Why CareCloud Experienced a Lower Revenue in 2022 Compared to 2021?

As the US healthcare system is transitioning to a value-based care delivery model, health IT service firms like CareCloud, NextGen, Cerner, Tebra, Veradigm, etc., are lighting the way ahead with their advanced health IT solutions and unmatched services.

As 2022 ended, CareCloud, a Nasdaq listed company, on March 2, 2023 announced its Q4 2022 earnings call. Let’s take a look at the year and see perhaps what lies ahead for the company.

However, before diving into the technicalities, here’s a brief highlight of the earnings call for the full year 2022 and the fourth quarter of 2022:

Summary for the Full Year of 2022

  • $138.8 million in revenue, down from $139.6 million in 2021
  • Income of $5.40 million under GAAP, a new high, up from $2.80 million in 2021
  • $16.3 million in adjusted net income, or $1.07 per share, down from $18.5 million, or $1.24 per share, in 2021.
  • $22.2M in adjusted EBITDA, up $129,000 from $22.1M in 2021

Summary for the Fourth Quarter of 2022

  • $499,000 under GAAP net income versus $3.5 million under GAAP in Q4 2021
  • Revenue of $32.5 million versus $37.5 million in 2021
  • The company had an adjusted net income of $3.9 million, or $0.25 per share.
  • $5.7 Adjusted EBITDA, which is down from $6.1 million in Q3 2021

If we look at these earnings, as stated by CareCloud, the numbers seem like they could have been more impressive. So, what is the reason behind it? The health IT service firm was previously too focused on expanding through acquisitions, but 2022 was the year they decided to let innovation take the front seat and scale organically, which was quite a bold move.

 So, why did the revenue fall from $139.5 million in 2021 to $138.8 million in 2022?

According to CareCloud’s Chief Financial Officer, Bill Korn, the two major clients of Meridian Medical Management at the time of our acquisition (mid-2020) were health systems that had been bought in 2016 and 2018 and were in the process of migrating off of Meridian Medical Management’s platform and onto those of their new owners. 

He added that since a sizable investment had already been made in this move, the company knew it would eventually lose its revenue, even if it didn’t know how long it would take. 

Moreover, by the second half of 2022, both clients had completed their entire migrations.  CareCloud’s full-year revenue for both years without these clients would have been $118.1 million in 2021, and in 2022 it would have been $126.7 million. If they had not had these customers in either year, their sales would have increased by 7% in 2022.

So, if we see CareCloud’s financial performance in terms of its organic growth only, in that case, the results hint towards more positive growth in the coming years as they are expanding their digital health product offerings to better fulfill the changing demands of the US health system and patients.

According to the fourth quarter 2022 earnings call CareCloud’s revenue by product is as follows:

  • 52% revenue from its technology-enabled RCM
  • 24% revenue from professional services
  • 12% revenue from cloud-based software without a service component
  • 10% revenue from managing entire medical practice for clients
  • 2% revenue from other services

Thus, their move from acquisitions to organic growth is likely paying off, and only time will tell what new product offerings they have in store to leverage the growing market demands further.