CareCloud Inc (CCLD) 2021 Q1 法說會逐字稿

Good day, and welcome to the CareCloud, Inc. First Quarter 2021 Results Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Kim Blanche, General Counsel. Please go ahead, ma'am.

Thank you. Good morning, everyone, and welcome to the CareCloud First 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 a Director; Stephen Snyder, our Chief Strategy Officer and a Director; and Bill Korn, our Chief Financial Officer.

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 facts 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.

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. Please refer to our press release and our reports filed with the Securities and Exchange Commission where you will 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 first quarter 2021 earnings presentation. Please visit our Investor Relations site at ir.carecloud.com, click on Events and download the earnings presentation.

Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our first quarter 2021 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

And with that said, I'll now turn the call over to Stephen Snyder. Steve?

Thank you, Kim, and thank you, everyone, for joining us on our first quarter 2021 earnings call. As a team, we are pleased to report another strong quarter as we remain focused on empowering health care providers and health systems with our technology-enabled solutions and we continue to pursue acquisitive and organic growth opportunities.

For the first quarter, we generated revenue of $29.8 million, notwithstanding seasonality that places downward pressure on first quarter revenues across the entire industry. This represents a year-over-year increase of 36%, driven largely by our acquisitive growth. And as we continue to grow our top line, we also increased our adjusted EBITDA year-over-year by 381% to $3.7 million. And at the same time, we increased our adjusted net income by 718% to $2.9 million.

As we look ahead, we are committed to continuing to make bold moves in pursuit of our growing customer base and expansive addressable market. During the first quarter, we are pleased to announce our rebranding to CareCloud, a name that more fully embodies our track record and leadership role in delivering powerful cloud-based solutions to the health care market.

We were also pleased to announce the promotion of some of our key team members who have played critical roles in helping us grow, including A. Hadi Chaudhry, who I've worked side-by-side with as a colleague and friend for more than 15 years and enthusiastically proposed for promotion to the role of CEO.

We believe we're off to a great start in 2021, and we are excited about our position in the market and the unique opportunities that exist for us. I'll now turn the floor over to our CEO, A. Hadi Chaudhry. Hadi?

Thank you, Steve, and thank you, everyone, for joining our quarter 1 2021 earnings call under our new brand, CareCloud. We are incredibly excited about where we find ourselves in our company's journey.

Before I discuss our progress this last quarter, I would first like to take a moment to thank Steve Snyder for his service as CEO over the past 3 years. Under his leadership, we worked together to transform our company and position us to be the leader we are today. We grew our revenues by 258% and customer base by 11x, a feat we are all very proud of. I know I speak for all of us when I say thank you and that we are excited about the role you will be taking on as of a Chief Strategy Officer, focusing on our M&A strategy.

The CareCloud name better represents who we are today and our commitment to providing powerful cloud-based solutions, powering more than 40,000 health care providers across 50 states. CareCloud today provides industry-leading electronic health records, practice management systems, a patient experience platform, revenue cycle management services, deep health care analytics and robotic process automation capabilities and more that drive the business of medicine supported by more than 3,000 team members worldwide.

We are hard at work everyday to help guide our health care clients into the future with modern, easy-to-use technology, paired with disciplined, efficient and comprehensive business solutions. Today's health care leaders are being asked to also innovate, to embrace new payment and care delivery models, reimagine their patient journeys and compete in a new health care landscape, and we are well poised to help.

This hard work and dedication by all of our team members has enabled us to achieve our targets, including a significant year-over-year increase in first quarter revenue of 36% to $29.8 million. Our disciplined approach has allowed us to post our 16th consecutive quarter of positive adjusted EBITDA. Adjusted EBITDA for the first quarter 2021 was $3.7 million, an increase of 381% from quarter 1 2020. We are reiterating our guidance of $133 million to $137 million for this year, which represents growth of 27% to 30% over 2020 revenue. We expect to generate between $22 million to $25 million of adjusted EBITDA for 2021, which will represent growth of 102% to 130%.

As we have continued to move forward as a company and build momentum, we have been focused on scaling our organization to meet the needs of our ever-growing customer base and prepare ourselves for our continued rapid growth. We have focused our efforts on better unifying our functional areas across divisions, including alignment of our sales and marketing teams, product and engineering organizations, and most recently, we further aligned our professional services, client success, operations and corporate integration functions.

These recent changes serve our ability to more fully unify our customer experiences and enhance and optimize critical aspects such as operational integration and functional service delivery. I am confident that our recently promoted leadership will further enhance our abilities to help facilitate increased alignment across our globally distributed teams and bring enhanced value to our customers.

In terms of organic growth, we are thrilled to see continued momentum in our sales and marketing initiatives, which has progressively resulted in new client signings and customer expansion through upsells. Our total new pipeline nearly doubled in quarter 1 of 2021 versus quarter 1 of last year. We believe we are still in the early stages of seeing our focus on sales and marketing efforts fully pay off, but are encouraged by the results the team has been able to achieve so far.

We continue to place top talent within our sales leadership and sales executive focused on our group practice and enterprise segments. As we continue to ramp up these team members, we continue to strive to exit fourth quarter of this year by doubling our average quarterly bookings from last year.

If we look at investment in sales and marketing, we increased our investment from $1.5 million in 2019 to $6.6 million in 2020 and expect to increase our investment this year by another 40% to 60%. We are pleased to see that for every $1 invested, we are yielding approximately $2 of bookings in annual recurring revenue.

Now shifting gears, I wanted to provide an update on our latest acquisition, Meridian Medical Management. We have transitioned all material third-party contractors and offshore business process outsources onto CareCloud's large-scale offshore operations. We continue to drive significant margin expansion and reduce our overall operating expenses. In fact, since the Meridian acquisition in June of 2020, we have reduced Meridian's operating expenses by 33%.

In terms of cost savings, our perspective is that we must always endeavor to find new and innovative ways to drive out costs from our operating model while simultaneously ensuring we improve quality and exceed our client's expectations. One recent example of this approach is from an effort we began last year and were able to fully execute on in quarter 1 this year. This effort was our conversion from a third-party rules engine that was costing us approximately $800,000 on an annualized basis, which powered our highly rated CareCloud practice management system, to our proprietary rule-based system, RBS. This move has given us the flexibility to build rules more quickly, create more complex and unique rules, ultimately allowing us to improve our customers' net collections and clean resolution rates amongst other KPIs.

As we charge ahead in 2021, we expect this to be another record year for us as we continue to expand our offerings, teams and footprint in our market, while maintaining our focus on our operating costs. Last quarter, we gave you an update on all the work we had been doing across a large portion of our product lines and technology assets, including how we are bringing together our solutions to better serve our customers in target markets we address. We continue to execute against these road map initiatives, and we are making great progress.

Lastly, we are always looking for ways to continue to innovate and focus on developing new and innovative solutions. In some cases, we initially incubate these ideas internally with the thought that we can potentially solve our own use cases. One area where we see a tremendous opportunity internally is the work we have been doing to integrate and unify health care data across disparate systems, partners and platforms, not only across over internal systems and platforms, but across our vast ecosystem of partners and integrations.

Our R&D teams have been solving this complex and widely applicable industry challenge with our new integration engine, which we call CareCloud conductor. This is a culmination of several quarters of R&D focus and decades of experience in our interface library. We see CareCloud conductor being able to unlock huge opportunities for us as we continue to achieve companies in our -- as we continue to acquire companies in our space and how we leverage this solution during our system integrations phase. We see CareCloud conductor as just one piece of our overall interoperability solution set. We plan on working to additional use cases and potentially commercializing this solution towards the end of the year. We look forward to keeping you updated on our progress and sharing with you some additional exciting innovations we have on the horizon and providing specific details over the months ahead.

Before I turn it over to Bill, I would like to personally thank all of our employees for their incredible dedication and hard work. Our future is bright. The best is yet to come.

I will now turn the floor over to our Chief Financial Officer, Bill Korn. Bill?

Thank you, Hadi.

First quarter 2021 was another strong quarter of growth for CareCloud. As both Stephen and Hadi mentioned, revenue for the first quarter of 2021 was $29.8 million, an increase of $7.9 million from $21.9 million in the first quarter of 2020.

First quarter results always include an element of seasonality due to the early year impact annual patient deductibles have on the 65% of our revenue that's tied to the money collected by the doctors who are our clients. When patients visit the doctor in the first few months of each year, their insurance has a deductible, so payment to the doctor takes longer and a portion of our revenue is delayed. This is normal in our industry.

Q1 also saw a small decline in patient volumes due to COVID-19, most notably in primary care practices. As many people work from home and many children went to school remotely, we didn't see the normal winter flu season. Up to half of all pediatric visits in the winter are often a result of colds or flu or the increased ear infections, exacerbation of asthma or other things that are caused by colds and flus. And with a healthier population, these visits were down. However, we didn't see much of a deferral of elective procedures as we did during 2020 and the overall decline was a few percentage points. So in total, we believe that most of the impact that COVID has had on reducing industry volumes is now behind us.

The increase in contribution from organic revenue growth in the first quarter included revenue from new clients as well as additional revenue from cross-selling existing clients, both of which will provide a boost to coming quarters as well.

Our first quarter 2021 GAAP net loss was $2 million, an improvement of $538,000 compared to a net loss of $2.5 million in the same period last year. The GAAP net loss includes $2.8 million of noncash depreciation and amortization expenses and $1.3 million of stock-based compensation. The GAAP net loss was $0.36 per share based on the net loss attributable to common shareholders, which takes into account the preferred stock dividends declared during the quarter.

Non-GAAP adjusted net income for the first quarter of 2021 was $2.9 million or $0.20 per share and is calculated using the end-of-period common shares outstanding. Non-GAAP adjusted diluted net income per share is $0.17 using end-of-period shares outstanding plus common shares issuable upon exercise of in-the-money warrants and the vesting of outstanding restricted stock units.

Adjusted EBITDA for first quarter 2021 was $3.7 million or 12% of revenue compared to $767,000 in the same period last year. Our adjusted EBITDA increased by approximately $2.9 million from Q1 2020, in large part due to the cost savings after integrating the businesses the company acquired last year. As we continue to scale our business through both organic and strategic means such as last year's CareCloud and Meridian acquisitions, we were able to spread our fixed expenses over a larger revenue base and generate larger adjusted EBITDA and adjusted net income than ever before.

As of March 31, 2021, we had approximately $21 million of cash with nothing drawn on our Silicon Valley bank line of credit and positive working capital, which is current assets less current liabilities, of approximately $18 million. In addition to our common stock, we also have a Series A preferred stock, which trades on NASDAQ global market under the ticker MTBCP. Our preferred stock pays monthly cash dividends at the rate of 11% per annum. And while it is perpetual, it can be redeemed at our option at any time we choose at $25 per share. We've paid dividends for 66 consecutive months.

I'd like to close by reiterating our forward-looking guidance for fiscal year ended December 31, 2021. Our first quarter revenue is in line with our projections to achieve full year 2021 revenue of approximately $133 million to $137 million, which represents growth of 27% to 30% over 2020 revenue. This includes organic growth from new clients as well as cross-selling new services to existing clients. Year-over-year guidance also reflects the fact that revenue from the Meridian acquisition did not start until mid-June 2020. We anticipate this will be our fifth consecutive year with annual revenue growth of 25% or more, a record few public companies have been able to achieve. Revenue guidance is based on management's expectations regarding revenues from existing clients and new clients acquired through organic growth and through tuck-ins, but excludes the effects of additional material acquisitions.

We still anticipate adjusted EBITDA will be $22 million to $25 million for full year 2021, growth of 102% to 130% over 2020 adjusted EBITDA as the company realizes the benefits of cost savings and a full year of additional scale from our acquisitions of CareCloud and Meridian during 2020. Between the revenue seasonality and the cost reductions which are in place, we are comfortable reaffirming our $22 million to $25 million full year adjusted EBITDA guidance.

I'll now turn the floor over to our Chairman, Mahmud, for his concluding comments.

Thank you, Bill.

We are fortunate to be in our strongest position ever, poised for another record-breaking growth and increasing profitability year. We thank our investors, customers and employees for their continued support.

We will now open the call to questions. Operator?

(Operator Instructions) We will now take our first question from Jeffrey Cohen from Ladenburg Thalmann.

So a couple of questions, trying to better ascertain for our models as far as the cadence for the year on the revenue side and how that correlates with what you found on the deductibles from Q1. Has COVID or any other kind of external metrics kind of pushed that out a little bit? I know that we've previously thought of the cadence being Q2 being more closer to Q1 and then showing more of a back half ramp. Any commentary there or any thoughts on that, please?

Thanks, Jeff. So good question. And I think that the pattern that you suggested seems very appropriate to us. We expect that we'll see a little bit of growth in Q2. We normally do.

I think that, at this point, as we see COVID impacts decreasing, there still is some impact. And again, Q2, typically at least the April time frame, would have sort of the tail end of cold and flu season, which is really not there this year. So you won't see the increase that you -- maybe as much of an increase as you would have seen. But everything that we've seen suggested by Q3, Q4, barring anything unforeseen, we should be back to sort of business as usual.

And of course, we continue to be signing up new customers and cross-selling existing customers, so that continues to grow our revenue base. And of course, anyone that we sign up today, you don't really see any revenue until the back half of the year. So I think the pattern that you mentioned sounds completely appropriate.

Okay. Got it. And then second for me is, Hadi, you had spoken a little bit about the 14% to 16% investing. Could you be more specific as far as where that's showing up? It looks like for the quarter, at least for Q1 and perhaps I'm assuming the outlook, so your G&A was lighter than we expected. So what I'm curious about is the investing in the business of 14% to 16%, where should we see that show up? Is that direct to operating cost? Or is that elsewhere?

This should be sales and marketing. Bill. If you're available, would you like to add specifically there? Was that increase in the sales and marketing? And Bill, would you like to add some color?

Sure. So I think you'll actually, Jeff, see increases. As Hadi said, we continue to add to our sales and marketing team. So you'll see that growing quarter-over-quarter.

We continue to be investing in R&D. And while we try to do that as cost-effectively as possible, you can continue to expect to see some growth there.

And finally, even in terms of direct operating costs, while we always keep a lid on our expenses as we roll out new clients and we have more work to do because our service is very -- both uses technology and people. You'll continue to see growth in direct operating costs, although as a percentage of revenue, it will continue to decrease.

We will now take our next question from Richard Baldry from ROTH Capital.

First, on the organic growth side. Can you talk about how much or how -- maybe how you structure the sales force to go after RCM, which seems sort of like a very different sale than sort of EHR or other solutions? So is it a unified sales approach? Or if it's split, how much do you really push one versus the other? And where are you seeing your better results?

Right. And thank you, Richard. Thanks for the question. It's a good question. And we also have Karl Johnson, who is our Chief Growth Officer, with us, and he can just give some more color and more details to it.

As we mentioned, we started ramping up this team over the last 2 quarters. And we are addressing -- we are -- the whole team is being divided and being addressing the different market segments, and at the same time for different product lines.

But maybe, Karl, I will turn the floor over to you. Maybe you can give some color to more how this team is structured.

Yes. Thank you, Hadi.

So looking overall, RCM, revenue cycle services, we're about half of our sales, software loan in a SaaS model, about 1/3 and force about an 1/8. We have a team of 44 sales and marketing folks. They really are selling both software and RCM. And our focus has really been on expanding into the enterprise-type sales. So we've had a significant growth in that team. And in fact, our advanced pipeline, a good share of that now is due to enterprise sales prospects. And by advanced pipeline, I mean people that are reviewing proposals, negotiating contracts, et cetera.

And my second question would be on the M&A pipeline. Can you maybe talk about what you're seeing there? I mean, how impacted by COVID? Was that in terms of me -- is it tougher to analyze the company's results for 2020 because they are dampened as well? Maybe there's some reluctance to sell until things sort of rebound or maybe there's more impetus to sell because of the challenges of 2020. So I'm curious, and maybe even valuations, things you're seeing, just so we get an idea for how likely it is to see more or less M&A activity in 2021.

Great question. Thanks, Rich, for asking it. And maybe breaking down that question into a couple of the parts that you asked in particular. First of all, with regard to analyzing a company, is it tougher? Maybe not tougher per se, but definitely requires us to look at an increased period of time. It's important for us to go back and look at multiple years and then to try to understand the COVID period in view of those trends that existed prior to COVID. So it certainly requires a little bit more in terms of analytical gymnastics as it were to make sure that we're really best understanding the COVID impact as opposed to just a continuation of those same trends.

With regard to the reluctance from a seller's perspective, I think you hit the nail on the head. There has been some reluctance relative to some of the companies that we have historically targeted. We continue to target those companies where we really see an opportunity to add value. We see an opportunity to be able to address something in the existing operations or business model of that company that we believe we can address as a combined company.

Companies that have been more distressed, it's been our observation that those companies have been able to remain in business by virtue of some of the governmental incentives, the PPP loans, some additional reluctance on behalf of creditors to enforce their rights, forbearance from lenders and the like. So that's provided perhaps a bit of an artificial extension of the time line to exit, but we believe that we're probably rounding the corner with regard to those sorts of COVID-related extensions of time. In fact, when we step back and look at the opportunities more holistically, we think, if anything, those opportunities have actually increased overall.

If we think about, in particular, to the first part of your question, the overall pipeline, we really continue to believe that the same thesis we've had for the last 15 years or so, that's really been driving our acquisitive growth. The thesis being that the revenue cycle management and also health care IT markets are heavily fragmented and right for consolidation continues to be the case today. And we really continue to really deploy and pursue these opportunities with that same disciplined approach we've been taking over these years.

And we're really optimistic that as we look -- think about 2020, representing probably the 14th year or 15th year of our M&A strategy campaign, represented the 2 largest acquisitions in our history. And we really, as Hadi mentioned, we believe our best days are ahead, whether it be organic growth or acquisitive growth or the continued growth of our overall platform.

We will now take our next question from Marc Wiesenberger from B. Riley Securities.

With the more than 40,000 providers that you're serving, can you update us on the current net patient revenue under management and what your expectations are for growth of that in 2021?

Thank you, Marc, for the question. So this 40,000, the providers, it's coming from a whole combination of the services that we are offering. One is from the revenue cycle management. Others are using our -- the SaaS-only solution. And when we talk about the RCM, most of those customers out of the 40,000, they do also use over any of the proprietary technology sets that we have. And then we have a good chunk of the providers that are using our BI solution, probably close to maybe less than around 40%, 45% on the BI, the solution that we have. And then we have the providers who are using an RPA, robotic automation process, set in their GPUs and the like.

From the revenue standpoint, yes, still the most of the revenue is coming from the RCM plus the package, which is RCM plus technology, and often followed by our SaaS-based model and then all of these of other tools. And many of our patient engagement solutions from the from the patient standpoint, whether that's Breeze or others, that's currently are still being sold as a package solution. But having said that, there are certain clients, especially on the CareCloud health side, the company we acquired, they are directly monetizing the patient experience management using the Breeze. But to summarize the answer towards your question for the sake of -- to continue for the year, we believe that still the most of the revenue will keep on coming from RCM plus our technology solutions together.

Got it. Okay. So a big topic lately has been the shift toward in-home care. I'm wondering if you can talk about the offerings that you have around that space and if you expect to kind of develop further to help that growth there?

Sure. Great question, Marc. As you remember, before, the 3 cohort was at least probably a year before that we already launched our first telehealth solution. That's, of course, one of the tools that enables the patient and the providers to conduct or perform in-home care.

We -- post-COVID, not only we launched the next advanced version of our data telehealth solution on MTBC's proprietary at that time the platform, the CareCloud -- the then CareCloud or the company that we acquired, we integrated quickly our telehealth solution in that platform. So today, our offering includes whether that's our proprietary platform on the talkEHR that we have been using for the last couple 2 decades, and then in the next version of the initial -- the practice management software or our new platform under this CareCloud, the telehealth is part and parcel of the same solution. So most of that is being sold similar to other package deal as part of an overall offering. With some exceptions there, some of the clients would only would like to use -- continue to use only the telehealth version of it.

On the other -- one of other perspective, interesting part is what we have done from the physical therapy space. There's one large enterprise clients who we work with. They provide home health therapy services across multiple states. And we came up with multiple -- not only from the RCM standpoint, a customized, developed integrated solution was provided to help them support that home health care with the help of apps, web-based system, fully integrated with the existing EHR and then MTBC's practice management system. I hope that answered your question.

Got it. And just one final one for me. Another major theme is the shift from fee-for-service towards value-based care. What percentage of your RCM providers kind of operate under the value-based care regime? And I guess, as that number does potentially increase as we move forward, what are the potential impacts to the top line?

Again, another great question. I think this model, we believe, is the way we are looking at it. Still, it's an infancy stage from the adoption point of view. We do not have exact number with us, but I would say our contribution towards this margin will be so fractional, less than 2% or 3% at this point.

So for the -- at least for the foreseeable future for the next few years, we don't see a big shift in terms of -- from our revenue, the way the revenue is calculated because of this switch in the industry. But at the same time, we -- our systems we do support. We already have the number of search, including even some of the certifications and we can service the clients who wants to go for this model of -- instead of a fee-for-service model, a quality-care-based model. Thank you very much.

We will now take our next question from Allen Klee from Maxim Group.

Could you give us some color or guidance on the outlook for CapEx and capitalized software for '21?

Sure, Alan. So as you know, GAAP requires us, when we're doing work on new products that are not yet generating revenue, we're always required to capitalize that expense. And so we'll continue to see that.

I think if you looked at first quarter of 2021, you'll see that there was roughly $1.5 million of development that was capitalized, which was very similar to what we saw in first quarter of 2020. So I anticipate that you'll see numbers that are somewhat similar to that as we go through the year.

Again, as we continue to enhance the capabilities that we got through last year's acquisitions and integrate our core platform that we developed internally with the platform that we got both from CareCloud, which we bought in January of last year, and Meridian that we bought in June of last year.

My last question is how much of the ATM has been exercised so far?

We have not started to sell anything off the ATM. The ATM that you're referring to when we filed a -- when we changed our name to CareCloud, we were now large enough that we were eligible to file a shelf registration statement without the restrictions of what we call the baby shelf rules that we were operating under in the past. So we filed a new S3, which was declared effective by the SEC.

As we did that, we included the facility to allow us if we chose to sell shares of common stock at the market. However, and I'm sure I sound like most CFOs of most public companies, we look at our stock and say there's no way we're selling shares at this price, at least not today. So we've got a capability that's available to us at a point that we're excited about the price that the shares are receiving. We may choose to exercise the capabilities there, raising capital. That could be used to help us to grow the business, again, both organically and potentially through acquisitions.

And as mentioned, our preferred stock at this point is fully redeemable. And it's been a great source of capital for us without having to sell shares at too low a price. Well, when the price is right, we might start selling common and we might start redeeming preferred. You never know.

We will now take our next question from Gene Mannheimer from Colliers Securities.

Congrats on a good quarter. I want to just continue with the organic growth theme for a moment. Can you talk about the percentage of bookings that you're generating from net new customers?

Thank you, Gene. This is a good question. And again, Karl can just give some more color.

So in terms of -- from the percent, if you are thinking about a difference between the upsells versus the new customers, so if you look at the numbers today, so we are about -- if you look at the last 2 quarters, collectively, about 50% of those are coming from the new customers and there about another 30% that comes from some of the existing practices growing by adding more and more other smaller groups. So we continue to be able to go and sell them and they continue to add more and still keep bringing those new customers to us. About 20% is coming as of the bookings that were through and upsells over the last 2 quarters.

Karl, would you like to add any further color to it?

No. I think you covered that well, Hadi. But I think it's worthwhile to note that we do see a tremendous opportunity where we're providing revenue cycle services to roughly 1/4 of our client base that are on our software platforms, practice management software platforms and a very strong focus of our sales efforts is on selling to existing clients. In fact, we have a dedicated team to do so. Thank you, Hadi.

Yes. Good color, both of you. And if you could comment on some of the attrition trends in the business? Are you seeing them higher or lower? I know with Meridian coming up on about a year old now, has most of the expected attrition from that transaction already played itself out?

Yes, good question, again, gene. So as you know, in this industry, in our space, a 12% attrition is considered to be still in an acceptable range due to the various factors. The last year, as we disclosed, we -- our attrition was close to about 9.8%, 9.9%. And for this year as well, so far, we're happy to report we are, if not exactly, if not the better, we are tracking towards the same number. So we have not seen any difference much in terms of the retention. If there is a difference, it is towards the positive side.

That's a good trend. And last one for me then is an update on your Force program. I thought I heard Karl mention that it's maybe about 1/8th of sales. Are there any new client arrangements to speak of here? And how do we think about the overall contribution to revenue? Is it greater than 5% of company revenue, for example? And that's it for me.

Great. And again, Gene, we typically do not publicly disclose the numbers in terms of the revenue for these specifics. But maybe, Karl, you can talk about an overall -- the Force opportunities.

Thank you, Hadi. Yes, actually we did see Force being roughly ninth of the most recent sales numbers. We do think that there's been opportunities as we really just launched Force in the second half of 2019. And the primary sources of revenue there, workforce augmentation, white-labeled software applications. What we are seeing is it's a very natural outgrowth of our acquisition strategy. So a number of the deals in our pipeline have come from that. So it's somebody who we'd looked at for an acquisition that might not have been a great fit, but we can go to them and say, we can provide you with certain resources, and that's been, I think, a home run for Force.

We will now take our next question from Kevin Dede from H.C. Wainwright.

Hadi, I'd like to go back to Force and just sort of understand how you've integrated that into your sales and marketing effort? I'm glad Karl's on the call. Maybe you can throw a couple of words in on it. And maybe, Steve, if you could comment on it, too, given that it sort of crosses over into enterprise software sales as well as driving the M&A effort?

Kevin, and thank you for your question. Maybe I can again start and then Karl can take it over. Again, the one thesis is, as you understand, we have a global workforce of about 3,000 employees. And not only on the operations side, we have a 600-plus it R&D team members. So the whole logic behind starting this Force was the same, providing the offshore combination of an offshore and onshore resource to workforce, not only on the billing operations side, but at the same time, we were possible on the technological side from the IT R&D resource perspective. So that's how we have started. We believe we are in a best position since -- because of this proven track record of over the last 20 years with the expertise and the client retention and arability of being working over 50 different platforms. So I'll turn over to Karl for any other further addition he would like to do.

Yes. Just to provide you some color on the sales process for Force, with the development of the large group, what I would call it, sales opportunity, which is selling into practices that are an enterprise level, we had spent a good bill of effort training up our existing large group sales teams, which is 6 people plus myself, where any time that we're in talking to somebody about a large software deal, we also can offer them labor in addition to that. And actually, we've had some very recent successes in our sales process by doing so.

So I think that's really kind of a -- it's now become an integrated sales process rather than an isolated one where we're looking not only at new deals, but also with existing clients to say, is there an opportunity for us to provide you some back-end services. We've also seen a very significant interest in us providing white label software applications to billing companies and the like and EHR companies. Thank you, Hadi.

And I'll just throw in one last thing. And thanks, Kevin, again, for the question. And you're absolutely right. There's a certain synergy between the MTBC Force opportunities and the acquisitive growth opportunities. And I think we continue to see that.

One interesting trend that's really perhaps more driven by kind of the unique time that we have listed over the last year or so really relates to the fact that loan forgiveness, for instance, under PPP loans, which are very common with regard to the smaller RCM companies that are good candidates (inaudible). So that loan forgiveness is really, in large part, conditioned upon retaining employees.

And part of the thesis or the opportunity around Force is really to reduce some of the onshore labor costs in favor of leveraging less expensive global team members and technology. So I think that's been -- while the kind of holistic industry and business trends are actually moving increasingly in phase in the direction of the Force opportunity, I think onshore labor costs continue to go up. I think the PPP loans and other similar incentives that have done a good job in terms of encouraging employers to retain employees, I think it's a bit of a countervailing trend or win that has really stunted the momentum temporarily in that regard.

But in any event, back to your main question, absolutely, those -- that synergistic relationship between the 2 continues to exist, and we think will be a powerful driver on both sides of the equation as the year progresses in future years.

Hadi, one other one for me. I don't understand, I guess, how you intend to commercialize the consolidator package that you talked to in your prepared remarks. It seems to me that it's one of your competitive advantages and differentiators. Could you just sort of explain a little bit how you can translate that to something that you might offer someone else?

Sure. Great question, Kevin. Let me just give some little background to it, and I'll come to answer your specific question. We are very excited about this new tool as part of our broader plans for a suite of interoperability products. This CareCloud conductor, it is an integration and interoperability engine. And while this concept, to your point, is not necessarily a new one in the market, but we believe that our approach to how we are trying to achieve this capability would be.

We are excited about this new solution for a variety of different reasons. As you may know, there are many different type of systems that we must integrate and the industry integrates with in order to best serve our end customers. These can be anything from other practice management systems to EHRs, to labs and state registries. Traditionally, this is being done using many standards such as HL7, Fire or many other proprietary standards.

So over the years, we have had to build so many of these interfaces in support of our customer needs. So with CareCloud conductor, now we are able to unify these interfaces into a single view and simplify this experience for our teams internally and cut the time it takes to integrate with other systems significantly.

This also provides the ability to centralize management of all inbound and outbound data streams. It also give us monitoring visibility on the services to provide the cost across this entire process. Pre-flowing of data can within all the CareCloud organization, whether it's Meridian and a number of others that we have acquired. It's a reusable and streamlined third-party vendor integration via a proprietary interface library that we are calling them now, so all this while simultaneously reducing our reliance on third-party integration companies or technologies and the cost associated with them.

So from the -- this -- on the internal side, this will absolutely help us by cutting the time it takes to make for interface live. We will have to spend less cost in terms of the man hours and net complicated in terms of the future implementation.

So yes, this product is not completely and entirely new in the market, there are a number of other similar solutions that exist out there, but I think in terms of -- when you look at even from the pricing standpoint, similar to any of our other offerings, we should be able to offer that, we believe, at a fraction of the cost of any other company or the vendors that are offering this division. So on one side, we have a library of integrated or integration libraries, the interfaces written over the last 2 decades, and not only with CareCloud's original MTBC company, but with these other companies we have acquired. So we have consolidated all of that in one. So that we believe will be one advantage -- competitive advantage when we try to commercialize this product along with the cost impact.

We will now take our next question from David Larsen from BTIG.

Can you talk about your M&A plans going forward? Are there any products in the market that you feel like would fill a need in your portfolio of solutions that you have now? And I'm thinking along the lines of perhaps like payer-facing or planned-facing or soft insured employer-facing solutions where you can charge like a PM rate and get into like remote patient monitoring. There's been a lot of chatter about that recently obviously with the Wall Street Journal article that was published earlier this week. Just any thoughts there would be very helpful.

Thanks for your question, David. And as you alluded to, historically, our acquisition targets have really come from either the revenue cycle, electronic health record, PM, GPO, BI-type verticals. We're actively looking for companies still in those target markets where we really think there's a significant opportunity and where we can really add value. But we are also, to answer your question, exploring other verticals, things like revenue, integrity or pop health and patient engagement, scheduling analytics, navigation, network health, the whole variety of other verticals where we also see an opportunity to add value.

Now from an acquisition perspective, the primary driver of that focus is not per se to acquire the technology. That's -- in some instances, there's some real value at it and CareCloud and Meridian are good examples of that. But that really probably is not the main strategic driver with more than 400 IT R&D team members globally, including many talented team members also here in the U.S. in addition to those, we have offshore who are employed by us. We really have the capability to develop the technology that we believe will continue to make us competitive in this space and help us stay on the leading edge when it comes to the opportunities.

We will now take our next question from Michael Galantino from Chapin Davis.

Great quarter. This is for Hadi and Steve specifically. Can you give us an update on how successful CareCloud MTBC has been and integrating the technology from the acquisitions last year, Meridian specifically? And then obviously, the CareCloud acquisition. I mean, how has it been putting the pieces of the puzzle together?

And more importantly, the second question I have is, are there opportunities to cross-sell new capabilities to your existing clients? And I assume that was the game plan all along, but you can elaborate on that a little bit?

Mike, thank you for the question. And yes, our technology integration is, we believe, is going very well according to our plan. We continue to grow our overall value proposition extensively and expand the main category products we offer between the CareCloud company we acquired or the Meridian Medical Management from revenue cycle management to practice management software to industry-leading health care business intelligence tools in Precision BI and our award-winning patient experience management platform Breeze.

We continue also to find new and exciting opportunities with our robotic process automation bots as well. We have given examples of how we are integrating Breeze, for example, with talkEHR for our small practice segment. The Breeze was the technology for the practice management that the company, [serial], we acquired. They had dispropriate products that we have been able to now almost implemented the Breeze integration with talkEHR with some of the clients being -- trying to use an evaluation version.

We are also leveraging our RPA bots initially internally because that we believe we are, from one perspective, the proof of the concept comes in. At the same time, that helps us eliminate some of the mundane tasks internally. We've been to significantly improve the operational workflows. And then in addition to that, from the cost standpoint. At the same time, that RPA bots are -- we are currently working at least with 2 other large enterprise groups that we have between the different platforms, and we're in the process of integrating those microbots with those clients.

In the same way, there are certain, like, let's say, talkEHR and CareCloud, the EHR and the practice management, which basically serves different market segments. So we continue to offer talkEHR to the small practices. And at the same time, in some cases, to the medium-sized groups. And we continue to offer -- we continue to go-to-market for the CareCloud platform for the medium to large enterprise group. So those are states as it is. So on one side, there is a strategy what to sell in which market segment and on the other side, there is an interoperability and integration between the different technologies that is taking and happening, and we continue to sell between the different markets.

Do you actually -- you break those numbers out in terms of sales from existing clients from new technology that you've acquired through these acquisitions? Or is that not broken out?

No, we do not publicly release those number -- disclose those numbers.

It appears there are no further questions at this time. Ms. Blanche, I will pass the call back over to you for any additional or closing remarks.

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

Thanks, everyone.

Thank you.

Thanks.

This concludes today's call. Thank you for your participation. You can now disconnect.