Beacon Securities - cantechletter.com By Nick Waddell Filed under: All posts, Analysts Stock: doc CloudMD keeps “Buy” rating at Beacon Securities
Its second quarter results have been put to bed and Beacon analyst Gabriel Leung still thinks there is money to be made on CloudMD (CloudMD Stock Quote, Chart, News, Analysts, Financials TSXV:DOC)
On August 28, DOC reported its Q2, 2023 results. The company posted Adjusted EBITDA of negative $700,000 on revenue of $23.2-million, down from 26.2-million in the same period last year.
“Our performance during the second quarter focused on driving profitable growth in the near term and executing our strategic plan to reduce costs and divest margin-dilutive businesses,” CEO Karen Adams said. “With our core assets in place, we are focused on expanding our pipeline. Importantly, after the quarter, we secured a contract with a United States hospital system customer for remote patient monitoring. This provides us with a testimonial to support new large pipeline growth opportunities in a $4.4-billion addressable market and paves the way for long-term sustainable growth. The second quarter results provide confidence that we are delivering on expectations.”
Leung gave his overview of the quarter.
“Note that Q2 results exclude contributions from its RXI and VisionPros business, which are both classified as held-for-sale (i.e. included in discontinued operations),” the analyst said. “Results also do not include the EHR, PM and RCM assets of Benchmark Systems, which were divested at the end of Q2 (for US$6.3M). The y/y decline in revenues reflect a reduction in one-time mandates (i.e. COVID-19 testing), along with lower contributions from the Ontario Health COVID-19 iCBT program (as previously disclosed). The results also benefited from ~$3M of annualized cost reductions actioned in Q2 (with the full impact expected in Q3). During Q2, DOC signed contracts representing ARR of $2.3M (~$2.9M in Q1). The pipeline currently stands at $58M in ARR and does not include large opportunities such as the DOC’s recent RPM deal with a major US regional hospital system, which it believes can deliver an average of ~$3–4M in revenue per quarter after a ramp up period (possibly in H2 2024). Gross margins were 38.2%, which was up from 33.1% last year. The company anticipates gross margin improvements as revenues scale over the course of the year.”
In a research update to clients September 1, Leung maintained his “Buy” rating and one-year price target of $0.50 on DOC, implying a return of 203 per cent at the time of publication.
Leung thinks the company will post Adjusted EBITDA of negative $2.6-million on revenue of $94.2-million in fiscal 2023. He expects those numbers will improve to EBITDA of positive $2.4-million on a topline of $104.0-million the following year.