Ms. Karen Adams reports

CLOUDMD REPORTS SECOND QUARTER 2023 CLOUDMD CONTINUES TO DRIVE EXECUTION WITH ADJUSTED EBITDA APPROACHING BREAKEVEN

CloudMD Software & Services Inc. has released its financial results for the second quarter ended June 30, 2023.

Karen Adams, chief executive officer of CloudMD, commented: "Our performance during the second quarter focused on driving profitable growth in the near term and executing our strategic plan to reduce costs and divest margin-dilutive businesses. With our core assets in place, we are focused on expanding our pipeline. Importantly, after the quarter, we secured a contract with a United States hospital system customer for remote patient monitoring. This provides us with a testimonial to support new large pipeline growth opportunities in a $4.4-billion addressable market and paves the way for long-term sustainable growth. The second quarter results provide confidence that we are delivering on expectations."

Prakash Patel, chief financial officer, added: "The incremental progress that's been achieved this year sets the stage for a dynamic second half of 2023. Both gross margin and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] have seen continuous improvement quarter over quarter and our goal for adjusted EBITDA break-even in Q4 2023 is within reach. Aligning our processes and controls to build operational efficiency while continuing to support our growth becomes a greater priority now that our core assets are in place."

Second quarter 2023 financial highlights:

• Q2 2023 revenue was $23.2-million, compared with $22.9-million in Q1 2023 and $26.2-million in Q2 2022. Year-over-year organic growth in health and wellness services was 7 per cent, normalizing for non-recurring COVID-19 contracts in the prior year. The company divested the remaining electronic medical records clinic billing business and commenced a process to divest VisionPros.
• Q2 2023 gross profit margin was 38.2 per cent, compared with 36.9 per cent in Q1 2023 and compared with 33.1 per cent in Q2 2022. Gross margin expansion was driven by improved operating efficiency in the delivery of care.
• Q2 2023 adjusted EBITDA of negative $700,000, compared with adjusted EBITDA of negative $1.4-million in Q1 2023 and compared with negative $3.2-million in Q2 2022. The improvement in adjusted EBITDA from both Q1 2023 and the prior year was driven by gross margin expansion and strong cost control across the organization.
• Net loss from continuing operations in Q2 2023 was $5.2-million compared with a loss of $11-million in the prior-year comparative period.
• Cash balance in the second quarter was largely unchanged. Normalized cash outflow for the second quarter was $3.1-million. As of June 30, 2023, the company had $18.8-million of cash and cash equivalents.

Second quarter and subsequent corporate highlights:

• On April 3, 2023, CloudMD announced the launch of its on-line prescription renewal in the United States.
• On April 4, 2023, CloudMD announced its partnership with Mohawk Medbuy to offer its full suite of services to hospitals across Canada.
• On April 10, 2023, CloudMD announced that Dhruv Chandra had joined the company as the new chief technology officer.
• On April 12, 2023, CloudMD announced an expanded partnership with Benefits Alliance to offer its full suite of Kii services to employee benefits plans across Canada.
• On May 11, 2023, CloudMD announced a partnership with XTM to bring employee assistance program and telemedicine to service industry workers.
• On June 7, 2023, CloudMD announced the appointment of Prakash Patel as chief financial officer.
• On July 4, 2023, CloudMD announces the divestment of non-core electronic medical records and practice management business.
• On July 6, 2023, CloudMD announced the results of Ontario therapist-assisted Internet-delivered cognitive behavioural therapy program.
• On Aug. 23, 2023, CloudMD announced a contract for remote patient monitoring program with major U.S. hospital system.

Outlook

Two thousand twenty-two was a transition year as the company focused on operationalizing, aligning and rationalizing historical acquisitions. The company has largely completed that goal and is increasing its focus on cross-selling and winning new health and wellness services customers while expanding its remote patient monitoring in the United States to drive organic growth. The company sees significant opportunities to continue improving the cost of delivery of care and efficiency across the organization to improve margins.

During Q2 2023, the company saw positive trends continue with improving gross margin, adjusted EBITDA and cash usage.

The company expects low-double-digit revenue growth in 2023 based on the fourth quarter of 2023 forecast compared with the fourth quarter of 2022. The company sold $2.3-million in multiyear contracts in Q2 2023 and has a robust growing pipeline that will continue to drive revenue growth in 2023. The company's announcement, subsequent to the second quarter of 2023, of a contract to provide remote patient monitoring for a major U.S. regional hospital system's Medicare patients has the potential to change the financial profile of the organization. The company believes that if the contract is scaled up over the initial two quarters, it can deliver an average of $3-million to $4-million in revenue per quarter and the opportunity to participate in the global remote patient monitoring market. This growth would be incremental to the low-double-digit growth target it has for its broader portfolio.

During the first half of 2023, the company actively identified and actioned approximately $4-million in annual cost reductions. These synergies come with severance costs, or working notice, which will continue to impact cash flows in the second half of 2023.

The cost savings achieved in the first and second quarters of 2023 have led to improvements in the company's adjusted EBITDA. The company expects to generate positive adjusted EBITDA1 in the fourth quarter of 2023.

The company believes its cash position of $18.8-million will provide sufficient liquidity to finance its obligations and organic growth. The company will continue to prudently manage expenditures and seek further efficiencies in its cost structure.

Select financial information

All results were prepared in accordance with international financial reporting standards (IFRS) as issued by the International Accounting Standards Board.

Summary of results from last four quarters

An attached table provides a summary of the company's financial results for the four most recently completed quarters. Financial results exclude all divested or held-for-sale assets.

Second quarter 2023 conference call and webinar details

Date and time:   Monday, Aug. 28, 2023, at 9:30 a.m. Eastern Time (6:30 a.m. Pacific Time)

Financial statements and management discussion and analysis

This news release should be read in conjunction with the company's unaudited condensed interim consolidated financial statements and accompanying notes and management discussion and analysis (MD&A) for the three months ended June 30, 2023, and 2022, copies of which can be found under the company's profile on SEDAR.

About CloudMD Software & Services Inc.

CloudMD is an innovative North American health care service provider focused on empowering healthier living by combining leading-edge technology with an exceptional national network of health care professionals. Every day, the company's employees and health care providers live CloudMD's values of delivering excellence, collaboration, connected communication and accountability to solve complex health problems. CloudMD's industry-leading workplace health and well-being solution, Kii, supports members and their families with a personalized and connected health care experience across mental, physical and occupation health. Kii delivers superior clinical health outcomes, consistent high engagement and measurable ROI (return on investment) for payers such as employers, educational institutions, associations, government and insurers. CloudMD is also a market leader in workplace absence management through data-driven prevention, intervention and return-to-work programs.

In addition, the company sells health and productivity tools to hospitals, clinics and other health care service providers to empower them to deliver better care.

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