CareCloud Q2 2026 Earnings Report

CareCloud EPS Results

• Actual EPS: $0.06
• Consensus EPS: $0.02
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

CareCloud Revenue Results

• Actual Revenue: $31.88 million
• Expected Revenue: $31.85 million
• Beat/Miss: Beat by +$29.00 thousand
• YoY Revenue Growth: N/A

CareCloud Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 8:30AM ET

CareCloud (NASDAQ:CCLD) is a healthcare technology company that provides cloud-based practice management, electronic health record (EHR) and revenue cycle management (RCM) solutions to medical practices and health systems. Its flagship offering, the CareCloud Central platform, combines clinical, financial and administrative workflows into a single, unified system. The platform includes modules for scheduling, billing, coding, patient engagement and telehealth, enabling practices to streamline front- and back-office operations and improve overall practice performance.

Founded in 2009 and headquartered in Miami Beach, Florida, CareCloud serves small to mid-size physician groups and specialty clinics across the United States. The company supports a broad range of specialties, including primary care, cardiology, orthopedics and behavioral health, among others. Over the years it has expanded its geographic reach through strategic partnerships and offshore support centers, while continuing to enhance its cloud-native technology with analytics, interoperability and patient engagement tools designed to meet evolving regulatory and clinical requirements.

CareCloud is led by founder and Chief Executive Officer Albert Santalo, a healthcare technology entrepreneur with extensive experience in digital health and practice automation. Under his leadership, the company has pursued both organic product development and targeted acquisitions to broaden its service offerings. CareCloud’s management team and board include healthcare, technology and finance veterans who drive the company’s mission to deliver scalable, data-driven solutions that help medical practices optimize revenue, reduce administrative burden and improve patient care.

CareCloud Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue grew 16% year over year to $31.9 million, while recurring technology-enabled solutions increased to approximately 75% of revenue from 69% a year ago. Management also reported $5.7 million in quarterly free cash flow and the ninth consecutive quarter of GAAP profitability.
• Positive Sentiment: CareCloud completed the redemption of its Series B preferred stock using a $50 million credit facility, eliminating approximately $3.3 million in annual preferred dividends with no common-share dilution. The move is expected to improve the portion of earnings attributable to common shareholders, although debt interest will increase.
• Positive Sentiment: The acquisition of Empower Healthcare & Compliance Partners expands CareCloud into compliance, audit defense, and regulatory readiness, with plans to launch AI-enabled compliance software in fall 2026. Management said the near-term financial contribution will be limited, but it sees cross-selling and recurring SaaS potential across both CareCloud and Empower customers.
• Neutral Sentiment: CareCloud reaffirmed 2026 guidance for revenue of $128 million to $132 million, adjusted EBITDA of $29 million to $31 million, and GAAP EPS of $0.20 to $0.23. Achieving the outlook requires a stronger second half, supported by recurring-revenue growth, enterprise expansion, cross-selling, and lower integration-related costs.
• Negative Sentiment: Second-quarter GAAP net income fell to $1.1 million from $2.9 million a year earlier, while adjusted EBITDA declined to $5.9 million from $6.8 million. Management attributed the pressure to higher AI and R&D investment, acquisition integration and amortization costs, and interest expense from the preferred-stock refinancing.

Presentation

[Operator]

Greetings. Welcome to the CareCloud, Inc.'s second quarter 2026 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Brendan Covello, Corporate Counsel. Thank you, Brendan. You may begin.

[Brendan Covello, Corporate Counsel at CareCloud]

Good morning, everyone. Welcome to CareCloud's second quarter 2026 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman, Stephen Snyder, our Chief Executive Officer, A. Hadi Chaudhry, our Chief Strategy Officer, and Norman Roth, our interim Chief Financial Officer and Corporate Controller. Before we begin, I would like to remind you that certain statements made during this 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 the statements of historical fact made during this 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 acquisition.

[Brendan Covello, Corporate Counsel at CareCloud]

Forward-looking statements may sometimes be identified with words such as "will," "may," "expect," "plan," "anticipate," "approximately," "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 to 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 comprehensive discussion of our performances and factors that could cause actual results to differ materially from these forward-looking statements.

[Brendan Covello, Corporate Counsel at CareCloud]

For anyone who dialed into the call by telephone, you may want to download our second quarter 2026 earnings presentation. Please visit our investor relations site, ir.carecloud.com, click on News & Events, then click on Events, and under second quarter 2026 results conference call, click on the earnings presentation to download. On today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our second quarter 2026 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. With that said, I'll now turn the call over to CEO Stephen Snyder. Steven?

[Stephen Snyder, CEO at CareCloud]

Thank you, Brendan, and good morning, everyone. The second quarter reflected disciplined execution across our strategic priorities and another quarter of meaningful progress against our long-term plan. We delivered 16% revenue growth year-over-year, our ninth consecutive quarter of positive GAAP net income, completed the full redemption of our Series B preferred stock, and entered an entirely new market, healthcare compliance and audit defense, through our acquisition of Empower Healthcare & Compliance Partners. This morning, I'll take you through the quarter's results, the redemption of our Series B preferred stock, our entry into the compliance market, where we are taking the company, and the path to our full-year guidance. Let me start with the numbers. For the second quarter, revenue was $31.9 million, up 16% from $27.4 million in the second quarter of last year.

[Stephen Snyder, CEO at CareCloud]

During the first half of 2026, revenue was $63.2 million, up 15% year-over-year. Just as important as our overall growth is the composition of that growth. Our recurring technology-enabled business solutions represented approximately 75% of revenue this quarter, up from 69% a year ago. That continuing shift towards recurring subscription-based revenue is foundational. On the bottom line, GAAP net income was $1.1 million, our ninth consecutive quarter of GAAP profitability, and adjusted EBITDA was $5.9 million. Both are lower than the prior year quarter for reasons that reflect investment strategy rather than margin erosion. Amortization and integration costs from the acquisitions are driving our growth. A more than doubling of our R&D expense as we accelerate AI development, with more of that work now expensed rather than capitalized, and new interest expense on the facility that retired our high-cost preferred stock.

[Stephen Snyder, CEO at CareCloud]

In each case, we traded near-term reported earnings for durable earnings power, and we expect that trade to begin paying off through the second half of the year. Shifting our focus now to our capital structure, the recent retirement of our Series B preferred stock marked the most significant simplification of CareCloud's balance sheet since our IPO. On May 15th, we redeemed 100% of our outstanding Series B preferred stock, funded through a $50 million credit facility with Citizens Bank and Provident Bank, with zero dilution to common shareholders. That single step eliminates approximately $3.3 million of annual preferred dividends. With it, the preferred overhang that shaped our capital structure for many years. Let me take a moment to explain what this means for our financial results and, more importantly, for our shareholders moving forward.

[Stephen Snyder, CEO at CareCloud]

Through the first six months of 2026, we paid approximately $6.4 million of preferred dividends. With the Series B fully redeemed, the substantial majority of that preferred dividend obligation is now permanently behind us. Beginning in the third quarter, far more of every dollar of net income we generate flows through to our common shareholders, reduced only by the cost of the debt that replaced the preferred, which is meaningfully less costly. That structural shift, combined with our operating plan, is an important part of the earnings per share outlook we are reaffirming today. That's the balance sheet. Let me now turn to the business we're building on top of it, starting with our most recent acquisition. In May, we acquired Empower Healthcare & Compliance Partners, a full-service compliance and advisory firm founded by industry veteran Mitchell Brie, who joined us as President of Empower.

[Stephen Snyder, CEO at CareCloud]

The transaction was funded from operating cash flow and follows the same disciplined tuck-in playbook we have now executed more than 20 times since our IPO. Empower takes CareCloud into an entirely new category: compliance, audit, defense, and regulatory readiness. At precisely the moment demand for those services is accelerating. The providers we serve are contending with rising payer scrutiny and audit activity, industry-wide denial rates, expanding privacy and security obligations, and a new layer of governance questions raised by the very AI adoption now sweeping through healthcare. Compliance has moved from back-office checkbox to an operational priority. Empower gives our providers a trusted partner for all of it, delivered through the platform they already rely upon every day. We saw that value proposition in action within a few weeks of closing.

[Stephen Snyder, CEO at CareCloud]

In June, Empower's certified coding and compliance team helped a wound care provider reverse more than $1 million in alleged overpayments in a successful audit defense before a hearing and appeals board. That is the kind of concrete, high-stakes outcome that builds durable client relationships, and it is a story we can now tell across our entire client base. Looking ahead, we plan to launch AI-enabled compliance software solutions during the fall of 2026, converting Empower's expertise into a scalable, recurring revenue model. This will include a tiered subscription-based proactive compliance program driven by our AI-powered SaaS platform and supported by Empower's certified compliance professionals. It is the same motion we have run with every acquisition: acquire trusted capability, integrate that capability into our platform, and amplify it with AI.

[Stephen Snyder, CEO at CareCloud]

That motion, acquire, integrate, amplify with AI, is a thread that runs through everything we're doing because our AI portfolio continues to scale. Hadi will walk you through our AI progress in a moment. What I'll offer here is the market context because the environment is moving decisively in our direction. Industry surveys show that physician adoption of AI has more than doubled over the past three years, with administrative burden consistently ranked as the single largest opportunity for AI in medicine. At the same time, the pressures on provider economics, denial, staffing, documentation, regulatory complexity, are intensifying, not easing. Taken together, these secular trends reinforce our strategy and strengthen our confidence in the long-term opportunity for our solution. An integrated platform that pairs AI with clinical, financial, and now compliance workflows allows providers to rely upon our solution as the one that they trust.

[Stephen Snyder, CEO at CareCloud]

Separately, it was a true pleasure to have the opportunity to spend time with many of you in person last quarter. For those who were not able to attend, in May, we hosted our Analyst Day at the Nasdaq market site and rang the Nasdaq closing bell, where we laid out four themes that define CareCloud. An AI-first operating model. Second, a clean common stock story. Third, compounding free cash flow. Finally, a proven acquisition engine. In June, our shareholders overwhelmingly approved every proposal in our annual meeting. The second quarter was, in every respect, execution against these four themes. All that brings me to our outlook. We are reaffirming our full year 2026 guidance of revenue of $128 to $132 million, adjusted EBITDA of $29 to $31 million, and GAAP earnings per share of $0.20 to $0.23.

[Stephen Snyder, CEO at CareCloud]

With $63.2 million in revenue and $11.3 million in adjusted EBITDA in the first half, our guidance implies a meaningfully stronger second half. The shape of our plan is first half-weighted towards investment and integration and second half that focuses on harvesting those investments. The building blocks of that ramp are specific, and they are underway. Continued growth in our recurring revenue base. The expansion of relationships with existing enterprise clients. Expense management and integration initiatives designed to align our cost structure with our profitability objectives. On earnings per share, specifically the elimination of the Series B preferred dividend for the entire second half of the year. As always, our expectations depend on the signing and continuation of certain client and vendor relationships, the anticipated timing and scope of client projects, and our timely execution of the integration and expense management initiatives that support these objectives.

[Stephen Snyder, CEO at CareCloud]

It is an important but demanding plan, and our team is working hard to deliver it. Before I hand it over to Hadi, let me step back and leave you with where we stand. Healthcare providers we serve are operating under enormous pressure: rising denials, workforce shortages, documentation burden, and a regulatory environment that grows more complex every year. Every one of these pressures increases the value of what CareCloud delivers. We enter the second half of 2026 with more than 40,000 providers on our platform, nine consecutive quarters of GAAP profitability, the cleanest capital structure our company has had in a decade, and a growing recurring revenue base. In addition to that, an AI portfolio that is in market and scaling, and with Empower, a foothold in one of the fastest-growing needs in healthcare operations.

[Stephen Snyder, CEO at CareCloud]

The market opportunity in front of us is as large as it has ever been, and CareCloud is better positioned to capture it than at any point in time in our history. With that, I'll turn the call over to Hadi Chaudhry, our Chief Strategy Officer, who will walk you through our AI strategy and product progress. Hadi?

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

Thank you, Steve, good morning, everyone. Last quarter, I laid out our AI strategy across three tracks: using AI internally to do our existing work faster and at lower cost, embedding AI into the products our clients already use, and building new standalone AI products. I'm pleased to report that we have made significant progress on all three, and I want to give you the substance behind that this morning. Let me start with our new AI product. Our AI prior authorization and AI-assisted medical coding remain on track to bring to market this year. Both have continued to mature through the quarter. Prior authorization is moving through pilot deployments, and coding continues to run internally as we refine it to the accuracy levels our clients expect.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

These are two of the most painful, most costly problems in healthcare administration, and we intend to meet the timeline we gave you. On stratusAI Desk Agent, our AI voice agent, demand is strong, and we are continuing to sign new business. With a new category like this, the work right now is in the implementation, and we are prioritizing getting each deployment right over maximizing the count. The depth before breadth approach I described last quarter. Revenue is still in its early stages, but the product is performing in production, and we are building the operational foundation that turns these deployments into durable recurring revenue. We will report that revenue as it scales. Let me turn to our platform work, because last quarter I made you some specific dated commitments, and I want to report against them directly.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

On our Inpatient Revenue Cycle platform, we have completed the parity gaps between the legacy system and RCM Cloud. On CareVue, the parity items we committed to for this quarter, bringing legacy CareVue onto this modern platform are complete. On Wellsoft, we completed two integrations this quarter. Our Breeze patient experience layer and cirrusAI Notes are both now live in the emergency department workflow. The Stratus AI integration follows next quarter, and the modernization of Wellsoft into a full cloud-based SaaS platform is on track to complete later this year. The takeaway is simple. These were specific commitments, and we delivered them. We saw the same execution in Marketware, our physicians' relationship platform.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

This quarter, we completed our flagship integration with PracticeMatch, added an integration with DocCafe, and launched a new candidate-facing portal that lets physicians and hospital staff apply and submit their credentials, degrees, experience letters, licensure directly to the hiring manager. We also brought our AI candidate matching engine live, turning Marketware from a relationship management tool into an AI-powered recruitment engine. That was part of more than 20 enhancements delivered this quarter, with another 20 plus, including Workday and DocuSign integrations underway for next quarter. I also want to flag something new that we are excited about. We are in active conversations with an existing private equity-based enterprise client about an AI-powered platform engagement. I will hold the details for now, but it's a strong validation of the capabilities we have built, and we will share the specifics as they materialize.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

Finally, a word on where all this thing is heading. Our growth through acquisitions has over time left us running a number of independent platforms, each with its own back end. We have begun the work of consolidating them, moving towards a single modular platform on a shared back end with a common data and AI foundation underneath. In that model, a client simply turns on the modules they need: ambulatory, inpatient, revenue cycle, compliance, patient engagement, while everything runs on one foundation with one patient record and one place to bring our AI to bear. I'm not going to put a timeline on the full journey today. This is a multi-year vision, and we will be disciplined about how we sequence it. The direction is deliberate. Fewer, stronger platforms built so that every new AI capability we create can be deployed everywhere at once.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

Across all three tracks, internal efficiency, smarter products, and new AI offerings, this was the quarter of visible, measurable progress. With that, I will turn the call over to our Interim Chief Financial Officer and Corporate Controller, Norman Roth, to walk you through the quarter's financials in more details. Norm?

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Thanks, Hadi, and thanks everyone for joining our call today. I will provide some financial results for the second quarter and year-to-date. Our second quarter reflects continued execution of our long-term strategy. We returned to revenue growth following the Medsphere acquisition, generated strong free cash flow, remained GAAP profitable for the ninth consecutive quarter, and continued investing in the capabilities we believe will support long-term profitable growth. Revenue for the second quarter of 2026 was $31.9 million, compared to $27.4 million for the second quarter of 2025. Recurring technology-enabled business solution revenue was $24 million during the second quarter of 2026, up approximately $5 million from the second quarter of 2025. While the non-recurring project-based professional services revenue from medSR decreased approximately $1.3 million. Revenue increased 16% from the second quarter of 2025, driven primarily by the Medsphere acquisition.

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Recurring revenue continues to represent the foundation of our business model and provides increased visibility into our future financial performance. Second quarter 2026 GAAP net income was $1.1 million as compared to net income of $2.9 million in the same period last year. As expected, profitability this quarter reflects continued strategic investments in AI-enabled capabilities that we believe will enhance our platform, strengthen our competitive position, and drive long-term customer value. Higher interest expense due to the borrowings to redeem the Series B preferred stock and additional amortization expense due to the intangibles acquired in our recent acquisitions also impacted net income. Gross margins remain consistent between periods. Earnings per share for the three months ended June 30th, 2026 was breakeven after deducting $941,000 of preferred stock dividends.

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

As part of our ongoing capital allocation strategy, we redeemed all outstanding Series B preferred stock during the quarter, reducing our annual preferred dividend obligation by $3.3 million. Our dividend obligation going forward will be just for the remaining Series A preferred shareholders. Free cash flow generation as defined for the second quarter of 2026 was $5.7 million, as compared to $5.4 million in the second quarter of 2025, reflecting the cash generative nature of our recurring revenue model and continued financial discipline. Adjusted EBITDA for the second quarter was $5.9 million. Adjusted net income was $2.4 million, or $0.06 per share, compared to $3.3 million or $0.07 per share in the same period last year, calculated using the end-of-period common shares outstanding. As of June 30th, 2026, the company had approximately $13.4 million of cash and net working capital of $695,000.

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Our balance sheet remains well-positioned to support our strategic priorities. During the quarter, we strengthened our capital structure through a new $50 million credit facility and established a $60 million at-the-market equity program, providing additional capital to support future growth opportunities when conditions warrant. Given our technology-enabled services model, we believe CareCloud remains relatively insulated from tariff-related risks affecting the physical goods industries. Additionally, healthcare demand has historically proven resilient through varying macroeconomic environments, supporting continuing demand for our solutions. Revenue for the first six months of 2026 was $63.2 million, compared to $55 million in the prior period. For the first six months of 2026, the company's GAAP net income was $2 million, compared to a GAAP net income of $4.9 million for the same period in 2025. This equates to a loss of $0.01 per share after subtracting the preferred stock dividends.

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Non-GAAP adjusted net income for the first half of 2026 was $4.5 million, or $0.11 per share. Year to date, adjusted EBITDA was $11.3 million, compared to $12.1 million in the same period last year. We generated $8.1 million of free cash flow as defined for the first six months of the year, compared to $9.1 million in the same period last year. Near-term profitability reflects the investment phase we planned. We are focusing on converting it in the second half of the year. Our long-term strategy remains unchanged. We continue to see meaningful opportunities in our core markets and believe the investments we have made in our platform, AI capabilities, and recent acquisitions position us well for long-term growth. With that, I'll now turn the call over to our chairman, Mahmud, for his closing remarks. Mahmud?

[Mahmud Haq, Founder and Executive Chairman at CareCloud]

Thank you, Norm. This quarter marks an exciting milestone for CareCloud. We have simplified our capital structure, are delivering profitable growth, and are accelerating our AI-driven healthcare compliance strategy. With strong momentum and a clear path forward, we believe the best is yet to come. I would like to thank our employees for their dedication, our clients for their continued trust, and our shareholders for their confidence and support. Operator, we are now ready to open the line for questions. Thank you.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Allen Klee with Maxim Group. Please proceed with your question.

[Allen Klee, Analyst at Maxim Group]

Good morning. What would you say are the major factors that you expect to make second half 2026 different from first half from a financial perspective?

[Stephen Snyder, CEO at CareCloud]

Allen, forgive us, would you mind just repeating that? We lost your volume for a minute.

[Allen Klee, Analyst at Maxim Group]

Just what are the major factors that you expect to make second half 2026 financially different from first half 2026?

[Stephen Snyder, CEO at CareCloud]

Okay. Very good. I'll let Norm dig into that a little bit more. As you said, the second half of the year, we expect to be much stronger than the first half of the year. Part of that is simply related to the natural seasonality that exists in our space. A component of that is seasonality. If we look at the revenue, only part of that is really seasonality. The other part of that relates to the fact that we will continue to layer growth on top of the existing business that we have, both through the expansion of the existing customer relationships, some of the enterprise relationships, and also through the Empower cross-selling that is well underway. Part of it, part of the story will be revenue.

[Stephen Snyder, CEO at CareCloud]

If you think about from a revenue perspective, we'll need to go from roughly $32 million in Q2 to $33 million, $34 million per quarter in the balance of the year to achieve our guidance. We feel comfortable that that is very doable. The other part of it really relates more to the adjusted EBITDA and EPS component. If we think about some of the downward pressure from a profitability perspective, some of the downward pressure really relates to the fact that we've been spending significant energies integrating the Medsphere acquisition. From the perspective of the performance of Medsphere acquisition, we've really been very pleased. As we talked about at the time when we acquired Medsphere, there's significant tech debt that we knew going into the acquisition really had to be remediated.

[Stephen Snyder, CEO at CareCloud]

We've been working hard to deploy the research and development resources that are necessary to accomplish that to really ensure that we have a solid foundation moving forward. Some of that development work relates to also making sure that the platform is really driven by AI, like the balance of our ambulatory platform. A lot of that energy and those resources have really been spent during the first half of the year. We believe we'll see the benefits of that in the second half of the year. Also, from an integration perspective and cost duplication, we see a significant amount of that integration efforts really being in our rear view mirror, having already been accomplished. There's still some more work to be done, but the lion's share of that was completed during the first and second quarters of the year.

[Stephen Snyder, CEO at CareCloud]

We'll see the benefits of that in the second half of the year. Are there other areas that would be helpful to talk about?

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Well, I think, Steve, that was comprehensive. Our amortization will be decreasing, Allen. We use a declining balance. It's an accelerated amortization that's related to the intangibles that'll be decreasing over time. As Steve said, we look very carefully at our forecasted revenue and expenses. We feel comfortable with the sales pipeline and what opportunities will turn into recognized revenue, and also how we're going to manage those expenses going forward.

[Allen Klee, Analyst at Maxim Group]

That was very comprehensive. Thank you. For the Empower Healthcare & Compliance Partners acquisition, should we be thinking of this as minor on the financial impact, but then maybe becomes bigger from the cross-selling perspective, or how should we think about it?

[Stephen Snyder, CEO at CareCloud]

Yes, that's exactly how I think it makes sense to think about it. Again, the acquisition we closed in the middle of May. From the perspective of Q2 results, it had minimal impact. Frankly, overall, it won't have a material impact on the financial data from the perspective of revenue contribution or overall EBITDA. The benefit that we see really will be twofold. First of all, we're able now to be able to take the healthcare compliance and all the defense services that are really critical and becoming more and more important to the providers who we serve, we're able to incorporate that expertise and that knowledge base now into our broader platform.

[Stephen Snyder, CEO at CareCloud]

We expect to be able to roll out a SaaS version of what has been, up to this point in time, delivered manually from the perspective of the professionals delivering these services. We'll scale that and be able to bring that to the market in a SaaS platform that will be further supplemented and augmented by the professionals who we have on board through Empower. Part of it will be taking our existing customer base and cross-selling that customer base into the SaaS platform. The other part will be being able to leverage cross-selling from the perspective of the existing Empower clients and cross-selling our revenue cycle management services and EHR solution into that base. The individual who now serves as the president of Empower, Mitch Brie, joined us through that acquisition. It was a company that he founded and grew.

[Stephen Snyder, CEO at CareCloud]

Just as a side note, we've known Mitch for some time, Mitch has referred business to us that today represents about 10% of our overall revenue on an annualized basis. He's really been instrumental in terms of partnering with us and helping us grow our business from an organic growth perspective. We think that he can do far more by being a member of the team and by having an overall structure as part of the acquisition that heavily aligns Mitch and Empower with what we're trying to achieve in terms of growth.

[Stephen Snyder, CEO at CareCloud]

In terms of the overall structure, I would just note that the overall structure of the acquisition really followed and tracked the same sort of structure you've seen in prior acquisitions with a minimal amount down, with roughly 30% of the trailing revenues, trailing 12 months revenue, paid at closing, then the balance of that will be paid from an earn-out that's really based upon the ability of Empower to help us grow and to be successful in leading cross-selling initiatives.

[Allen Klee, Analyst at Maxim Group]

Thank you. On slide 11 of the presentation, I think it's stratusAI Desk Agent it might be referring to. You have a section called demand, you talk of new business signed through Q2. I was wondering if you could dig into a little bit of when you say new business signed through Q2 and demand from across the client base.

[Stephen Snyder, CEO at CareCloud]

Absolutely. From an AI perspective, I'll let Hadi talk a little bit more about the AI initiatives that we're seeing success on today, both in terms of Stratus and also within our broader platform. One other thing I'd mention too is that we're in conversations also, some of these conversations are in the relatively early phases, but we're in active conversations with private equity groups about whether or not there may be an opportunity that relates to their portfolio companies. Private equity groups that are focused on healthcare companies. We really see an opportunity to be able to partner with these private equity groups long term and to be able to assist them in accomplishing the ability to optimize their overall revenue structure and increase revenues while at the same time being able to be effective in helping them reduce their costs.

[Stephen Snyder, CEO at CareCloud]

Really, the same thing that we do as we acquire companies, we think we can accomplish the same thing on their behalf. A lot of those discussions really revolve around our ability to assist them, in particular with regard to the AI needs that their portfolio companies have. Again, no promise that any of these individual conversations will result in new business, but we've had some promising conversations. In terms of the overall AI, Hadi, if you don't mind just providing a little bit more color on that'd be great.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

Thanks, Steve. As Steve mentioned, in terms of the Stratus AI, to your question, we continue to see the demand. We continue to sign up more deals on Stratus AI and other AI products. We are in the extensively in the implementation phase, and I think when we get to a point of where the AI specific revenue numbers are scalable enough that we should be able to start disclosing, we will separate it out from the technology-enabled services revenue. If you look at from the AI, it's the same three tracks we continue. One is over using it internally to perform the work more efficiently and effectively and cost efficiently. The front-end application that we are developing and selling to the customers.

[Allen Klee, Analyst at Maxim Group]

Okay. Thank you so much.

[Stephen Snyder, CEO at CareCloud]

Thank you.

[Operator]

Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Richard Hansky with Zacks. Please proceed with your question.

[Richard Hansky, Analyst at Zacks]

Hello, everyone. Yeah, I'm filling in. Lisa had to jump off at nine, as you know, I'm going to ask a couple questions on her behalf. How are you doing?

[Stephen Snyder, CEO at CareCloud]

Doing well, Richard. Thanks for calling in.

[Richard Hansky, Analyst at Zacks]

All right. Yeah, good. Now, her first set of questions related to AI and what's going on there. I think you guys have covered that quite extensively, both in your remarks and in answer to the previous question. I think you've covered that. I think she got what she needs there. Let's talk about cross-selling a little bit. I know, Hadi, you made a comment that you're in the early innings of cross-selling opportunity. Are you referring to Empower and Medsphere or just Empower? Let's just focus on Medsphere. Have you exhausted all the opportunities there?

[Stephen Snyder, CEO at CareCloud]

Good question. If we kind of break that up. From the perspective of Empower, we're focused heavily today on these cross-selling initiatives. Cross-selling is already well underway with regard to Empower. We don't have any new signings yet in terms of from the perspective of the Empower cross-selling, but since it's only been a couple of months, I guess that would be understandable. From the Medsphere perspective, we still have significant opportunity to score additional wins from a Medsphere cross-selling perspective. We've already really seen some pretty significant traction in terms of the hospitals that we're working with from Medsphere acquisition perspective. We've been able to cross-sell and to expand the overall wallet share of those hospitals. Having said that, I still think we're just beginning in the whole scheme of cross-selling from a Medsphere perspective, and Hadi might add to that.

[A. Hadi Chaudhry, Chief Strategy Officer at CareCloud]

Naturally, the one that you were referring to, Richard, that I was referring to, and I'll be careful here because that deal has not yet been signed. All that I can say that we are in active conversation with one existing PE-backed large enterprise client about an AI-powered platform engagement. We will hold the specifics for now in terms of the names, the scope, or any number until it gets materialized. I would simply frame it as a strong validation of our capabilities in AI and over the decades that we have developed into our space. That's other than the Empower or the cross-sell opportunities that Steve was referring to.

[Richard Hansky, Analyst at Zacks]

Okay. Excellent. Thank you. Next question I think is related. Lisa was under the understanding that you have tripled your sales force. I'm not sure what over a period of time that was. How does that change your expectations? Are they up to speed? Do you plan to expand any further? Could you talk a little bit about your sales force?

[Stephen Snyder, CEO at CareCloud]

That's right, Richard. We've really significantly expanded the overall sales force. The sales force continues to be focused primarily on cross-selling, expanding the existing wallet share. That's where we see the opportunity. That's where we're seeing the successes. From an expense structure perspective, in terms of the overall cost, it's less expensive to sell to our existing customers as opposed to pursuing more broadly net new wins. We continue to focus on that cross-selling. The team is fully up to speed in terms of our applications. Many of the individuals who are part of this expanded sales team joined us through the Medsphere acquisition. They already understood their applications, understand the place in the market for those various applications and solutions, and also how to position those solutions from a cross-selling perspective.

[Richard Hansky, Analyst at Zacks]

Okay, excellent. Thank you for that. Just one final question, different subject completely. You had that cyber breach back, I guess it was in Q1 March, something like that. Any update on that? Insurance is going to substantially cover all the costs. Too early to tell? Any update there?

[Stephen Snyder, CEO at CareCloud]

Certainly based upon what we know today, we don't believe that this incident will have any material impact on our operations or financial conditions. We still feel very strongly that that's the case. If we just back up for a minute, we just talk more generally about the security incident. I think you're referring to the March 16th incident that we had. You'll recall this was really an incident that affected a single environment within CareCloud Health, and we were really thankful that we had the ability to fully restore our system the same day that it was impacted. We restored it the same afternoon that it was impacted. Also, I'd say beyond that, from the perspective of customers, I think they can rest assured that we were able to expel the bad actor from our system on that same day, on March 16th.

[Stephen Snyder, CEO at CareCloud]

We've since had forensic analyses performed that validate our belief that we had cut off their access or essentially kicked them out of the system on March 16th. It was a limited universe of our overall platform and client base. It was restored quickly, and the threat no longer, to the best of our knowledge, exists within our platform as validated by our third-party forensic examiner. We're in the process right now of sending out notices to the patients who were impacted by that breach. That's well underway, and we continue, once again, to believe that the insurance coverage will provide everything that we need from a financial perspective to be able to both communicate to the patients, to perform the forensic analysis, which is already in our rear-view mirror. Legal costs, litigation fees, and the like, we believe will be within that coverage amount.

[Richard Hansky, Analyst at Zacks]

Okay, sounds like you had it very well contained. That's excellent. All right, I'll leave you with this. Looks to me like you met or slightly exceeded Lisa's expectations for you, top and bottom line, for Q2, that's good. Anyway, thank you, and thanks for taking my call.

[Stephen Snyder, CEO at CareCloud]

Thank you, Richard.

[Operator]

Once again, if you would like to ask a question, please press star one on your telephone keypad. We have reached the end of the question and answer session. I would like to turn the floor back over to Norman Roth for closing comments.

[Norman Roth, Interim CFO and Corporate Controller at CareCloud]

Thank you everyone for attending our call today. Have a great day.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Brendan Covello, Corporate Counsel
• Stephen Snyder, CEO
• A. Hadi Chaudhry, Chief Strategy Officer
• Norman Roth, Interim CFO and Corporate Controller
• Mahmud Haq, Founder and Executive Chairman

Analysts

• Allen Klee, Analyst at Maxim Group
• Richard Hansky, Analyst at Zacks