CareCloud, Inc. (MTBC) Q3 2021 Earnings Conference Call November 4, 2021 8:30 AM ET Company Participants Kimberly Blanche - General Counsel, VP of Compliance & Secretary Mahmud Haq - Founder and Executive Chairman Hadi Chaudhry - Chief Executive Officer, President, and Director Stephen Snyder - Chief Strategy Officer and Director Bill Korn - Chief Financial Officer Jerry Howell - CEO of MedMatica Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann & Co. Allen Klee - Maxim Group Marc Wiesenberg ...

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's analysis for the period ended September 30, 2021 [Item 1. Condensed Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, highlighting significant revenue growth and improved net income driven by acquisitions [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$142.5 million** by September 30, 2021, primarily due to goodwill and intangible assets from acquisitions, while liabilities also rose Condensed Consolidated Balance Sheet Highlights ($ in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $8,313 | $20,925 | | Accounts receivable - net | $18,094 | $12,089 | | Intangible assets - net | $32,143 | $29,978 | | Goodwill | $60,661 | $49,291 | | **Total Assets** | **$142,509** | **$137,999** | | **Liabilities & Equity** | | | | Total current liabilities | $26,465 | $29,024 | | Borrowings under line of credit | $6,000 | $- | | Contingent consideration | $6,500 | $- | | **Total Liabilities** | **$45,458** | **$36,754** | | **Total Shareholders' Equity** | **$97,051** | **$101,245** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net revenue for Q3 2021 increased **21%** to **$38.3 million**, leading to an operating income of **$1.4 million** and reduced net loss per common share Statement of Operations Summary ($ in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenue** | **$38,304** | **$31,639** | **$102,137** | **$73,085** | | Operating Income (Loss) | $1,425 | $(1,235) | $(362) | $(8,682) | | Net Income (Loss) | $1,505 | $(1,673) | $(686) | $(8,968) | | Net Loss Attributable to Common Shareholders | $(2,137) | $(5,903) | $(11,094) | $(19,118) | | Net loss per common share | $(0.15) | $(0.46) | $(0.77) | $(1.53) | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated **$7.2 million** in cash for the nine months ended September 30, 2021, offsetting significant cash used in investing activities for acquisitions Cash Flow Summary for Nine Months Ended Sep 30 ($ in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7,210 | $(4,333) | | Net cash used in investing activities | $(19,851) | $(28,772) | | Net cash provided by financing activities | $1,272 | $36,139 | | **Net (Decrease) Increase in Cash** | **$(11,612)** | **$2,846** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover the company's healthcare IT business, recent acquisitions like medSR, accounting policies, and disaggregated revenue sources, showing growth in professional services - The company operates as a healthcare information technology firm providing a suite of proprietary cloud-based solutions, including RCM, PM, and EHR, to healthcare providers across the U.S. It leverages offshore offices in Pakistan and Sri Lanka for client support and operations[30](index=30&type=chunk) - On June 1, 2021, the company acquired MedMatica and its subsidiary SRS (renamed medSR) for **$10 million in cash** plus a working capital adjustment and potential earn-outs up to **$13 million**, expanding specialty consulting services[41](index=41&type=chunk)[42](index=42&type=chunk) Disaggregation of Revenue (Nine Months Ended Sep 30, $ in thousands) | Revenue Source | 2021 | 2020 | | :--- | :--- | :--- | | Technology-enabled business solutions | $80,075 | $61,138 | | Professional services | $10,978 | $1,278 | | Medical practice management services | $9,341 | $8,926 | | Other | $1,743 | $1,743 | | **Total** | **$102,137** | **$73,085** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **40% revenue growth** for the first nine months of 2021 to acquisitions, achieving **$16.0 million in Adjusted EBITDA** and maintaining solid liquidity [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Net revenue for Q3 2021 increased **21%** to **$38.3 million**, with nine-month revenue up **40%** to **$102.1 million**, primarily due to acquisitions and reduced R&D expenses - Revenue for the nine months ended September 30, 2021, includes approximately **$63.1 million** from customers acquired in the medSR, CCH, and Meridian acquisitions[218](index=218&type=chunk) - Research and development expense decreased by **79% in Q3 2021** and **37% in the nine-month period** year-over-year, due to capitalizing **$5.3 million** in development costs for new technology[222](index=222&type=chunk) Operating Expenses Comparison (Nine Months Ended Sep 30, $ in thousands) | Expense Category | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Direct operating costs | $62,719 | $45,842 | 37% | | Selling and marketing | $6,469 | $4,778 | 35% | | General and administrative | $17,814 | $17,176 | 4% | | Research and development | $4,328 | $6,846 | (37)% | | **Total operating expenses** | **$102,499** | **$81,767** | **25%** | [Key Performance Measures](index=37&type=section&id=Key%20Performance%20Measures) Adjusted EBITDA for the nine months ended September 30, 2021, significantly increased to **$16.0 million** from **$5.2 million** in the prior year, driven by revenue growth and cost management Adjusted EBITDA Reconciliation ($ in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | GAAP net income (loss) | $1,505 | $(1,673) | $(686) | $(8,968) | | Stock-based compensation | $1,004 | $1,763 | $4,006 | $4,951 | | Depreciation & amortization | $3,547 | $3,206 | $9,505 | $6,944 | | Transaction & integration costs | $269 | $609 | $1,118 | $1,709 | | Other adjustments | $269 | $(11) | $1,585 | $532 | | **Adjusted EBITDA** | **$6,674** | **$4,214** | **$16,018** | **$5,170** | [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$9.3 million in cash** and **$9.9 million in working capital**, supported by **$7.2 million** in operating cash flow and an increased **$20 million** credit facility - The company generated positive cash flow from operations of **$7.2 million** for the nine months ended September 30, 2021[234](index=234&type=chunk)[240](index=240&type=chunk) - During the first quarter of 2021, the exercise of 858,000 warrants provided net proceeds of approximately **$6.4 million**[236](index=236&type=chunk) - The company's credit line with Silicon Valley Bank (SVB) was increased from **$10 million to $20 million** and extended through October 2023[80](index=80&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the registrant is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company defined by 17 C.F.R. 229.10(f)(1), the registrant is not required to provide the information requested under this item[248](index=248&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[251](index=251&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[252](index=252&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides details on legal proceedings, risk factors, equity sales, and exhibits filed with the report [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company's subsidiary, MTBC Acquisition Corp., is involved in an arbitration proceeding with RPRWC, facing claimed damages of approximately **$11 million** plus costs - The company is involved in an arbitration demand filed by Randolph Pain Relief and Wellness Center ("RPRWC") against its subsidiary, MTBC Acquisition Corp. ("MAC")[96](index=96&type=chunk) - RPRWC's claimed damages have fluctuated, most recently estimated at approximately **$11 million** plus costs, which MAC intends to vigorously defend against[98](index=98&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported, with investors directed to the Annual Report on Form 10-K for a comprehensive discussion - The report directs investors to the Risk Factors section of the Annual Report on Form 10-K filed on February 25, 2021, for a comprehensive discussion of potential risks[257](index=257&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the current reporting period - Not applicable[258](index=258&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files (Exhibits 101 series)[262](index=262&type=chunk)

Financial Data and Key Metrics Changes - CareCloud reported record revenue of $34.1 million for Q2 2021, a 74% increase from $14.5 million in Q2 2020, and 6% above the previous all-time high [37] - The annual revenue run rate is now $136 million, which is 29% higher than 2020 and 111% higher than 2019 [37] - The net loss for Q2 2021 was $227,000, significantly reduced from a net loss of $4.8 million in the same period last year [38] - Adjusted EBITDA for Q2 2021 was $5.7 million, representing 17% of revenue, a substantial increase from $191,000 in Q2 2020 [40] Business Line Data and Key Metrics Changes - Approximately 81% of revenue in the first half of 2021 was driven by technology assets, with 52% from clients using the full technology suite [41][42] - The company is focusing on expanding its service offerings, including revenue cycle management and robotic process automation, to existing clients [56] Market Data and Key Metrics Changes - The company is experiencing a shift towards telehealth services, with 63% of practices reporting frequent to occasional telehealth use post-COVID, down from 93% during the pandemic [66] - The company is targeting larger multi-specialty hospital groups and specialties with higher average revenue per claim, such as orthopedics [60] Company Strategy and Development Direction - CareCloud is focused on integrating and cross-selling acquired assets while driving organic growth [7] - The recent acquisition of medSR aims to accelerate growth in the hospital market, which has not been a significant focus previously [18][19] - The company plans to leverage partnerships with existing EHR vendors rather than compete directly against them [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued strong momentum in the second half of 2021, raising full-year revenue guidance to $135 to $138 million [46] - The company anticipates its seventh consecutive year of annual revenue growth of 25% or more [47] - Management noted that the operating environment is returning to pre-COVID levels, with a mix of telehealth services continuing to be utilized [64] Other Important Information - The company has increased its investment in sales and marketing significantly, from $1.5 million in 2019 to $6.6 million in 2020, with plans for a further 30% to 40% increase [25] - Cash flow from operations for Q2 2021 was approximately $1.1 million, but would have been $5.1 million without a one-time payment related to a previous acquisition [45] Q&A Session Summary Question: Can you discuss the commercial organization and sales pipeline? - Management indicated steady sales and upsell activities, with optimism about increasing overall sales bookings for the year [52][53] Question: How normalized is the operating environment regarding COVID? - Management noted that patient volumes are almost back to pre-COVID levels, with a significant increase in telehealth utilization during the pandemic [64][66] Question: What is the impact of the recent acquisition of medSR? - The acquisition is expected to enhance capabilities in the hospital market, with a focus on cross-selling revenue cycle management services [19][84] Question: How is CareCloud addressing cybersecurity concerns? - The company has contracted an external security firm to monitor network traffic and ensure compliance with industry standards [88] Question: What challenges exist in accessing decision-makers in the hospital market? - Management acknowledged the difficulty in reaching decision-makers but emphasized the importance of leveraging established relationships through the medSR acquisition [21][100]

0 Q2 2021 Results Nasdaq Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. 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 ...

Company Operations - The company reported that it provides services to over 40,000 providers across approximately 2,600 independent medical practices and hospitals, representing 80 specialties in 50 states[174]. - Offshore operations in Pakistan and Sri Lanka accounted for approximately 11% of total expenses for the six months ended June 30, 2021, with personnel-related costs making up about 80% of those expenses[180]. - The company leverages its proprietary software and a team of approximately 700 U.S. health industry experts, supported by 3,300 offshore team members, to maintain competitive pricing[173]. - The company continues to expand its telehealth operations as an alternative to office visits, although not all physicians are utilizing this service to the same extent[165]. - The company served over 40,000 providers and approximately 2,600 independent medical practices and hospitals as of June 30, 2021[193]. Acquisitions - The company acquired CareCloud Corporation for $11.9 million in cash and assumed a working capital deficiency of approximately $5.1 million[177]. - The company purchased Meridian Billing Management for $11.9 million in cash and issued 200,000 shares of Series A Preferred Stock, along with warrants for 2,250,000 shares of common stock[178]. - The total consideration for the acquisition of MedMatica was $10 million in cash, with an additional earn-out of up to $8 million based on EBITDA and revenue targets[179]. - Revenue for the three months ended June 30, 2021, included approximately $21.3 million from customers acquired in the medSR, CCH, and Meridian acquisitions[217]. Financial Performance - Net revenue for Q2 2021 was $34,065,000, a 74% increase from $19,579,000 in Q2 2020[186]. - Adjusted EBITDA for Q2 2021 was $5,656,000, compared to $191,000 in Q2 2020, reflecting significant operational improvement[186]. - Adjusted operating income for Q2 2021 was $4,644,000, with an adjusted operating margin of 13.6%, compared to a loss of $165,000 and a margin of -0.8% in Q2 2020[187]. - GAAP net loss for Q2 2021 was $(227,000), significantly improved from $(4,792,000) in Q2 2020[186]. - The company reported a non-GAAP adjusted net income of $4,540,000 for Q2 2021, compared to a loss of $(351,000) in Q2 2020[190]. - Subscription-based technology-enabled business solutions accounted for approximately 80% of revenues in Q2 2021, down from 83% in Q2 2020[194]. - Medical practice management services generated approximately 8% of revenue in Q2 2021, down from 12% in Q2 2020[195]. Expenses and Costs - Direct operating costs for the three months ended June 30, 2021, were $20.5 million, up 64% from $12.6 million in the same period of 2020[218]. - Selling and marketing expenses increased by 36% to $2.2 million for the three months ended June 30, 2021, compared to $1.6 million in the same period of 2020[219]. - General and administrative expenses rose by 16% to $6.3 million for the three months ended June 30, 2021, compared to $5.4 million in the same period of 2020[220]. - Research and development expenses primarily consist of personnel-related costs and third-party contractor costs, reflecting the company's commitment to innovation[198]. - Research and development expenses decreased by 16% to $1.8 million for the three months ended June 30, 2021, compared to $2.1 million in the same period of 2020[221]. - Depreciation expense increased by 85% to $533,000 for the three months ended June 30, 2021, compared to $288,000 in the same period of 2020[222]. - Amortization expense for the three months ended June 30, 2021, was $2.6 million, a 23% increase from $2.1 million in the same period of 2020[224]. - The company incurred impairment and unoccupied lease charges of $223,000 for the three months ended June 30, 2021, compared to $63,000 in the same period of 2020, reflecting a 254% increase[218]. Cash Flow and Financing - Positive cash flow from operations was approximately $1.1 million for the three months and $2.1 million for the six months ended June 30, 2021[232]. - Capital expenditures were $1.5 million for the six months ended June 30, 2021, compared to $817,000 for the same period in 2020[240]. - Cash provided by financing activities was $3.6 million for the six months ended June 30, 2021, compared to $23.1 million for the same period in 2020[241]. - The net cash provided by operating activities increased by $5,009,000 or 171% for the six months ended June 30, 2021 compared to the same period in 2020[235]. - The net change in operating assets and liabilities was $6.9 million for the six months ended June 30, 2021[238]. - The company incurred approximately $4.2 million in cash to resolve a civil investigation related to a subsidiary acquired in 2020[236]. Tax and Interest - Interest income decreased by $2,000 or 50% to $2,000 for the three months ended June 30, 2021, and by $36,000 or 86% to $6,000 for the six months ended June 30, 2021 compared to the same periods in 2020[226]. - Interest expense decreased by $31,000 or 21% to $115,000 for the three months ended June 30, 2021, and by $81,000 or 31% to $183,000 for the six months ended June 30, 2021 compared to the same periods in 2020[227]. - Other income (expense) - net was $205,000 for the three months ended June 30, 2021, compared to a loss of $114,000 for the same period in 2020, representing a change of $319,000 or 280%[228]. - The provision for income taxes was $213,000 for the three months ended June 30, 2021, compared to a benefit of $74,000 for the same period in 2020[229]. Future Outlook - The company forecasts a return to profitability despite historical losses and has recorded a valuation allowance against all deferred tax assets as of June 30, 2021[204]. - The COVID-19 pandemic did not materially adversely affect the company's financial results during the six months ended June 30, 2021, but ongoing impacts are uncertain[165].

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]