By Michael Kim
NASDAQ:CCLD
READ THE FULL CCLD RESEARCH REPORT
Pre-market open on 8/25/25, CareCloud (NASDAQ:CCLD) announced the acquisition of the business assets of Medsphere Systems, a comprehensive business/IT services provider to 600+ small and middle-market hospitals across 50 states. The total consideration of $16.5 million included $8.25 million in cash and the assumption of $8.25 million of Medsphere loans (bearing a 12% interest rate and due on February 20, 2026).
Stepping back, the news reinforces management’s ongoing focus on increasingly capitalizing on M&A to enter new markets and drive incremental growth via cross-/up-selling services and leveraging existing infrastructure and technology post-acquisition. The M&A pipeline remains strong, particularly as it relates to non-core/distressed assets that bring clients/relationships at low Customer Acquisition Costs (CACs), as well as synergistic opportunities.
Excluding stock-based compensation expense, amortization of purchased intangible assets, other (income)/expense, integration costs, transaction costs, goodwill impairment charges, changes in contingent considerations, and related tax impacts, as well as preferred stock dividends, we forecast Adjusted EPS of $0.31 for 2025 and $0.46 for 2026 (up from our prior estimates of $0.30 and $0.40, respectively). On a GAAP basis, our updated model calls net income attributable to common shareholders of $0.13 per share for 2025 (at the high-end management’s most recent $0.10 to $0.13 guidance range) followed by $0.31 per share in 2026. Our revisions reflect revenue/operating income accretion from Medsphere, partially offset by incremental interest expense related to the assumption of $8.25 million of loans (bearing a 12% interest rate) maturing in February 2026. Consistent with prior transactions, our model assumes approximately $16.5 million of incremental revenue from Medsphere based on a deal multiple of roughly 1x sales.
Turning to valuation, as a result of our higher earnings outlook, we are taking up our no change DCF-derived price target from $5.00 to $6.00 representing meaningful upside potential from current levels. Despite the stock’s more recent outperformance, we continue to look for an upward revaluation for shares of CCLD, as awareness and appreciation of the company’s unique business model, durable competitive advantages, and reaccelerating growth prospects compound.
We highlight the following key takeaways from the Medsphere acquisition:
1. End-to-end platform: Post acquisition, the company’s platform will span Medsphere’s hospital IT services along with CCLD’s Artificial Intelligence (AI) capabilities culminating in comprehensive/differentiated solutions offered within competitive cost structures. More specifically, Medsphere’s current portfolio includes integrated inpatient and ambulatory Electronic Health Record (EHR), cloud-hosted Revenue Cycle Management (RCM), Emergency Department Information System (EDIS), supply chain and inventory management, practice management, implementation, help desk, interface management, and infrastructure support services tailored to smaller hospitals and physician practices.
Turning to CCLD, senior executives remain focused on incorporating proprietary AI solutions across operations, products, and services to enhance provider/patient experience, streamline claims coding, improve A/R workflows, and augment denial management efficacy. Key AI benefits include incremental top-line contributions from new products/services, enhancing customer satisfaction and retention reflecting more competitive/differentiated capabilities, and rising margins/profitability via back-office optimization/operational efficiencies.
2. Scale in key hospital market: In addition to incorporating Medsphere’s technology capabilities and services, management plans to tap into Medsphere’s existing inpatient EHR and RCM relationships across small- and mid-sized hospitals. Yesterday’s announcement aligns with senior official’s initiative to further expand CCLD’s footprint to drive sustainable growth. As previously discussed, CareCloud’s EHR platform recently attained ONC Health IT Certification for Critical Access Hospitals (CAHs) – likely a key catalyst to increasingly penetrating a $1.5+ billion addressable market spanning more than 1,300 CAHs across rural markets needing to upgrade legacy EHR systems.
3. Meaningfully accretive: We are raising our Adjusted EPS estimates after layering in incremental revenue related to the Medsphere acquisition. Indeed, expected Medsphere revenue of approximately $16.5 million on an annualized basis equates to 15% of the midpoint of management’s prior 2025 revenue guidance range of $111 million to $114 million. Over time, we look for CCLD to realize meaningful cost synergies, as management increasingly rationalizes duplicative expenses, transitions R&D/QA responsibilities to lower-cost offshore personnel, and leverages overlapping vendor relationships to negotiate better terms.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives payments totaling a maximum fee of up to $50,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.