CareCloud, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparative period is fiscal 2022. The filing also reports fourth-quarter results. CareCloud provides healthcare IT, revenue-cycle management, software, professional services, and medical-practice management.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $117.1 million | $138.8 million |
| Operating income (loss) | $(47.1) million | $6.6 million |
| GAAP net income (loss) | $(48.7) million | $5.4 million |
| Adjusted EBITDA (non-GAAP) | $15.4 million | $22.2 million |
| Adjusted operating margin (non-GAAP) | 5.1% | 12.0% |
| Cash from operating activities | $15.5 million | $21.2 million |
| Cash at year-end | $3.3 million | $12.3 million |
| Working capital | $(57,000) | $12.3 million |
Revenue fell 16%, including a $9.5 million decline in project-based professional services and about $9.0 million of lower revenue from two acquired customer accounts transitioning to their acquirers’ systems. Direct operating costs declined 16%; selling and marketing declined 1%, general and administrative costs declined 10%, and research and development rose 8%. Higher amortization and $42.0 million of goodwill impairment contributed to the GAAP operating loss. The impairment comprised approximately $2.0 million from the annual test and $40.0 million following a December triggering event.
Fourth-quarter 2023 revenue was $28.4 million, versus $32.5 million in fourth-quarter 2022. Fourth-quarter net loss was $43.7 million, principally reflecting the $42.0 million goodwill impairment; adjusted EBITDA was $4.1 million, compared with $5.7 million.
Investing activities used $11.6 million, including $8.6 million of capitalized software spending. Financing activities used $13.3 million. At year-end, total liabilities were $36.1 million and shareholders’ equity was $41.7 million. The company had $10.0 million drawn on its revolving credit line, plus approximately $329,000 of vehicle and insurance financing notes. The credit line’s borrowing base left approximately $4.6 million available at year-end; the facility is secured by domestic assets and 65% of shares in offshore subsidiaries.
Material changes and management outlook
- Preferred-stock cash dividends were suspended in December 2023. The suspension saves approximately $1.3 million per month; cumulative dividends continue to accrue in arrears, subject to the terms described in the filing. The suspension also ended the company’s common-stock and Series B preferred-stock ATM facilities.
- Management reported substantial doubt about the company’s ability to continue as a going concern, citing the annual net loss, low cash, negative working capital, and debt. Management believes cost controls and restructuring alleviate that doubt for at least the next 12 months, but acknowledges there is no assurance the plan will succeed.
- A restructuring plan begun in 2023 included $645,000 of costs in 2023, primarily severance, with approximately $250,000 of additional restructuring costs expected in 2024. Management anticipates further headcount reductions and cost savings; it estimates approximately $10 million of annualized free-cash-flow improvement, including about $5 million of annualized payroll savings. No specific revenue or earnings guidance is provided.
- Revenue renewal rate for RCM clients declined to 91% in 2023 from 98% in 2022. The company served approximately 40,000 providers and 2,600 practices, based partly on estimates.
- Management said it was in compliance with SVB loan covenants at December 31, 2023. The credit agreement’s amended terms were scheduled to expire March 31, 2024, after which the facility would revert to prior terms; monitor subsequent disclosures for changes or covenant compliance.
Risks, contingencies, and unusual items
- Operations depend heavily on offshore teams, predominantly in Pakistan, exposing CareCloud to political, social, infrastructure, currency, regulatory, and climate-related disruption risks.
- Healthcare regulation, privacy and cybersecurity, EHR certification, interoperability, AI use, competition, customer retention, and integration of acquired businesses are material risks. The company reported no cybersecurity incident with a material adverse impact as of the filing date; it reported ISO 27001 compliance and a 2023 SOC 2 Type 2 review.
- The $42.0 million goodwill impairment is a significant non-cash charge and reflects lower estimated fair value of the Healthcare IT reporting unit. The auditor identified goodwill impairment and going-concern analysis as critical audit matters.
- An arbitration award to Ramapo Anesthesiologists was $117,000; CareCloud’s share was approximately $32,000, with insurance expected to cover the balance. The company recorded its portion at year-end and reported payment in first-quarter 2024. Management said other proceedings were not expected to have a material adverse effect.
- Related-party arrangements include leases from Executive Chairman Mahmud Haq and consulting agreements with director-affiliated entities. The filing describes these arrangements and related payments; investors may wish to review their terms and governance oversight.
Important facts for investors to verify
- Subsequent cash, revenue, cost savings, and liquidity against management’s going-concern forecasts, including whether the cost-reduction plan was completed as expected.
- Current SVB facility terms, borrowing availability, covenant requirements, and compliance after the March 31, 2024 amendment expiry.
- Preferred-dividend arrears, the board’s reinstatement decision, and any restrictions on paying dividends or raising capital.
- Customer retention and replacement of revenue lost from the two transitioning accounts; confirm actual 2024 revenue from those customers against the approximately $300,000 estimate.
- Potential additional goodwill impairment and the assumptions used in valuing the Healthcare IT reporting unit.