CloudMD Software & Services (TSXV: DOC) this morning announced the closing of the $100 million purchase of Oncidium, a health management firm focused on Canada. The transaction is expected to significantly bolster the firms revenue run-rate.
The transaction will see CloudMD receive a significant increase in clientele, with Oncidium having over 500 clients that services two million employees in Canada, for whom it provides occupational health, medical management, and assessment services. The transaction is said to be immediately accretive, with the firm having a revenue run-rate of $54 million annually, with adjusted EBITDA margins reportedly at 10%.
The $100 million price tag for Oncidium is comprised of cash, shares, and a potential future earn-out arrangement. $30 million of the transaction is to be funded via cash, while $38 million in common shares has been issued at a price of $2.30 per share. Finally, $32 million in additional compensation is to be paid out based on performance milestones related to top line revenue and adjusted EBITDA.
The transaction effectively was funded by shares, cash on hand, and a new credit facility that the company has entered into with the Bank of Montreal via its new Oncidium subsidiary.
A total of $62 million in funding has come from BMO, with an initial $25.0 million being used to fund a large portion of the cash consideration for the transaction, while an uncommitted $24 million senior secured term loan has been put in place to fund performance-based earnouts for the next three years. A $3.0 million revolver for working capital and a $10 million accordion facility for future acquisitions has also been provided by the bank. The debt matures in three years and is secured by a first ranking security interest in Oncidium, along with a guarantee by CloudMD.
Following the close of the transaction CloudMD has stated it now has a revenue run-rate of $140 million annual with gross margins at 25%. Adjusted EBITDA is also said to be positive. The company has also indicated that it now has roughly $55.0 million in cash on hand, which it intends to use to fund future growth.
CloudMD Software & Services last traded a $1.87 on the TSX Venture.
Information for this briefing was found via Sedar and CloudMD Software & Services. The author has no securities related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.