CareCloud Inc. (CCLD:NASDAQ) has halted payments for its Series A and B non-convertible cumulative preferred redeemable perpetual stock, according to Roth MKM analyst Richard Baldry in a March 21 research note.
Baldry noted that this showcases the company's challenges and that while this cost reduction will impact the company's bottom line in a positive way, more will be needed for the company to stabilize financially.
"If cuts do not also result in worsening revenue retention (and/or if revenue growth were to resume ahead of expectation), a path to dividend payment resumption and equity shareholder value improvement could emerge by 2H24," Baldry said, writing that because of this, he will be maintaining his Buy rating and US$2 target price.
However, he pointed out that current costs are still much higher than they should be compared to the company's stalled revenues. Baldry pointed out that Q323 revenue was down 13% year-over-year at US$29.3 million, and did not quite hit the previous estimate of US$30.4 million. Q4 was not much better, once again, skirting the US$120-122 million expectation with revenues of US$31.4-33.4 million.
Baldry wrote, "We believe that the current focus on cost-cutting is limiting growth opportunities, and its MedSR segment continues to be weak, but we do view the cuts as the necessary point of focus near-term."
Due to this, Baldry's 2024 estimate has been lowered slightly to US$118.0M from US$123.5M.
However, Badlry stated that his 2024 AEBITDA forecast will remain as it is, deciding that the lowered revenue forecast will offset any incremental savings.
With this intense pullback, Baldry pointed out that CareCloud's market cap is only at a 1.6x run-rate revenues, "with equity valued at under US$21M and the bulk of its enterprise value in its US$150M in preferred shares (which we treat as debt) and US$10M in credit borrowings."
While all of this may cause short-term pain, it is believed that these pressures will end in additional cost cutting, which will give the company a stable P&L foundation.
"Our US$2.00 price target reflects our view that cost cutting should result in an improved financial foundation," Baldry said.
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Disclosures for Roth MKM, CareCloud Inc., March 21, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: An Associated Person owns debt or equity securities of CareCloud, Inc.. An Associated Person owns debt or equity securities of Asure Software, Inc.. The price target and rating history for Five9, Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. ROTH makes a market in shares of CareCloud, Inc., Asure Software, Inc., Cryoport, Inc., eGain Communications Corp., LivePerson, Inc., Reservoir Media, Inc., SoundThinking, Inc., Upland Software, Inc., VirTra, Inc and Zeta Global Holdings Corp. and as such, buys and sells from customers on a principal basis. A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of CareCloud, Inc., Cryoport, Inc., FiscalNote Holdings, Inc., OptimizeRx Corporation, SoundThinking, Inc. and Zeta Global Holdings Corp.. Shares of CareCloud, Inc., LivePerson, Inc., FiscalNote Holdings, Inc., Rimini Street, Inc. and Upland Software, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities. Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Asure Software, Inc. and SoundThinking, Inc.. Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has managed or co-managed a public offering for Asure Software, Inc.. Within the last twelve months, ROTH has received compensation for non-investment banking securities-related services from eGain Communications Corp..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
