Carebook Technologies receives target drop from iA Capital

Digital healthcare company Carebook Technologies (Carebook Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:CRBK) is showing laudable financial discipline, with the impact likely to pan out in the upcoming year, according to iA Capital Markets analyst Chelsea Stellick. In a research report on Friday, Stellick maintained a “Buy” rating on Carebook while lowering her 12-month target price from $0.70 to $0.50 per share.

Montreal-based Carebook, which offers a digital health and virtual care platform including assessment tools and complementary solutions, announced it third quarter 2020 result on Friday, featuring revenue up 15 per cent year-over-year to $2.1 million but down 12 per cent sequentially and a net loss of $1.7 million compared to a loss of $3.6 million a year earlier. The company said last year’s acquisitions of key assets InfoTech and CoreHealth increased operating expenses but also delivered incremental revenue and cost synergies, while the company took on $3 million in new contract values over the Q3.

“Our third quarter results continue the positive trend begun at the start of our current fiscal year as we benefit from our acquisitions of Infotech and CoreHealth,” said Michael Peters, Carebook CEO. “Our recent announcements of major wins with tier one employers reflects the strength of our offerings and serves as an endorsement of our relentless focus on delivering quality customer programs in the growing employer market.”

The $2.1 million topline was below the iA Capital estimate at $2.6 million, but Stellick said she’s positive on the ability of Carebook’s SaaS model to drive organic growth into 2023. Stellick noted operating costs continue to trend downward for the company, with sales and marketing expenses down 30 per cent sequentially over the quarter to $0.5 million, G&A expenses dropping 31 per cent sequentially to $0.8 million and R&D expenses falling 14 per cent sequentially to $2.1 million. Stellick said the result was an adjusted EBITDA loss of $1.0 million, which represented a 54 per cent year-over-year improvement.

“CRBK reported Q3 revenue below our estimate and has been slower than we anticipated to enter an organic growth trajectory and cut costs. However, the significant contract sales value wins and substantial cost cutting which took place in Q3/22 sets up CRBK for a positive 2023 as customer wins are incorporated into financial results and reduced costs allow this incremental revenue to largely drop to the bottom line,” Stellick wrote.

Looking ahead, the analyst is projecting fourth quarter revenue and adjusted EBITDA for CRBK of $2.3 million and negative $0.9 million, respectively. At press time, Stellick’s new $0.50 target represented a projected return of 455.6 per cent.