CareCloud(US:CCLD)2021-11-03 16:00PART I. FINANCIAL INFORMATION 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 This section presents the unaudited condensed consolidated financial statements, highlighting significant revenue growth and improved net income driven by acquisitions Condensed Consolidated Balance Sheets 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 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 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 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 operations30 - 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 services4142 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 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 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 acquisitions218 - 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 technology222 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 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 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, 2021234240 - During the first quarter of 2021, the exercise of 858,000 warrants provided net proceeds of approximately $6.4 million236 - The company's credit line with Silicon Valley Bank (SVB) was increased from $10 million to $20 million and extended through October 202380 Item 3. Quantitative and Qualitative Disclosures about Market Risk 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 item248 Item 4. Controls and Procedures 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, 2021251 - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter252 PART II. OTHER INFORMATION This section provides details on legal proceedings, risk factors, equity sales, and exhibits filed with the report Item 1. Legal Proceedings 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 - RPRWC's claimed damages have fluctuated, most recently estimated at approximately $11 million plus costs, which MAC intends to vigorously defend against98 Item 1A. Risk Factors 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 risks257 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - Not applicable258 Item 6. Exhibits 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