CareCloud Inc

NASDAQ:CCLD

Earnings Call Transcript 2021-Q4

[Operator]

00:04 Good day, everyone. Welcome to the CareCloud, Inc. Fourth Quarter 2021 Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note this event is being recorded. 00:21 I'd now like to turn the call over to Kim Blanche, CareCloud’s General Counsel. Ms. Blanche, the floor is yours.

[Kim Blanche, General Counsel]

00:28 Good morning, everyone and welcome to the CareCloud fourth quarter 2021 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; A. Hadi Chaudhry, our Chief Executive Officer, President, and Director; Bill Korn, our Chief Financial Officer; Stephen Snyder, our Chief Strategy Officer and Director; and Karl Johnson, President of CareCloud Force. 00:53 Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical fact made during this conference call are forward-looking statements including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook, and potential organic growth and acquisitions. 01:35 Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate, or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise these forward-looking statements in light of new information or future events. 02:17 Please refer to our press release and our reports filed with the Securities and Exchange Commission where you'll find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements. For anyone who dialed into the call by telephone, you may want to download our fourth quarter 2021 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, scroll down to upcoming events, click on the fourth quarter 2021 results conference call and download the earnings presentation. 02:55 And finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our fourth quarter 2021 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. 03:10 And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

[Hadi Chaudhry, CEO & President]

03:16 Thank you, Kim. Thank you everyone for joining us this morning to discuss our fourth quarter and full-year 2021 results. In the call, I will cover our 2021 results, discuss other emerging organic growth opportunity, review the strategic acquisition of medSR, and conclude by talking about the evolution of our company. 03:40 I would like to begin by highlighting some of CareCloud’s financial accomplishments for last year. We are very pleased to report another year of strong financial results with record level of revenue, EBITDA, non-GAAP net income and free cash flow. Revenues were approximately $140 million, an increase of 33% year-over-year. Adjusted EBITDA was $22.1 million, which was more than double of 2020 levels. And we delivered adjusted net income of $18.5 million, or $1.24 per share compared to $8.5 million, or $0.63 per share in 2020. 04:27 Turning to our operational highlights for the full year, we made one strategic acquisition headlined by the June acquisition of certain assets of MedMatica in Santa Rosa Consulting. We subsequently pre-branded it as medSR. This acquisition gives us new service offerings and staffing capabilities and expand our footprint into the health systems market. This provides us with greenfield opportunities to cross-sell our RCM and technology solutions such as business intelligence and robotic process automation. 05:01 We continued on the path of innovation as we introduced several new products during the year, like, CareCloud Conductor, a family of technology solutions rich with interoperability and data exchange capabilities to accommodate more and bigger customers. We integrated our various acquired platforms with CareCloud’s proprietary rule-based claims scrubbing engine CollectiveIQ that includes custom rules for over 80 medical specialties. 05:30 This integration of CollectiveIQ with these acquired platforms enabled our clients to achieve an industry-leading first pass rate of up to 97%. And we are planning to launch this platform for healthcare IT industry very soon. We were pleased with the uptake and continued high utilization of virtual care visits on our platform. During the quarter, telehealth visits were 26 times that of pre-pandemic levels and the peak of the pandemic of 44 times increase versus pre-COVID. We also took steps to strengthen our management team, particularly in the area of operations, and sales and marketing. 06:15 Today, we announced the appointment of Steve Link, as Chief Operating Officer of CareCloud. In this role, he will be leading the company's revenue cycle management operations, including all functional components of service delivery and client success. Steve was previously, Senior Vice President of Client Operations at CareCloud and brings to the company 30 years of operations, strategy and process improvement experience, including leading multiple business units at Athenahealth. 06:45 Additionally, we hired Brian Zelenka, as Vice President of Marketing, who joins CareCloud with greater than 25 years of healthcare and technology experience, building and leading high performance teams. He has an impressive track record implementing data driven marketing strategies that accelerate growth and profitability. 07:10 With respect to sales and operations, we appointed as Patti Peets, as Senior Vice President of Sales to lead the company's sales growth and market expansion strategy and execution. Ms. Peets joined CareCloud in 2014 and was previously, Vice President of Client Solutions. She has 30 years of sales, consulting and healthcare experience including SAGE and NextGen Healthcare. 07:37 Last but not least, we appointed Carinda Cox, as Vice President of Sales Operations. She has 17 years of experience, including managing sales team at Change Healthcare, where she exceeded both growth and booking strategies in the ambulatory, and small breakfast channels. 07:58 I would like to point out that our sales team is now roughly 30 people up from one or two employees at the time of the IPO. As I will discuss shortly, we look to continue to expand our sales resources over the course of the year. Our focus will be signing new clients as well as leveraging our vast customer base through the cross-sell and up-sell of CareCloud solutions. 08:21 We would now like to take a deeper dive into our organic growth strategy, which has evolved over time from our prior history as a pure consolidator of billing companies. Coinciding with our diverse portfolio of products and services that we have amassed over the years, we have increased our sales and marketing efforts to fully capitalize on the addressable market opportunity that exists across our family of products. 08:47 As an illustration of our increasing focus on organic growth, we invested just 2% of revenue on sales and marketing in 2019. While in 2021, we tripled that spend to north of 6%. Further, we intend to increase our sales and marketing investment by 20% to 25% this year, positioning us to execute on the marketing opportunities ahead. To help manage this increased sales and marketing effort, we have as mentioned expanded our sales leadership team with extensive digital health experience. We believe that this stepped up effort in sales and marketing will return higher level of organic growth versus what we have achieved in the past. Namely, new incremental business frequently carries with a higher margin than existing contracts on the acquired businesses, contributing to higher margin profile moving forward. 09:42 Turning to our recent acquisition of medSR. We are now more than six months into the acquisition, since it closed in June of 2021 and are pleased to provide an update of our progress. To review the acquisition of medSR, provides strategic value to CareCloud on at least two fronts scale and expertise. Over the last two years alone, medSR has worked with greater than 100 hospitals, providing a solid foundation upon which CareCloud can cross-sell products and services. 10:16 medSR has entrenched relationships with the C-suites of these customers providing CareCloud a warm introduction that we believe will bear fruit versus a pure cold calling effort. The medSR acquisition is unique for us as it helps expand CareCloud’s footprint in the hospital and health system space, an area in which until now had only a small presence. 10:36 The current labor shortage environment in hospitals combine with an increased inflation provides a solid backdrop upon with medSR can thrive. Given the company's value proposition of staffing high level FTEs for short and long-term consulting engagements, six months end, we have completed most of the integration and training of employees, setting us up for cross-sell of products and services into the medSR base and vice versa. We continue to expect the transition to be accretive to our 2022 financial performance. 11:13 The transaction is consistent with CareCloud’s strategy of targeting high quality, undervalued companies whose IP, human capital and our financial profile is something that can -- that we can leverage across our vast platform. Our acquisition pipeline remains robust and we feel that we're in enviable position to be a consolidator in the industry, as many companies with less solid footing have been victim to increasingly stringent regulations, COVID related fallout, labor shortages and inflation. 11:46 This month marks my one-year anniversary as CEO of CareCloud and I couldn't be prouder of our accomplishment this year and throughout our history. I believe the company truly set certain inflection point as we have evolved over the last 20 years, since I joined the company. We began as a pure play revenue cycle management company, became the leading consolidator of the industry and evolved into a fully diversified provider of digital health and technology solutions and services. 12:19 As Slide 4 depicts, we now offer leading solutions in practice management and RCM, Electronic Health Records, Project Management staffing and digital health solutions, improving the patient experience including telemedicine and digital front door tools. This breadth of overall capabilities is a key differentiator of ours and continues to attract prospects speaking a single partner to accommodate their digital health requirements. Our clients tells us that they prefer to work with vendors, they can offer a wide variety of solutions to meet their ever-changing needs, they face as they navigate through the complex healthcare environment. 13:02 I would like to take a moment to illustrate how our diversified portfolio positively impacts the outcomes of our customers. As just one example, we have been working with the Hutchinson Clinic in Kansas across a variety of initiatives since 2020, to address collection challenges among other issues. During a recent interview, we were reminded by their CEO and CFO of the great work both of our teams had been doing together. 13:32 Over the past several months, we have been deploying additional workforce, software and automation that has delivered a dramatic impact to their bottom line. While this increase in revenue and proper reimbursement is important, it is crucial to remember that the business of medicine is not just about bottom line results, but rather it has the opportunity to make an even broader impact on the community and those near and around central Kansas. 14:01 And as shown on Slide 5, we have expanded our customer base from initially small physician practices to large practices and clinics, hospitals and health systems spanning from 100 beds to 1,000 beds, specialists, labs, peers and vendor partners. With this backdrop exiting 2021, we are very excited about our prospects for 2022 as Bill will share later in our outlook. 14:28 Our newly issued 2022 guidance implies 10% revenue growth at the midpoint and low teens EBITDA growth, which is a combination of organic growth and a tuck-in acquisitions. We plan to increase wallet share within our vast client base, introduced new solutions that built-on innovation. We are fortunate (ph) in the area of digital health and patient experience by looking opportunistically at acquisition. We note that our guidance does not contemplate any large transformative acquisitions. 15:03 Before turning over the call to Bill, I want to reiterate CareCloud’s three pillars of growth as outlined on Slide 6. Organic growth through adding new customers, products and the cross-sell of products, and services into our client base; acquisitions, which have always been part of CareCloud’s DNA to drive long-term shareholder value; and partnerships, namely through a workforce initiatives in which we work with partners by leveraging over staffing, RCM and technology capabilities. In fact, we have seen increased interest in forced to help mitigate labor shortages that are rapidly becoming more prevalent across the hospital settings. 15:45 We are well positioned in the market to deliver positive outcomes and help drive the success of our 2,600 strong customer base of medical practices and health care institutions. Our 2021 performance in these unprecedented times gives us confidence in our ability to achieve over 2022 outlook and emerge from this year even stronger than last. 16:09 I will now turn the call over to Bill Korn, our Chief Financial Officer to provide an update on company's full year and fourth quarter financials, as well as comment on our 2022 outlook. Bill?

[Bill Korn, CFO]

16:25 Thank you for joining us all on the call this morning. I want to reiterate Hadi’s sentiment that we are really proud of our fourth quarter results and what we achieved in 2021. On today's call, I'm going to share some 2021 financial highlights, review our fourth quarter results and close by providing some color on our initial 2022 outlook. 16:47 First, I want to cover some of our financial accomplishments from last year. I feel strongly that our performance reflects continued traction in the marketplace. Revenue increased 33% year-over-year to $139.6 billion, and technology solutions represented 83% of the total. Thinking back three years ago, prior to our acquisition of CareCloud at midway through our pivot to become a more technology driven company. Technology enabled solutions only accounted for 58% of our total revenue. 17:24 Taking a close look at the technology enabled revenue, 49% of revenue was from clients using our core technology suite of electronic health records and practice management solutions, 21% was from clients using one or more components of our technology, 13% was from clients for whom we are providing IT services using our technology processes and know-how. Of the remaining revenue 6% of revenue is from pure revenue cycle management. 17:50 And as a quick comparison, pure RCM represented 26% of our total revenue three years ago and 75% of revenue at the time of our IPO in 2014. Clients where we provide comprehensive medical practice management services were 9% of revenue and other services accounted for the last 2%. All of these breakouts, can be found in our earnings press release and our 10-K, 18:24 Now while our revenue growth was impressive, our improvements in profitability even more noteworthy. GAAP net income of positive $2.8 million for the year compared very favorably to a net loss of $8.8 million last year. I want to call out that 2021 includes $2.5 million related to a gain in the change of fair value of the contingent consideration from the medSR acquisition. This $2.5 million has been excluded from our non-GAAP adjusted results. However, even without this non-cash gain, we delivered positive GAAP net income for the year for the first-time since going public in 2014. 19:07 For non-GAAP adjusted net income, we generated $18.5 million or $1.24 per share, an increase of $10 million over adjusted net income of $8.5 million in 2020. Adjusted EBITDA of $22.1 million more than doubled in 2021, while adjusted EBITDA margins increased 550 basis points to 15.8%. During the year, we completed the strategic acquisition of medSR that Hadi mentioned, which added professional services to our offering and gave us a sizable footprint in new markets, including health systems and hospitals in which we believe there is a meaningful opportunity to cross-sell some of our technology solutions. As you can see, we are making progress on all fronts. 19:59 Now turning to fourth quarter highlights. Revenue of $37.5 million increased 17% compared to a year ago. From a revenue standpoint, this quarter we saw patient volumes return to a more normal cadence continuing our pattern of normal organic growth. GAAP net income of $3.5 million compared favorably to $155,000 last year. Please note that this includes the $2.5 million gain in the change of fair value related to the medSR acquisition that I mentioned a moment ago. Even without the change in the estimated value of the earn-out, we would have reported a GAAP net income in excess of [Technical Difficulty].

[Hadi Chaudhry, CEO & President]

20:59 So Bill, I think there is some technical glitch, maybe we stopped hearing you.

[Bill Korn, CFO]

21:22 Hadi, can you hear me?

[Hadi Chaudhry, CEO & President]

21:24 Yes. We can hear you now.

[Bill Korn, CFO]

21:26 Okay. Now turning to the fourth quarter results. Revenue of $37.5 million increased 17% compared to a year ago. From a revenue standpoint, this quarter, we saw our patient volumes return to a more normal cadence continuing our pattern of organic growth. GAAP net income of $3.5 million compared favorably to $155,000 last year. Please note that this includes the $2.5 million gain in the change of fair value related to the medSR acquisition that I mentioned a moment ago. Even without the change in the estimated value of the earn-out, we would have reported a GAAP net income in excess of $1 million in the quarter. 22:13 Non-GAAP adjusted net income of $5 million was flat with last year. Adjusted EBITDA of $6.1 million increased 7% compared to $5.7 million last year. This increase was primarily driven by the realization of synergies from our prior acquisitions. Adjusted EBITDA margins came in at 16.3% compared to 17.8% a year ago. Fourth quarter adjusted EBITDA margins were slightly impacted by the addition of professional services revenue from our mid-year acquisition of medSR. 22:51 Turning to our balance sheet and cash flow, we ended the year with $10.3 million in cash, including $1 million in restricted cash from the medSR transaction, and generated $6.1 million in cash flows from operations in the quarter and we ended the year with net working capital of $6 million. Finally, guidance for the full year 2022, we expect revenue to be in the range of $152 million and $155 million which represents 10% growth at the midpoint. And adjusted EBITDA to be between $24 million and $26 million reflecting 13% annual growth at the midpoint, even after the incremental sales and marketing investments. 23:43 Now let me provide some additional color that is underpinning our guidance. As always, our annual guidance is based on a combination of organic growth and growth from tuck-ins, and excludes major acquisitions. While we don't normally guide to quarters, I want to provide a reminder of the fourth quarter to first quarter seasonality in our industry. We typically see a sequential decline in revenue from Q4 to Q1 due to patient deductibles resetting on January 1. 24:20 This has historically been partially offset by flu-driven visits in Q1, but we are seeing a very mild flu season as we did in Q1 2021, given the social distancing and increase in people working from home, given the puts and takes, we're expecting a roughly 10% sequential step down in revenue and a similar dollar decline in adjusted EBITDA since our costs are related to the volumes of activity and not to payments. Looking over the course of 2022, our third quarter is typically the high points of the year as physician visits related to the start of the school year pickup and flu shots are being administered. Adjusted EBITDA generally follows the same seasonal pattern. 25:05 I'd like to close by talking about our capital structure. Earlier this year, we took our first small step towards reducing our cost of capital by launching a Series B Preferred Stock with an 8.75% dividend rate. As of the end of February, we raised approximately $27 million on a net basis and are using the proceeds to retire $20 million of our higher dividend of Series A Preferred. We are grateful to our Series A investors as this was an important financial instrument that allowed us to fund our growth strategy and reached the point, we're at today. 25:44 Our goal is to reduce our exposure to Series A and lean on more cost effective sources of capital in the future. We're considering several paths forward depending on market conditions, including offering an exchange to allow Series A shareholders to exchange for Series B shares, selling more Series B and using the proceeds to redeem more Series A, considering debt options to allow us to redeem more Series A, and selling common equity to retire Series A. We are fortunate to have multiple options and are cognizant of potential shareholder impacts of our choices. Rest assured, we will choose the best combination of actions that we anticipate will produce the highest expected return at the lowest risk for common shareholders. Look out for further steps to reduce our cost of capital as the year progresses. 26:40 In conclusion, we are pleased with our 2021 performance and believe we are well positioned to continue to execute our strategic initiatives and look forward to keeping you posted over the course of the year. 26:51 With that, I will turn the call over to Mahmud for his closing remarks.

[Mahmud Haq, Founder & Executive Chairman]

26:58 Thank you, Bill. We are pleased to report another year of record financial performance and look forward to set a new record in 2022 and beyond. I would like to thank our customers, shareholders and employees for their continued support of CareCloud mission. 27:17 We will now open the call to questions. Operator?

[Operator]

27:21 Thank you, sir. [Operator Instructions] We'll take our first question from Jeffrey Cohen with Ladenburg Thalmann.

[Jeffrey Cohen, Ladenburg Thalmann]

27:44 Good morning, everyone. How are you?

[Hadi Chaudhry, CEO & President]

27:47 Good morning, Jeff. I’m Good. How are you?

[Jeffrey Cohen, Ladenburg Thalmann]

27:49 Just fine. So, I guess firstly, if you could discuss in further detail your guidance for ‘22? It seems a little lighter than we had previously expected. What's -- what are the inputs and factors that you're taking into account, when taking growth rates down towards the 10% as a midpoint?

[Bill Korn, CFO]

28:16 Yeah. Thanks for the question, Jeff. As we put forward our guidance where we are always torn between expressing the optimism, we have to grow the business. The opportunities to have step function growth from acquisitions as well as setting reasonable expectations for the marketplace based on sort of pure organic growth and so, based on that -- as we look at the volume of customers, we look at the volume of healthcare visits, we think getting to that net growth that you see in our guidance is a good approximation of where we'd be without doing anything major and strategic. Now rest assure, we're always looking for great, great opportunities for step up function growth but it's impossible to predict those and therefore, we always leave those out of the guidance. So we've tried to balance this and be conservative. I think it's all of our goals to exceed the numbers that we put forward, but we don't want to set unrealistically high expectations and then run the risk that people are disappointed in the future.

[Jeffrey Cohen, Ladenburg Thalmann]

29:34 Okay. Got it. And then secondly for us, could you talk a little bit about your current base of customers and going forward over at least this year, if not next year as well, talk a little bit about the offerings in the platform and where you're expecting most of the growth from current customers, whether it'd be the larger companies or the onesies and twosies on the smaller side?

[Hadi Chaudhry, CEO & President]

30:03 Great. Thank you, Jeff. Definitely, I mentioned earlier, there are three major areas for us, the set of customers who use our core technologies, so we will still continue to see our revenue about roughly 50% of the revenue coming from the clients who are using our core technology platform, whether it's our EHR or practice management and the like. And we still see about 20% plus customers, roughly, who have been using at least some component of our technology, at least one component or more components of the technology, but may not be the core component. On the professional IT services that number stands somewhere around 13%. This is primarily the projects that we are doing with the help of medSR division. And the rest of the revenue is being generated by different other, either pure RCM Services or the Force deals and the like. 31:02 In terms of the future opportunities, we do see some increase in the Force deals and Karl, can talk about it more about the more opportunities we see there. In terms of, I think we will continue to grow in the same way 50% plus. So our goal is to keep on increasing this 50%, the revenue share using -- utilizing the core services and then over the next priority or the next segment is of course the 20%, which is to-date, which is at least one component of the products and the services that the client should be using. So we see the same traction with the help of the medSR as we mentioned earlier, we do see more and more opportunities as we have ramped up our sales and marketing efforts and planning to increase it further in this coming year. With those additional connections coming in with the help of the medSR and other related opportunities, we do see that we should be signing more business into the large enterprise space.

[Jeffrey Cohen, Ladenburg Thalmann]

32:11 Okay. [Multiple Speakers]

[Hadi Chaudhry, CEO & President]

32:12 In terms of -- sorry, Jeff. Go ahead.

[Jeffrey Cohen, Ladenburg Thalmann]

32:15 No go ahead, Hadi.

[Hadi Chaudhry, CEO & President]

32:19 Karl, would you like to talk about the other opportunities that we see on the four side?

[Karl Johnson, President of CareCloud Force]

32:24 Yes. I'd be happy to add a little color to what you've already said, which is right on point. Certainly, overall, we compare day to or Q4 to where we were a year ago, the percentage of Force sales is almost triple where we were. And I think I attribute that to a number of factors, one, is just an increased effort on the sales and marketing side with net new deals; two, definitely there is a dramatic shortage of qualified workers in the U.S. at hospitals, large practices, revenue cycle companies that we've been able to tap into and to meet a need there; and three, the acquisition of medSR has gained as a whole new set of connections at an executive level and we've already seen a number of very strong deals come into play that really, really have enhanced what we're providing in the workforce. Thank you, Hadi.

[Hadi Chaudhry, CEO & President]

33:29 Thanks, Karl.

[Jeffrey Cohen, Ladenburg Thalmann]

33:30 Okay. Just one more quick one, if I could, for Bill on the adjusted EBITDA guide of 24 to 26. So it looks like you would expect that the adjustments would be similar to 2021 with the GAAP gain being at or slightly larger than the 2.84 from 2021. Is that a good way to phrase it?

[Bill Korn, CFO]

33:56 I think so, in terms of the adjustments between GAAP and GAAP net income and non-GAAP or adjusted EBITDA, one of the things to take into account is that if we were to do a large scale acquisition that might raise the amortization of intangibles, that might raise the transaction and integration costs, but it doesn't really change the long-term impact of the business. So in some ways, the adjusted EBITDA is a more steady state number that you can look forward to and when you think about the adjusted EBITDA growth, recognize that we are also increasing our investment in sales and marketing from where we were in 2021. So, despite increasing the sales and marketing adjusted investment will still be growing the bottom line.

[Jeffrey Cohen, Ladenburg Thalmann]

34:45 Perfect. Okay. Got it. Thanks for taking the questions.

[Bill Korn, CFO]

34:50 Thanks, Jeff.

[Hadi Chaudhry, CEO & President]

34:51 Thank you.

[Operator]

34:54 Next question will come from the line of Marc Wiesenberger with B. Riley Securities.

[Marc Wiesenberger, B. Riley Securities]

34:59 Thank you. Good morning. Appreciate taking the questions. Bill, if you could just follow along with that kind of commentary on the sales and marketing investments. And when should we expect the revenue to flow through from those investments, is that going to come more in the second half of the year?

[Bill Korn, CFO]

35:19 Good question, Marc. So as CFO, you would love to be able to hire a sales person and on the first day that they arrive, they signed a $1 million customer who goes live that minute, sees a patient and insurance pays them within 24 hours of the visit. But then the reality comes in, which is that it does take people a little bit of time to ramp up, bigger clients take a little longer to sign, sometimes there's a month before we going live often because they need to give notice to a previous provider, and then they see patients, but of course, we get paid at the point that the doctor gets paid. So, I guess that's a long-winded answer to say when we make those investments in the first quarter of the year, you start to see the results in the second half of the year, as you make the investments during second quarter, you really only see some, some incremental results in Q4. Now from our perspective, the investments we're making now really are driving ‘22 revenue and I'm sorry, 2023 revenue and 2023 profitability, which is why we feel it's important to increase the investment level now to be able to continue that growth into the future.

[Marc Wiesenberger, B. Riley Securities]

36:38 Very helpful. Thank you. And then…

[Hadi Chaudhry, CEO & President]

36:41 Marc, just to elaborate a little more. Thank you, to add to what Bill has said. On the enterprise side, what we have seen is historically, it takes roughly for us between five to seven months for an account to go live. Because, as Bill mentioned, the notice period and then the basic initial integration configurations and the like. Then another probably three more months when if they get to actually fully ramped up. So as we are shifting a little more focused towards the enterprise size or the large customer that's roughly five to seven months and three more months. On the mid-sized somewhere between three to five months, and then you can add another two or, two to three months on the go-live side. Just to add some more color to what Bill has said.

[Marc Wiesenberger, B. Riley Securities]

37:27 That was very helpful. Appreciate it. Bill, if you could also talk about kind of the trajectory that we saw in the gross margin kind of throughout ’21. Kind of compare and contrast the first half of the year versus the second half of the year? And then how do we think about that moving throughout 2022?

[Bill Korn, CFO]

37:47 Yeah. Good question. So when you think about the gross margin, recognize that when we bought medSR, we picked up a revenue stream that's a little bit different and I'd say in medSR because it's really sort of service driven, the direct operating cost is usually a little bit bigger percentage of revenue than it is for either our SaaS business or our RCM business. So in some respects, when you think about the gross margin, gross margin declined in the second half of 2021 primarily due to the fact that medSR was there. So when we think about 2022, you're going to start it a little bit lower level. I expect that that assuming we don't do any other major acquisitions by the end of 2022. You'll be back to the gross margin levels that you saw at the beginning of 2021, which really means improvement in gross margins, improvement in profitability throughout combination of efficiencies and leveraging our technology and our offshore team throughout the business. And of course, depending on what happened -- where we defined another really compelling strategic opportunity, depending on the margin profile of that business, it might increase or it might decrease the gross margins going forward.

[Marc Wiesenberger, B. Riley Securities]

39:20 Understood. Could you shed light on the conversations you're having with the mid-size and large practices as well as the health systems and how they're communicating their financial positions and does that have any impact on the outlook for medSR? And how is your expectations for that business kind of changed over the second half of 2021 into the first half of ’22? And then also comment on the Oracle and Cerner acquisition and potential opportunities for medSR would be helpful?

[Hadi Chaudhry, CEO & President]

39:53 All right. Let me just try to answer the part of the question and Bill, feel free to jump in. When it comes in terms of any of these clients sharing with us their financial positions or the goals, not specifically that by design anyone it does that, but for the, all the rest of the existing clients that we have, we do have based on their historical numbers, financial numbers we do, do our own internal forecast and we understand that over the next couple of quarters, how we see the growth coming up and those growth have already been incorporated into our financial forecast. 40:31 In terms of stepping into this, these other larger groups, I can -- we have not yet seen or have not been to the point where we want to be just because of the fact that these large deals through the health system typically takes little more time than a typical small to medium sized closing a small practice deal because of the different Board members, the C-level and the process they have to go through to get the deal closed with any new vendor. 41:04 Since the acquisition of medSR, in the annualized recurring revenue side of it, big leveraging the existing relationships, we have made a small, some decent success in terms of closing $800,000 to $900,000 in annualized recurring revenue. But our active pipeline and when I say pipeline, where we are in active conversations with some of the deals at different stages, whether we are going through the RFP process, so we have some discussion that pipeline is somewhere between $4 million to $5 million and the active overall pipeline is even much bigger at this point. 41:43 But again, I just want to remind the fact, but typical these deals, they are, they take even much more longer than compared to the small to medium sized practices. And even in many cases, the non-health system based enterprise clients, these deals stays even more time to get closed.

[Marc Wiesenberger, B. Riley Securities]

42:01 Helpful. I appreciate it. And then just a final one for me. You have data from across approximately 40,000 providers wondering, what your plans are to potentially monetize the data that you get from patients may be in an anonymized way and leverage kind of customers of payors or even life science companies? Thank you very much.

[Hadi Chaudhry, CEO & President]

42:23 Great. Thank you. Very good question. Actually, as you are saying we are in -- at least with one opportunity with an active conversations nothing has yet been finalized, but if that happens, this will be our first client towards that direction and we are seriously considering that part. Has not been signed, but we believe we are very far ahead in the conversation and if that gets materialized, we will make an announcement accordingly.

[Marc Wiesenberger, B. Riley Securities]

42:51 Great. Thank you very much.

[Hadi Chaudhry, CEO & President]

42:54 Thank you for the question. Thank you.

[Operator]

42:59 Your next question comes from the line of Allen Klee with Maxim Group.

[Allen Klee, Maxim Group]

43:06 Good morning. If we look at your CapEx and your capitalized software in ‘21. I think they were around $3 million and $8 million or so. How do you think about the direction of those two numbers for ’22?

[Hadi Chaudhry, CEO & President]

43:26 All right. Good question, Allen. So when we think about it, I would say, think about those numbers being fairly equivalent. Capital expenditures in our business aren't huge amounts, but as we continue to grow, we're always adding facilities, adding computers we do leverage a lot of cloud services. So, a lot of our compute power, we don't actually have to go buy the servers, Amazon or Google does. In terms of the capitalized software, as you know, when you're developing new software, there are specific rules in GAAP as to when they gets capitalized versus expensed and so basically work on new products that are not yet in production gets capitalized, and so that's the investment that you see in 2021. You should continue to expect to see that going forward into 2022 as well.

[Allen Klee, Maxim Group]

44:21 Okay. Thank you.

[Operator]

44:24 [Operator Instructions] Take our next question from Kevin Dede with H.C. Wainwright (ph).

[Kevin Dede, H.C. Wainwright]

44:40 Good morning, Hadi, Bill. Hadi, your referenced -- you referenced conductor, but you didn't really -- you didn't really tear into how you're proceeding with it? Sort of confusion on the third quarter call, I was just wondering if you wouldn't mind taking some time to review that and your outlook.

[Hadi Chaudhry, CEO & President]

45:07 Good morning, Kevin and thank you for joining, and thank you for the question. You are very right about that, as you remember that this product is for us, we are stepping into a different market segment, where we have -- they were two-fold purpose of the conductor, one is for us, creating or creating a database at library of all the interfaces that we have created since the inception of the company and/or that now we have the capability, because of the different acquisitions we have done. So this product by creating this product internally, this is giving us a better -- this is putting us in a better position for future acquisitions where there is another company we acquired, so their platform is there, week can -- in much more effective, we can create those interfaces. 46:00 The second thing is, when the client is -- when we signed a new client and we have to make the client live and it has to go through a creation of the interface even that, this product is helping us improve the go-live time of that new client that we are signing. So as far as the internal implementation is concerned, we virtually have completed the incorporation or integration of this new product. When it comes to the external since we are hitting now this with the help of this product vendors, the target market, the segment is the different vendors and whether it's an EMR or PH (ph) -- EMR vendors or practice management vendors or some of the enterprise groups. We conducted a so far, some webinars and have done at least once campaign. There are interest out there so far, we did not have any success, but we are still optimistic we are base of the technology for hitting because all what we need is a couple of the closing, couple of the signings through the year to get to generate a decent number in terms of the revenue. But internal efficiencies have already kicked in because of the development of the launch of this product.

[Kevin Dede, H.C. Wainwright]

47:16 And Hadi, you mentioned that you had 30 salespeople on staff now, where do you think that number goes this year?

[Hadi Chaudhry, CEO & President]

47:27 Good question, Kevin. We do not have -- we have not specifically defined the number of employees to grow, but we do anticipate as I mentioned, increasing the sales and marketing spend by 20% to 25%, which will be a combination of additional resources, some additional campaigns even investment in some of the media campaigns and all of those pieces together. So keeping in view wherever we see more results coming in, we will keep on investing in -- on that side. But yes, it will be a combination of some additional resources on the enterprise sales side because of the opportunities we see now through either the medSR of our own pipeline and in the medium-size segment as well.

[Kevin Dede, H.C. Wainwright]

48:19 Okay. Fair enough, Hadi. Now, in that expansion of budget, have you classified some of the expense for campaigns? Do you think most of it will be digitally focused print? Can you give us a little insight on how we might actually see you raised the CareCloud brand and through media?

[Hadi Chaudhry, CEO & President]

48:43 No. Absolutely, it is a combination of all of those and, one of the interview that I was referring to for Hutchinson as well. So we are doing a campaign as an example in that area based on how good we have performed with that one health system is one example there, number of others after that, we'll be moving forward to in couple of other states as well. But to answer your question, it is a combination of visitors digital campaigns or even door-to-door campaigns based on some of these anchor clients where we have tremendously improved the overall performance and have created an impact in the community. But in terms of that how much of what that split is, those are the numbers Kevin, we would like not to disclose that's something internally, we would like to continue and improve the overall deliverability.

[Kevin Dede, H.C. Wainwright]

49:37 Yeah. Fair enough, Hadi. Thank you. Bill, could you give us the count for the Series A and Series B count at this point?

[Bill Korn, CFO]

49:48 So rather than giving as account, I'll try to do this a little simpler and do it in dollar terms. We’ve -- over the life of our Series A, over the six years that we were selling it, ranging from the first $5 million that we sold back in 2015. We sold a total of about $133 million worth of Series A. And as you've seen now that we've launched Series B, we are redeeming the first $20 million of Series A that will happen at the end of this week. And we have sold so far about $27 million worth of Series B. As we think about our prospects going forward, we don't have to do anything, but we will look out at options too either offer Series A shareholders maybe the chance to convert their shares to or exchange the shares for Series B that would lower their coupon a little bit, but would given them a couple of years of core protection. We might decide that it makes sense to sell some more Series B and use the proceeds to redeem Series A. Yeah. We've had discussions with banks and we'll will look at whether it makes sense to take on some debt to redeem Series A. 51:09 And finally, not at today's share price, but maybe we'll see a point where the market looks at us and [indiscernible] $150 million to $155 million company, $24 million to $26 million of adjusted EBITDA, maybe the share price is not appropriate and maybe we'll see that share price get to a level where it makes sense for us to sell some common stock and use the proceeds to redeem Series A. So I'm not sure which of those payouts will take, but if I had my crystal ball, I'd say that 12 months from now. You might not see a lot of Series A left on the balance sheet, you might see lower cost of capital.

[Kevin Dede, H.C. Wainwright]

51:48 Fair enough. Thanks, Bill. Thanks, Hadi.

[Hadi Chaudhry, CEO & President]

51:53 Thank you, Kevin.

[Operator]

51:56 All right. [Operator Instructions] Okay. It looks like we have no further questions at this time. So I'd like to turn it back over to Ms. Blanche for any additional or closing remarks.

[Kim Blanche, General Counsel]

52:31 I'd like to thank everyone who's joined us on today's call. We appreciate your participation patient and your interest in us as a company, and we look forward to speaking with you again next quarter. Thank you all and have a great day.

[Operator]

52:45 That does conclude today's conference. We thank everyone again for your participation.