CareCloud, Inc. (MTBC) Q1 2021 Earnings Conference Call May 6, 2021 8:30 AM ET Company Participants Kim Blanche - General Counsel Mahmud Haq - Founder & Executive Chairman Hadi Chaudhry - CEO & President Stephen Snyder - CSO Bill Korn - CFO Karl Johnson - Chief Growth Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann Richard Baldry - ROTH Capital Marc Wiesenberger - B. Riley Securities Allen Klee - Maxim Group Gene Mannheimer - Colliers Securities Kevin Dede - H.C. Wainwright David Lar ...

0 Q1 2021 Results Nasdaq Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "goals", "intend", "likely", "may", "might", "plan", "potential", ...

[Front Matter & Filing Information](index=1&type=section&id=Front%20Matter%20%26%20Filing%20Information) [Company Information & Filing Status](index=1&type=section&id=Company%20Information%20%26%20Filing%20Status) CareCloud, Inc. filed its 10-Q for Q1 2021, identifying as a non-accelerated and smaller reporting company, and disclosed common stock outstanding as of April 29, 2021 - Company filed quarterly report (Form 10-Q) for the period ended March 31, 2021[3](index=3&type=chunk) - Registrant name is CareCloud, Inc. (formerly MTBC, Inc.)[3](index=3&type=chunk) - Company identified as a non-accelerated filer and smaller reporting company[6](index=6&type=chunk) Common Stock Outstanding | Date | Common Stock Outstanding | | :----------- | :--------------- | | April 29, 2021 | 14,400,834 shares | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements regarding future events, operating results, or financial performance, subject to various known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements involve expected future events, operating results, or financial performance, identifiable by words like “may,” “will,” “expect”[9](index=9&type=chunk) - Company operations involve many risks and uncertainties beyond its control, which may cause actual results to differ materially from forward-looking statements[9](index=9&type=chunk) - Risk factors include managing growth, customer retention, international operations, adapting to industry changes, regulatory compliance, data privacy, technology development, retaining key personnel, debt covenants, preferred stock dividend payments, competition, COVID-19 pandemic impact, and market acceptance of products and services[10](index=10&type=chunk)[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited condensed consolidated financial statements for the periods ended March 31, 2021, and December 31, 2020, including balance sheets, statements of operations, comprehensive loss, shareholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets Key Data (As of March 31, 2021, and December 31, 2020) | Metric | March 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :--------------- | :----------------------- | :------------- | | Total Assets | $137,426 | $137,999 | | Total Liabilities | $33,913 | $36,754 | | Total Shareholders' Equity | $103,513 | $101,245 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Key Data (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | YoY Change (Amount, Thousands of USD) | YoY Change (Percentage) | | :--------------------------------- | :----------------------- | :----------------------- | :--------------- | :----------------- | | Net Revenue | $29,768 | $21,867 | $7,901 | 36.1% | | Total Operating Expenses | $31,449 | $24,704 | $6,745 | 27.3% | | Operating Loss | $(1,681) | $(2,837) | $(1,156) | -40.7% | | Net Loss | $(1,964) | $(2,502) | $(538) | -21.5% | | Net Loss Attributable to Common Stockholders | $(5,092) | $(5,145) | $(53) | -1.0% | | Net Loss Per Common Share (Basic and Diluted) | $(0.36) | $(0.42) | $(0.06) | -14.3% | [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss Key Data (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | | :----------------------- | :----------------------- | :----------------------- | | Net Loss | $(1,964) | $(2,502) | | Foreign Currency Translation Adjustment | $345 | $(590) | | Comprehensive Loss | $(1,619) | $(3,092) | [Condensed Consolidated Statements of Shareholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Condensed Consolidated Statements of Shareholders' Equity Key Data (As of January 1, 2021, and March 31, 2021) | Metric | January 1, 2021 (Thousands of USD) | March 31, 2021 (Thousands of USD) | | :------------------- | :------------------- | :------------------- | | Preferred Stock | 5 | 6 | | Common Stock | 14 | 15 | | Additional Paid-in Capital | 136,781 | 140,666 | | Accumulated Deficit | (33,889) | (35,853) | | Accumulated Other Comprehensive Loss | (1,004) | (659) | | Less: Treasury Stock, Common | (662) | (662) | | Total Shareholders' Equity | 101,245 | 103,513 | - Preferred stock dividends are paid monthly at an annual rate of **$2.75 per share**[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Key Data (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | YoY Change (Amount, Thousands of USD) | | :--------------------------------- | :----------------------- | :----------------------- | :--------------- | | Net Cash Provided by (Used in) Operating Activities | $958 | $(3,884) | $4,842 | | Net Cash Used in Investing Activities | $(2,219) | $(14,033) | $11,814 | | Net Cash Provided by Financing Activities | $1,157 | $6,810 | $(5,653) | | Effect of Exchange Rate Changes on Cash | $174 | $(492) | $666 | | Net Increase (Decrease) in Cash | $70 | $(11,599) | $11,669 | | Cash at End of Period | $20,995 | $8,395 | $12,600 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. ORGANIZATION AND BUSINESS](index=12&type=section&id=1.%20ORGANIZATION%20AND%20BUSINESS) CareCloud, Inc. is a healthcare information technology company offering cloud-based electronic health record and practice management solutions, expanding its business and customer base through acquisitions like CareCloud Health, Inc. and Meridian Medical Management - CareCloud, Inc. (formerly MTBC, Inc.) is a healthcare information technology company providing proprietary cloud-based electronic health record and practice management solutions and related business services[31](index=31&type=chunk) - Company acquired CareCloud Corporation (now CareCloud Health, Inc.) in January 2020 and Meridian Billing Management Co. and its affiliates (“Meridian”) in June 2020[33](index=33&type=chunk) - Company owns subsidiaries including MTBC Private Limited (Pakistan), MTBC Acquisition Corp. (MAC), its Sri Lankan subsidiary RCM MediGain Colombo, Pvt. Ltd., and CareCloud Practice Management, Corp. (CPM)[32](index=32&type=chunk) [2. BASIS OF PRESENTATION](index=12&type=section&id=2.%20BASIS%20OF%20PRESENTATION) These condensed consolidated financial statements are prepared under US GAAP and Regulation S-X, Rule 8-03, relying on management's estimates and assumptions, with recent accounting updates having no material impact, though ASU 2020-06's effect is still being evaluated - Unaudited condensed consolidated financial statements are prepared in accordance with GAAP and Regulation S-X, Rule 8-03 for interim financial reporting purposes[35](index=35&type=chunk) - Preparation of financial statements involves management's estimates and assumptions regarding assets, liabilities, contingencies, and revenues and expenses[35](index=35&type=chunk) - Recent accounting pronouncements such as ASU 2018-02, ASU 2018-07, and ASU 2019-12 had no impact on the condensed consolidated financial statements[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Company is evaluating the potential impact of ASU 2020-06 (Debt—Debt with Conversion and Other Options) on its condensed consolidated financial statements[41](index=41&type=chunk) [3. ACQUISITIONS](index=13&type=section&id=3.%20ACQUISITIONS) The company completed acquisitions of Meridian Medical Management and CareCloud Health, Inc. (CCH) in 2020, expanding its customer base, geographic reach, and technological capabilities, with consideration including cash, preferred stock, and warrants, and preliminary purchase price allocations completed - On June 16, 2020, company acquired Meridian Billing Management Co. and its affiliates (“Meridian”) for a total consideration of **$21,634 thousand**, including **$11,864 thousand cash**, **$5,000 thousand preferred stock**, and **$4,770 thousand warrants**[42](index=42&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk) - On January 8, 2020, company acquired CareCloud Corporation (now CareCloud Health, Inc., “CCH”) through a merger for a total consideration of **$32,153 thousand**, including **$11,853 thousand cash**, **$19,000 thousand preferred stock**, **$300 thousand warrants**, and **$1,000 thousand contingent consideration**[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Meridian acquisition brought additional customers, expanding the company's presence in the healthcare IT industry through geographic expansion of its client base and increased client relationship resources[47](index=47&type=chunk) - CCH acquisition increased the company's customer base and provided CCH's software technology and related businesses, further expanding geographic coverage and client relationship resources in the healthcare IT industry[56](index=56&type=chunk) Revenue from Acquired Customers in Q1 2021 | Source | Revenue (Thousands of USD) | | :------ | :------------- | | Meridian | 8,900 | | CCH | 8,300 | [4. GOODWILL AND INTANGIBLE ASSETS-NET](index=17&type=section&id=4.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS-NET) As of March 31, 2021, the company's goodwill remained stable, net intangible assets slightly decreased, but capitalized software increased, with amortization expenses significantly rising due to acquisitions Goodwill and Net Intangible Assets (As of March 31, 2021, and December 31, 2020) | Metric | March 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :------------------- | :------------------- | :------------------- | | Total Goodwill at Period End | 49,291 | 49,291 | | Capitalized Software | 7,284 | 5,760 | | Net Intangible Assets | 29,166 | 29,978 | Amortization Expense (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | YoY Change (Percentage) | | :----------- | :----------------------- | :----------------------- | :--------------- | | Amortization Expense | **$2.4 million** | **$1.1 million** | **118%** | - Remaining weighted-average amortization period is approximately **3.4 years**[62](index=62&type=chunk) [5. NET LOSS PER COMMON SHARE](index=18&type=section&id=5.%20NET%20LOSS%20PER%20COMMON%20SHARE) As of March 31, 2021, the company's basic and diluted net loss per common share improved, with unvested restricted stock units and unexercised warrants excluded due to their anti-dilutive nature Net Loss Per Common Share (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :--------------------------------- | :----------------------- | :----------------------- | | Net Loss Attributable to Common Stockholders | $(5,092) thousand | $(5,145) thousand | | Weighted-Average Common Shares Used in Basic and Diluted Loss Per Share Calculation | 14,084,749 | 12,310,818 | | Net Loss Per Common Share (Basic and Diluted) | $(0.36) | $(0.42) | - All unvested restricted stock units and unexercised warrants were excluded from the calculation due to their anti-dilutive nature[64](index=64&type=chunk) [6. DEBT](index=18&type=section&id=6.%20DEBT) The company has a revolving credit facility agreement with SVB, which was undrawn as of March 31, 2021, and also holds vehicle financing notes and insurance financing - Company has a revolving credit facility agreement with SVB, which was undrawn as of March 31, 2021, and December 31, 2020[65](index=65&type=chunk) - SVB revolving credit facility interest rate is prime plus **1.50%**, with a minimum rate of **6.5%**, and an annual fee of **0.5%** on the unused portion[65](index=65&type=chunk) - Company also finances through vehicle financing notes (three to six-year terms) and insurance financing (annual interest rate of **4.0%**)[66](index=66&type=chunk) [7. LEASES](index=18&type=section&id=7.%20LEASES) The company primarily uses operating leases for facilities and some equipment, recognizing right-of-use assets and lease liabilities at fair value upon acquisition, with 36 leased properties and total lease liabilities of $9,456 thousand as of March 31, 2021 - Company primarily uses operating leases and has no finance leases[67](index=67&type=chunk) - Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term[68](index=68&type=chunk) Lease Liabilities and Right-of-Use Assets (As of March 31, 2021, and December 31, 2020) | Metric | March 31, 2021 (Thousands of USD) | December 31, 2020 (Thousands of USD) | | :----------------------- | :------------------- | :------------------- | | Operating Lease Right-of-Use Assets, Net | 7,075 | 7,743 | | Current Operating Lease Liabilities | 4,236 | 4,729 | | Non-Current Operating Lease Liabilities | 5,220 | 6,297 | | Total Operating Lease Liabilities | 9,456 | 11,026 | Lease Expenses (For the Three Months Ended March 31, 2021, and March 31, 2020) | Lease Expense Category | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :----------- | :----------------------- | :----------------------- | | Operating Lease Cost | **$1,057 thousand** | **$800 thousand** | | Short-Term Lease Cost | **$22 thousand** | **$9 thousand** | | Variable Lease Cost | **$6 thousand** | **$13 thousand** | | Total Lease Cost | **$1,085 thousand** | **$822 thousand** | - As of March 31, 2021, the company has **36 leased properties** with remaining lease terms ranging from less than one year to five years[74](index=74&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in a legal arbitration with RPRWC against MAC, claiming between $11 million and $20 million, and a civil investigation related to the CCH acquisition was resolved in April 2021, with costs largely covered by escrow funds - Company is involved in an arbitration initiated by Randolph Pain Relief and Wellness Center (RPRWC) against MTBC Acquisition Corp. (MAC), with claims ranging from **$11 million to $20 million**[78](index=78&type=chunk)[81](index=81&type=chunk) - Civil investigation related to the CCH acquisition was resolved in April 2021, with the company accruing **$4.2 million**, of which **$4.0 million** is covered by escrow funds[82](index=82&type=chunk) - Management believes the company is not currently involved in any legal proceedings that, individually or in aggregate, would have a material adverse effect on its business, consolidated results of operations, financial condition, or cash flows[83](index=83&type=chunk) [9. RELATED PARTIES](index=21&type=section&id=9.%20RELATED%20PARTIES) The company engages in various related party transactions, including service sales to an entity owned by the Executive Chairman's wife, aircraft leases with a company owned by the Executive Chairman, and office and facility leases from the Executive Chairman Related Party Transaction Revenue (For the Three Months Ended March 31, 2021, and March 31, 2020) | Transaction Type | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :------- | :----------------------- | :----------------------- | | Sales Revenue | **$4 thousand** | **$5 thousand** | Related Party Lease Expenses (For the Three Months Ended March 31, 2021, and March 31, 2020) | Lease Type | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :------- | :----------------------- | :----------------------- | | Aircraft Lease | **$30 thousand** | **$41 thousand** | | Office Lease | **$47 thousand** | **$47 thousand** | - talkMD Clinicians, PA, a variable interest entity (VIE) formed by the Executive Chairman's wife to provide telehealth services, had not commenced operations or engaged in any transactions with the company as of March 31, 2021[89](index=89&type=chunk) [10. REVENUE](index=22&type=section&id=10.%20REVENUE) Company revenue primarily derives from revenue cycle management services, SaaS solutions, and practice management services, recognized under ASC 606 upon satisfaction of performance obligations, involving estimates and judgments for variable consideration - Company recognizes revenue under ASC 606 (Revenue from Contracts with Customers), with all revenue recognized upon satisfaction of performance obligations[90](index=90&type=chunk) Revenue Disaggregation (For the Three Months Ended March 31, 2021, and March 31, 2020) | Revenue Source | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | | :----------------------- | :------------------------------- | :------------------------------- | | Revenue Cycle Management Services | 19,448 | 13,190 | | SaaS Solutions | 5,261 | 3,614 | | Professional Services | 617 | 391 | | Ancillary Services | 984 | 721 | | Group Purchasing Services | 188 | 177 | | Printing and Mailing Services | 383 | 429 | | Clearinghouse and EDI Services | 152 | 319 | | Practice Management Services | 2,735 | 3,026 | | **Total** | **29,768** | **21,867** | - Contract assets, primarily from revenue cycle management and group purchasing services, were approximately **$4.4 million** as of March 31, 2021[113](index=113&type=chunk)[114](index=114&type=chunk) [11. STOCK-BASED COMPENSATION](index=25&type=section&id=11.%20STOCK-BASED%20COMPENSATION) The company grants common and preferred stock restricted stock units (RSUs) to employees, executives, directors, and consultants through its equity incentive plan, with a slight decrease in stock-based compensation expense in Q1 2021 and executive bonuses approved for payment in preferred stock - Company grants incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, and RSUs under its 2014 Equity Incentive Plan (as amended and restated)[118](index=118&type=chunk) Stock-Based Compensation Expense (For the Three Months Ended March 31, 2021, and March 31, 2020) | Expense Category | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | | :------------------- | :------------------------------- | :------------------------------- | | Direct Operating Costs | 305 | 171 | | General and Administrative Expenses | 624 | 851 | | Research and Development Expenses | 137 | 76 | | Sales and Marketing Expenses | 201 | 209 | | **Total Stock-Based Compensation Expense** | **1,267** | **1,307** | - In January 2021, the Compensation Committee approved executive bonuses payable in preferred stock, with approximately **$154 thousand** recorded as expense in Q1 2021[121](index=121&type=chunk) [12. INCOME TAXES](index=27&type=section&id=12.%20INCOME%20TAXES) The company recorded a $1 thousand income tax benefit in Q1 2021, primarily from deferred tax benefits offsetting state minimum and foreign income taxes, and established a valuation allowance against deferred tax assets due to historical losses and uncertainty of future U.S. taxable income Income Tax Benefit/Expense (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :----------- | :----------------------- | :----------------------- | | Income Tax Benefit | **$1 thousand** | **$30 thousand** | - Q1 2021 income tax benefit included **$35 thousand** in current tax expense and **$36 thousand** in deferred tax benefit[126](index=126&type=chunk) - Company has established a valuation allowance against federal and state deferred tax assets due to historical accumulated losses and uncertainty regarding future U.S. taxable income[129](index=129&type=chunk) - Company deferred approximately **$1.9 million** in payroll taxes under the CARES Act[128](index=128&type=chunk) [13. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=27&type=section&id=13.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) As of March 31, 2021, the carrying values of short-term financial instruments like accounts receivable, accounts payable, and accrued expenses approximated their estimated fair values, with notes payable classified as Level 2 fair value, and contingent consideration (Level 3 liability) fully settled by December 31, 2020 - As of March 31, 2021, and December 31, 2020, the carrying values of accounts receivable, accounts payable, and accrued expenses approximated their estimated fair values[130](index=130&type=chunk) - Notes payable are presented at cost and classified as Level 2 fair value due to interest rates approximating market rates[131](index=131&type=chunk) - Contingent consideration, a Level 3 liability, was fully settled by December 31, 2020, with no additional contingent consideration in Q1 2021[132](index=132&type=chunk) [14. SEGMENT REPORTING](index=28&type=section&id=14.%20SEGMENT%20REPORTING) The company operates in two reportable segments, Healthcare IT and Practice Management, with Healthcare IT being the primary revenue driver, and both segments recording operating losses or minimal profit in Q1 2021 - Company is organized into two operating and reportable segments: Healthcare IT and Practice Management[135](index=135&type=chunk) Segment Revenue and Operating Loss (For the Three Months Ended March 31, 2021) | Metric | Healthcare IT (Thousands of USD) | Practice Management (Thousands of USD) | Unallocated Corporate Expenses (Thousands of USD) | Total (Thousands of USD) | | :--------------- | :------------------- | :----------------- | :--------------------- | :------------- | | Net Revenue | 27,033 | 2,735 | - | 29,768 | | Operating Loss | (55) | 52 | (1,678) | (1,681) | Segment Revenue and Operating Loss (For the Three Months Ended March 31, 2020) | Metric | Healthcare IT (Thousands of USD) | Practice Management (Thousands of USD) | Unallocated Corporate Expenses (Thousands of USD) | Total (Thousands of USD) | | :--------------- | :------------------- | :----------------- | :--------------------- | :------------- | | Net Revenue | 18,841 | 3,026 | - | 21,867 | | Operating Loss | (1,662) | (19) | (1,156) | (2,837) | [15. SUBSEQUENT EVENT](index=29&type=section&id=15.%20SUBSEQUENT%20EVENT) The company resolved the civil investigation discussed in Note 8 in April 2021, with the settlement amount largely within the escrow funds - Company resolved the civil investigation discussed in Note 8 in April 2021, with the settlement amount largely within the escrow funds[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's Q1 2021 and 2020 financial condition and operating results, covering COVID-19 impact, business overview, key performance indicators, revenue, expenses, taxes, accounting policies, and liquidity [COVID-19 Pandemic Impact](index=30&type=section&id=COVID-19%20Pandemic%20Impact) The COVID-19 pandemic did not materially adversely affect the company's consolidated financial results and operations in Q1 2021, with expanded telehealth services as an alternative to in-office visits, though the full impact remains uncertain - COVID-19 pandemic did not materially adversely affect the company's consolidated financial results and operations in Q1 2021[142](index=142&type=chunk) - Company expanded telehealth operations as an alternative to in-office visits[142](index=142&type=chunk) - Full impact of the pandemic on the company's business, operations, and financial condition remains uncertain and beyond company control[143](index=143&type=chunk)[144](index=144&type=chunk) - Approximately **65% of revenue** is directly tied to collections from healthcare provider clients, and reduced patient visits during social distancing may lead to short-term revenue declines[228](index=228&type=chunk) [Overview of Business and Solutions](index=31&type=section&id=Overview%20of%20Business%20and%20Solutions) CareCloud, Inc. is a healthcare IT company providing a full suite of proprietary cloud-based solutions and related business services, including RCM, PM, EHR, business intelligence, telehealth, and patient experience management - CareCloud, Inc. is a healthcare information technology company offering a full suite of proprietary cloud-based solutions and related business services, including revenue cycle management (RCM), practice management (PM), electronic health records (EHR), business intelligence, telehealth, and patient experience management (PXM) solutions[146](index=146&type=chunk) - Company's solutions include RCM services, proprietary healthcare IT software (EHR, PM software, mobile health, telehealth, medical claims clearinghouse, business intelligence) and medical office practice management services[147](index=147&type=chunk) - Company provides industry-leading solutions at competitive prices by combining proprietary software with a global team of approximately **3,800 employees** across the U.S., Pakistan, and Sri Lanka[150](index=150&type=chunk)[156](index=156&type=chunk) - Company serves over **40,000 healthcare providers** and approximately **2,600 independent medical groups and hospitals**, covering **80 specialties and sub-specialties**[151](index=151&type=chunk) [Key Performance Measures (Non-GAAP)](index=32&type=section&id=Key%20Performance%20Measures%20(Non-GAAP)) Management uses non-GAAP financial measures such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate performance - Management uses Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share as non-GAAP financial measures to assess performance[157](index=157&type=chunk) Adjusted EBITDA (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | | :------------- | :------------------------------- | :------------------------------- | | Adjusted EBITDA | **3,691** | **767** | Adjusted Operating Income and Operating Margin (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | | :------------------- | :------------------------------- | :------------------------------- | | GAAP Operating Loss | (1,681) | (2,837) | | GAAP Operating Margin | (5.6%) | (13.0%) | | Non-GAAP Adjusted Operating Income | **2,971** | **428** | Non-GAAP Adjusted Net Income and EPS (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :------------------------- | :----------------------- | :----------------------- | | Non-GAAP Adjusted Net Income | **$2,896 thousand** | **$354 thousand** | | Non-GAAP Adjusted EPS | **$0.20** | **$0.03** | | Non-GAAP Adjusted Diluted EPS | **$0.17** | **$0.03** | [Key Metrics & Sources of Revenue](index=36&type=section&id=Key%20Metrics%20%26%20Sources%20of%20Revenue) As of March 31, 2021, the company served over 40,000 healthcare providers and approximately 2,600 independent medical groups and hospitals, with revenue primarily from RCM and bundled services - As of March 31, 2021, the company serves over **40,000 healthcare providers** and approximately **2,600 independent medical groups and hospitals**[168](index=168&type=chunk) Revenue Source Composition (For the Three Months Ended March 31, 2021, and March 31, 2020) | Revenue Source | For the Three Months Ended March 31, 2021 | For the Three Months Ended March 31, 2020 | | :----------------------- | :----------------------- | :----------------------- | | Revenue Cycle Management Services and Bundled Services | **Approximately 65%** | **Approximately 60%** | | SaaS Services | **Approximately 18%** | **Approximately 17%** | | Other Healthcare IT Services | **Approximately 8%** | **Approximately 9%** | | Practice Management Services | **Approximately 9%** | **Approximately 14%** | [Operating Expenses Analysis](index=36&type=section&id=Operating%20Expenses%20Analysis) This section details the components of operating expenses, including direct operating costs, sales and marketing, general and administrative, research and development, depreciation and amortization, and impairment and unoccupied lease expenses - Direct operating costs primarily include personnel compensation and benefits, claims processing costs, and operating costs for managed practices[171](index=171&type=chunk) - Sales and marketing expenses primarily include compensation and benefits, commissions, travel, and advertising costs[172](index=172&type=chunk) - General and administrative expenses primarily include administrative personnel compensation and benefits, travel, facility lease costs, insurance, software license fees, and external professional fees[173](index=173&type=chunk) - Research and development expenses primarily include personnel-related costs and third-party contractor costs[174](index=174&type=chunk) - Depreciation and amortization expenses are amortized over **3 to 12 years** using the straight-line method and accelerated or straight-line methods, respectively[174](index=174&type=chunk) - Impairment and unoccupied lease expenses include costs for leased facilities and vendor contracts no longer in use, and lease-related costs for unoccupied space[175](index=175&type=chunk) [Interest and Other Income (Expense)](index=37&type=section&id=Interest%20and%20Other%20Income%20(Expense)) Interest expense primarily covers credit lines, term loans, and acquisition-related payments, offset by interest income, while other income/expense mainly stems from foreign currency transaction gains/losses and temporary cash investments - Interest expense primarily includes interest costs on credit lines, term loans, and acquisition-related payments, offset by interest income[177](index=177&type=chunk) - Other income (expense) primarily arises from foreign currency transaction gains and losses and income from temporary cash investments[177](index=177&type=chunk) [Income Tax](index=37&type=section&id=Income%20Tax) The company estimates income taxes across jurisdictions and assesses temporary differences, establishing a valuation allowance against all deferred tax assets due to historical losses and future U.S. taxable income uncertainty - Company estimates income taxes in each jurisdiction when preparing condensed consolidated financial statements and assesses temporary differences arising from tax and financial reporting treatments[178](index=178&type=chunk) - Company has established a valuation allowance against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income[178](index=178&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies and estimates remain consistent with the company's 2020 Form 10-K annual report, covering leases and capitalized software costs - Critical accounting policies and estimates in this report are not materially different from those described in the company's annual report on Form 10-K for December 31, 2020[190](index=190&type=chunk) - Leases: Company incorporates operating leases into right-of-use assets and lease liabilities, with no finance leases[180](index=180&type=chunk) - Capitalized Software Costs: Company capitalizes certain costs of internally developed software and amortizes them over **three years** using the straight-line method once the asset is placed in service[184](index=184&type=chunk)[187](index=187&type=chunk) Internally Developed Capitalized Software Carrying Value | Date | Carrying Value (Thousands of USD) | | :--------------- | :--------------- | | March 31, 2021 | 6,800 | | December 31, 2020 | 5,500 | [Results of Operations Comparison (Q1 2021 vs Q1 2020)](index=38&type=section&id=Results%20of%20Operations%20Comparison%20(Q1%202021%20vs%20Q1%202020)) This section compares the company's operating results for Q1 2021 versus Q1 2020, highlighting changes in net revenue, operating expenses, and net loss, primarily driven by acquisitions and software capitalization Operating Results Key Data (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | YoY Change (Amount, Thousands of USD) | YoY Change (Percentage) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------------- | :----------------- | | Net Revenue | 29,768 | 21,867 | 7,901 | **36%** | | Direct Operating Costs | 18,060 | 13,567 | 4,493 | **33%** | | Sales and Marketing Expenses | 1,890 | 1,581 | 309 | **20%** | | General and Administrative Expenses | 5,624 | 5,593 | 31 | **1%** | | Research and Development Expenses | 2,026 | 2,333 | (307) | **(13%)** | | Depreciation | 460 | 275 | 185 | **67%** | | Amortization | 2,371 | 1,058 | 1,313 | **124%** | | Impairment and Unoccupied Lease Expenses | 1,018 | 297 | 721 | **243%** | | Operating Loss | (1,681) | (2,837) | (1,156) | **(41%)** | | Net Loss | (1,964) | (2,502) | (538) | **(21%)** | - Net revenue growth primarily attributed to approximately **$17.2 million** in revenue from CCH and Meridian acquisitions[192](index=192&type=chunk) - Research and development expenses decreased primarily due to additional capitalization of software costs[196](index=196&type=chunk) Interest and Other Income (Expense) (For the Three Months Ended March 31, 2021, and March 31, 2020) | Metric | For the Three Months Ended March 31, 2021 (Thousands of USD) | For the Three Months Ended March 31, 2020 (Thousands of USD) | YoY Change (Amount, Thousands of USD) | YoY Change (Percentage) | | :----------------------- | :------------------------------- | :------------------------------- | :--------------- | :----------------- | | Interest Income | 15 | 38 | (23) | **(61%)** | | Interest Expense | (79) | (118) | 39 | **(33%)** | | Other (Expense) Income, Net | (220) | 445 | (665) | **(149%)** | | Income Tax (Benefit) Expense | (1) | 30 | (31) | **(103%)** | - Change in other (expense) income, net, primarily reflects foreign currency transaction gains and losses[203](index=203&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) In Q1 2021, the company generated positive cash flow from operations, held approximately $21 million in cash, had an undrawn revolving credit facility, and a working capital of $17.9 million, while expecting to pay $4.2 million for a civil investigation - Q1 2021 operating activities generated **$958 thousand** in positive cash flow, compared to **$3.9 million** in negative cash flow in the prior year period[205](index=205&type=chunk)[211](index=211&type=chunk) - As of March 31, 2021, the company had approximately **$21 million in cash**, an undrawn revolving credit facility, and **$17.9 million in working capital**[205](index=205&type=chunk) - In Q1 2021, the company received **$6.4 million** from the exercise of common stock warrants[215](index=215&type=chunk) - Company expects to pay approximately **$4.2 million** in 2021 to resolve a civil investigation, with **$4.0 million** covered by escrowed preferred stock[210](index=210&type=chunk) - As of March 31, 2021, the company was in compliance with all SVB covenants[216](index=216&type=chunk) [Contractual Obligations and Commitments](index=42&type=section&id=Contractual%20Obligations%20and%20Commitments) The company has contractual obligations under its credit facility and operating leases - Company has contractual obligations under its credit facility and operating leases[216](index=216&type=chunk) [Off-Balance Sheet Arrangements](index=42&type=section&id=Off-Balance%20Sheet%20Arrangements) As of March 31, 2021, and 2020, the company had no off-balance sheet arrangements with unconsolidated entities or financial partnerships, and talkMD Clinicians, PA, a variable interest entity, had not commenced operations - As of March 31, 2021, and 2020, the company had no off-balance sheet arrangements with unconsolidated entities or financial partnerships[217](index=217&type=chunk) - talkMD Clinicians, PA (a variable interest entity) had not commenced operations or engaged in any transactions with the company as of March 31, 2021[217](index=217&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is not required to provide information for this item under Regulation S-K Item 305(e) - As a smaller reporting company, the company is not required to provide information for this item pursuant to 17 C.F.R. 229.10(f)(1) and Regulation S-K Item 305(e)[218](index=218&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - Management evaluated and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021[221](index=221&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[222](index=222&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the discussion of legal proceedings in Note 8, "Commitments and Contingencies," of the condensed consolidated financial statements - Discussion of legal proceedings can be found in Note 8, “Commitments and Contingencies,” to the condensed consolidated financial statements in this quarterly report[225](index=225&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section highlights risks related to the COVID-19 pandemic, including potential impacts on business, financial condition, operations, customer collections, capital access, acquisition delays, and integration challenges - COVID-19 pandemic may harm the company's business, financial condition, results of operations, and growth[227](index=227&type=chunk) - Pandemic may lead to constrained employee resources, difficulties in international operations, and challenges for healthcare provider clients, such as resource diversion and suspension of non-essential medical procedures[227](index=227&type=chunk)[228](index=228&type=chunk) - Approximately **65% of revenue** is directly tied to customer collections, and reduced patient visits may lead to revenue declines; an economic recession or market adjustment due to the pandemic may affect capital access[228](index=228&type=chunk)[230](index=230&type=chunk) - Pandemic may cause delays in future acquisitions and increase the difficulty of integrating CCH or Meridian[231](index=231&type=chunk)[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable - This section is not applicable[235](index=235&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable - This section is not applicable[236](index=236&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable - This section is not applicable[237](index=237&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section is not applicable - This section is not applicable[238](index=238&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including certifications from the CEO and CFO, and XBRL taxonomy files - Exhibits include certifications from the company's Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL instance and taxonomy files[240](index=240&type=chunk) [Signatures](index=46&type=section&id=Signatures) [Signatures](index=46&type=section&id=Signatures) This report was signed by CEO A. Hadi Chaudhry and CFO Bill Korn on May 6, 2021 - This report was signed by Chief Executive Officer A. Hadi Chaudhry and Chief Financial Officer Bill Korn on May 6, 2021[245](index=245&type=chunk)

February 2021 Investor Presentation A leading healthcare technology company with a complete suite of proprietary, cloudbased solutions for healthcare providers NASDAQ Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology ...

Financial Data and Key Metrics Changes - The company reported record revenue of $32 million for Q4 2020, representing a 103% increase year-over-year, and full-year revenue of $105.1 million, a 63% increase over 2019 [6][18] - Adjusted EBITDA for Q4 2020 reached a record $5.7 million, up 105% year-over-year, while full-year adjusted EBITDA was $10.9 million, a 34% increase compared to 2019 [6][20] - GAAP net loss for 2020 was $8.8 million, or $1.79 per share, while non-GAAP adjusted net income was $8.5 million, or $0.63 per share, marking an improvement of $1.7 million from the previous year [19][20] Business Line Data and Key Metrics Changes - The company experienced significant growth in its base business, with strong client retention and increased commitment from existing clients [7] - The acquisitions of CareCloud and Meridian were pivotal, contributing to revenue growth and expanding the product portfolio [7][12] - Organic bookings contributed 9% to revenue growth in 2020, with a focus on upselling existing clients and expanding into new markets [19][30] Market Data and Key Metrics Changes - The company noted a small decline in patient volumes due to COVID-19, averaging approximately 5% below historic levels in Q4 2020, which was less significant than in Q2 2020 [21] - The gross margin for Q4 was reported at 43%, with expectations to return to 45% to 50% over the next few quarters [23][24] Company Strategy and Development Direction - The company plans to increase its investment in sales and marketing by 40% to 60% in 2021, aiming to double its organic growth rate by Q4 2021 [30][46] - A rebranding initiative is set to take place, changing the company name to CareCloud, Inc., to better reflect its market position and unify its brand [9][61] - The company aims to leverage its acquisitions to enhance its product offerings and expand its total addressable market [15][57] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, expecting revenue growth of 27% to 30% in 2021, with guidance of $133 million to $137 million [13][26] - The company anticipates generating adjusted EBITDA of $22 million to $25 million in 2021, representing growth of 102% to 130% over 2020 [13][26] - Management acknowledged the challenges posed by COVID-19 but emphasized the company's strong position and record-breaking performance [28] Other Important Information - The company raised net proceeds of $44.5 million by issuing 1.9 million shares of non-convertible Series A preferred stock, some of which was used for acquisitions [25] - As of December 31, 2020, the company had approximately $20.9 million in cash and positive working capital of about $16 million [25] Q&A Session Summary Question: Areas of growth in revenue cycle management, practice management, and electronic health records - Management highlighted that organic growth came from upselling existing clients, with a focus on larger groups and enterprise sales [29][30] Question: Expected growth sources for 2021 - Growth is anticipated from new clients signed in 2020 and recovery in patient volumes as COVID-19 impacts lessen [38][39] Question: Cost rationalizations from Meridian acquisition - Management confirmed that cost-cutting measures are on track, with some challenges due to prior management efforts before acquisition [40][41] Question: Cadence of activity in 2021 - The company expects typical Q1 seasonality but anticipates a back-end loading of revenue due to COVID-19 impacts [42][43] Question: Bookings in Q4 and future expectations - Total bookings for the full year were approximately $15 million, with expectations to double that by Q4 2021 [45][46] Question: Efficiency of sales and marketing ROI - Management indicated that the customer acquisition cost is favorable, allowing for strategic acquisitions while maintaining organic growth [48][49] Question: Acquisition pipeline and COVID-19 impact - The acquisition pipeline remains robust, with COVID-19 potentially increasing opportunities for strategic acquisitions [51][57]

Q4 and Full Year 2020 Results A leading healthcare technology company with a complete suite of proprietary, cloudbased solutions for healthcare providers NASDAQ Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such a ...

Forward-Looking Statements [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements within the 10-K report, emphasizing that they are predictions subject to substantial known and unknown risks and uncertainties, including growth management, client retention, offshore operations, industry changes, regulatory compliance, and the impact of the COVID-19 pandemic - Forward-looking statements are predictions about future events, results of operations, or financial performance, identifiable by terms like 'may,' 'will,' 'expects,' 'plans,' 'believes,' 'estimates,' or 'potential'[10](index=10&type=chunk) - Key risks include managing growth and integrating acquisitions (Meridian Medical Management, CareCloud), retaining clients, maintaining cost-effective offshore operations in Pakistan and Sri Lanka, adapting to rapid healthcare industry changes, ensuring regulatory compliance, protecting data privacy and intellectual property, attracting and retaining key personnel, complying with debt covenants, competing effectively, and the impact of the COVID-19 pandemic[11](index=11&type=chunk)[12](index=12&type=chunk) - The company does not guarantee future results and is not obligated to update or revise forward-looking statements, except as required by law[13](index=13&type=chunk) Summary Risk Factors [Summary Risk Factors](index=5&type=section&id=Summary%20Risk%20Factors) This section provides a high-level overview of the principal risks that could materially impact the company's business, financial condition, and results of operations, categorized into risks related to acquisition strategy, business/industry/operations, regulatory compliance, and ownership of common/preferred stock - Risks related to acquisition strategy include ineffective growth management, potential liabilities from acquired entities, inability to complete future acquisitions, and dilutive issuances of equity or increased indebtedness[15](index=15&type=chunk) - Business, industry, and operational risks encompass the adverse effects of the COVID-19 pandemic, intense industry competition, failure to innovate or introduce new products, heavy reliance on offshore operations, changes in the healthcare industry affecting demand, customer churn, historical operating losses, variable sales/implementation cycles, loss of key personnel, and intellectual property protection challenges[16](index=16&type=chunk)[19](index=19&type=chunk) - Regulatory risks highlight the heavily regulated healthcare industry, potential non-compliance liabilities (e.g., HITECH Act, HIPAA, false claims), and the risk of employee misconduct like embezzlement or identity theft[18](index=18&type=chunk)[20](index=20&type=chunk) - Risks related to stock ownership include fluctuating revenues/operating results, potential dilution from future stock sales, significant control by Mahmud Haq (**34.3% common stock**), anti-takeover provisions, and limited voting rights/fixed dividends for Series A Preferred Stock holders[21](index=21&type=chunk)[22](index=22&type=chunk) PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) MTBC, Inc. is a healthcare information technology company providing cloud-based solutions and business services to healthcare providers in the U.S., with offerings including RCM, PM, EHR, business intelligence, telehealth, and PXM solutions, supported by a cost-effective global workforce - MTBC provides a full suite of proprietary cloud-based solutions (SaaS) and related business services to healthcare providers and hospitals in the U.S., including Revenue Cycle Management (RCM), Practice Management (PM), Electronic Health Record (EHR), Business Intelligence, Telehealth, and Patient Experience Management (PXM)[24](index=24&type=chunk)[25](index=25&type=chunk) - The U.S. healthcare spending is projected to reach **$8.3 trillion by 2040**, with the healthcare IT market estimated at **$177 billion in 2019**, growing at a **12% CAGR for RCM**, **6% for EHR**, and **27% for Analytics/AI**[29](index=29&type=chunk)[31](index=31&type=chunk) - The company's business strategy focuses on providing comprehensive solutions, enhancing existing offerings, expanding into new categories/markets, growing its client base, strengthening client relationships, leveraging cost advantages from its global workforce (primarily in Pakistan and Sri Lanka), pursuing acquisitions, and developing a partner ecosystem[38](index=38&type=chunk)[40](index=40&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - As of December 31, 2020, MTBC served approximately **40,000 providers** across **2,600 independent medical practices and hospitals** in **80 specialties**, plus **200 non-medical practice clients**[64](index=64&type=chunk)[65](index=65&type=chunk) - MTBC has a competitive advantage due to its proprietary software automating workflows and a global team of **3,700 employees** (**3,100 offshore in Pakistan/Sri Lanka**) at significantly lower labor costs, enabling competitive pricing and industry consolidation[76](index=76&type=chunk)[78](index=78&type=chunk) [Overview](index=7&type=section&id=Overview) MTBC, Inc. is a healthcare information technology company offering a full suite of proprietary cloud-based solutions and related business services to healthcare providers and hospitals across the United States - MTBC, Inc. is a healthcare information technology company offering a full suite of proprietary cloud-based solutions and related business services to healthcare providers and hospitals across the United States[24](index=24&type=chunk) - The company's Software-as-a-Service (SaaS) platform includes revenue cycle management (RCM), practice management (PM), electronic health record (EHR), business intelligence, telehealth, and patient experience management (PXM) solutions[24](index=24&type=chunk)[25](index=25&type=chunk) - Solutions aim to improve financial and operational performance, streamline clinical workflows, enhance data insights, and reduce administrative burdens for clients[27](index=27&type=chunk) [Industry](index=7&type=section&id=Industry) The U.S. healthcare spending is projected to reach $8.3 trillion by 2040, with the healthcare IT market estimated at $177 billion in 2019, driven by a shift towards integrated, end-to-end systems - U.S. healthcare spending is projected to reach **$8.3 trillion by 2040**, with an average annual growth of **5.4% from 2021-2028**, outpacing GDP growth[29](index=29&type=chunk) US Healthcare IT Market Estimates (2019) | Segment | Market Size (approx.) | CAGR (approx.) | | :----------------------- | :-------------------- | :------------- | | US Healthcare IT Industry | $177 billion | - | | RCM | $87 billion | 12% | | North American EHR | $40 billion | 6% | | Analytics and AI | $30 billion | 27% | | Telehealth | $20 billion | 17% | - The market is shifting towards integrated, end-to-end systems, with standalone billing and practice management solutions declining[31](index=31&type=chunk) [Our Market Opportunity](index=8&type=section&id=Our%20Market%20Opportunity) The company is uniquely positioned to address evolving client needs, driven by the transition to complex value-based reimbursement models, increasing legislative and regulatory compliance requirements, rising health insurance costs, and accelerated digital transformation due to COVID-19 - The company is uniquely positioned to address evolving client needs, driven by the transition to complex value-based reimbursement models, increasing legislative and regulatory compliance requirements, rising health insurance costs, and accelerated digital transformation due to COVID-19[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Healthcare organizations are consolidating and investing in IT and data strategies, creating a continuous need for robust solutions to replace legacy tools and support future growth[36](index=36&type=chunk)[37](index=37&type=chunk) [Our Business Strategy](index=8&type=section&id=Our%20Business%20Strategy) The company's objective is to be a market-leading provider of integrated, end-to-end SaaS and business services solutions for healthcare organizations, achieved through comprehensive product suites, R&D, market expansion, client growth, and strategic acquisitions - Objective: To be a market-leading provider of integrated, end-to-end SaaS and business services solutions for healthcare organizations[38](index=38&type=chunk) - Strategies include providing comprehensive product suites, enhancing solutions through R&D and acquisitions, expanding into new categories/markets, growing the client base via sales/marketing, extending relationships with existing clients (upselling RCM services), strengthening client community, leveraging cost advantages from offshore workforce, pursuing strategic acquisitions, and developing a partner ecosystem[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The company plans to utilize its large data repository to provide clinical and process insights, aiming for frictionless information flow and care coordination[49](index=49&type=chunk) [Our Offerings](index=10&type=section&id=Our%20Offerings) The company's offerings are organized into four critical areas: Core Software Products, Tech-enabled & Business Services, Apps and App Ecosystem Partners, and On-demand Workforce, all designed to simplify claim reimbursement, reduce denial rates, and improve patient collections - Offerings are organized into four critical areas: Core Software Products (PM, EHR, PXM), Tech-enabled & Business Services (RCM, medical coding, credentialing), Apps and App Ecosystem Partners (BI, RPA, telemedicine, mobile apps), and On-demand Workforce (MTBC Force) for offshore engineering and RCM operations[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Integrated solutions aim to simplify claim reimbursement, reduce denial rates, improve accounts receivable days, and increase patient collections[57](index=57&type=chunk) - Pricing for complete, integrated solutions is typically a percentage of healthcare-related revenues, with a monthly minimum fee and a nominal one-time setup fee[59](index=59&type=chunk) [Additional Business Services](index=11&type=section&id=Additional%20Business%20Services) MTBC operates a Group Purchasing Organization (GPO) serving over 4,000 physician and mid-level provider members, negotiating discounts on pharmaceuticals and other products/services - MTBC operates a Group Purchasing Organization (GPO) serving over **4,000 physician and mid-level provider members**, negotiating discounts on pharmaceuticals and other products/services[60](index=60&type=chunk) [Research and Development](index=11&type=section&id=Research%20and%20Development) R&D focuses on enhancing and expanding service offerings, ensuring regulatory compliance, and continually updating software and technology infrastructure through an agile development life cycle, supported by both onshore and offshore teams - R&D focuses on enhancing and expanding service offerings, ensuring regulatory compliance, and continually updating software and technology infrastructure through an agile development life cycle[61](index=61&type=chunk)[62](index=62&type=chunk) - Teams are located both onshore and offshore, complemented by third-party technology providers for infrastructure and ecosystem connectivity[62](index=62&type=chunk) [Clients](index=11&type=section&id=Clients) As of December 31, 2020, the company served approximately 40,000 providers in 2,600 medical practices and hospitals across 80 specialties in 50 states, plus 200 non-medical practice clients, ranging from small independent practices to large enterprise medical groups and health systems - As of December 31, 2020, the company served approximately **40,000 providers** in **2,600 medical practices and hospitals** across **80 specialties** in **50 states**, plus **200 non-medical practice clients**[64](index=64&type=chunk)[65](index=65&type=chunk) - Client base ranges from small independent practices to large enterprise medical groups and health systems[66](index=66&type=chunk) [Sales and Marketing](index=11&type=section&id=Sales%20and%20Marketing) Sales and marketing efforts are aimed at driving growth in the client base, including small practices, large groups, and health systems, through direct sales, MTBC Force deals, partner initiatives, and marketing campaigns - Sales and marketing efforts are aimed at driving growth in the client base, including small practices, large groups, and health systems, through direct sales, MTBC Force deals, partner initiatives, and marketing campaigns[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Our Growth Levers](index=12&type=section&id=Our%20Growth%20Levers) Growth is driven by organic sales, partnerships, and strategic acquisitions, leveraging the highly fragmented healthcare IT service industry for consolidation opportunities - Growth is driven by organic sales (segmented sales force, demand generation), partnerships (channel partners, integrated solutions), and acquisitions (**16 transactions since 2014**, leveraging technology and offshore teams for cost reduction and value delivery)[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - The healthcare IT service industry is highly fragmented, presenting significant opportunities for consolidation[72](index=72&type=chunk) [Competition](index=13&type=section&id=Competition) The market for practice management, EHR, and RCM solutions is highly competitive, with MTBC maintaining an advantage through competitive pricing, proprietary software, and a global team of over 3,700 employees, primarily offshore - The market for practice management, EHR, and RCM solutions is highly competitive, with rivals including larger healthcare IT companies (e.g., athenahealth, eClinicalWorks) and regional RCM firms[74](index=74&type=chunk)[75](index=75&type=chunk) - MTBC maintains a competitive advantage by delivering solutions at competitive prices, leveraging proprietary software for automation and a global team of over **3,700 employees** (**3,100 offshore**) with significantly lower labor costs[76](index=76&type=chunk)[78](index=78&type=chunk) - The company has a reputation for acquiring and transforming distressed competitors into profitable operations[77](index=77&type=chunk) [Employees](index=13&type=section&id=Employees) As of December 2020, the company employed approximately 3,700 full-time people worldwide, with anticipated increases tied to revenue growth or specific functional emphasis like marketing and sales - As of December 2020, the company employed approximately **3,700 full-time people worldwide**, with anticipated increases tied to revenue growth or specific functional emphasis like marketing and sales[78](index=78&type=chunk) [Voting Rights of Our Directors, Executive Officers, and Principal Stockholders](index=13&type=section&id=Voting%20Rights%20of%20Our%20Directors,%20Executive%20Officers,%20and%20Principal%20Stockholders) As of December 31, 2020, directors and executive officers held approximately 40% of both common stock shares and voting power, enabling them to control significant corporate decisions - As of December 31, 2020, directors and executive officers held approximately **40% of both common stock shares and voting power**, enabling them to control significant corporate decisions[79](index=79&type=chunk) [Corporate Information](index=13&type=section&id=Corporate%20Information) MTBC, Inc. was incorporated in Delaware on September 28, 2001, changed its name on February 6, 2019, and maintains its principal executive offices in Somerset, New Jersey - MTBC, Inc. was incorporated in Delaware on September 28, 2001, and changed its name from Medical Transcription Billing, Corp. on February 6, 2019. Its principal executive offices are in Somerset, New Jersey[80](index=80&type=chunk) [Where You Can Find More Information](index=14&type=section&id=Where%20You%20Can%20Find%20More%20Information) The company's website and the SEC's website provide free access to its SEC filings, including 10-K, 10-Q, and 8-K reports - The company's website (www.mtbc.com) provides access to SEC filings (10-K, 10-Q, 8-K) free of charge, and SEC filings are also available at the SEC's Public Reference Room or website (www.sec.gov)[84](index=84&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) This section details the significant risks facing MTBC, categorized by acquisition strategy, business operations, regulatory environment, and stock ownership, including challenges in integrating acquisitions, the impact of the COVID-19 pandemic, intense competition, reliance on offshore operations, and the complex regulatory landscape - Acquisition strategy risks include difficulties in managing growth, retaining customers post-acquisition, potential liabilities from acquired entities (e.g., CareCloud's civil investigation), inability to secure future financing for acquisitions, and dilutive equity issuances or increased debt[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) - Business risks are significantly impacted by the COVID-19 pandemic, which caused patient volume decreases, potential revenue decline (**65% of revenue tied to customer collections**), and challenges in completing acquisitions. Other risks include intense competition, failure to innovate, heavy dependence on cost-effective offshore operations (Pakistan, Sri Lanka), changes in healthcare industry demand, customer churn, and historical operating losses[95](index=95&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Regulatory risks stem from the heavily regulated healthcare industry, including potential non-compliance with federal and state laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, HITECH Act), which could lead to liabilities, adverse publicity, and penalties, with evolving telehealth regulations also posing risks[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Risks related to common stock ownership include revenue/operating result fluctuations, potential market price depression from future stock sales, and significant control by Executive Chairman Mahmud Haq (**34.3% ownership**); preferred stock risks include junior ranking to debt, potential inability to pay dividends due to loan covenants or insufficient cash, and limited voting rights[204](index=204&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) [Risks Related to Our Acquisition Strategy](index=14&type=section&id=Risks%20Related%20to%20Our%20Acquisition%20Strategy) Ineffective management of growth, customer churn post-acquisition, potential liabilities from acquired entities, and challenges in financing future acquisitions pose significant risks to the company's revenue and operating results - Ineffective management of growth, including integration of acquired businesses (Meridian, CareCloud), can harm revenue and operating results[85](index=85&type=chunk) - Acquisitions may lead to customer churn, especially if non-competition clauses are unenforceable, resulting in revenue decreases[86](index=86&type=chunk) - The company may incur liabilities from acquired businesses' creditors, customers, and shareholders, despite due diligence and indemnities[87](index=87&type=chunk) - The CareCloud acquisition involved a civil investigation into pre-acquisition regulatory compliance, with a potential settlement covered by escrowed funds, but an unfavorable outcome could materially affect the company[89](index=89&type=chunk) - Future acquisitions may be difficult to implement due to financing challenges, competition, and the risk of not achieving anticipated cost savings or cross-selling opportunities[90](index=90&type=chunk)[91](index=91&type=chunk) - Acquisitions can result in dilutive equity issuances, increased debt, assumed liabilities, and higher amortization expenses[94](index=94&type=chunk) [Risks Related to Our Business](index=15&type=section&id=Risks%20Related%20to%20Our%20Business) The company faces significant business risks, including the negative impact of the COVID-19 pandemic on revenue, intense competition, reliance on offshore operations, and the challenge of maintaining profitability amidst industry changes and intellectual property protection issues - The COVID-19 pandemic has negatively impacted business, financial condition, and growth, causing patient volume decreases and potential revenue decline (**65% of revenue tied to customer collections**)[95](index=95&type=chunk)[97](index=97&type=chunk) - The company operates in a highly competitive industry with larger, more resourced competitors, risking adverse effects on revenue, growth, and market share[103](index=103&type=chunk)[104](index=104&type=chunk) - Failure to introduce new products or keep pace with technological advances could lead to customer loss and hinder business growth[105](index=105&type=chunk) - Heavy dependence on offshore operations in Pakistan and Sri Lanka (**3,100 employees, 98% in Pakistan**) for cost-effective services means any disruption could severely impact the business[107](index=107&type=chunk)[109](index=109&type=chunk) - Changes in the healthcare industry, such as provider consolidation or healthcare reform (e.g., ACA revisions), could reduce demand for services and decrease revenues[112](index=112&type=chunk)[113](index=113&type=chunk) - The company has incurred net losses of **$8.8 million in 2020** and **$872,000 in 2019**, and may not achieve or maintain profitability due to acquisition costs and increased operating expenses[118](index=118&type=chunk)[119](index=119&type=chunk) - Loss of key management, particularly Mahmud Haq, could harm the business due to his instrumental role in offshore operations[133](index=133&type=chunk)[134](index=134&type=chunk) - Inability to protect intellectual property rights or claims of infringement by others could lead to significant costs, litigation, and business disruption[135](index=135&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[147](index=147&type=chunk) - Proprietary or acquired software platforms may not operate properly, leading to reputational damage, liability claims, and diversion of resources[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - Security breaches or failures in protecting customer data could lead to significant liabilities, reduced customer confidence, and reputational harm[157](index=157&type=chunk)[158](index=158&type=chunk) - Disruptions in internet/telecommunication services or damage to data centers could adversely affect business reliability and customer confidence[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Regulatory Risks](index=27&type=section&id=Regulatory%20Risks) The heavily regulated healthcare industry, with complex and evolving laws, poses significant compliance risks, potentially leading to liabilities, adverse publicity, and penalties, particularly concerning data privacy, false claims, and employee misconduct - The heavily regulated healthcare industry, with complex and evolving laws (e.g., Anti-Kickback Statute, False Claims Act, Stark Law), poses significant compliance risks, potentially leading to liability, adverse publicity, and negative business impact[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - Failure to maintain EHR solution certification under the HITECH Act could adversely affect business, financial condition, and results of operations[188](index=188&type=chunk)[190](index=190&type=chunk) - Breaches of personal data protected by HIPAA or the HITECH Act could result in significant civil and criminal liabilities, including penalties up to **$1.5 million per incident**[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Non-compliance with federal and state laws governing false claims or financial relationships among healthcare providers could lead to civil/criminal penalties or loss of eligibility for government programs[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Potential healthcare reform and new regulatory requirements could increase costs, delay new product introductions, or impair existing services[199](index=199&type=chunk)[200](index=200&type=chunk) - Additional regulation on medical information disclosure outside the U.S. could adversely affect offshore operations and increase costs[201](index=201&type=chunk)[202](index=202&type=chunk) - Services involving handling patient payments and data present potential for embezzlement, identity theft, or other illegal behavior by employees, leading to liability and reputational damage[203](index=203&type=chunk) [Risks Related to Ownership of Shares of Our Common Stock](index=30&type=section&id=Risks%20Related%20to%20Ownership%20of%20Shares%20of%20Our%20Common%20Stock) Fluctuations in revenues, potential dilution from future stock sales, significant control by the Executive Chairman, anti-takeover provisions, and the absence of cash dividends pose risks to common stockholders - Fluctuations in revenues, operating results, and cash flows may cause the common stock price to decline if investor expectations are not met[204](index=204&type=chunk)[205](index=205&type=chunk) - Future sales of a substantial number of common stock shares could depress the market price[207](index=207&type=chunk) - Mahmud Haq, the founder and Executive Chairman, controls **34.3% of outstanding common stock**, preventing other investors from influencing significant corporate decisions and potentially delaying or preventing a change of control[208](index=208&type=chunk)[209](index=209&type=chunk) - Provisions of Delaware law and the company's charter/bylaws may make a takeover more difficult, potentially causing the common stock price to decline[210](index=210&type=chunk)[211](index=211&type=chunk) - Future issuances of additional preferred stock could dilute the rights of existing common stockholders[212](index=212&type=chunk) - The company does not intend to pay cash dividends on common stock, making capital appreciation the sole source of gain for stockholders[213](index=213&type=chunk) - Complying with public company laws and regulations (e.g., Sarbanes-Oxley Act Section 404) increases costs and management demands, potentially harming operating results and investor perception if deficiencies are found[214](index=214&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - As a smaller reporting company, reduced disclosure requirements may make common stock less attractive to investors, leading to a less active trading market and higher stock price volatility[219](index=219&type=chunk)[220](index=220&type=chunk) [Risks Related to Ownership of Shares of Our Preferred Stock](index=33&type=section&id=Risks%20Related%20to%20Ownership%20of%20Shares%20of%20Our%20Preferred%20Stock) Ownership of Series A Preferred Stock carries risks including junior ranking to debt, potential inability to pay dividends due to loan covenants or insufficient cash, dilution from future issuances, market interest rate sensitivity, limited voting rights, and no conversion to common stock - Series A Preferred Stock ranks junior to all company indebtedness and other liabilities, meaning assets would first pay creditors in bankruptcy or liquidation[222](index=222&type=chunk) - The company may be unable to pay dividends on Series A Preferred Stock if it falls out of compliance with loan covenants (e.g., SVB Credit Agreement) or has insufficient cash[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - Issuance of additional preferred stock (pari passu or senior) could dilute existing Series A Preferred Stock holders' rights to dividends or liquidation amounts[227](index=227&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) - Market interest rates can materially and adversely affect the value of Series A Preferred Stock, as higher rates may lead to expectations of higher dividend yields[232](index=232&type=chunk) - Holders of Series A Preferred Stock may not be eligible for the dividends-received deduction or preferential tax rates if the company lacks sufficient current or accumulated earnings and profits[233](index=233&type=chunk)[234](index=234&type=chunk) - The company may redeem Series A Preferred Stock at any time, potentially if market conditions allow for lower-rate financing, ending dividend accrual and holder rights[237](index=237&type=chunk) - The market price of Series A Preferred Stock is variable and influenced by factors like interest rates, dividend history, economic conditions, and company performance[238](index=238&type=chunk) - Series A Preferred Stock holders have extremely limited voting rights, primarily for electing directors if dividends are in arrears or for certain charter amendments[239](index=239&type=chunk)[240](index=240&type=chunk) - The Series A Preferred Stock is not convertible into common stock, so investors will not realize upside from increases in common stock price[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[244](index=244&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) MTBC's corporate headquarters are in Somerset, New Jersey, occupying 2,400 square feet, with approximately 190,000 square feet leased across 19 U.S. locations and additional offshore facilities in Pakistan and Sri Lanka, all deemed adequate by management - Corporate headquarters: **2,400 sq ft** in Somerset, New Jersey (month-to-month lease)[245](index=245&type=chunk) - U.S. leased space: Approximately **190,000 sq ft** across **19 locations**, including five pediatric offices (leases expiring 2021-2026); a new **8,000 sq ft pediatric office in Ohio** was leased in February 2021 for **15 years**[245](index=245&type=chunk) - Offshore leased space: Approximately **48,000 sq ft in Islamabad, Pakistan** (lease expires July 2021), and **33,000 sq ft in Bagh, Pakistan** (annually renewable lease); office space in Sri Lanka (lease expires March 2021, to be renewed)[246](index=246&type=chunk) - Management believes current facilities are adequate and suitable additional space will be available[247](index=247&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) MTBC is involved in an arbitration with Randolph Pain Relief and Wellness Center (RPRWC) where MTBC Acquisition Corp. (MAC) is defending against claims of up to $11 million, and a civil investigation related to the CareCloud acquisition is ongoing, with an estimated $4.2 million settlement covered by a $4 million escrow - Randolph Pain Relief and Wellness Center (RPRWC) filed an arbitration demand against MTBC, Inc. and MTBC Acquisition Corp. (MAC) for alleged breach of a billing services agreement by an acquired subsidiary, Millennium Practice Management Associates, Inc. (MPMA)[248](index=248&type=chunk) - The Chancery Court ruled that MTBC, Inc. cannot be compelled to participate in the arbitration, but MAC is required to; RPRWC's claimed damages have varied, from **$6.6 million to $20 million**, and then an estimated **$11 million plus costs**; MAC intends to vigorously defend, anticipating a substantially lower award[249](index=249&type=chunk)[250](index=250&type=chunk) - A civil investigation related to CareCloud Corporation's acquired software technology is ongoing, with an estimated **$4.2 million settlement** (including costs) expected to be substantially covered by a **$4 million escrow** from the acquisition[89](index=89&type=chunk)[559](index=559&type=chunk) - Management believes no current legal proceedings, individually or collectively, would have a material adverse effect on the company's business, consolidated results of operations, financial position, or cash flows[253](index=253&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no disclosures related to mine safety - There are no mine safety disclosures[254](index=254&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) MTBC's common stock trades on the Nasdaq Global Market under 'MTBC' since July 2014, with approximately 6,800 common stockholders as of February 2021; the company has not declared cash dividends and is prohibited from doing so without senior lender consent, with no unregistered securities sold or equity repurchased in Q4 2020 - MTBC common stock has been listed on the Nasdaq Global Market under the symbol 'MTBC' since **July 23, 2014**[255](index=255&type=chunk) - As of **February 8, 2021**, there were approximately **6,800 holders of record** of the company's common stock[256](index=256&type=chunk) - The company has not declared cash dividends on common stock since going public and does not anticipate paying any in the foreseeable future, being prohibited without prior written consent from its senior lender, SVB[257](index=257&type=chunk) - No unregistered equity securities were sold, and no share repurchase activity occurred during the three months ended December 31, 2020[258](index=258&type=chunk)[259](index=259&type=chunk) Equity Compensation Plan Information (as of December 31, 2020) | Plan Category | Number of securities to be issued upon vesting | Number of securities remaining available for future issuance | | :------------------------------------------------ | :--------------------------------------------- | :----------------------------------------------------------- | | Equity compensation plan approved by security holders - common shares | 369,436 | 1,718,012 | | Equity compensation plan approved by security holders - preferred shares | 44,000 | 370,075 | | **Total** | **413,436** | **2,088,087** | [Item 6. Selected Financial Data](index=38&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected consolidated financial data for MTBC, Inc. for the years ended December 31, 2016-2020, including statements of operations and balance sheet data, and a reconciliation of GAAP net loss to Adjusted EBITDA, highlighting significant increases in revenue and expenses due to recent acquisitions Consolidated Statements of Operations Data (Selected, in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Net revenue | $105,122 | $64,439 | $50,546 | $31,811 | $24,493 | | Total operating expenses | $113,393 | $64,372 | $53,085 | $36,333 | $32,394 | | Operating (loss) income | $(8,271) | $67 | $(2,539) | $(4,522) | $(7,901) | | Net loss | $(8,813) | $(872) | $(2,138) | $(5,565) | $(8,797) | | Preferred stock dividend | $13,877 | $6,386 | $4,824 | $2,030 | $753 | | Net loss attributable to common shareholders | $(22,690) | $(7,258) | $(6,962) | $(7,595) | $(9,550) | | Net loss per common share (basic and diluted) | $(1.79) | $(0.60) | $(0.59) | $(0.69) | $(0.95) | Consolidated Balance Sheet Data (Selected, as of December 31, in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Cash | $20,925 | $19,994 | $14,472 | $4,362 | $3,477 | | Working capital - net | $15,795 | $19,823 | $17,916 | $4,608 | $(7,418) | | Total assets | $137,999 | $56,402 | $47,623 | $25,526 | $28,324 | | Long-term debt | $41 | $83 | $222 | $121 | $4,200 | | Shareholders' equity | $101,245 | $42,837 | $38,870 | $20,250 | $7,067 | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Net loss | $(8,813) | $(872) | $(2,138) | $(5,565) | $(8,797) | | Depreciation | $1,354 | $909 | $689 | $634 | $527 | | Amortization | $8,551 | $2,097 | $2,165 | $3,666 | $4,581 | | Interest expense - net | $446 | $121 | $250 | $1,307 | $646 | | Income tax provision (benefit) | $103 | $193 | $(157) | $68 | $197 | | Stock-based compensation expense | $6,502 | $3,216 | $2,464 | $1,487 | $1,928 | | Transaction and integration costs | $2,694 | $1,735 | $1,891 | $515 | $976 | | Restructuring, impairment and unoccupied lease charges | $963 | $219 | - | $276 | - | | Change in contingent consideration | $(1,000) | $(344) | $73 | $152 | $(716) | | **Adjusted EBITDA** | **$10,871** | **$8,101** | **$4,802** | **$2,291** | **$(605)** | - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate profitability and efficiency, excluding income tax, interest, foreign exchange, stock-based compensation, depreciation, amortization, transaction/integration costs, restructuring, and changes in contingent consideration[267](index=267&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of MTBC's financial condition and results of operations for 2020 and 2019, covering revenue sources, operating expenses, key performance measures, and liquidity, highlighting significant revenue growth driven by acquisitions, increased operating expenses, and a net loss, with liquidity enhanced by preferred stock offerings despite negative cash flow from operations - Net revenue increased by **$40.7 million (63%) to $105.1 million in 2020** from **$64.4 million in 2019**, with **$53.3 million from CareCloud and Meridian acquisitions**[323](index=323&type=chunk) - Operating expenses increased by **$49.0 million (76%) to $113.4 million in 2020**, primarily due to acquisitions, leading to an operating loss of **$8.3 million in 2020** compared to operating income of **$67,000 in 2019**[323](index=323&type=chunk)[325](index=325&type=chunk) - Net loss was **$8.8 million in 2020**, up from **$872,000 in 2019**, largely due to increased non-cash amortization expense (**$8.1 million in 2020 vs. $1.9 million in 2019**)[118](index=118&type=chunk) Adjusted EBITDA and Operating Income (in thousands) | Metric | 2020 | 2019 | | :------------------------- | :---------- | :--------- | | Adjusted EBITDA | $10,871 | $8,101 | | Non-GAAP adjusted operating income | $9,015 | $6,770 | | Non-GAAP adjusted operating margin | 8.6% | 10.5% | - Cash used in operating activities was **$892,000 in 2020**, compared to cash generated of **$7.6 million in 2019**, including **$10.3 million used to pay acquisition-related obligations in 2020**[345](index=345&type=chunk)[350](index=350&type=chunk) - Cash provided by financing activities was **$33.4 million in 2020**, primarily from issuing **1,932,000 shares of Preferred Stock for $44.5 million**, offset by **$11.4 million in Preferred Stock dividends**[345](index=345&type=chunk)[354](index=354&type=chunk) - The company had **$20.9 million in cash** and **$15.8 million in positive working capital** at year-end 2020, with management forecasting sufficient liquidity for the next twelve months[343](index=343&type=chunk)[346](index=346&type=chunk) [Overview](index=41&type=section&id=Overview) MTBC is a healthcare IT company providing cloud-based RCM, PM, EHR, business intelligence, telehealth, and PXM solutions to U.S. healthcare providers and hospitals, leveraging cost-effective offshore operations in Pakistan and Sri Lanka - MTBC is a healthcare IT company providing cloud-based RCM, PM, EHR, business intelligence, telehealth, and PXM solutions to U.S. healthcare providers and hospitals[273](index=273&type=chunk) - Offshore operations in Pakistan and Sri Lanka accounted for approximately **10% of total expenses in 2020** (**14% in 2019**), with personnel-related costs being significantly lower than in the U.S., providing a competitive advantage and enabling cost reductions post-acquisition[275](index=275&type=chunk) [Key Performance Measures](index=42&type=section&id=Key%20Performance%20Measures) Management utilizes non-GAAP financial measures such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate performance and provide additional insight, excluding various non-cash and non-recurring items - Management uses non-GAAP financial measures like Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate performance and provide additional insight[277](index=277&type=chunk)[279](index=279&type=chunk) - Adjusted EBITDA excludes income tax, interest, foreign exchange, stock-based compensation, depreciation, amortization, integration costs, restructuring charges, and changes in contingent consideration[280](index=280&type=chunk) Adjusted EBITDA (in thousands) | Metric | 2020 | 2019 | | :---------------- | :---------- | :--------- | | GAAP net loss | $(8,813) | $(872) | | Adjustments | $19,684 | $8,973 | | **Adjusted EBITDA** | **$10,871** | **$8,101** | Adjusted Operating Income and Margin (in thousands) | Metric | 2020 | 2019 | | :------------------------- | :---------- | :--------- | | GAAP operating (loss) / income | $(8,271) | $67 | | Adjustments | $17,286 | $6,703 | | **Non-GAAP adjusted operating income** | **$9,015** | **$6,770** | | **Non-GAAP adjusted operating margin** | **8.6%** | **10.5%** | Non-GAAP Adjusted Net Income and EPS | Metric | 2020 | 2019 | | :----------------------------------- | :---------- | :--------- | | GAAP net loss | $(8,813) | $(872) | | Adjustments | $17,257 | $7,610 | | **Non-GAAP adjusted net income** | **$8,459** | **$6,738** | | Non-GAAP adjusted earnings per share | $0.63 | $0.55 | | Non-GAAP adjusted diluted earnings per share | $0.50 | $0.53 | [Quarterly Results of Operations](index=45&type=section&id=Quarterly%20Results%20of%20Operations) This section presents the company's quarterly net revenue, net income (loss), and Adjusted EBITDA for the periods ending December 31, 2020, and December 31, 2019 Quarterly Net Revenue (in thousands) | Quarter | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | | :---------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net revenue | $32,037 | $31,639 | $19,579 | $21,867 | $15,758 | $16,851 | $16,750 | $15,080 | Quarterly Net Income (Loss) and Adjusted EBITDA (in thousands) | Quarter | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | | :---------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net income (loss) | $155 | $(1,674) | $(4,791) | $(2,503) | $333 | $(139) | $(771) | $(295) | | Adjusted EBITDA | $5,702 | $4,213 | $191 | $765 | $2,786 | $2,594 | $1,141 | $1,580 | [Key Metrics](index=46&type=section&id=Key%20Metrics) As of December 31, 2020, the company served approximately 40,000 providers across 2,600 practices, demonstrating an 88% customer renewal rate in 2020 - As of December 31, 2020, the company served approximately **40,000 providers** across **2,600 practices**, an increase from **10,500 providers and 1,800 practices in 2019**[290](index=290&type=chunk) - Customer renewal rates were **88% in 2020** and **90% in 2019**, measuring the percentage of RCM clients utilizing the technology platform who remained clients throughout the year[291](index=291&type=chunk) [Sources of Revenue](index=46&type=section&id=Sources%20of%20Revenue) Primary revenue is derived from revenue cycle management (RCM) services and bundled services, typically billed as a percentage of customer collections, with other contributions from SaaS fees, printing/mailing, clearinghouse, EDI, ancillary RCM, group purchasing, and practice management services - Primary revenue is derived from revenue cycle management (RCM) services and bundled services (including EHR and PM software), typically billed as a percentage of customer collections[292](index=292&type=chunk) Revenue Contribution by Source | Revenue Source | 2020 Revenue (%) | 2019 Revenue (%) | | :------------------------------------------- | :--------------- | :--------------- | | RCM and bundled services | 62% | 66% | | Software-as-a-service (SaaS) fees (standalone) | 18% | 1% | | Printing and mailing operations, clearinghouse, EDI, ancillary RCM | 6% | 8% | | Group purchasing services | 1% | 2% | | Practice management services | 11% | 21% | - Telehealth services, launched in December 2019, generated approximately **$7,000 in revenue in 2020**, included within RCM services[297](index=297&type=chunk) [Operating Expenses](index=48&type=section&id=Operating%20Expenses) Operating expenses include direct operating costs, selling and marketing, general and administrative, research and development, changes in contingent consideration, depreciation and amortization, and restructuring charges, with offshore operations contributing to cost efficiency - Direct operating costs primarily consist of salaries, benefits, claims processing, and other direct service costs; offshore operations accounted for **10% of direct operating costs in 2020** (**13% in 2019**)[298](index=298&type=chunk) - Selling and marketing expenses include compensation, commissions, travel, and advertising; Research and development expenses are mainly personnel-related and third-party contractor costs[299](index=299&type=chunk) - General and administrative expenses cover administrative salaries, benefits, travel, occupancy, insurance, software license fees, and professional fees; offshore offices accounted for **15% of G&A in 2020** (**16% in 2019**)[300](index=300&type=chunk) - Contingent consideration is adjusted to fair value each period, reflecting changes in forecasted revenue of acquired entities[301](index=301&type=chunk) - Depreciation is calculated straight-line over **3-5 years**; amortization for most intangible assets is over **3-4 years**, while practice management client value is amortized over **12 years**[302](index=302&type=chunk) - Restructuring, impairment, and unoccupied lease charges relate to unused facilities and vacant space, with one lease obligation settled in February 2021[303](index=303&type=chunk) [Interest and Other Income (Expense)](index=48&type=section&id=Interest%20and%20Other%20Income%20(Expense)) Interest expense includes costs related to the working capital line of credit and acquisition amounts, offset by interest income, while other income (expense) primarily results from foreign currency transaction gains/losses - Interest expense includes costs related to the working capital line of credit and acquisition amounts, offset by interest income; other income (expense) primarily results from foreign currency transaction gains/losses[304](index=304&type=chunk) [Income Taxes](index=49&type=section&id=Income%20Taxes) Income taxes are estimated based on current tax exposure and temporary differences, resulting in deferred tax assets and liabilities, with a valuation allowance recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income - Income taxes are estimated based on current tax exposure and temporary differences, resulting in deferred tax assets and liabilities; a valuation allowance is recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income[306](index=306&type=chunk) - The company accounts for Global Intangible Low-Taxed Income (GILTI) provisions as incurred[306](index=306&type=chunk) [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies requiring significant judgment and estimates include revenue from contracts with customers (especially RCM), contingent consideration, goodwill impairment, and business combinations, with revenue recognition for RCM services involving estimation of variable consideration - Key accounting policies requiring significant judgment and estimates include revenue from contracts with customers (especially RCM), contingent consideration, goodwill impairment, and business combinations[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - Revenue recognition for RCM services involves estimating variable consideration (payment-to-charge ratios, billing rates, payment periods) and is recognized over the performance period using the input method[309](index=309&type=chunk)[311](index=311&type=chunk)[314](index=314&type=chunk) - Goodwill is tested for impairment annually (October 31) at the reporting-unit level (Healthcare IT and Practice Management), using discounted cash flow and market approaches, with no impairment recorded in 2020 or 2019[318](index=318&type=chunk) - Business combinations are accounted for using the acquisition method, recording acquired assets and assumed liabilities at fair value, with goodwill representing the excess purchase price[319](index=319&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) This section presents the consolidated results of operations as a percentage of total revenue for 2020 and 2019, detailing the proportional contribution and changes in various revenue and expense categories Consolidated Results of Operations as a Percentage of Total Revenue | Metric | 2020 | 2019 | | :--------------------------------------- | :---------- | :---------- | | Net revenue | 100.0% | 100.0% | | Direct operating costs | 61.7% | 63.9% | | Selling and marketing | 6.3% | 2.4% | | General and administrative | 21.7% | 27.8% | | Research and development | 8.9% | 1.4% | | Change in contingent consideration | (1.0)% | (0.5)% | | Depreciation and amortization | 9.4% | 4.7% | | Restructuring, impairment and unoccupied lease charges | 0.9% | 0.3% | | Total operating expenses | 107.9% | 100.0% | | Operating (loss) income | (7.9)% | 0.0% | | Interest expense - net | 0.4% | 0.2% | | Other income (expense) - net | 0.0% | (1.0)% | | Loss before income taxes | (8.3)% | (1.2)% | | Income tax provision | 0.1% | 0.3% | | Net loss | (8.4)% | (1.5)% | [Comparison of 2020 and 2019](index=51&type=section&id=Comparison%20of%202020%20and%202019) Net revenue increased by $40.7 million (63%) in 2020, primarily due to acquisitions, while total operating expenses surged by $49.0 million (76%), driven by higher direct operating costs, selling and marketing, R&D, and amortization expenses Revenue and Operating Expenses Comparison (in thousands) | Metric | 2020 | 2019 | Change Amount | Change Percent | | :--------------------------------------- | :---------- | :---------- | :------------ | :------------- | | Net revenue | $105,122 | $64,439 | $40,683 | 63% | | Direct operating costs | $64,821 | $41,186 | $23,635 | 57% | | Selling and marketing | $6,582 | $1,522 | $5,060 | 332% | | General and administrative | $22,811 | $17,912 | $4,899 | 27% | | Research and development | $9,311 | $871 | $8,440 | 969% | | Change in contingent consideration | $(1,000) | $(344) | $(656) | 191% | | Depreciation | $1,354 | $909 | $445 | 49% | | Amortization | $8,551 | $2,097 | $6,454 | 308% | | Restructuring, impairment and unoccupied lease charges | $963 | $219 | $744 | 340% | | Total operating expenses | $113,393 | $64,372 | $49,021 | 76% | - Net revenue growth in 2020 was significantly driven by **$53.3 million from CareCloud and Meridian acquisitions**[323](index=323&type=chunk) - Direct operating costs increased due to higher salary costs (**$12.2 million**) from acquisitions, outsourcing, and facility costs[325](index=325&type=chunk) - Selling and marketing expense surged by **332%** due to increased emphasis post-CareCloud acquisition; R&D expense increased by **969%** for new product development related to CareCloud and Meridian technologies[326](index=326&type=chunk)[328](index=328&type=chunk) - Amortization expense increased by **308%** due to intangible assets acquired from CareCloud and Meridian[331](index=331&type=chunk) Interest and Income Tax Comparison (in thousands) | Metric | 2020 | 2019 | Change Amount | Change Percent | | :------------------------- | :---------- | :---------- | :------------ | :------------- | | Interest income | $42 | $262 | $(220) | (84)% | | Interest expense | $(488) | $(383) | $(105) | 27% | | Other income (expense) - net | $7 | $(625) | $632 | 101% | | Income tax provision | $103 | $193 | $(90) | 47% | - Interest income decreased due to lower earnings on temporary cash investments; other income (expense) shifted from a net expense to a net income, primarily due to foreign currency transaction gains[334](index=334&type=chunk)[336](index=336&type=chunk) - A valuation allowance was recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income[338](index=338&type=chunk) - As of December 31, 2020, the company had a total federal NOL carryforward of **$270.9 million**, with **$237.6 million from CareCloud and Meridian acquisitions** subject to Section 382 limitations[341](index=341&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company had $20.9 million in cash and $15.8 million in positive working capital, despite negative cash flow from operations of $892,000 for the year, with liquidity enhanced by $44.5 million in net proceeds from Preferred Stock issuances - As of December 31, 2020, the company had **$20.9 million in cash** and **$15.8 million in positive working capital**, despite negative cash flow from operations of **$892,000 for the year**[343](index=343&type=chunk) - Cash used by operations in 2020 included **$10.3 million for outstanding obligations** from CareCloud and Meridian acquisitions[343](index=343&type=chunk) - The company raised **$44.5 million in net proceeds** from issuing **1,932,000 shares of Preferred Stock in 2020**, and **$9.6 million from 373,000 shares in 2019**[343](index=343&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | 2020 | 2019 | Change Amount | Change Percent | | :--------------------------------- | :---------- | :--------- | :------------ | :------------- | | Net cash (used in) provided by operating activities | $(892) | $7,618 | $(8,510) | (112)% | | Net cash used in investing activities | $(31,469) | $(4,158) | $(27,311) | (657)% | | Net cash provided by financing activities | $33,422 | $1,422 | $32,000 | 2,250% | | Effect of exchange rate changes on cash | $(130) | $640 | $(770) | (120)% | | Net increase in cash | $931 | $5,522 | $(4,591) | (83)% | - Management expects sufficient liquidity for the next twelve months through continued focus on profitability, revenue growth, and expense management[346](index=346&type=chunk) - The company estimates a **$4.2 million payment in 2021** to resolve a civil investigation related to an acquired subsidiary, with **$4.0 million from escrowed preferred stock**[349](index=349&type=chunk) [Operating Activities](index=54&type=section&id=Operating%20Activities) Cash used by operating activities was $892,000 in 2020, a decrease from $7.6 million generated in 2019, primarily due to a $7.9 million increase in net loss, including higher non-cash depreciation and amortization and stock-based compensation - Cash used by operating activities was **$892,000 in 2020**, a decrease from **$7.6 million generated in 2019**, primarily due to a **$7.9 million increase in net loss**, including higher non-cash depreciation and amortization (**$7.1 million**) and stock-based compensation (**$3.3 million**)[350](index=350&type=chunk) - Accounts payable, accrued compensation, and accrued expenses increased by **$11.9 million in 2020**, compared to **$1.4 million in 2019**, with cash used for pre-acquisition obligations shown as operating cash outflow[352](index=352&type=chunk) [Investing Activities](index=55&type=section&id=Investing%20Activities) Cash used in investing activities increased by $27.3 million to $31.5 million in 2020, primarily due to $23.7 million paid for CareCloud and Meridian acquisitions, and higher capitalized software costs - Cash used in investing activities increased by **$27.3 million to $31.5 million in 2020**, primarily due to **$23.7 million paid for CareCloud and Meridian acquisitions**, compared to **$1.6 million for ETM in 2019**[353](index=353&type=chunk) - Capitalized software costs were **$5.2 million in 2020**, up from **$538,000 in 2019**[353](index=353&type=chunk) [Financing Activities](index=55&type=section&id=Financing%20Activities) Cash provided by financing activities was $33.4 million in 2020, a significant increase from $1.4 million in 2019, primarily driven by $44.5 million net proceeds from Preferred Stock issuance, offset by $11.4 million in Preferred Stock dividends and $2.2 million in tax withholding obligations - Cash provided by financing activities was **$33.4 million in 2020**, a significant increase from **$1.4 million in 2019**[354](index=354&type=chunk) - This includes **$44.5 million net proceeds from Preferred Stock issuance**, offset by **$11.4 million in Preferred Stock dividends** and **$2.2 million in tax withholding obligations**[354](index=354&type=chunk) - No borrowings were outstanding under the revolving line of credit as of December 31, 2020 and 2019[354](index=354&type=chunk) [Contractual Obligations and Commitments](index=55&type=section&id=Contractual%20Obligations%20and%20Commitments) The company has contractual obligations under its line of credit and operating leases for property and equipment, and was in compliance with all SVB covenants in 2020 - The company has contractual obligations under its line of credit and operating leases for property and equipment, and was in compliance with all SVB covenants in 2020[355](index=355&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2020 and 2019, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements, though a variable interest entity (VIE), talkMD Clinicians, PA, was formed in Q1 2020 to provide telehealth services - As of December 31, 2020 and 2019, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[356](index=356&type=chunk) - A variable interest entity (VIE), talkMD Clinicians, PA, was formed in Q1 2020 to provide telehealth services, controlled by the company but had not commenced operations or transactions by year-end 2020[356](index=356&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, MTBC is exempt from providing quantitative and qualitative disclosures about market risk - MTBC is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[357](index=357&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the company's consolidated financial statements and supplementary data, which are included starting on page F-1 of the Annual Report on F

November 2020 Investor Presentation A leading healthcare technology company with a complete suite of proprietary, cloudbased solutions for healthcare providers NASDAQ Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology ...

Financial Data and Key Metrics Changes - The company reported record revenue of $31.6 million for Q3 2020, an increase of 88% compared to Q3 2019 [9] - Adjusted EBITDA reached a record $4.2 million, up 68% year-over-year [10] - Adjusted net income for Q3 was $3.5 million, a 58% increase from the previous year [10] - Year-to-date revenue for the first nine months of 2020 was $73.1 million, compared to $48.7 million in the same period of 2019, marking a 50% increase [40] Business Line Data and Key Metrics Changes - The company has significantly increased its sales and marketing investment, growing from 2.2% of revenue in the first nine months of 2019 to 6.5% in the same period of 2020, contributing to revenue growth [40] - The company has closed more than twice as much new organic business compared to all of 2019 [19] Market Data and Key Metrics Changes - The company serves approximately 40,000 providers across the country, with around 12,000 to 13,000 utilizing end-to-end revenue cycle management (RCM) [63] - Patient volumes are currently about 5% below pre-COVID levels, with many providers operating at near pre-COVID capacity [81] Company Strategy and Development Direction - The company is focused on empowering healthcare providers with tech-enabled solutions and has a robust acquisition strategy, having acquired CareCloud and Meridian Medical Management [15][36] - The company aims to achieve annualized revenues of over $130 million and adjusted EBITDA of more than $24 million by the end of 2020 [23][54] - The company is expanding its product offerings, including Precision BI and robotic process automation (RPA), to enhance its competitive position [25][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth of over 60% year-over-year and adjusted EBITDA growth of nearly 50% or more [23] - The company believes it is well-positioned to support healthcare providers during the ongoing COVID-19 pandemic [14] - Management anticipates continued organic growth and is optimistic about the potential for future acquisitions [68] Other Important Information - The company has approximately $22.8 million in cash and has paid 60 consecutive monthly dividends on its preferred stock [52] - The company expects to end 2020 with a historic annualized revenue run rate of $130 million or greater [53] Q&A Session Summary Question: Guidance and Top-Line Growth - Management clarified that the 60% year-over-year growth refers to 2020 compared to 2019, with guidance for 2021 to be provided in Q1 of next year [58] Question: Depreciation and Amortization - The $3.2 million in depreciation and amortization for Q3 includes both CareCloud and Meridian, and is considered a good baseline going forward [60] Question: Priorities for Business Optimization - Management emphasized the importance of both optimizing current business and pursuing new acquisitions, with expectations of 25% to 30% adjusted EBITDA margins in 2021 [61][62] Question: Changes in Customer Base Post-Acquisitions - The company has seen increased involvement with larger hospital clients and multi-specialty groups, enhancing cross-selling opportunities [64] Question: Organic Growth Strategy - Management indicated that a significant portion of organic growth will come from cross-selling and upselling to existing customers, with 20% to 25% of bookings currently from these efforts [87]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-36529 MTBC, Inc. (Exact name of registrant as specified in its charter) Delaware 22-3832302 (State or other jurisdiction ...