Skylight Health Group Inc. (NASDAQ: SLHG; TSXV: SLHG) (“Skylight
Health” or the “Company”), a multi-state primary care management
group in the United States, today announced its financial results
for the second quarter ended June 30, 2022.
- Doubles revenue to $16.1 million vs
$7.7 million in the previous quarter and 134% Year over Year.
- Gross profit margin of 25%, down
from the previous quarter of 44% primarily driven by the Capitated
revenue from full-risk Value Based Care (“VBC”) contracts with the
acquisition of NeighborMD (“NMD”). Capitated revenue has lower
Gross Margins but much higher dollar contribution.
- Adjusted EBITDA loss improved by
19% from the previous quarter to $5.4 million ($4.4 million
excluding the latest acquisition) compared to $6.7 million in the
previous quarter.
- Accelerates its 3 year journey to
Medicare Advantage (“MA”) full risk into 2022 with the acquisition
of NMD and the joint venture (“JV”) with Collaborative Health
Systems (“CHS”). The Company has entered fully capitated Medicare
Advantage risk contracts in Florida with more than 2,400
lives.
- As of the date of this release on
an unaudited basis, the Company has already reduced its annual cost
base by over $10 million and expects further operational
improvements by year end.
- Over $70 million revenue run rate
on a proforma basis and trending towards adjusted EBITDA break-even
by the end of 2022.
- Due to increased demand, the
Company has agreed to upsize its non-brokered private placement of
convertible debenture units (the “Debenture Units”) offering from
$2 million to $2.345 million and expects to close on or about
August 17, 2022.
Prad Sekar, CEO Skylight Health said, “We could
not be more pleased with our second quarter results. We doubled our
top line while reducing our costs and improving adjusted EBITDA. We
set an aggressive plan in Q1 to work on operational efficiencies,
right-size costs and make material reductions on our annual cost
basis. Exiting Q2 we already forecast a further improved adjusted
EBITDA for Q3 as we remain committed to working towards adjusted
EBITDA break-even by end of 2022. Additionally, we accelerated our
journey to VBC by 3 years through the acquisition of NMD and our
partnership with CHS. It is a proud moment for all of us at
Skylight to continue executing in a positive direction even with
the headwinds of a macro market and economy. We remain committed to
our goals and are beyond excited for the quarters ahead.”
Financial Highlights:
- Revenues for the three and six
months ended June 30, 2022, revenues were $16.1 million
and $23.8 million, respectively, compared to $6.9 million
and $9.1 million, respectively, for the three and six months
ended June 30, 2021 (excluding revenue from discontinued
operations of $3.0 million and $5.9 million,
respectively), an increase of $9.2 million and
$14.7 million, respectively. This increase was primarily as a
result of partial revenue from the acquisition of NMD in Q2 2022.
The Company also achieved organic growth of 4% compared to Q1 2022
within its fee-for-service and other revenues segment;
- Gross profit was $4.0 million
and $7.4 million, respectively, for the three and six months
ended June 30, 2022, compared to $3.8 million and
$5.0 million, respectively, for the three and six months ended
June 30, 2021 (excluding gross profit from discontinued
operations of $2.3 million and $4.5 million,
respectively);
- Gross profit margin was 25% and
31%, respectively, for the three and six months ended June 30,
2022, compared to 55% for both the three and six months ended
June 30, 2021 (discontinued operations gross profit margin was
77% for both the three and six months ended June 30, 2021).
The margins in Q2 2022 were lower due to the change in how Gross
profits are calculated in a traditional fee-for-service model
versus a VBC or capitated model at risk. The Company believes the
gross profit margins are in line with the industry standards and
will establish a new baseline as the capitated segment will be
expected to contribute significantly to growth in the future. Gross
Margin dollar contribution is significantly greater in capitation.
Please refer to further details in the Segmentation section of the
Company’s MD&A;
- Adjusted EBITDA for the three and
six months ended June 30, 2022 was a loss of $5.4 million
and $12.1 million, respectively, compared to a loss of
$3.4 million and $5.2 million, respectively, during the
three and six months ended June 30, 2021. Compared to Q1 2022,
the Company has seen an improvement in Adjusted EBITDA prior to the
NMD acquisition from pre-disclosed initiatives to cost saving and
integration efforts. Adjusted EBITDA for Q1 and Q2 2022 for the
Company prior to the acquisition of NMD was $6.7 million and
$4.4 million respectively. The Company anticipates that it
will continue to see further improvements in the coming
quarters;
- Net loss from continuing operations
during the three and six months ended June 30, 2022 was
$5.2 million and $13.5 million, respectively (three and
six months ended June 30, 2021: $5.8 million and
$9.1 million, respectively, excluding net income from
discontinued operations of $1.0 million and
$1.8 million). In Q1 2022, Net loss from continuing operations
was $8.3 million, the significant improvement in Q2 2022 was
primarily due to reductions in salaries and wages, professional
fees, office and administration costs, foreign exchange gain and
gain in fair value of financial liabilities;
- The Company still has an unutilized
US $10 million debt facility.
Operational Highlights:
- Entered into a JV partnership with
CHS, a population health management services organization and
wholly owned subsidiary of Centene Corporation, to integrate
essential VBC services and contracts into Skylight Health’s growing
enterprise of primary care practices.
- Closed on the acquisition of NMD,
to add 9 new practices in the Florida market, and entered full risk
on 2,400 Medicare Advantage lives with Humana and CarePlus.
Purchase price consideration was $10.2 million (US$ 8.0 million)
for an annualized revenue contribution from NMD of an estimated
US$35 million.
- Appointment of Farooq Akhter as
interim CFO. Mr. Akhter joined Skylight in 2019 and has been part
of the Company’s transformational growth. He played a key role as
Vice President, Finance supporting operational and capital markets
efforts.
- Closed a $25.5 million (US$ 20.0
million) debt facility with FLC Credit Partners (“FLC”), a New York
based lender. Post the closing of NMD, the Company still has $12.8
million (US$ 10.0 million) available in the facility. With the JV
and NMD acquisition in place, the Company is now ready to begin
transitioning Medicare Advantage lives within its current
practices, realizing a growth of US$200-$400 to US$10,000-$12,000
per member per year under current capitated payor contracts.
Second Quarter Performance:
Q2 2022 was focused on executing the Company’s
plans to get to adjusted EBITDA break-even. Efforts made in Q2 2022
have resulted in an adjusted EBITDA improvement of approximately
$1.3 million compared to Q1 2022. Excluding the NMD acquisition,
this improvement was approximately $2.3 million. These efforts will
continue to extend into Q3 and Q4 2022. Exiting Q2, the Company
reduced its annualized adjusted EBITDA from the start of the
quarter by nearly 50% and expects to see a continued reduction in
Q3 and Q4. These are driven by activities in the earlier part of
the year being fully realized during these Quarters. Concurrently,
the Company expects adjusted EBITDA will continue to improve each
following quarter demonstrating the company’s execution and pathway
to break-even.
The Company is pleased to announce that while
cost-saving initiatives have been the primary focus, it has
continued to see a normalized patient volume since its loss of
COVID-19 related cases industry wide at the start of Q1 2022.
Further the visits are of higher acuity thereby improving the per
visit charges associated with fee-for-service visits. Increased
revenue from its existing business prior to the acquisition of NMD
was also driven by a growth in its research division.
Moving forward, the Company is most excited
about the growth it can organically expect to realize from the
foundation laid in 2021 and 2022 year to date. While historically
the Company has been focused on growth primarily through mergers
and acquisitions (“M&A”), the Company has now built sufficient
scale and size to benefit from strong organic growth.
The existing infrastructure of practices,
providers and support teams means the Company can expect to add
meaningful revenue and EBITDA without the need to rely heavily on
M&A. These areas of growth come from continued expansion of its
FFS business model, and more importantly, from the growth of its
managed care business line including Medicare and Medicare
Advantage programs at risk which generate capitated revenue.
The Company expects that its primary driver to
organic growth will be through the growth in Medicare and Medicare
Advantage. Medicare lives have been historically based on 100%
fee-for-service with limited to no benefit in shared savings or
total cost of care. The Company is working with its JV partner
CHS/Centene in the participation through the ACO Reach program for
2023. Through this program and the JV, the Company can expect to
shift from fee-for-services to global capitated risk on its
existing traditional Medicare population. The Company expects that
the shift to global capitation can contribute an organic revenue
growth of 25% in 2023 with an associated 10% EBITDA margin.
Medicare Advantage offers strong growth in the
Florida market. With an aging population, and a need now more than
ever to improve the quality of care for seniors, the Company is
well positioned with current and potential new MA risk contracts
for effective 2023 participation. As is the case with MA, most
health plans focus on enrolling new members for 2023 through the
Annual Enroll Period (“AEP”) which takes place in Q4 2022. During
this time, the Company will be heavily focused on marketing to
current and prospective patients the benefits of MA and the
opportunity to select one of the Company’s locations as the
patients home for MA in 2023. The program which runs October
through December, will be an important period for the Company to
add to the current membership of MA lives. As part of this, the
Company has already begun laying its plan for AEP, including
budgets and working with plan partners in driving new membership
growth within its existing Medicare only population.
As the Company continues to focus on achieving
its goal of adjusted EBITDA break even towards the end of the year,
the goal for 2023 will be cash flow positivity. While organic
growth efforts remain the focus, the Company believes it will be in
a good position in the near to medium term to utilize its own cash
flow from operations to continue strategic M&A to grow market
density and expand on its Medicare lives at risk population.
The Company is pleased to announce that in order
to meet demand, it has agreed to increase the size of its $2
million non-brokered private placement of convertible Debenture
Units announced on August 8, 2022, at $1,000 per Debenture Unit for
gross proceeds of $2.345 million. The upsized offering is expected
to close on or about August 17, 2022 (the “Closing Date”).
Q2 2022 Financial Highlights**
(in 000s of dollars) |
Three months ended June 30 |
Six months ended June 30 |
|
2022 |
2021 |
2022 |
2021 |
Revenue |
16,077 |
|
6,877 |
|
23,789 |
|
9,051 |
|
Cost of sales |
12,106 |
|
3,067 |
|
16,392 |
|
4,041 |
|
Gross profit |
3,971 |
|
3,810 |
|
7,397 |
|
5,010 |
|
Total operating expenses |
10,636 |
|
8,916 |
|
21,645 |
|
13,852 |
|
Loss from continuing operations |
(6,665 |
) |
(5,106 |
) |
(14,248 |
) |
(8,842 |
) |
Net loss from continuing operations |
(5,169 |
) |
(5,800 |
) |
(13,475 |
) |
(9,053 |
) |
Net income from discontinued operations |
─ |
|
987 |
|
─ |
|
1,844 |
|
Net loss |
(5,169 |
) |
(4,813 |
) |
(13,475 |
) |
(7,209 |
) |
Adjusted EBITDA* |
(5,426 |
) |
(3,356 |
) |
(12,099 |
) |
(5,234 |
) |
*Adjusted EBITDA is defined as earnings before
interest, tax, depreciation, and amortization, adjusted by
significant nonrecurring, nonoperational expenses and partially
offset by the cash impact of certain accounting treatments during
the period. Please see the Company’s Management Discussion &
Analysis for a detailed reconciliation to loss from continuing
operations.** Certain prior period financial information on the
consolidated statements of loss and comprehensive loss, and
consolidated statements of cash flows have been updated to present
the Legacy Business as discontinued operations and has therefore
been excluded from continuing operations for all periods presented
in this MD&A. This press release reflects only the
results of continuing operations, unless otherwise
noted.
Conference Call Details
The Company will host a conference call at
8:00am EDT on the morning of August 16, 2022 to discuss the
financial results. If you would like to participate in the call,
details can be found below. Please dial in approximately 10 minutes
prior to the start of the call. An audio replay of the conference
call will be available on www.skylighthealthgroup.com within
24 hours after the live call has ended. Management will also be
presenting brief slides during the call. Please follow the link
below to join the
webcast:https://event.choruscall.com/mediaframe/webcast.html?webcastid=sgQvTvJG
Date: |
August 16, 2022 |
Time: |
8:00am Eastern |
US/Canada Toll Free Dial In: |
1-800-319-4610 |
Toronto Local Dial In: |
416-915-3239 |
International Dial In: |
+1-604-638-5340 |
Call Name: |
Skylight Health Group Second Quarter 2022 Financial Results |
Notice to Voluntarily de-list from
NASDAQ
The Company believes the TSX Venture (TSX-V)
provides its shareholders with sufficient liquidity, and the cost
savings from the elimination of Nasdaq listing fees and associated
professional fees, as well as the savings in time and effort of
management required to maintain a Nasdaq listing, can be redirected
to strategic initiatives intended to generate long-term shareholder
value. Effective at the close of markets on August 25, 2022,
Skylight’s common shares will no longer be listed or traded on the
Nasdaq Exchange. The Company’s shares will continue to trade on the
TSX-V and concurrent with the Nasdaq de-listing, expect to list its
shares on the OTCQX market under ticker symbol SLHG and SLHGP. The
Company will file Form 25 with SEC on August 15, 2022.
Prad Sekar continues, “Annual costs amount to
over $2 million when considering all costs required to be a Nasdaq
listed Company. While this may not be a lot to some, we consider it
material for us, especially when we consider where we believe value
is being derived from today and in the future. Valuations in the
space are driven by business fundamentals and not the market we
trade on. We entered the Nasdaq under very different market
conditions. Our focus is now on strong organic revenue growth,
positive cash flow for M&A and through that, maximizing
shareholder value."
Minimum Bid Price
The Company is non-compliant on the Nasdaq
Listing Rule 5550(a)(2) which requires listed securities to
maintain a minimum bid price of US$1.00 per share. In accordance
with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been
provided 180 calendar days, or until December 13, 2022, to regain
compliance with Nasdaq Listing Rule 5550(a)(2). To regain
compliance, the Company’s common shares must have a closing bid
price of at least US$1.00 for a minimum of 10 consecutive business
days. In the event the Company does not regain compliance by
December 13, 2022, the Company may be eligible for additional time
to regain compliance or may face delisting.
Multi-Jurisdictional Disclosure System
Due to the decrease in the Company’s common
share price, the Company is no longer eligible to utilize the
multi-jurisdictional disclosure system (MJDS). As a result, the
Company will no longer be afforded the ability to prepare and file
its disclosure reports and other information with the SEC
incorporating (accordance with) the disclosure requirements of
Canada and will now be required to file the same reports that a
non-MJDS eligible foreign private issuer (FPI) is required to file
with the SEC, including the requirement to file an Annual Report on
Form 20-F with financial statements audited under rules of the
Public Company Accounting Oversight Board (“PCAOB”), the additional
costs of which will be significant. The Company has not yet engaged
an auditor under PCAOB standards for its December 31, 2019 or
December 31, 2020 financial statements. Accordingly, the Company
was not able to timely file its Annual Report on Form 20-F for the
year ended December 31, 2021 (the “2021 20-F”) which was due on
April 30, 2022. As a result, there could be several consequences,
including, but not limited to, (i) the Company will no longer be in
compliance with the continued listing requirements of the Nasdaq
Capital Market and received a deficiency notice and the Company’s
securities that are listed on Nasdaq may be subject to delisting
and (ii) the Company will not be able to file a registration
statement with the SEC until such time as the 2021 20-F is filed
(and will not be able to utilize a Form F-3 for at least one year)
which will limit Company’s ability to conduct financings in the
U.S.
ABOUT SKYLIGHT HEALTH GROUP
INC.
Skylight Health Group (NASDAQ:SLHG; TSXV:SLHG)
is a healthcare services and technology company, working to
positively impact patient health outcomes. The Company operates a
US multi-state primary care health network comprised of physical
practices providing a range of services from primary care,
sub-specialty, allied health, and laboratory/diagnostic testing.
The Company is focused on helping small and independent practices
shift from a traditional fee-for-service (FFS) model to VBC through
tools including proprietary technology, data analytics and
infrastructure. In a FFS model, payors (commercial and government
insurers) reimburse on an encounter-based approach. This puts a
focus on volume of patients per day. In a VBC model, payors
reimburse typically on a capitation (fixed fee per member per
month) basis. This places an emphasis on quality over volume. VBC
will lead to improved patient outcomes, reduced cost of delivery
and drive stronger financial performance from existing
practices.
For more information, please visit www.skylighthealthgroup.com
or contact:
Investor Relations:
Canadian Investors
Jackie
Kelly investors@skylighthealthgroup.com 416-301-2949
Currency Usage, Cautionary and Forward-Looking
Statements
All currency contained in this Press Release represent Canadian
Dollars unless otherwise stated.
Statements in this news release that are
forward-looking statements are subject to various risks and
uncertainties concerning the specific factors disclosed here and
elsewhere in Skylight Health's filings with Canadian and United
States securities regulators. When used in this news release, words
such as "will, could, plan, estimate, expect, intend, may,
potential, believe, should," and similar expressions, are
forward-looking statements.
Although Skylight Health has attempted to
identify important factors that could cause actual results,
performance or achievements to differ materially from those
contained in the forward-looking statements, there can be other
factors that cause results, performance or achievements not to be
as anticipated, estimated or intended, including, but not limited
to: the ability of Skylight Health to execute on its business
strategy, continued revenue growth in accordance with management’s
expectations, operating expenses continuing in accordance with
management expectations, dependence on obtaining regulatory
approvals; Skylight Health being able to find, complete and
effectively integrate target acquisitions; change in laws relating
to health care regulation; reliance on management; requirements for
additional financing; competition; hindering market growth or other
factors that may not currently be known by the Company.
There can be no assurance that such information
will prove to be accurate or that management's expectations or
estimates of future developments, circumstances or results will
materialize. As a result of these risks and uncertainties, the
results or events predicted in these forward-looking statements may
differ materially from actual results or events.
Accordingly, readers should not place undue
reliance on forward-looking statements. The forward-looking
statements in this news release are made as of the date of this
release. Skylight Health disclaims any intention or obligation to
update or revise such information, except as required by applicable
law, and Skylight Health does not assume any liability for
disclosure relating to any other company mentioned herein.
Non-GAAP Financial Measures
This Press Release contains references to EBITDA
and Adjusted EBITDA. These financial measures are not measures that
have any standardized meaning prescribed by IFRS and are therefore
referred to as non-GAAP measures. The non-GAAP measures used by the
corporation may not be comparable to similar measures used by other
companies. EBITDA is defined as “income (loss) before interest
expenses, taxes, expenses related to listing on the Canadian
Securities Exchange, depreciation, foreign exchange and financial
expenses.
Adjusted EBITDA excludes the effect of
share-based compensation expenses and related payroll taxes as well
as removes substantial one-time costs for unusual business
activities. Additional discussion on this can be found in the
Skylight Health Management Discussion and Analysis filed on
SEDAR.
The Company uses these non-GAAP measures because
they provide additional information on the performance of its
commercial operations. Such tools are frequently used in the
business world to analyze and compare the performance of
businesses; however, the Company’s definition of these metrics may
differ from those of other businesses. Skylight Health will, at
times, use certain non-GAAP financial measures to provide readers
with additional information in order to assist investors in
understanding our financial and operating performance. Skylight
Health believes that these non-GAAP measures provide readers with
useful information about the Company’s operating results, enhance
the overall understanding of past financial performance and future
prospects, and allow for greater transparency with respect to key
metrics used by management in its financial and operational
decision making.
Such non-GAAP financial measures should be
considered as a supplement to, and not as a substitute for, the
corresponding measures calculated in accordance with IFRS. See the
Company’s unaudited Financial Statements for a reconciliation of
the non-GAAP measures.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
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