CareCloud Inc
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-21.
0001493152-24-010800
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001493152-25-010217
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 112 previous paragraphs and 106 current paragraphs.
62 unchanged; 42 reworded; 2 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 24 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
(1) Working capital-net is defined as current assets less current liabilities.
Current report
Reconciliation of net income (loss) to adjusted EBITDA
Removed paragraphs (8)
Previous report
Reconciliation of net (loss) income to adjusted EBITDA
Previous report
*Change in Contingent Consideration.*Contingent consideration represents the portion of consideration payable to the sellers of some of our acquisitions, the amount of which is based on the achievement of defined performance measures contained in the purchase agreements. Contingent consideration is adjusted to fair value at the end of each reporting period.
Previous report
Contingent Consideration:
Previous report
If a business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date. The Company adjusts the contingent consideration liability at the end of each reporting period based on fair value inputs representing changes in forecasted revenue of the acquired entities and the probability of an adjustment to the purchase price. Critical estimates include determining the forecasted revenue for certain acquisitions, probability and timing of cash collections and an appropriate discount rate. Changes in the fair value of the contingent consideration after the acquisition date are included in earnings if the contingent consideration is recorded as a liability.
Previous report
*Change in Contingent Consideration.*The change of $3.1 million for the year ended December 31, 2022 reflected the estimated decrease in the fair value of the contingent consideration from the medSR acquisition. There was no contingent consideration liability recorded at December 31, 2023 or 2022.
Previous report
In fiscal year 2023, the Company incurred a net loss of $48.7 million compared to $5.4 million of net income in fiscal year 2022, and at December 31, 2023, had cash of $3.3 million and a working capital deficit of $57,000. The decrease in cash for fiscal 2023 was $9 million compared to an increase in cash of $2 million in fiscal 2022. The Company also has $10 million drawn on its line of credit. Together, these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
Previous report
However, management has considered its plans to continue the Company as a going concern and believes substantial doubt is alleviated by focusing on cost-control. Management developed a plan that was substantially implemented during fiscal 2023 to improve liquidity in its operations through reductions in payroll and operating expenses. After the reduction is implemented and through employee attrition, the Company expects an improvement of approximately $10 million in annualized free cash flow, which represents approximately 14% of total payroll cost. This reduction will result in approximately $5 million in annualized payroll expense savings. In addition, the Company instituted certain other expense reductions. The Company also suspended its Preferred Stock dividends in December 2023 resulting in cash savings of $1.3 million per month. Additional headcount reductions occurred in early 2024. Additional cost reductions will continue throughout the year. The Company is focused on reducing costs, returning to profitability, generating positive cash flow and maintaining compliance with its debt covenants. Although there are no guarantees that the Company will be successful, it believes that such initiatives will enable it to continue as a going concern through at least the next twelve months.
Previous report
Management continues to focus on the Company’s overall profitability, including managing expenses, and to the extent possible growing revenue, and expects that these efforts will continue to enhance our liquidity and financial position. Based on management’s forecasts, the Company will have sufficient liquidity to meet its obligations as they become due for the next twelve months from the date of the financial statements issuance.
Reworded paragraphs (42)
Previous wording
Our offshore operations in Pakistan and Sri Lanka together accounted for approximately 9% and 14% of total expenses for the years ended December 31, 2023 and 2022, respectively. A significant portion of those expenses were personnel-related costs (approximately 76% and 79% of foreign costs for the years ended December 31, 2023 and 2022, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. All of the medical billing companies that we have acquired used domestic labor or subcontractors from higher cost locations to provide all or a substantial portion of their services. We are able to achieve significant cost reductions as we shift these labor costs to our offshore operations.
Current wording
Our offshore operations together accounted for approximately 15% and 9% of total expenses for the years ended December 31, 2024 and 2023, respectively. A significant portion of those expenses were personnel-related costs (approximately 75% and 76% of foreign costs for the years ended December 31, 2024 and 2023, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. All of the medical billing companies that we have acquired used domestic labor or subcontractors from higher cost locations to provide all or a substantial portion of their services. We are able to achieve significant cost reductions as we shift these labor costs to our offshore operations.
Previous wording
Adjusted EBITDA excludes the following elements which are included in GAAP net (loss) income:
Current wording
Adjusted EBITDA excludes the following elements which are included in GAAP net income (loss):
Previous wording
Adjusted operating income and adjusted operating margin exclude the following elements which are included in GAAP operating (loss) income:
Current wording
Adjusted operating income and adjusted operating margin exclude the following elements which are included in GAAP operating income (loss):
Previous wording
Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net (loss) income:
Current wording
Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net income (loss):
Previous wording
No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net (loss) income to non-GAAP adjusted net income for the years ended December 31, 2023 and 2022:
Current wording
No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net income (loss) to non-GAAP adjusted net income for the years ended December 31, 2024 and 2023:
Previous wording
The following table contains a reconciliation of net (loss) income to adjusted EBITDA by year.
Current wording
The following table contains a reconciliation of net income (loss) to adjusted EBITDA by year.
Previous wording
The following table contains a reconciliation of net (loss) income to adjusted EBITDA by quarter.
Current wording
The following table contains a reconciliation of net income (loss) to adjusted EBITDA by quarter.
Previous wording
Customer Renewal Rate: Our customer renewal rate measures the percentage of our RCM clients who utilize our technology platform who were a party to a services agreement with us on January 1 of a particular year and continued to operate and be a client on December 31 of the same year. It also includes acquired accounts, if they are a party to a services agreement with the company we acquired and are generating revenue for us, so long as the risk of client loss under the respective purchase agreement has fully shifted to us by January 1 of the particular year. Our renewal rates for 2023 and 2022 were 91% and 98% of the number of practices that renewed, respectively. These renewal percentages are not indicative of the loss of revenue due to non-renewal.
Current wording
Customer Renewal Rate: Our customer renewal rate measures the percentage of our RCM clients who utilize our technology platform who were a party to a services agreement with us on January 1 of a particular year and continued to operate and be a client on December 31 of the same year. It also includes acquired accounts, if they are a party to a services agreement with the company we acquired and are generating revenue for us, so long as the risk of client loss under the respective purchase agreement has fully shifted to us by January 1 of the particular year. Our renewal rates for 2024 and 2023 were 95% and 91% of the number of practices that renewed, respectively. These renewal percentages are not indicative of the loss of revenue due to non-renewal.
Previous wording
*Revenue:*We primarily derive our on-going revenues from technology-enabled business solutions, reported in our Healthcare IT segment, which typically includes revenue cycle management and is billed as a percentage of payments collected by our customers. This fee includes the ability to use our EHR, practice management systems and other software as part of the bundled fee. These solutions accounted for approximately 65% and 63% of our revenues during the years ended December 31, 2023 and 2022, respectively. This includes customers utilizing our proprietary product suites, as well as customers from acquisitions of RCM companies which we are servicing utilizing third-party software. Key drivers of our revenue include growth in the number of providers we are servicing, the number of patients served by those providers, and collections by those providers. It also includes SaaS fees, for clients not utilizing revenue cycle management services. When clients utilize our revenue cycle management services, basic SaaS services are included at no additional charge. Revenue is also generated from coding, credentialing, indexing, transcription and other ancillary services.
Current wording
*Revenue:*We primarily derive our on-going revenues from technology-enabled business solutions, reported in our Healthcare IT segment, which typically includes revenue cycle management and is billed as a percentage of payments collected by our customers. This fee includes the ability to use our EHR, practice management systems and other software as part of the bundled fee. These solutions accounted for approximately 67% and 65% of our revenues during the years ended December 31, 2024 and 2023, respectively. This includes customers utilizing our proprietary product suites, as well as customers from acquisitions of RCM companies which we are servicing utilizing third-party software. Key drivers of our revenue include growth in the number of providers we are servicing, the number of patients served by those providers, and collections by those providers. It also includes SaaS fees, for clients not utilizing revenue cycle management services. When clients utilize our revenue cycle management services, basic SaaS services are included at no additional charge. Revenue is also generated from coding, credentialing, indexing, transcription and other ancillary services.
Previous wording
We earned approximately 1% of our revenue from group purchasing services during both the years ended December 31, 2023 and 2022. We earned approximately 11% and 10% of our revenue from medical practice management services during the years ended December 31, 2023 and 2022, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.
Current wording
We earned approximately 1% of our revenue from group purchasing services during both years ended December 31, 2024 and 2023. We earned approximately 13% and 11% of our revenue from medical practice management services during the years ended December 31, 2024 and 2023, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.
Previous wording
*Direct Operating Costs.*Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to our customers, claims processing costs, costs to operate the three managed practices, including facility lease costs, supplies, insurance and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred. The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations. Operations in our Offshore Offices together accounted for approximately 11% of direct operating costs for both the years ended December 31, 2023 and 2022. As we grow, we expect to achieve further economies of scale and to see our direct operating costs decrease as a percentage of revenue.
Current wording
*Direct Operating Costs.*Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to our customers, claims processing costs, costs to operate the three managed practices, including facility lease costs, supplies, insurance and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred. The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations. Operations in our Offshore Offices together accounted for approximately 13% and 11% of direct operating costs for the years ended December 31, 2024 and 2023, respectively. As we grow, we expect to achieve further economies of scale and to see our direct operating costs decrease as a percentage of revenue.
Previous wording
*General and Administrative Expense.*General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees. Our Offshore Offices accounted for approximately 17% and 23% of general and administrative expenses for the years ended December 31, 2023 and 2022, respectively.
Current wording
*General and Administrative Expense.*General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees. Our Offshore Offices accounted for approximately 22% and 17% of general and administrative expenses for the years ended December 31, 2024 and 2023, respectively.
Previous wording
*Goodwill Impairment Charges.*Goodwill impairment charges, which were related to the Healthcare IT reporting unit, represent the impairment recorded as it was determined that the fair value of the goodwill was less than the carrying value.
Current wording
*Goodwill Impairment Charges.*Goodwill impairment charges in 2023, which were related to the Healthcare IT reporting unit, represent the impairment recorded as it was determined that the fair value of the goodwill was less than the carrying value.
Previous wording
*Net Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Net loss on lease termination represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. Unoccupied lease charges represent the portion of lease and related costs for vacant space not being utilized by the Company. The Company was able to turn back to the landlord one of the unused facilities effective January 1, 2022. Restructuring costs, which were incurred in 2023, primarily consist of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Current wording
*Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Lease terminations represent the write-off of leasehold improvements and gains or losses as the result of lease terminations. Unoccupied lease charges represent the portion of lease and related costs for vacant space not being utilized by the Company. Restructuring costs, primarily consist of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Previous wording
Interest and Other Income (Expense). Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, motor vehicle loans and amounts due in connection with acquisitions. Other income (expense) results primarily from foreign currency transaction gains (losses).
Current wording
Interest and Other Income (Expense). Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, motor vehicle loans and amortization of deferred financing costs. Other income (expense) results primarily from foreign currency transaction gains (losses).
Previous wording
Income Taxes. In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company reported GAAP earnings in 2022, it incurred losses historically and in 2023 and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of December 31, 2023 and December 31, 2022. For the global intangible low-taxed income (“GILTI”) tax, companies can either account for the GILTI inclusion in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI. The Company records the GILTI provisions as they are incurred each period.
Current wording
Income Taxes. In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company reported GAAP earnings in 2024, it has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of December 31, 2024 and December 31, 2023. For the global intangible low-taxed income (“GILTI”) tax, companies can either account for the GILTI inclusion in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI. The Company records the GILTI provisions as they are incurred each period.
Previous wording
Goodwill is evaluated for impairment annually as of October 31 st, referred to as the annual test date. As a result of the annual impairment test, an impairment of approximately $2 million was recorded. The Company will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting-unit level. The Company has determined that its business consists of two operating segments and two reporting units (Healthcare IT and Medical Practice Management). Application of the goodwill impairment test requires judgment including the use of a discounted cash flow approach, the trading price of publicly traded stock and the guideline public company method. These analyses require significant assumptions and judgments. These assumptions and judgments include estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, determination of our weighted average cost of capital and the selection of comparable companies and the interpretation of their data. Future business and economic conditions, as well as differences in actual financial results related to any of the assumptions, could materially impact the consolidated financial statements through impairment of goodwill or intangible assets and acceleration of the amortization period of the purchased intangible assets which are finite-lived assets. There was a triggering event at August 31, 2023, but it was determined that there was no impairment. Due to a triggering event in December 2023, an additional impairment test was performed. As a result, the Company recorded an additional impairment of approximately $40 million. No impairment charges were recorded during the year ended December 31, 2022.
Current wording
Goodwill is evaluated for impairment annually as of October 31 st, referred to as the annual test date. As a result of the annual impairment test, an impairment of approximately $2 million was recorded in October 2023. The Company also tests for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting-unit level. The Company has determined that its business consists of two operating segments and two reporting units (Healthcare IT and Medical Practice Management). Application of the goodwill impairment test requires judgment including the use of a discounted cash flow approach, the trading price of publicly traded stock and the guideline public company method. These analyses require significant assumptions and judgments. These assumptions and judgments include estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, determination of our weighted average cost of capital and the selection of comparable companies and the interpretation of their data. Future business and economic conditions, as well as differences in actual financial results related to any of the assumptions, could materially impact the consolidated financial statements through impairment of goodwill or intangible assets and acceleration of the amortization period of the purchased intangible assets which are finite-lived assets. There was a triggering event at August 31, 2023, but it was determined that there was no impairment. Due to a triggering event in December 2023, an additional impairment test was performed. As a result, the Company recorded an additional impairment of approximately $40 million. No impairment charges were recorded during the year ended December 31, 2024.
Previous wording
*Net revenue.*Net revenue of $117.1 million for the year ended December 31, 2023 decreased by $21.8 million or 16% from revenue of $138.8 million for the year ended December 31, 2022. Revenue for the years ended December 31, 2023 and December 31, 2022 includes $76.6 million and $88.1 million relating to technology-enabled business solutions, $23.0 million and $34.0 million related to professional services and $13.4 million and $13.6 million for medical practice management services, respectively.
Current wording
*Net revenue.*Net revenue of $110.8 million for the year ended December 31, 2024 decreased by $6.2 million or 5% from revenue of $117.1 million for the year ended December 31, 2023. Revenue for the years ended December 31, 2024 and December 31, 2023 includes $73.7 million and $76.6 million relating to technology-enabled business solutions, $18.2 million and $23.0 million related to professional services and $14.4 million and $13.4 million for medical practice management services, respectively.
Previous wording
There was a $9.5 million decrease in project-based professional services revenue for the year ended December 31, 2023 as compared to 2022. The 2023 technology-enabled business solutions revenue was negatively impacted by two large accounts that had each been previously acquired prior to our beginning to serve them after a 2020 acquisition. The services provided to them were each winding down at the time of our acquisition and they both transitioned to the systems of their acquirers during 2022. Revenue from these two customers for the year ended December 31, 2023 was approximately $3.1 million, accounting for approximately $9.0 million of the decline in revenue. Revenue from these customers is expected to be approximately $300,000 for the year 2024. (Refer to Forward-Looking Statements disclosure on page 2 of this Form 10-K.)
Current wording
There was a $4.8 million decrease in project-based professional services revenue for the year ended December 31, 2024 as compared to 2023. The 2024 technology-enabled business solutions revenue was negatively impacted by two large accounts that had each been previously acquired prior to our beginning to serve them after a 2020 acquisition. The services provided to them were each winding down at the time of our acquisition and they both transitioned to the systems of their acquirers during 2022. Revenue from these two customers for the year ended December 31, 2024 was approximately $300,000, accounting for approximately $2.8 million of the decline in revenue. No further revenue from these customers is expected for the year 2025. (Refer to Forward-Looking Statements disclosure on page 3 of this Form 10-K.)
Previous wording
*Direct Operating Costs.*Direct operating costs of $70.8 million for the year ended December 31, 2023 decreased by $13.6 million or 16% from direct operating costs of $84.4 million for the year ended December 31, 2022. Salary costs decreased by $9.4 million due to the decrease in the Pakistan exchange rate, a decrease in the U.S. headcount and the redeployment of employees performing functions that were classified as direct operating costs to functions classified as research and development expense. Outsourcing and other customer processing costs decreased by $3.1 million and other costs such as medical supplies, vaccines, rent and consultancy fees decreased by $957,000.
Current wording
*Direct Operating Costs.*Direct operating costs of $60.8 million for the year ended December 31, 2024 decreased by $10.0 million or 14% from direct operating costs of $70.8 million for the year ended December 31, 2023. Salary costs decreased by $6.3 million due to the decrease in the Pakistan exchange rate, a decrease in the U.S. headcount and the redeployment of employees performing functions that were classified as direct operating costs to functions classified as research and development expense. Outsourcing and other customer processing costs decreased by $2.4 million and billable expenses decreased by $1.3 million.
Previous wording
*Selling and Marketing Expense.*Selling and marketing expense of $9.7 million for the year ended December 31, 2023 decreased by $138,000 or 1% from selling and marketing expense of $9.8 million for the year ended December 31, 2022. The decrease for the year ended December 31, 2023 was due to lower spending on selling and marketing activities.
Current wording
*Selling and Marketing Expense.*Selling and marketing expense of $6.2 million for the year ended December 31, 2024 decreased by $3.4 million or 35% from selling and marketing expense of $9.7 million for the year ended December 31, 2023. The decrease for the year ended December 31, 2024 was due to lower spending on selling and marketing activities and a reduction in headcount.
Previous wording
*General and Administrative Expense.*General and administrative expense of $21.5 million for the year ended December 31, 2023 decreased by $2.4 million or 10% from general and administrative expense of $23.8 million for the year ended December 31, 2022. Salary costs decreased by $1.1 million due to the decrease in headcount and the Pakistan exchange rate. The Company’s contributions to community based projects and to a new academic institution in the Bagh area, a community where the Company has a large employee base, decreased by $1.0 million. Other costs such as computer expenses, utilities and office supplies decreased by $646,000. This increase was offset by a $635,000 increase in consulting expenses.
Current wording
*General and Administrative Expense.*General and administrative expense of $16.1 million for the year ended December 31, 2024 decreased by $5.3 million or 25% from general and administrative expense of $21.5 million for the year ended December 31, 2023. Salary costs decreased by $3.5 million due to the decrease in headcount and the Pakistan exchange rate. Legal, professional and audit fees decreased by $790,000. Other costs such as computer expenses, utilities and office supplies decreased by $295,000.
Previous wording
Research and Development Expense. Research and development expense of $4.7 million for the year ended December 31, 2023 increased by $335,000 or 8% from research and development expense of $4.4 million for the year ended December 31, 2022. The increase was due to the redeployment of employees performing functions that were previously classified as direct operating costs to functions classified as research and development expense which was offset by a decrease in the U.S. headcount. During the years ended December 31, 2023 and 2022, the Company capitalized approximately $8.6 million and $9.2 million of development costs in connection with its internal-use software, respectively.
Current wording
Research and Development Expense. Research and development expense of $3.8 million for the year ended December 31, 2024 decreased by $955,000 or 20% from research and development expense of $4.7 million for the year ended December 31, 2023. The decrease was due to a decrease in the U.S. headcount which was offset by the redeployment of employees performing functions that were previously classified as direct operating costs to functions classified as research and development expense. During the years ended December 31, 2024 and 2023, the Company capitalized approximately $5.7 million and $8.6 million of development costs, respectively, in connection with its internal-use software.
Previous wording
*Depreciation.*Depreciation was $2.0 million for both the years ended December 31, 2023 and 2022.
Current wording
*Depreciation Expense.*Depreciation expense was $2.0 million for both the years ended December 31, 2024 and 2023.
Previous wording
*Amortization Expense.*Amortization expense of $12.4 million for the year ended December 31, 2023 increased by $2.6 million or 27% from amortization expense of $9.8 million for the year ended December 31, 2022. The increase in amortization expense was due to the amortization on certain internal-use software placed into production.
Current wording
*Amortization Expense.*Amortization expense of $12.1 million for the year ended December 31, 2024 decreased by $302,000 or 2% from amortization expense of $12.4 million for the year ended December 31, 2023. The decrease in amortization expense was due to certain intangible assets related to acquisitions becoming fully amortized.
Previous wording
*Goodwill Impairment Charges.*Goodwill impairment charges represent the impairment recorded as it was determined that the fair value of the Healthcare IT reporting unit was less than the carrying value at both the annual impairment test date of October 31 and as a result of a triggering event in December 2023.
Current wording
*Goodwill Impairment Charges.*Goodwill impairment charges in 2023 represent the impairment recorded as it was determined that the fair value of the Healthcare IT reporting unit was less than the carrying value at both the annual impairment test date of October 31, 2023 and as a result of a triggering event in December 2023. There were no impairment charges recorded in 2024.
Previous wording
*Net Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Net loss on lease terminations represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. During the year ended December 31, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less space. Charges of $102,000 for the year ended December 31, 2023, were incurred as a result of vacating the former premises. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the year ended December 31, 2023 of $162,000. In addition, during the year ended December 31, 2023, the Company paid $27,000 to settle a claim regarding a lease termination in India. Unoccupied lease charges represent the portion of lease and related costs for that portion of the space that is vacant and not being utilized by the Company. The Company was able to turn back to the landlord one of the unused facilities effective January 1, 2022. Unoccupied lease charges for the year ended December 31, 2023 were $169,000. In addition, there was $645,000 of restructuring costs being recorded in 2023, whereas in 2022, there were no restructuring costs. Restructuring costs consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Current wording
*Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Lease terminations represent the write-off of leasehold improvements and gains or losses as the result of lease terminations. During the year ended December 31, 2024, there was a gain on a lease termination of $10,000. During the year ended December 31, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less space. Charges of $102,000 for the year ended December 31, 2023, were incurred as a result of vacating the former premises. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the year ended December 31, 2023 of $162,000. In addition, during the year ended December 31, 2023, the Company paid $27,000 to settle a claim regarding a lease termination in India. Unoccupied lease charges represent the portion of lease and related costs for that portion of the space that is vacant and not being utilized by the Company. Unoccupied lease charges for the year ended December 31, 2023 were $169,000. There were no unoccupied lease charges in 2024. In addition, during the years ended December 31, 2024 and 2023, the Company recorded approximately $606,000 and $645,000 of restructuring costs, respectively. Restructuring costs consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Previous wording
*Interest Income.*Interest income of $154,000 for the year ended December 31, 2023 increased by $113,000 or 276% from interest income of $41,000 for the year ended December 31, 2022. The interest income represents interest earned on temporary cash investments, which increased due to rising interest rates and late fees from customers.
Current wording
*Interest Income.*Interest income of $88,000 for the year ended December 31, 2024 decreased by $66,000 or 43% from interest income of $154,000 for the year ended December 31, 2023. The interest income represents late fees from customers and interest earned on temporary cash investments, which decreased due to lower balances being invested.
Previous wording
*Interest Expense.*Interest expense of $1.2 million for the year ended December 31, 2023 increased by $789,000 or 195% from interest expense of $405,000 for the year ended December 31, 2022. The increase in interest expense was due to the increased use of the line of credit and increases in interest rates. Interest expense on the line of credit was $906,000 and $138,000 and the amortization of deferred financing costs was $169,000 and $124,000 during the years ended December 31, 2023 and 2022, respectively.
Current wording
*Interest Expense.*Interest expense of $900,000 for the year ended December 31, 2024 decreased by $294,000 or 25% from $1.2 million for the year ended December 31, 2023. The decrease in interest expense was due to the decreased use of the line of credit and decreases in the interest rate charged. Interest expense on the line of credit was $649,000 and $906,000 and the amortization of deferred financing costs was $127,000 and $169,000 during the years ended December 31, 2024 and 2023, respectively.
Previous wording
*Other Expense - net.*Other expense - net was $883,000 for the year ended December 31, 2023 compared to other expense - net of $637,000 for the year ended December 31, 2022. Other expense primarily represents foreign currency transaction gains and losses. There were foreign exchange losses of $790,000 and $610,000 for the years ended December 31, 2023 and 2022, respectively. Transaction gains and losses result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts receivable/payable between the entities. Whenever the exchange rate varies, the gains and losses are recorded in the consolidated statements of operations.
Current wording
*Other Expense - net.*Other expense - net was $298,000 for the year ended December 31, 2024 compared to other expense - net of $883,000 for the year ended December 31, 2023. Other expense primarily represents foreign currency transaction gains and losses and legal settlements made by the Company. There was a foreign exchange gain of $130,000 and a loss of $790,000 for the years ended December 31, 2024 and 2023, respectively. Transaction gains and losses result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts receivable/payable between the entities. Whenever the exchange rate varies, the gains and losses are recorded in the consolidated statements of operations.
Previous wording
*Income Tax (Benefit) Provision.*There was a$364,000 benefit for income taxes for the year ended December 31, 2023 compared to the provision for income taxes of $177,000 for the year ended December 31, 2022.
Current wording
*Income Tax Provision (Benefit).*There was a $160,000 provision for income taxes for the year ended December 31, 2024 compared to the benefit for income taxes of $364,000 for the year ended December 31, 2023.
Previous wording
The current income tax expense for the year ended December 31, 2023 was approximately $161,000 compared to a current income tax expense of approximately $101,000 for the year ended December 31, 2022. The current provision for 2023 and 2022 primarily relates to state and foreign income taxes. The pre-tax loss and pre-tax income was $49 millionand $5.6 million for the years ended December 31, 2023 and 2022, respectively. The Company has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at December 31, 2023 and 2022.
Current wording
The current income tax expense for the years ended December 31, 2024 and 2023 was $160,000 and $161,000, respectively. For the year ended December 31, 2023, there was a deferred tax benefit of $525,000. There was no deferred tax recorded for the year ended December 31, 2024. The current provision for 2024 and 2023 primarily relates to state and foreign income taxes. The pre-tax income and pre-tax loss was $8.0 million and $49.0 million for the years ended December 31, 2024 and 2023, respectively. Although the Company reported GAAP earnings in 2024, it has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at December 31, 2024 and 2023.
Previous wording
The Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes. However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes. As such, deferred income tax expense and a deferred tax liability arise as a result of the tax-deductibility of this indefinitely lived asset. The resulting deferred tax liability, which is recorded over the amortization period, will have an indefinite life. As a result of the Company incurring tax losses for 2023 and 2022 which have an indefinite life under the recent tax reform legislation, the federal deferred tax liability resulting from the amortization of goodwill was offset against these indefinite federal operating net loss deferred tax assets to the extent allowable. The remaining deferred tax liability remains on the Company’s consolidated balance sheet indefinitely unless there is an impairment of goodwill (for financial reporting purposes) or a portion of the related business is sold. In 2023, there was a goodwill impairment charge of $42 million, a portion of which was allocated to the tax deductible portion of the goodwill balance. The impairment charge resulted in the reversal of the entire deferred tax liability at December 31, 2023.
Current wording
The Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes. However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes. As such, deferred income tax expense and a deferred tax liability arise as a result of the tax-deductibility of this indefinitely lived asset. The resulting deferred tax liability, which is recorded over the amortization period, has an indefinite life. In 2023, there was a goodwill impairment charge of $42 million, a portion of which was allocated to the tax deductible portion of the goodwill balance. The impairment charge resulted in the reversal of the entire deferred tax liability at December 31, 2023. There was no deferred tax liability recorded at December 31, 2024.
Previous wording
As of December 31, 2023, the Company has a total federal NOL carry forward of approximately $274 million of which approximately $198 million will expire between 2034 and 2037, and the balance of approximately $76 million has an indefinite life. Out of the total federal NOL carry forward, approximately $238 million is from the CareCloud and Meridian acquisitions and is subject to the federal Section 382 NOL annual usage limitations. The Company has state NOL carry forwards of approximately $199 million, of which $86 million relates to the State of New Jersey. These NOLs expire starting in 2025.
Current wording
As of December 31, 2024, the Company has a total federal NOL carry forward of approximately $265 million of which approximately $187 million will expire between 2031 and 2038, and the balance of approximately $78 million has an indefinite life. Out of the total federal NOL carry forward, approximately $237 million is from the CareCloud and Meridian acquisitions and is subject to the federal Section 382 NOL annual usage limitations. The Company has state NOL carry forwards of approximately $211 million, of which $84 million relates to the State of New Jersey. These NOLs expire starting in 2025.
Previous wording
During the year ended December 31, 2023, there was positive cash flow from operations of $15.5 million and at year-end, the Company had $3.3 million in cash and negative working capital of $57,000. During the year ended December 31, 2022, there waspositive cash flow from operations of$21.2 millionand atyear-end, the Companyhad $12.3 millionin cash and positive working capitalof $12.3 million. The Company has a revolving line of credit with SVB, and as of December 31, 2023, there was $10 million outstanding. During the year ended December 31, 2023, the Company sold 59,773 shares of 8.75% Series B Preferred Stock and raised$1.4 millionin net proceeds after fees and expenses. During the year ended December 31, 2022, the Company sold 1,324,858 shares of 8.75% Series B Preferred Stock and raised $30.9 million in net proceeds after fees and expenses.
Current wording
During the year ended December 31, 2024, there was positive cash flow from operations of $20.6 million and at year-end, the Company had $5.1 million in cash and positive working capital of $5.2 million. During the year ended December 31, 2023, there was positive cash flow from operations of $15.5 million and at year-end, the Company had $3.3 million in cash and negative working capital of $57,000. The Company has a revolving line of credit with SVB and, as of December 31, 2023, $10 million was outstanding. The line of credit was fully repaid during the year ended December 31, 2024 and there was nothing outstanding at December 31, 2024. During the year ended December 31, 2023, the Company sold 59,773 shares of 8.75% Series B Preferred Stock and raised $1.4 million in net proceeds after fees and expenses.
Previous wording
The loss before income taxes was $49 millionfor the year ended December 31, 2023, of which $42 million was a non-cash goodwill impairment charge and $14.4 million was non-cash depreciation. The income before income taxes for the year ended December 31, 2022 was $5.6 million, which included $11.7 million of non-cash depreciation and amortization.
Current wording
The income before income taxes was $8.0 million for the year ended December 31, 2024, which included $14.1 million of non-cash depreciation and amortization. The loss before income taxes for the year ended December 31, 2023 was $49.0 million, of which $42.0 million was a non-cash goodwill impairment charge and $14.4 million was non-cash depreciation and amortization.
Previous wording
We have not been adversely affected by inflation as typically we receive a percentage of the fees our clients collect from our revenue cycle management services. Additionally, our medical practice management contracts are based on our costs plus a percentage of the medical practice’s operating income. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. In the event of inflation, we believe that we will be able to pass on any price increases for fixed rate contracts to our customers, as the prices that we charge are not governed by long-term contracts. The interest rate on our line of credit is based on prime rate which had been increasing through 2023 but now appears to be remaining steady.
Current wording
We have not been adversely affected by inflation as typically we receive a percentage of the fees our clients collect from our revenue cycle management services. Additionally, our medical practice management contracts are based on our costs plus a percentage of the medical practice’s operating income. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. In the event of inflation, we believe that we will be able to pass on any price increases for fixed rate contracts to our customers, as the prices that we charge are not governed by long-term contracts. The interest rate on our line of credit is based on the prime rate which had been increasing through 2023 but decreased during 2024.
Previous wording
Cash provided by operating activitieswas $15.5 millionand $21.2 million during the years ended December 31, 2023 and 2022, respectively. The decrease in the net income of$54.1 million included the following changes in non-cash items: a goodwill impairment charge of $42 million, an increase in depreciation and amortization of$2.6 millionanda decrease in the change in contingent considerationof $3.1 million. Revenue decreased by $21.8 millionfor the year ended December 31, 2023 compared to the year ended December 31, 2022, offset by a decrease in cash operating expenses of $15.8 million for the same period.
Current wording
Cash provided by operating activities was $20.6 million and $15.5 million during the years ended December 31, 2024 and 2023, respectively. The increase in the net income of $56.5 million included the following changes in non-cash items: a decrease in stock-based compensation expense of $4.8 million and a decrease in depreciation and amortization of $420,000. No goodwill impairment charges were recorded during 2024 as compared to the $42 million charge recognized in 2023. Revenue decreased by $6.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, offset by a decrease in cash operating expenses of $20.2 million for the same period.
Previous wording
Accounts receivable decreased by$2.2 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively. Accounts payable, accrued compensation and accrued expenses increased by$3.3 million and$6.6 millionfor the years ended December 31, 2023 and 2022, respectively.
Current wording
Accounts receivable increased by $1.2 million and decreased by $2.2 million for the years ended December 31, 2024 and 2023, respectively. Accounts payable, accrued compensation and accrued expenses decreased by $4.7 million and $3.3 million for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Cash used in investing activities during the year ended December 31, 2023 was $11.6 million, adecrease of $154,000 comparedto $11.8 million during the year ended December 31, 2022. Capitalized software was $8.6 million and $9.2 million during the years ended December 31, 2023 and 2022, respectively. Purchases of property and equipment were $3.1 million and $2.6 million during the years ended December 31, 2023 and 2022, respectively.
Current wording
Cash used in investing activities during the year ended December 31, 2024 was $7.4 million, a decrease of $4.2 million compared to $11.6 million during the year ended December 31, 2023. Capitalized software was $5.7 million and $8.6 million during the years ended December 31, 2024 and 2023, respectively. Purchases of property and equipment were $1.7 million and $3.1 million during the years ended December 31, 2024 and 2023, respectively.
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