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TICKERS: DOC; DOCRF; 6PH

As COVID Is Turbocharging the Adoption of TeleHealth, Small Cap Is Growing Exponentially

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All three brokerage firms that cover the rapidly expanding CloudMD Software & Services rate the company a Speculative Buy, and now the company has gained a toehold in the U.S.

Interest in telehealth and virtual medical visits has been growing over the past few years, but demand has skyrocketed with the coronavirus pandemic.

Vancouver-based CloudMD Software & Services Inc. (DOC:TSX.V; DOCRF:OTCQB; 6PH:FSE) has been at the forefront of telemedicine in Canada, both through organic growth and acquisitions, and now has made a move into the U.S. market with a reseller agreement and the purchase of a clinic in the Southeast U.S region.

"The current COVID pandemic is the single largest public health crisis of our lifetime and it has accelerated the adoption of digital virtual health; it has opened up the ability for people across North America to access quality healthcare from home," Dr. Amit Mathur, President of CloudMD, told Streetwise Reports. "Technology focused companies like ours, the right size, nimble, and with expertise in healthcare, are really in the right position to respond to the need that's upon us."

Company management believed pre-COVID that it would take years to significantly adopt telemedicine. "But that three to five year plan is three to five months today; we're quite proud of what we've done," Dr. Mathur said.

CloudMD just released second quarter 2020 results and announced a CA$13 million bought-deal financing, which was subsequently upsized to $18 million due to significant demand. For the quarter, total revenue was $2,789,987, a 163% increase year over year; revenue from medical clinics and pharmacies rose 223% to $2,330,412, while revenue from SAAS model digital services rose 35% to $459,575. The company reported the net loss and comprehensive loss in Q2 2020 was $2,768,117, resulting in a net loss per share (basic and diluted) of $0.03.

The company noted that it ended the quarter "with a strong balance sheet with cash and cash equivalents of $13.8 million and a working capital balance of approximately $12.6 million."

Several investment houses cover CloudMD, including Canaccord Genuity, Echelon Capital Markets and Beacon Securities. All three have Speculative Buy ratings on the company and target prices that range from CA$1.70 to CA$2. The company's shares are currently trading at CA$1.60.

Canaccord Genuity analyst Doug Taylor wrote on August 31, CloudMD "DOC released Q2 results after market close Monday that were slightly below top-line growth expectations given the challenging environment for on-premise sales, particularly early in the quarter. With that said, we continue to focus on the string of highly accretive M&A transactions recently announced which will begin contributing to CloudMD's financial performance in Q3 and Q4. Recall that the company has announced 5 acquisitions since quarter-end which are expected to contribute annual revenue (pre-synergies) of ~$11M in aggregate. Based on the contributions from these acquisitions, we expect the company will approach breakeven EBITDA as it continues to aggressively consolidate and drive organic growth through innovations including its pharmacy telemedicine kiosks. Despite the high activity level, M&A remains a priority for management and represents an additional catalyst in the near term."

Earlier, in Taylor's initiation report on CloudMD on June 2 he wrote, "In Canada, where an increasing proportion of healthcare services is expected to be delivered through telemedicine applications, CloudMD has assembled the technology stack and footprint to capitalize on this secular trend. . .The factors driving a paradigm shift in how healthcare is delivered to Canadians have been galvanized by the COVID-19 pandemic and suggest, in our view, years of extraordinary growth ahead for industry participants. We believe this sets up CloudMD to produce significant returns for equity holders as it executes on both organic and inorganic growth opportunities."

Gabriel Leung, an analyst with Beacon Securities, wrote that CloudMD is "at the forefront of the telehealth revolution" and describes the company as a "technology driven healthcare operator, allowing it to combine professional health expertise with advanced digital platforms to empower physicians and patients. The company's goal is to digitize the delivery of healthcare by providing patients access to all points of their care from their phone, tablet or desktop computer... We believe the company is well positioned to capitalize on this opportunity given its extensive healthcare background, and strong B2C and B2B telehealth offering."

On September 1, Leung added, "We believe near-term catalysts include the closing of the US-based chronic care medical clinic, Snapclarity and Re: Function, additional acquisitions, an update on the Save-On-Foods rollout, new kiosk pharmacy wins, and an update on the Snapclarity pipeline (which we believe includes several large enterprise/payor prospects)."

Echelon Capital Markets analyst Rob Goff wrote in a September 1 report, "With a modest capital outlay, the Company's portfolio has emerged as an integrated healthcare platform with patient showcase capabilities and a significant competitive advantage in its low-cost B2B and B2C distribution capabilities. . .We highlight that the Company's two clinic acquisitions over the past month are on-strategy, establishing key region representation for integrated healthcare while completed on attractive, accretive terms prior to synergies."

Independent financial analyst Matt Badiali wrote on August 10, "Cloud MD is a digital medical service that offers routine care. Similar to Teledoc, it services customers across Canada. It recently bought a U.S.-based mental health and complex care clinic. The company's growth looks great. Bloomberg estimates that Cloud MD will grow revenue by 111% from 2020 to 2021."

What is behind all of this attention?

With the growth of telehealth, "a new company seems to be popping up every morning to participate in this boom and growth, but what CloudMD is doing is just a strategic march along our plan that was developed long before COVID. We're able to accelerate it both with the capital that was raised, and, of course, we are in a good position with an experienced management and team who can distribute our suite of digital solutions," Dr. Mathur said.

"The core, of course, is owning the proprietary technology, and that's why we're able to respond and grow," Dr. Mathur explained. "We've been continuing with both inorganic and organic growth; we're still continuing to acquire clinics and that provides us not only with patients who are going to use our technology, but we're also able to onboard regional expertise."

Over the last year or so, CloudMD has acquired medical clinics in British Columbia and Ontario, and also has acquired pharmacies and placed telemedicine kiosks in pharmacies. It is making its first foray into the United States with the acquisition of a chronic care medical clinic based in Mississippi, and plans to expand its services in the southeastern United States.

The company is also acquiring Snapclarity Inc., an enterprise mental health platform, which will allow its telehealth offerings to include mental wellness.

"A huge majority of mental health issues actually involve either chronic pain or physical issues," Dr. Mathur explained. "A lot of times both of those two aspects have been completely siloed and fragmented. We see the opportunity to be one of the providers and telehealth companies that can address both the mental and physical health at the same time and in a longitudinal way providing continuity of care for our patients."

Dr. Mathur points to the fact that, according to the Centers for Disease Control and Prevention, 90% of the $3.5 trillion expended annually in the U.S. on healthcare is spent on patients with chronic conditions and/or mental health issues.

"By providing a patient centered, longitudinal care team approach, we see better outcomes for patients and earlier intervention, making it possible for patients to take care of their own health, change their behavior, and stay away from emergency departments and the higher cost of seeing patients later when they're sicker," Dr. Mathur said. "For patients, payors and government, the excitement is in these ecosystem approaches."

Dr. Mathur explained that CloudMD is starting in the southeastern region of the U.S. because the area "has the issue of access in rural communities and a greater population distribution of chronic disease and mental health issues, a population that struggles. The models that we have really provide better outcomes and patient care, and that in the end is the name of the game."

In May, CloudMD announced that it was entered into a value added reseller agreement with IDYA4 Corp., "a leader in data interoperability and integration solutions within the government and private sectors." Under the agreement, IDYA4 will resell CloudMD's Livecare technology in the U.S. "IDYA4 provides revolutionary technology solutions within public safety, corrections, health and human services sectors," the company noted. "IDYA4 has an impressive portfolio of clients including, the Bureau of Justice Assistance, U.S. Department of Justice, the U.S. Department of Homeland Security, U.S Health and Human Services, Centers for Disease Control, Experis US (Manpower Group) and Deloitte to name a few."

"The value add is that IDYA4 is a true data integration and security specialist providing technology solutions for years at a high level of state and federal organizations, making it possible for our technologies to be on the government cloud," Dr. Mathur explained. "It makes sense on a security, privacy and service level for our American expansion."

As to the future, "eventually this pandemic is going to go away. But now that we've seen how convenient it is to see a doctor through a video call, why have the hassle of having to go down to the medical office, being in a waiting room with a bunch of sick people?" Dr. Mathur said. "I believe we will see a virtual first hybrid model, where a virtual video visit is, when necessary, followed up by a physical visit. The landscape has been transformed forever."

CloudMD currently has around 114 million shares outstanding and just shy of 144 million fully diluted. On September 2, the company announced an increased $18 million bought-deal public offering led by Canaccord Genuity and Beacon Securities, for 13.1 million shares at a price of $1.38 per share. The offering is expected to close on September 22.

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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with CloudMD. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of CloudMD, a company mentioned in this article.
6) This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.

Additional disclosures:

Disclosures from Echelon Wealth Partners, CloudMD Stofware & Services Inc., Sept. 1, 2020

Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

Important Disclosures:
Is this an issuer related or industry related publication? Issuer.

Does the Analyst or any member of the Analystís household have a financial interest in the securities of the subject issuer? No

The name of any partner, director, officer, employee or agent of the Dealer Member who is an officer, director or employee of the issuer, or who serves in any advisory capacity to the issuer. No

Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No

Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer? No

During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes

During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes

Has the Analyst had an onsite visit with the Issuer within the last 12 months? No

Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No

Has the Analyst received any compensation from the subject company in the past 12 months? No

Is Echelon Wealth Partners Inc. a market maker in the issuerís securities at the date of this report? No

Disclosures from Canaccord Genuity, CloudMD Software and Services Inc., August 31, 2020

Analyst Certification

Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analystís personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analystís coverage universe and (ii) no part of the authoring analystís compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoring analystís knowledge, she/he is not in receipt of material non-public information about the issuer.

CloudMD Software & Services Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to CloudMD Software & Services Inc..br> In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from CloudMD Software & Services Inc.
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or comanager of a public offering of securities of CloudMD Software & Services Inc. or any publicly disclosed offer of securities of CloudMD Software & Services Inc. or in any related derivatives.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from CloudMD Software & Services Inc. in the next three months.

Disclosures are available here.

Disclosures from Beacon Securities, CloudMD Software & Services Inc., September 1, 2020

Does Beacon, or its affiliates or analysts collectively, beneficially own 1% or more of any class of the issuer's equity securities? No

Does the analyst who prepared this research report have a position, either long or short, in any of the issuerís securities? No

Has any director, partner, or officer of Beacon Securities, or the analyst involved in the preparation of the research report, received remuneration for any services provided to the securities issuer during the preceding 12 months? No

Has Beacon Securities performed investment banking services in the past 12 months and received compensation for investment banking services for this issuer in the past 12 months? Yes

Was the analyst who prepared this research report compensated from revenues generated solely by the Beacon Securities Investment Banking Department? No

Does any director, officer, or employee of Beacon Securities serve as a director, officer, or in any advisory capacity to the issuer? No

Are there any material conflicts of interest with Beacon Securities or the analyst who prepared the report and the issuer? No

Is Beacon Securities a market maker in the equity of the issuer? No

This report makes reference to a recent analyst visit to the head office of the issuer or a site visit to an issuer's operation(s)? No

Did the issuer pay for or reimburse the analyst for the travel expenses? No

Beacon analysts are not permitted to own the securities they cover, but are permitted to have a position, either long or short, in securities covered by other members of the research team, subject to blackout conditions.

Analyst Certification: The Beacon Securities Analyst named on the report hereby certifies that the recommendations and/or opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of the report; or any other companies mentioned in the report that are also covered by the named analyst. In addition, no part of the research analystís compensation is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Matt Badiali
Matt Badiali does not own shares of CloudMD, and neither he nor his company has a financial relationship with the company.




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