- Oncidium is one of Canada’s leading health management companies with a loyal client base of over 500 corporate and public sector clients across various industries
- Strategic tuck-in acquisition increases Oncidium’s annualized revenue run rate to $54 million with strong baseline growth of blue-chip customers
- Award-winning technology platform used for workflow management and health care provider engagement
- Rounds out holistic employer health approach with additional occupational health and onsite medical management solutions
- The acquisition is funded by a combination of cash on hand, CloudMD shares, and new credit facilities of up to $62 million
- CloudMD’s overall annualized revenue run rate will be approximately $140 million, with approximately $55 million of cash on hand
VANCOUVER, British Columbia, June 28, 2021 (GLOBE NEWSWIRE) — CloudMD Software & Services Inc. (TSXV: DOC, OTCQB: DOCRF, Frankfurt: 6PH) (the “Company” or “CloudMD”), a healthcare technology company revolutionizing the delivery of care, is pleased to announce that it has closed the previously announced acquisition of Oncidium Inc. (“Oncidium”), one of Canada’s leading healthcare providers to employers. Oncidium has built a difficult-to-replicate ecosystem of over 500 clients servicing more than 2 million employees across Canada and more than 2,000 health care providers and medical assessors.
The acquisition of Oncidium enables CloudMD to evolve its ecosystem of healthcare services through occupational health, medical management and assessment services. COVID-19 has accelerated the need for employers to have robust health and safety solutions resulting in increased demand for new approaches in the workplace. The new capabilities will be a key component of the Company’s Enterprise Health Solutions (“EHS”) Division and provide Oncidium’s clients with access to our new connected healthcare platform. This transformative acquisition expands CloudMD’s national footprint to include 5,500 clients and over 5 million individual lives touched.
Since announcing the binding agreement, Oncidium acquired an organization specializing in independent medical evaluations and health-related services to employers and insurers. The strategic tuck-in is complementary to Oncidium and will provide immediate cost saving synergies through consolidation and integration. The business has also developed an award-winning technology platform that offers workflow management that will be used across CloudMD with our provider networks. The highly accretive business generated $17 million in revenue with positive earnings before interest, tax, depreciation and amortization (“EBITDA”) for the 12-month period ending April 2021.
“With over 25 years in the employer healthcare market, Oncidium is an ideal fit with the overall CloudMD strategy for the Enterprise Health Solutions Division,” said Luciano M. Barbuto, CEO of Oncidium, “We are at a pivotal time where employers are dependent on their solution providers to support their workforce’s health and wellness issues, and to assist in providing leadership and guidance with respect to their ongoing, increasing healthcare costs.”
“It is a time of rapid innovation and accelerated adoption of digital healthcare services by employers,” commented Karen Adams, President of CloudMD. “At the core of our offering is that employers can choose to offer their employees a solution that encompasses medical management through health and safety, onsite medical management and navigation with a focus on cost-effective personalized care plans.”
The addition of Oncidium is immediately synergistic to CloudMD with cross-selling opportunities through a combined network of 5,500 loyal corporate clients and over 5 million covered lives. Oncidium is a rapidly growing business in the fastest growing segment of the Canadian healthcare industry, providing a significant competitive advantage compared to industry peers with a comprehensive platform, addressing whole-person healthcare through assessment, triage and support services across mental health, specialist care, healthcare navigation, short-term and long-term support, and educational resources.
The acquisition of Oncidium, which has an annualized revenue run rate of $54 million with an Adjusted EBITDA margin of 10%, is highly accretive to CloudMD. The acquisition also enables revenue and margin expansion for the Enterprise Health Solutions division1 with an annualized revenue run rate of $70 million with a healthy gross margin of 38% and Adjusted EBITDA margin of 10%. On a consolidated basis, CloudMD has an annualized revenue run rate of approximately $140 million with overall gross margin of 35% and positive Adjusted EBITDA.
1. Enterprise Health Solutions Division plus Re:Function Health Group, a rehabilitation clinic network for enterprise clients, insurers and corporations
Terms of Acquisition
In consideration for the purchase of 100% of the outstanding securities of Oncidium, CloudMD has paid shareholders of Oncidium: (i) $30 million in cash, subject to an estimated negative net working capital adjustment of $524,279; and (ii) $38 million in common shares of the Company, at a deemed price of $2.30 per common share. In addition to the closing considerations, the Company may pay a performance-based earnout of up to an additional $32 million in common shares of the Company or cash, at the election of the Company, and is based on Oncidium meeting certain performance milestones with respect to Oncidium’s revenue and Adjusted EBITDA following closing. Specifically, the Company will pay an additional $13.5 million to the vendors if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2021, an additional $13.5 million if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2022, and an additional $5 million if Oncidium meets or exceeds the revenue and Adjusted EBITDA targets for the year ending December 31, 2023. The common shares will be subject to certain contractual restrictions on trading for a period of 30 months from the date of issuance.
Concurrent with the closing of the acquisition, CloudMD is pleased to announce that it has secured credit facilities of up to $62 million with Oncidium entering into a senior credit agreement with the Bank of Montreal (“BMO”).
BMO will be providing a committed senior term loan of up to $25 million to fund a portion of the initial cash consideration of the transaction with Oncidium. In addition, BMO has also provided an uncommitted senior term loan structured to fund $24 million of any performance-based earnouts over a 3-year period at the time of payment. Lastly, BMO has also provided a committed revolving facility for working capital purposes and an uncommitted accordion facility for future acquisitions in the amounts of $3 million and $10 million, respectively.
The credit facilities will have a term of 3 years and are secured by a first ranking security interest in all the present and future assets and subsidiaries of Oncidium, including a guarantee from CloudMD.
The credit agreement contains usual representations, warranties and covenants associated with a financing transaction of this nature.
After closing the acquisition of Oncidium, CloudMD will have approximately $55 million in cash, that is available to fund future growth.
Echelon Capital Markets acted as the exclusive financial advisor to CloudMD in the arrangement of their credit facilities and in connection with the acquisition.
KES 7 Capital Inc. acted as the exclusive financial advisor to Oncidium in connection with the transaction with CloudMD.
About CloudMD Software & Services
CloudMD is digitizing the delivery of healthcare by providing a patient-centric approach, with an emphasis on continuity of care. By leveraging…