CloudMD keeps Speculative Buy rating with Echelon

Echelon Capital Markets analyst Rob Goff likes the look of just-released quarterly results from Canadian healthcare tech company CloudMD (CloudMD Stock Quote, Charts, News, Analysts, Financials TSXV:DOC). Goff reviewed the numbers in a report to clients on Tuesday where he maintained a “Speculative Buy” rating on the stock and 12-month target of $0.40 per share, good for a projected return of 122 per cent at the time of publication.

Vancouver-based CloudMD announced its first quarter 2023 earnings on Monday, featuring revenue of $26.1 million, down from $31.0 million a year ago but up from $25.9 million in the previous quarter. Gross profit margin was 36.1 per cent, while adjusted EBITDA for the Q1 was negative $1.6 million compared to negative $1.7 million a year ago.

CloudMD said 2022 was a year of transition for the company as it spent its energies on integrating recent acquisitions, while it pointed to the positive trends in the first quarter on key performance indicators such as revenue, adjusted EBITDA and normalized cash flow. 

“We had strong performance in our Employer Health and Wellness services with new partnerships with Benefits Alliance, Mohawk Medbuy, and XTM. This will bring our Kii service offering to potentially hundreds of thousands of new users these organizations represent,” said Karen Adams, CEO, in a press release.

Goff called it a solid quarter for DOC, where $26.1 million in revenue and negative $1.6 million in EBITDA compared with his forecasts at $25.9 million and negative $2.4 million, respectively. The consensus calls were for $27.0 million and negative $2.0 million, respectively.

“We are encouraged to see Q422 and now Q123 results support baseline organic revenue growth of ~ten per cent with expanding gross margins, as annually recurring revenues (ARR) take on a larger share of the mix and where efficiency measures support our forecast of modest positive EBITDA in Q423,” Goff wrote.

Goff said he’s staying bullish on a more focused and efficient CloudMD going forward and sees a free cash flow (FCF) positive turn expected in 2024.

By the numbers, Goff is forecasting full 2023 revenue and adjusted EBITDA of $111.7 million and negative $3.1 million, respectively, and 2024 revenue and EBITDA of $126.6 million and positive $2.6 million, respectively.

“We believe emerging evidence supporting CloudMD’s timeline to EBITDA/FCF positive operations alongside high-quality revenues (90 per cent recurring/reoccurring, gross margins 36 per cent+) support positive revaluation considerations on an ongoing basis. Furthermore, these trends strengthen the Company’s candidacy in a consolidation or takeover scenario,” he said.