CARECLOUD(CCLDP) - 2025 Q2 - Quarterly Report

Forward-Looking Statements The report contains forward-looking statements regarding future financial performance, operating expenditures, growth, profitability, business outlook, increased sales and marketing expenses, and expected results from acquisitions. These statements are subject to substantial known and unknown risks and uncertainties - The report contains forward-looking statements regarding future financial performance, operating expenditures, growth, profitability, business outlook, increased sales and marketing expenses, and expected results from acquisitions. These statements are subject to substantial known and unknown risks and uncertainties[12][13] - Key risks include managing growth and integrating acquired businesses, retaining clients and revenue, maintaining offshore operations (Pakistan, Sri Lanka) for cost efficiency, keeping pace with the rapidly changing healthcare industry, ensuring compliance with regulations, protecting confidential information, developing new technologies, attracting and retaining key personnel, realizing cost savings from restructuring, complying with credit agreement covenants, ability to pay preferred stock dividends, incorporating AI faster than competitors, and competing with larger companies[13][16] PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining the company's financial position, performance, and accounting policies for the periods ended June 30, 2025, and 2024 Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining the company's financial position, performance, and accounting policies for the periods ended June 30, 2025, and 2024 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash | $10,440 | $5,145 | | Accounts receivable - net | 13,563 | 12,774 | | Total current assets | 31,090 | 24,800 | | TOTAL ASSETS | $75,244 | $71,614 | | LIABILITIES (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Accounts payable | $4,215 | $4,565 | | Accrued compensation | 3,324 | 1,817 | | Dividend payable | 714 | 5,438 | | Total current liabilities | 16,240 | 19,580 | | Total liabilities | 19,168 | 21,840 | | SHAREHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Total shareholders' equity | $56,076 | $49,774 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $75,244 | $71,614 | - Total assets increased by $3,630 thousand (5.07%) from December 31, 2024, to June 30, 2025. Total liabilities decreased by $2,672 thousand (12.23%) in the same period, while total shareholders' equity increased by $6,302 thousand (12.66%)[18] Condensed Consolidated Statements of Operations This statement reports the company's financial performance over specific periods, detailing revenues, expenses, and net income | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET REVENUE | $27,377 | $28,090 | $55,009 | $54,052 | | Total operating expenses | 24,381 | 25,819 | 49,994 | 51,652 | | OPERATING INCOME | 2,996 | 2,271 | 5,015 | 2,400 | | INCOME BEFORE PROVISION FOR INCOME TAXES | 2,944 | 1,713 | 4,933 | 1,511 | | NET INCOME | $2,902 | $1,674 | $4,850 | $1,433 | | Preferred stock dividend | 1,365 | 3,923 | 4,176 | 5,235 | | NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $1,537 | $(2,249) | $674 | $(3,802) | | Net income (loss) per common share: basic and diluted | $0.04 | $(0.14) | $0.02 | $(0.24) | - Net revenue for the three months ended June 30, 2025, decreased by 3% YoY, while for the six months, it increased by 2% YoY. Operating income significantly increased for both periods, with a 31.9% increase for the three months and a 108.96% increase for the six months YoY. Net income attributable to common shareholders turned positive for both periods in 2025, compared to losses in 2024[20] Condensed Consolidated Statements of Comprehensive Income This statement presents the total change in equity from non-owner sources, including net income and other comprehensive income items | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET INCOME | $2,902 | $1,674 | $4,850 | $1,433 | | Foreign currency translation adjustment | (101) | (68) | (159) | (40) | | COMPREHENSIVE INCOME | $2,801 | $1,606 | $4,691 | $1,393 | - Comprehensive income increased significantly, by 74.41% for the three months and 236.75% for the six months ended June 30, 2025, compared to the same periods in 2024, primarily driven by higher net income[23] Condensed Consolidated Statements of Shareholders' Equity This statement details changes in the equity section of the balance sheet, including net income, dividends, and stock transactions - Total shareholders' equity increased from $49,774 thousand at January 1, 2025, to $56,076 thousand at June 30, 2025. This increase was primarily driven by net income of $4,850 thousand and the conversion of preferred stock and accrued dividends to common stock, adding $2,435 thousand to additional paid-in capital[26] - For the six months ended June 30, 2025, the Company declared six months of dividends and paid five months of dividends on the Preferred Shares. No dividends were declared or paid during the six months ended June 30, 2024[27][28] Condensed Consolidated Statements of Cash Flows This statement reports the cash generated and used by the company across operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | OPERATING ACTIVITIES: Net income | $4,850 | $1,433 | | Net cash provided by operating activities | 12,521 | 8,345 | | INVESTING ACTIVITIES: Purchases of property and equipment | (1,786) | (425) | | Capitalized software and other intangible assets | (1,677) | (3,046) | | Net cash used in investing activities | (3,503) | (3,471) | | FINANCING ACTIVITIES: Preferred stock dividends paid | (3,317) | - | | Repayment of line of credit | - | (5,000) | | Net cash used in financing activities | (3,694) | (5,512) | | NET INCREASE (DECREASE) IN CASH | 5,295 | (714) | | CASH - End of the period | $10,440 | $2,617 | - Net cash provided by operating activities increased by $4,176 thousand (50%) for the six months ended June 30, 2025, compared to the same period in 2024. Net cash used in financing activities decreased by $1,818 thousand (33%) due to no line of credit repayments in 2025, despite preferred stock dividend payments[31] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. ORGANIZATION AND BUSINESS This note describes CareCloud, Inc.'s core business as a healthcare IT provider and its operational structure, including offshore locations - CareCloud, Inc. is a leading provider of technology-enabled services and generative AI solutions for healthcare providers, offering revenue cycle management, cloud-based software, digital health services, healthcare IT professional services & staffing, and medical practice management services[33][34] - The company maintains corporate offices in New Jersey and client support teams throughout the U.S., with offshore offices in Pakistan, Azad Jammu and Kashmir, and Sri Lanka[35] 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the accounting principles used for the unaudited financial statements and discusses recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim reporting, requiring estimates and assumptions. No changes to significant accounting policies occurred during the six months ended June 30, 2025[36][38] - Recent accounting pronouncements include ASU 2023-01 (Leases), ASU 2023-06 (Disclosure Improvements), ASU 2023-07 (Segment Reporting, adopted by the Company), ASU 2023-09 (Income Taxes), ASU 2024-02 (Codification Improvements), ASU 2024-03 (Expense Disaggregation Disclosures), and ASU 2025-01 (Clarifying Effective Date for ASU 2024-03). Most are not expected to have a material impact on financial statements, with some affecting disclosures[39][40][41][42][43][44][45][46] 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS This note details the composition and changes in prepaid expenses and other current assets, including prepayments to vendors and prepaid credit card balances | (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Prepayments to vendors | $1,567 | $1,099 | | Prepaid credit card | 545 | - | | Prepaid insurance | 167 | 494 | | Prepaid commissions | 183 | 243 | | Other | 131 | 121 | | Total | $2,593 | $1,957 | - Prepaid expenses and other current assets increased by $636 thousand (32.5%) from December 31, 2024, to June 30, 2025, primarily due to an increase in prepayments to vendors and the introduction of a prepaid credit card balance[47] 4. ACQUISITION This note describes the acquisition of RevNu Medical Management, including the consideration, purchase price allocation, and impact on revenue - On April 1, 2025, CareCloud acquired certain assets of RevNu Medical Management, a provider of audiology and hearing aid billing/revenue cycle IT solutions. The acquisition was accounted for as a business combination[48][49] - Total consideration for the RevNu acquisition was approximately $649 thousand, consisting of contingent consideration based on future revenue performance. The preliminary purchase price allocation included $14 thousand in contract assets, $629 thousand in customer relationships, and $6 thousand in goodwill[50][51] - Revenue earned from RevNu clients was approximately $333 thousand for the three and six months ended June 30, 2025. The acquisition expanded CareCloud's customer base and presence in the healthcare IT industry[52][53] 5. GOODWILL AND INTANGIBLE ASSETS-NET This note details the changes in goodwill and intangible assets, including the impact of acquisitions and amortization expense - Goodwill increased by $6 thousand to $19,192 thousand at June 30, 2025, primarily from the RevNu acquisition, with most allocated to the Healthcare IT segment[56][57] | Intangible Assets – Net (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Contracts and relationships acquired | $48,355 | $47,597 | | Capitalized software | 36,660 | 35,108 | | Total intangible assets | 94,668 | 92,358 | | Less: Accumulated amortization | 79,156 | 73,660 | | Intangible assets - net | $15,512 | $18,698 | - Amortization expense was approximately $2,800 thousand for the three months and $5,600 thousand for the six months ended June 30, 2025, a decrease of 13% and 16% respectively, compared to 2024, due to previously acquired customer relationships becoming fully amortized[58][183] 6. NET INCOME (LOSS) PER COMMON SHARE This note presents the calculation of basic and diluted net income (loss) per common share, highlighting the impact of preferred stock dividends | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common shareholders | $1,537 | $(2,249) | $674 | $(3,802) | | Weighted-average common shares | 42,321,629 | 16,132,420 | 33,118,912 | 16,073,364 | | Net income (loss) per common share: basic and diluted | $0.04 | $(0.14) | $0.02 | $(0.24) | - Net income per common share improved significantly, turning positive in 2025 ($0.04 for Q2, $0.02 for H1) compared to losses in 2024 ($0.14 for Q2, $0.24 for H1). This includes preferred stock dividends of $1,400 thousand (Q2 2025) and $4,200 thousand (H1 2025)[60] 7. ACCRUED EXPENSES AND DEBT This note details accrued expenses, the company's revolving line of credit, and significant reductions in interest expense | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Accrued expenses | $3,034 | $3,528 | | Payable to managed practices | 1,593 | 1,116 | | Taxes and other | 282 | 307 | | Total | $4,909 | $4,951 | - The Company has a revolving line of credit with Silicon Valley Bank, reduced to $10,000 thousand in October 2024, with an unused borrowing base of approximately $9,500 thousand at June 30, 2025. No borrowings were outstanding under the facility at June 30, 2025, compared to $5,000 thousand outstanding at June 30, 2024[62][195] - Interest expense on the line of credit decreased significantly to approximately $13 thousand (Q2 2025) and $25 thousand (H1 2025), from $616 thousand (Q2 2024) and $906 thousand (H1 2024), due to no borrowings in 2025. The Company was in compliance with all covenants at June 30, 2025[63][64] 8. LEASES This note provides details on lease expenses, right-of-use assets, and lease liabilities, including cash payments and sublease income | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $522 | $620 | $1,098 | $1,257 | | Short-term lease cost | - | - | 5 | 4 | | Variable lease cost | 4 | 7 | 11 | 12 | | Total - net lease cost | $526 | $627 | $1,114 | $1,273 | | Operating Leases (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Operating lease ROU assets, net | $3,058 | $3,133 | | Current operating lease liabilities | $1,294 | $1,287 | | Non-current operating lease liabilities | 1,785 | 1,847 | | Total operating lease liabilities | $3,079 | $3,134 | | Weighted average remaining lease term (in years) | 4.8 | 5.0 | | Weighted average discount rate | 13.8% | 14.2% | - Cash paid for operating leases was $1,082 thousand for the six months ended June 30, 2025, a decrease from $1,277 thousand in the prior year. Sublease income decreased from $56 thousand (H1 2024) to $13 thousand (H1 2025)[72] 9. COMMITMENTS AND CONTINGENCIES This note outlines various legal settlements and management's assessment of their potential impact on the company's financial position - The Company settled several legal disputes: a $117 thousand arbitration award to Ramapo Anesthesiologists (Company's portion $32 thousand), a $200 thousand settlement for a former customer's mishandling claim, a $316 thousand settlement for transition-related costs from a prior acquisition, a $100 thousand settlement for a Massachusetts State Court complaint, and a $29 thousand settlement for a New York Supreme Court complaint[73][74][75][76][77] - Management believes no current legal proceedings would individually or collectively have a material adverse effect on the company's business, consolidated results of operations, financial position, or cash flows[78] 10. RELATED PARTIES This note discloses transactions with related parties, including sales, rent expenses, and consulting agreements with directors and executives - Sales to a related party (Executive Chairman's wife) were approximately $31 thousand (Q2 2025) and $51 thousand (H1 2025), with an accounts receivable balance of $9 thousand at June 30, 2025[79] - Related party rent expense from the Executive Chairman for corporate offices and temporary housing was approximately $71 thousand (Q2 2025) and $142 thousand (H1 2025). The Company spent $838 thousand (H1 2025) to upgrade these leased facilities[80] - Consulting agreements with entities owned by a former non-independent director (who became Co-CEO) and a Board member were in place, involving preferred stock issuance and monthly fees for services like investor relations and acquisition assistance[82][83] 11. RESTRUCTURING COSTS This note details the workforce reduction initiative in the Healthcare IT segment, including estimated and incurred restructuring expenses - The Company committed to workforce reduction in the Healthcare IT segment in October 2023 to align resources and improve profitability. Total estimated expenses are $1,500 thousand, with $137 thousand incurred during the six months ended June 30, 2025[85][86] | Restructuring Costs (in thousands) | Six Months Ended June 30, 2025 | | :--------------------------------- | :----------------------------- | | Balance as of January 1, 2025 | $- | | Additions | 137 | | Payments and other adjustments | (137) | | Balance as of June 30, 2025 | $- | 12. SHAREHOLDERS' EQUITY This note discusses changes in preferred stock dividends, common share authorization, and the conversion of preferred stock to common stock - The Board suspended monthly cash dividends for Series A and B Preferred Stock in December 2023, resuming payments in February 2025. The Series A Preferred Stock dividend rate was amended from 11% to 8.75% in September 2024[88][89][91] - In January 2025, authorized common shares increased from 35,000 thousand to 85,000 thousand. On March 6, 2025, the Board converted 3,541,701 shares of Series A Preferred Stock into common stock, reducing monthly cash dividends to approximately $455 thousand[90][92] - As of June 30, 2025, total undeclared dividends amounted to approximately $7,100 thousand, representing accumulated but undeclared dividends due to preferred shareholders[93] 13. REVENUE This note details revenue recognition policies and disaggregates revenue by service type, along with changes in contract assets and deferred revenue - Revenue is recognized in accordance with ASC 606, primarily from technology-enabled business solutions (revenue cycle management, SaaS), professional services, printing and mailing, group purchasing, and medical practice management services[94][97] | Revenue Disaggregation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Healthcare IT: Technology-enabled business solutions | $18,991 | $19,034 | $36,696 | $36,317 | | Healthcare IT: Professional services | 4,076 | 4,491 | 9,967 | 8,913 | | Medical Practice Management: Medical practice management services | 3,300 | 3,510 | 6,290 | 6,751 | | Total | $27,377 | $28,090 | $55,009 | $54,052 | - The contract asset decreased by $411 thousand during the six months ended June 30, 2025, to $3,955 thousand, while deferred revenue (current and long-term) increased from $1,599 thousand to $1,863 thousand. Deferred commissions were $257 thousand at June 30, 2025[119][120] 14. STOCK-BASED COMPENSATION This note provides information on shares available for grant under the equity incentive plan, RSU transactions, and stock-based compensation expense - As of June 30, 2025, 499,683 shares of common stock and 16,000 shares of Series B Preferred Stock were available for grant under the Equity Incentive Plan[124] | RSU Transactions (Shares) | Common Stock | Series A Preferred Stock | Series B Preferred Stock | | :------------------------ | :----------- | :----------------------- | :----------------------- | | Outstanding and unvested at January 1, 2025 | 242,500 | - | 19,199 | | Vested | (89,700) | - | - | | Outstanding and unvested at June 30, 2025 | 152,800 | - | 19,199 | | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $111 | $268 | $216 | $(428) | | Total stock-based compensation expense (benefit) | $111 | $265 | $219 | $(443) | 15. INCOME TAXES This note details income tax expense, the valuation allowance against deferred tax assets, and the expected impact of recent tax legislation - Income tax expense for the three months ended June 30, 2025, was $42 thousand (state $30 thousand, foreign $12 thousand), and for the six months, $83 thousand (state $60 thousand, foreign $23 thousand). There was no deferred income tax for these periods[130] - A valuation allowance has been recorded against all federal and state deferred tax assets at June 30, 2025, and December 31, 2024, due to historical losses and uncertainty regarding sufficient future U.S. taxable income[133] - The recently signed One Big Beautiful Bill Act (OBBBA) is not expected to have a material impact on the Company's consolidated financial statements[134] 16. FAIR VALUE OF FINANCIAL INSTRUMENTS This note categorizes fair value measurements into Level 1, 2, and 3, identifying notes payable as Level 2 and contingent consideration as Level 3 - The Company categorizes fair value measurements into Level 1 (unadjusted quoted prices), Level 2 (quoted prices for similar instruments), and Level 3 (significant unobservable inputs). Notes payable are Level 2, and contingent consideration is a Level 3 instrument[135][136][137] | Contingent Consideration (in thousands) | Six Months Ended June 30, 2025 | | :------------------------------------ | :----------------------------- | | Balance - January 1 | $- | | Acquisitions | 756 | | Balance - June 30 | $756 | 17. SEGMENT REPORTING This note defines CareCloud's two reportable segments, Healthcare IT and Medical Practice Management, and presents their financial performance - CareCloud operates in two reportable segments: Healthcare IT (revenue cycle management, SaaS solutions) and Medical Practice Management (management of three medical practices). The CODM evaluates performance based on revenue, operating expenses, and operating income (loss)[139][140][141] | Six Months Ended June 30, 2025 (in thousands) | Healthcare IT | Medical Practice Management | Total | | :-------------------------------------------- | :------------ | :-------------------------- | :---- | | Net revenue | $48,719 | $6,290 | $55,009 | | Segment operating income (loss) | $8,417 | $(378) | $8,039 | | Three Months Ended June 30, 2025 (in thousands) | Healthcare IT | Medical Practice Management | Total | | :--------------------------------------------- | :------------ | :-------------------------- | :---- | | Net revenue | $24,077 | $3,300 | $27,377 | | Segment operating income (loss) | $4,518 | $(76) | $4,442 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on CareCloud's financial condition and results of operations, including an overview of the business, key performance measures, detailed analysis of revenue and expenses, liquidity, and capital resources for the three and six months ended June 30, 2025, and 2024 Financial Risks This section highlights the financial risks associated with maintaining cash balances in excess of FDIC insurance limits and in foreign banks without deposit insurance - The Company maintains cash balances at Silicon Valley Bank (SVB) in excess of FDIC insurance limits and approximately $1,200 thousand in foreign banks (Pakistan and Sri Lanka) without deposit insurance, posing a risk from banking system volatility[147] Overview This section provides a general description of CareCloud's business as a healthcare IT company, its AI solutions, and its operational model leveraging an offshore workforce - CareCloud is a healthcare IT company providing technology-enabled revenue cycle management and cloud-based solutions (EHR, PM, AI, PXM, telehealth) to healthcare providers. Its AI solutions, branded 'cirrusAI', enhance clinical decision-making, streamline workflows, and optimize revenue management[148][149][151] - The company leverages a proprietary software platform and a highly educated, specialized offshore workforce (approximately 3,600 team members in Pakistan and Sri Lanka) to offer competitive pricing, with offshore operations accounting for 18% of total expenses for the six months ended June 30, 2025[150][152] Key Performance Measures This section discusses management's use of non-GAAP financial measures like Adjusted EBITDA, Adjusted Operating Income, and Adjusted Net Income to evaluate performance - Management uses non-GAAP financial measures like Adjusted EBITDA, Adjusted Operating Income, and Adjusted Net Income to assess performance, providing an alternative view to GAAP measures[153][155] | Adjusted EBITDA (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $6,529 | $6,389 | $12,124 | $10,076 | | Non-GAAP Adjusted Operating Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-GAAP adjusted operating income | $3,334 | $3,249 | $5,676 | $3,844 | | Non-GAAP adjusted operating margin | 12.2% | 11.6% | 10.3% | 7.1% | | Non-GAAP Adjusted Net Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-GAAP adjusted net income | $3,281 | $2,958 | $5,571 | $3,178 | | Non-GAAP adjusted earnings per share | $0.07 | $0.18 | $0.13 | $0.20 | Sources of Revenue This section breaks down the company's revenue by source, primarily subscription-based technology-enabled business solutions and medical practice management services - The primary revenue source is subscription-based technology-enabled business solutions (Healthcare IT segment), accounting for approximately 69% (Q2 2025) and 67% (H1 2025) of total revenue. Other healthcare IT services contributed 19% (Q2 2025) and 22% (H1 2025)[163] - Medical practice management services generated approximately 12% of total revenue for both the three and six months ended June 30, 2025 and 2024[164] Operating Expenses This section defines the components of operating expenses, including direct operating costs, selling and marketing, general and administrative, R&D, depreciation, amortization, and restructuring costs - Direct operating costs include salaries, benefits, claims processing, and costs to operate managed practices. Selling and marketing expenses cover compensation, commissions, travel, and advertising. General and administrative expenses include administrative personnel costs, facility leases, insurance, software licenses, and professional fees[165][166] - Research and development expenses primarily consist of personnel, software, and third-party contractor costs. Depreciation is straight-line over 3-5 years, while amortization is accelerated or straight-line over 3-12 years for intangible assets. Restructuring costs are mainly severance and separation costs[167][168][169] Interest and Other Income (Expense) - net This section explains the sources of interest income and expense, along with foreign currency transaction gains or losses - Interest income is from temporary cash investments and late fees. Interest expense is from the line of credit and term loans. Other income (expense) - net primarily reflects foreign currency transaction gains or losses from revaluing intercompany accounts[170] Income Taxes This section describes the estimation of income taxes and the application of a valuation allowance against deferred tax assets due to historical losses - Income taxes are estimated based on operations in each jurisdiction. A valuation allowance is recorded against all deferred tax assets due to historical losses and uncertainty regarding sufficient future U.S. taxable income[171] Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting policies and notes the decrease in the carrying amount of internally-developed capitalized software - No material changes occurred in critical accounting policies and estimates from those described in the Annual Report on Form 10-K/A. The carrying amount of internally-developed capitalized software decreased to $8,700 thousand at June 30, 2025, from $12,300 thousand at December 31, 2024, as amortization exceeded new capitalization[172][173][174] Results of Operations This section provides a detailed comparative analysis of the company's revenues and expenses for the three and six months ended June 30, 2025, and 2024 | Consolidated Results as % of Total Revenue | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | 100.0% | 100.0% | 100.0% | 100.0% | | Total operating expenses | 89.1% | 91.9% | 90.9% | 95.5% | | Operating income | 10.9% | 8.1% | 9.1% | 4.5% | | Net income | 10.6% | 6.1% | 8.8% | 2.8% | | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change Amount | Change Percent | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change Percent | | :------------- | :------------------------------- | :------------------------------- | :------------ | :------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Net revenue | $27,377 | $28,090 | $(713) | (3%) | $55,009 | $54,052 | $957 | 2% | | Direct operating costs | $14,480 | $15,242 | $(762) | (5%) | $29,944 | $30,419 | $(475) | (2%) | | Selling and marketing | 1,118 | 1,664 | (546) | (33%) | 2,249 | 3,434 | (1,185) | (35%) | | General and administrative | 4,358 | 4,028 | 330 | 8% | 8,690 | 7,749 | 941 | 12% | | Research and development | 1,020 | 1,055 | (35) | (3%) | 2,255 | 1,968 | 287 | 15% | | Depreciation | 594 | 503 | 91 | 18% | 1,155 | 1,006 | 149 | 15% | | Amortization | 2,788 | 3,211 | (423) | (13%) | 5,564 | 6,638 | (1,074) | (16%) | | Restructuring costs | 23 | 116 | (93) | (80%) | 137 | 438 | (301) | (69%) | | Interest income | $51 | $24 | $27 | 113% | $93 | $51 | $42 | 82% | | Interest expense | (68) | (288) | (220) | (76%) | (126) | (653) | (527) | (81%) | | Other expense - net | (35) | (294) | 259 | 88% | (49) | (287) | 238 | (83%) | | Income tax provision | 42 | 39 | 3 | 8% | 83 | 78 | 5 | 6% | Liquidity and Capital Resources This section discusses the company's cash position, working capital, cash flow from operations, and management's plans to ensure sufficient liquidity for the next twelve months - As of June 30, 2025, the Company had $10,400 thousand in cash and $14,900 thousand in net working capital. Cash provided by operations was $12,500 thousand for the six months ended June 30, 2025, leading to a $5,300 thousand increase in cash[191] - Management's plan to improve liquidity includes payroll and operating expense reductions, which were substantially implemented in fiscal 2023 and 2024, and further cost reductions are expected throughout 2025. The Company expects sufficient liquidity for the next twelve months[192][193] | Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change Percent | | :------------------------ | :----------------------------- | :----------------------------- | :------------ | :------------- | | Net cash provided by operating activities | $12,521 | $8,345 | $4,176 | 50% | | Net cash used in investing activities | (3,503) | (3,471) | (32) | (1%) | | Net cash used in financing activities | (3,694) | (5,512) | 1,818 | 33% | | Net increase (decrease) in cash | $5,295 | $(714) | $6,009 | 842% | Contractual Obligations and Commitments This section briefly mentions the company's contractual obligations under its line of credit and operating leases, confirming compliance with covenants - The Company has contractual obligations under its line of credit and operating leases, and was in compliance with all covenants as of June 30, 2025. Further details are in the Annual Report on Form 10-K/A[200] Off-Balance Sheet Arrangements This section states that the company did not have any off-balance sheet arrangements during the reporting periods - As of June 30, 2025, and 2024, the Company did not have any off-balance sheet arrangements[201] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, CareCloud is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide information under this item[202] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms that management assessed the effectiveness of disclosure controls and procedures as of June 30, 2025 - Management, with the participation of Co-Chief Executive Officers and Interim Chief Financial Officer, concluded that the disclosure controls and procedures were effective as of June 30, 2025[203][205] Changes in Internal Control Over Financial Reporting This section reports no material changes in internal control over financial reporting and notes future attestation requirements - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[206] - For the year ending December 31, 2025, the Company will be required to have an attestation by its independent registered public accounting firm regarding the effectiveness of its internal controls over financial reporting and will become an accelerated filer[207] PART II. OTHER INFORMATION This section covers various other information not included in the financial statements, such as legal proceedings, risk factors, and equity security sales Item 1. Legal Proceedings This section refers to Note 9 of the Condensed Consolidated Financial Statements for a discussion of legal proceedings - Refer to Note 9, 'Commitments And Contingencies,' in the Notes to Condensed Consolidated Financial Statements for details on legal proceedings[209] Item 1A. Risk Factors This section directs readers to the Annual Report on Form 10-K/A for a comprehensive list of risk factors and highlights the specific risk associated with maintaining cash balances at financial institutions in excess of federally insured limits - Readers should consider risk factors discussed in Part I—Item 1A. 'Risk Factors' in the Annual Report on Form 10-K/A filed on April 3, 2025[210] - A specific risk highlighted is maintaining cash at financial institutions, often in balances exceeding federally insured limits, which could be adversely impacted by volatility in the banking system[211] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the Company for the reporting period - Not applicable[212] Item 3. Defaults Upon Senior Securities This section discusses the suspension and subsequent resumption of preferred stock dividends, the amendment of the Series A Preferred Stock dividend rate, and the conversion of Series A Preferred Stock, resulting in approximately $7,100 thousand in dividends in arrears - The Board suspended monthly cash dividends for Series A and B Preferred Stock starting December 15, 2023. The dividend rate on Series A Preferred Stock changed from 11.00% to 8.75% in September 2024[213] - The Company resumed monthly dividend payments in February 2025. Due to the conversion of most Series A Preferred Stock in March 2025, dividends on converted shares were settled. As of the filing date, approximately $7,100 thousand in dividends are in arrears[213] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not applicable[214] Item 5. Other Information This section reports that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[215] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including certifications and XBRL interactive data files | Exhibit Number | Exhibit Description | | :------------- | :------------------ | | 31.1 | Certification of Co-Principal Executive Officer | | 31.2 | Certification of Co-Principal Executive Officer | | 31.3 | Certification of Principal Financial Officer | | 32.1* | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.2* | Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.3* | Certification of Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS | XBRL Instance | | 104 | Cover Page Interactive Data File | Signatures This section contains the official signatures of the Company's Co-Chief Executive Officers and Interim Chief Financial Officer, certifying the filing of the report - The report is duly signed on behalf of CareCloud, Inc. by A. Hadi Chaudhry (Co-Chief Executive Officer), Stephen Snyder (Co-Chief Executive Officer), and Norman S. Roth (Interim Chief Financial Officer and Corporate Controller) on August 5, 2025[219][220]