Cloudticity, a cloud-based managed services provider for healthcare organizations, may be positioned to launch a sale process in 2H24 or 2025, said Gerry Miller, CEO and sole owner.
Miller said he would hire an advisor and look to sell a majority stake in the Seattle-based business, which he founded in 2011. In the meantime, the 55-year-old executive said he is entertaining inbound interest.
Cloudticity generated revenue of approximately USD 20m in 2023, with more than 90% of revenue recurring, according to Miller. The company has been profitable and cash-flow positive since its inception, with USD 100m in revenue projected by 2027 or 2028, he said.
Sale valuations peaked at around 7x revenue prior to COVID-19 and are now around 4x-5x revenue, though Miller said he is “seeing some recent acceleration” of multiples.
Cloudticity’s technology helps manage and automate compliance and security, and organize and analyze data for Amazon, Google and Microsoft cloud-based platforms.
The company has gross margins of 60%-70%, compared to the average 30%-40% for most managed services providers (MSPs) due to the cost of labor differential, Miller said. Cloudticity’s platform is primarily software-based, with a significantly reduced reliance on human labor to address or troubleshoot issues for clients, he explained.
The business caters to healthcare technology firms, providers, payors, government entities, genomics companies and life sciences companies. It recently expanded into academic medical centers, Miller said. Clouticity's roughly 50 clients include New York State and Michigan Health Information Network Shared Services, he added.
Proceeds from a private equity investment would primarily boost marketing, sales, and platform development but could also be used for international expansion and acquisitions, the CEO noted. Cloudticity operates primarily in the US and sees an opportunity to enter countries such as Canada, Singapore, Japan and Germany, which it would likely do through M&A, Miller said.
Cloudticity receives regular approaches from potential buyers, and Miller said the company hired an undisclosed banker to run a minority stake sale process in 2019. Miller said he found the terms of a minority stake sale “unfavorable,” so the company went back to the market for a majority stake sale. By that time, the market had soured from the pandemic, he explained.
There has been a “tremendous amount” of consolidation in the MSP space, particularly among private equity firms looking for a platform to roll up the highly fragmented industry, especially around managed security, according to Miller. Most MSPs are smaller, regional players with around USD 5m in revenue, he added.
Larger players in the space include PwC, Deloitte and ClearDATA, though Miller said Cloudticity’s primary competitor is internal IT departments. Austin, Texas-based ClearDATA has raised more than USD 80m in capital from investors including Merck Global Health Innovation Fund and Norwest Venture Partners. Cloudticity has a remote workforce of 35 people. The company uses law firm Honigman.
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