostic and procedural support, automating documentation while suggesting relevant diagnosis and procedures. Adaptable to various healthcare settings and supporting multiple languages, CareCloud CirrusAI is a powerful tool for boosting clinical efficiency and enhancing patient outcomes. A key differentiator of CareCloud CirrusAI is its seamless integration within our…

Good morning, everyone. Thank you for joining us today on CareCloud's third quarter 2024 earnings call. Today, I'll be covering three key topics, including our successful focus on free cash flow during 2024, the outcomes and significance of our recent Series A preferred shareholder proposal, and finally, the path that lies ahead for growth. Let's turn first to free cash flow. In line with the objectives we discussed during the last quarterly earnings call, expense reduction and the generation of free cash flow remain our primary goals for 2024. Our strategy remains clear. By enhancing efficiency and maintaining financial discipline, we are positioning CareCloud for long-term value creation and enabling us to resume dividends on our shares of preferred stock on March 15, 2025, a truly exciting milestone. As we discussed in our last earnings call, we are achieving these increased efficiencies in three primary ways, which are each having a direct positive impact on our generation of free cash flow. First, we have been using our proprietary technology, including our AI, which has empowered us to reduce costs while accomplishing day-to-day tasks in a more systematic, efficient, and reliable manner. Second, we have continued to reduce our reliance on third-party contractors, leveraging our lower-cost in-house team of subject matter experts instead. This approach increases our operational control and reduces the risk that comes with relying upon third parties to handle critical business functions. And third, we continue to embrace the core strength of our global business model, leveraging our most effective and cost-efficient resource for each discrete process, thereby enabling us to both increase our overall bandwidth while simultaneously reducing the associated costs. During 2024, we have made meaningful progress increasing our free cash flow and expanding our margins. This progress has enabled us to fully pay off the…

Thank you, Steve, and good morning, everyone. As Chief Operating Officer, my primary focus is on maximizing client satisfaction. Our objective is clear. We do not want to lose a single client due to performance issues or dissatisfaction. While our metrics are already best in class, we know that maintaining our competitive edge requires continuous improvement. In today's fast evolving landscape, achieving this goal is impossible without leveraging advanced technology. An AI is central to our approach. As Hadi mentioned, we have developed and deployed a range of AI-powered tools to support these objectives. I'm focused on ensuring that our AI-driven solutions, such as denial management and appeal generation, are effectively implemented and fully utilized to maximize their impact. These AI tools are critical for enhancing performance across the board. For example, Our AI-driven quality monitoring system in the contact center allows us to perform QA on customer and patient support calls. This technology provides detailed scoring and sentiment analysis for every interaction, enabling us to take proactive measures and deliver a more personalized and responsive support experience, achieving results much faster and more effectively than would be possible manually. With AI at the core of our operation, we're committed to driving unmatched efficiency and setting a new standard for client satisfaction. Now we'll turn the call over to our CFO, Norman Roth. Norm?

Thanks, Crystal. And thanks, everyone, for joining our call today. As you just have heard, we had a great quarter and are proceeding nicely with accomplishing the goals we laid out for ourselves this year. In particular, we are now generating record levels of free cash flow and will resume paying dividends on our preferred shares on March 15, 2025. Further, we have fully paid off our Silicon Valley Bank line of credit with internally generated profits and cash flows. We generated $10.3 million of free cash flow during the last nine months and used $10 million to repay our line of credit. Since we are not relying on our line of credit and we do not plan on using the line in the near future, we have negotiated with SVB to reduce the total capacity on the line to $10 million, thereby lowering our costs and alleviating the need to spend management time satisfying bank covenants while still providing us with some rainy day money. The key to growing our free cash flow has been reducing expenses and growing our GAAP net income. Third quarter, 2024, GAAP net income was $3.1 million as compared to a net loss of $2.7 million in the same period last year. GAAP net loss was $0.04 per share based on the net loss attributable to common shareholders which takes into account the preferred stock dividends earned, whether or not they were declared or paid during the quarter. This is our second consecutive quarter returning to positive GAAP net income and our largest quarterly net income since Q4 2021. Revenue for the third quarter 2024 was $28.5 million compared to $29.3 million for the third quarter of 2023. Recurring technology enabled business solution revenues during third quarter 2024 were $24.2 million, potentially flat with…

Thank you, Norm. Third quarter accomplishments including substantial improvement in profitability, the full repayment of our credit line and setting us up to resume dividends by March ‘25, demonstrates the strength of our strategy and resilience of our team. I want to extend a heartfelt thank you to our employees, shareholders, investors and clients for their continued trust and support. As we look to the future, we remain committed to sustainable growth, continuous innovation in setting new standards in healthcare technology. Thank you for being part of this journey with us. Operator, please open the floor for questions.

[Operator Instructions] The first question we have is from Jeff Cohen of Ladenburg-Hulman.

This is Destiny on for Jeff. Thank you for taking our questions. In your prepared remarks, I heard you mentioned life science partnerships. And I'm not sure that I had heard that before on any of the other conference calls. So I'm wondering if you can give any more color or insight on what types of companies, and whatever else you're able to give us at the moment.

Good morning, Destiny, and thank you for the question. So we did a recent press release with our partnership, an initial partnership, as an example, with [Docuread]. And so it's a medicine adherence. We look at any patient-specific, the existing medications, the different demographic information, and the previous symptoms. And based on that, we recommend and suggest to those companies, the different through Docuread. And they push a specific ad to that specific provider that these could be the different medicines that can be provided. Then at the same time, the method gets pushed to the cell phone of the patient if there are any applicable, as an example, any coupons available for those specific medicines. And then also confirmation when it's ready to be picked up and when the medicine will get picked up. But that's just, one of those relationships that we have entered into. But the whole idea behind this is if you look at the entire data asset of 20 plus years, whether it's clinical, whether it's medicine related, whether it's financial related, a lot of this information can be used and can be very effectively used with the help of these life sciences partners, whether it's through giving them the specific guidance in terms of the different medicines available or for them to do their risk assessment and the research on their side. So even though right now the revenue is not being separately identified other than the top line item, but we anticipate we expect that this revenue to start contributing towards our revenue roles for the next year.

Okay, so this is your current partnership is putting different kind of medicines in front of patients through an ad, if I understood correctly. Now, you also said it could be used for life science companies to kind of de-risk or that nature, things of that nature. Are you also able to or interested in kind of helping these companies determine what patient groups are best for trials or are you going to stay a little further down the whole clinical and regulatory area of companies?

And Destiny, this is going to be any and all of these possibilities, our team is working with a variety of at the moment the different possible opportunities and we will keep everyone up to date as we move forward. But I think that the real value from where this whole thing is stemming from, whether it's for AI or whether it's for supporting the life sciences company is that we are trying to monetize, we are trying to use the value of the data that we have for the last 20 plus years. It started with financial, there's an extensive data from the clinical perspective, a whole different demographic, almost every single state of the US. It's a large data set that can be utilized and help these companies.

The next question we have is from Allen Klee of Maxim Group.

Good morning. You've spoken in the past that your strategy of rolling out your AI services would start giving letting your clients trial them and then move to charging. Where are you on that today and what are you thinking about the early indications? Thanks.

Good morning, Allen. You're very right and we still continue -- let me step back there. For us, the way we think that we have positioned ourselves a little differently with our competitors, there is a front end and there is a back end, so we simultaneously have started to work on both fronts. So if you talk about it from the front end, which is the doctor of initial, the application was CirrusAI notes, which have been significantly enhanced and we basically merged the two applications together, which is the CirrusAI guide that we initially launched and then the CirrusAI notes. So best of the both worlds when this enhanced version is launched, now this one application can listen to the practice provider conversation and not only converse it into a SOAP notes instead, now it converts that into a structured chart and at the same time, suggest and recommend whether it's the diagnosis of procedures based on the current and the prior history. So yes, this product we initially launched as a 30-day trial, which we extended to 60-days trial and we have started to convert those providers into a paying client, so revenue generating client. At the same time, some of these additional features we were able to launch during this quarter, which is chart summary. Think about it, if you go and look at one of the patients chart, there could be 50 different prior visits over the last three years. So you expect the doctor to go through each one of those to understand, okay, I need to remember all of this before I take an action or decide about the next course of action for the patient. Now with the help of the AI, everything gets summarized over the last 10, 15 different visits, and it helps the doctor on one side not to miss any critical information and also saving them significant time. So all of this together, for some of those, we have added it as part of the regular flow because there is no point of charging separately because it's going to bring in the overall value. For charging, yes, we started to charge, there is a revenue as I mentioned, is a modest revenue. The overall client base was using front end, the different AI features has gone over a few thousand plus, I'm sorry, 100 plus users, but not all of them are paying. They are a subset of those which are paying and other subset which is still in trial and the other subset which will not be paying.

Great, thank you. And moving on to medSR, I think you mentioned it was around $4.3 million of revenue during the quarter. I know it's kind of hard to forecast this, the nature of the business, but is there anything from what you're hearing from your pipeline and stuff that gives you a sense that this might be bottoming or has a potential for growth in the future?

Okay, let me just take this opportunity to just zoom out and just remind everyone that how did we get to this point in terms of the overall revenue and from the medSR standpoint. So, when we acquired medSR in second quarter of 2021, it was doing about $32 million in professional services revenue, and we bought medSR at about 30% to 35% multiples of revenue. So, great price in terms of buying this company. The narrative behind us was one is the revenue and the second, how we can leverage this relationship and try to upsell into the hospital space. About 60%, 55% to 60% was APIC-related professional services revenue, and balance was from different consulting services from other EHRs with smaller portion of the market. And if you think about it, this APIC challenge, which is, if you think, you can call it like an 800 pound gorilla in the hospital space is over 55% to 60% on the basis of the hospital beds or roughly in that number, the market share. Post-acquisition, they became increasingly paranoid that we maybe try to compete with them and begin erecting roadblocks for us, and then really prohibited us all together from supporting the client. So we cannot, from that point onward, service any of the APIC clients. We respect their decisions. It's their business decision, what they did. In retrospect, for us, our mistake was it took too long for us to respond, and we did not cut or realign our expenses because there was still some light of hopes that we may be able to convince them on the point that we are not competing with them, or there was some activation probability, but none of them really got materialized. So if you think about that, take the APIC…

We have a follow up question from Allen Klee of Maxim Group,

Yes. Hi. I have a couple more questions, I've got cuddle. In the past, you've provided that you've identified $26 million of potential expense cuts of which $20 million you hoped to make happen in 2024 and the rest in ‘26. I'm not sure if I saw that on this call, but do you still feel comfortable with that or is there any reason why it might be more or less?

Good morning, Allen. Great question. We still feel very comfortable with that, the $26 million number and overall cost rationalization is still the right number to be thinking about. Really, that number, of course, relates to all the expenses that we've been able to cut since the beginning of this exercise through the end of the year. So we have another month and a half, two months still to go and we believe that we will hit that $26 million number by the end of this year. Of course, you won't see all the positive impact in our financials for this year, but you will see the entirety of that impact as we progress into next year.

Is there a way to think of how much we see this year of the $26 million?

Yes, and I think if you think about probably the $20 million number is probably the right number to think about so that there's still some additional benefit we'll see in the upcoming year. Again, if we kind of step back for a moment, how did we get here? How did we accomplish those cuts? We really accomplished those cuts through those expense reductions through three main avenues. One has been utilizing our proprietary technology, our AI, in order to perform the same tasks that we are performing before on a manual basis with the use of technology. Kind of a second key component of those overall reductions relates to taking work that was being handled by outside third parties and bringing that work in-house. And then not only has the benefit of reducing the expenses but also has the benefit of giving us more control from an end-to-end perspective with regard to that overall responsibility and discharging those responsibilities. And a third key basis or way that we were able to accomplish this really comes through kind of recognizing the fact that we have this powerful global business model and then fully utilizing that global business model to further reduce costs and but the overall number is right that you say which is $26 million.

Thank you, that's helpful. You guys commented on remote patient monitoring as an opportunity. Could you give some color on kind of how it performed this quarter and how you think about the outlook or pipeline for this in the future?

Sure, we'd be happy to for sure. And from an RPM perspective, one of the things to think about, Allen, is we've actually launched our own RPM solution in-house. We were partnering before with a third party who was helping us with RPM. So we've launched our own in-house solution. And we're really excited by that because of the margin. The margins will be significantly different. And we think we'll be far more capable of being able to meet our clients' needs and to deliver the results that they'd like to be able to deliver through RPM. So if you think about the overall number, maybe Hadi or Norm can jump in in terms of the full year number for this year from a RPM, CCM perspective.

The digital help. So if we want to break it up between chronic care management and RPM, so for the nine months in 2024, we did $2.2 million just of chronic care management and then $544,000 in remote patient monitoring. So that's about $2.7 million, $2.8 million, so.

And Allen, if you think about it again, as we've been saying since the very beginning of the year, certainly during 2024, our North Star has been generating free cash flow. That's the reason, of course, we're able to fully satisfy the Silicon Valley Bank obligation and have that be zero today as we stand here in the fourth quarter. That's the reason why we feel very confident to be able to say that we're going to be resuming dividends in the first quarter of next year because we believe from an expense perspective, we have an expense model that lays the foundation for continued growth as we go into this next year. So whether it be RPM or CCM or force or leveraging AI across our entire platform we're excited about that.

Thank you. Just to follow up, you've mentioned that you brought the RPM solution in-house. I assume you mean RPM and CCM, does, when did that happen?

So it's actually just RPM at this point in time because RPM really gives us the ability to utilize our core technology strength coupled with the support that's provided together with that core technology strength and to leverage that core technology strength to the benefit of our clients. And we just launched that within the last 30 days. So we have a team that we've built in-house, we're managing that out of our Miami office. And we expect great things ahead -- in the year ahead.

Thank you. My last two questions are a little bit initial related to models. And if you want to take it offline, that's fine. But what they were was, how to think about is capitalized software an area where going forward that might be at a lower run rate and then just wanted to understand with you paying off your line and reducing it to %10 million. What does that imply? But you have to pay like a, I don't know what the word is, maintenance fee just for having it, even if you don't draw it. What would be the expense related to that? Thank you.

And Allen, I think we can find a specific answer right now but we can get into the more details offline on our call, if that makes sense.

Okay, great. Well, thank you so much. And congrats on everything you've accomplished. I was told by people that when companies stop paying their dividends, like they almost never resume on the preferred. So you guys really standout on everything that you accomplished. They're very impressive discipline. So congrats.

Well, we really appreciate that and we really appreciate the support, your support and support of all of our analysts who continue to recommend CareCloud. And we've heard the same thing. I don't know whether it's necessarily true, but at the point in time when we stopped the dividends, we were told by bankers, there's a 1% chance that you'll ever resume dividends. They kind of wrote us off. So much like our IPO, which was given about a 0% chance of being successful, we were excited to be able to defy the odds and really thankful for all the support. And to your point, Allen, if you think more broadly, just for a moment about the dividends, and maybe that kind of brings into maybe clearer focus the preferred, the Series A preferred changes, maybe if we kind of think about that, if you don't mind, I'll just take a minute. And we'll kind of walk through those changes. Obviously, you're very familiar with them, Allen, but I'm not sure that our investors or broadly have the same familiarity with those. So maybe we'll just kind of walk through those changes. What were the changes and why did the changes matter? Why do they benefit or how do they benefit the shareholders? Those three changes were, first of all, changing the change of control provision. So what that really means is that we provide a protection for the Series A shareholders, giving them the right to have their shares liquidated at $25 per share in the event of a change of control. So the benefits certainly to the Series A holders are pretty clear. It really ensures that the A's can't be left outstanding against their will for change of control. It gives them essentially the same protection that…

Thank you. I mean, I don't have a public opinion on the prefers. I cover your common stock. I have a personal opinion that it's one of the most compelling investments of anything in the market right now. I don't know if you're interested to walk through to investors like what they get from a potential return if they invest in them. I don't know if that's the focus of this call, but thank you.

No, I appreciate the comments. Whether it be the A or the B or the common, 100% agree that the thesis for investing in any of them, we think, is a pretty compelling thesis. So we appreciate your comments for sure.

Well, very good. Maybe over to Norm.

Okay. I think that will conclude our call today. So thank you, everyone, for attending. And have a great day.

Thanks, everyone.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.