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 third quarter ended September 30, 2021.
Third Quarter Highlights:
- Revenue increased 269% to $12.2
million, compared to $3.3 million for the same period last year,
and up 16% from the second quarter 2021;
- Approximately 8% QoQ organic growth
driven by improved revenue cycle management, provider access and
patient flow post acquisition;
- Adjusted EBITDA loss of $2.6
million, driven by bench strengthening investments in people,
technology and acquisition related expenses;
- Entered into Pennsylvania with the
acquisition of Aspire Health Concepts, Inc., adding over 2,000
Medicare lives to Skylight Health Group’s existing panel;
- Executed clinical trial contracts
expected to generate revenue with strong margin potential;
- Net loss from operations was $3.9
million, with approximately $1.9 million in non-cash items and $1.1
million in professional fees related to accounting, legal and
consulting fees; and
- Cash balance of $5.6 million as of
September 30, 2021.
“We are excited that we achieved our largest
revenue quarter in the history of the Company. The third quarter
continued our path of transformative growth that started in the
first and second quarters of this year from strategic and mission
aligned acquisitions as well as organic growth from existing
practices,” said Prad Sekar, CEO of Skylight Health. “We
prioritized our resources on the continued integration of existing
practice sites, along with efforts to capture revenue and cost
synergies. This focus helped us recognize a second straight quarter
of organic growth which will be further accentuated by our robust
pipeline of future primary care practice acquisitions. We are
further excited to be participating in value-based contracting in
2022 through the direct contracting entity (DCE) alongside a
Fortune 50 national payor. The combination of building market
density, with significant Medicare panels, and sound centralization
of support services allows us the opportunity to fully embrace
value-based care initiatives.
Third Quarter Performance:
Revenue increased 269% from the same period last
year due to additional revenue being contributed by the clinics
acquired during the fiscal year ended December 31, 2020, and the
nine months ended September 30, 2021. The third quarter of 2021 was
the first period that included a full three months of contribution
by Denver based Rocky Mountain and Doctors Center Inc., located in
Florida’s Jacksonville area, and the fourth quarter will be the
first period that includes a full three-months contribution by
Harrisburg, Pennsylvania’s Aspire Health Concepts, Inc. The Company
remains committed to a strong growth by acquisition model fueled by
a strengthened balance sheet and robust pipeline. The Company also
saw organic growth of approximately 8% from prior acquisitions
driven by improved revenue cycle management, provider access and
patient flow post acquisition, compared to the second quarter of
2021.
The Company ended the quarter with the addition
of new clinics, providers and patient panels. As of the end of the
third quarter, the Company had approximately 99,000 lives vs 88,000
lives compared to the previous quarter. Eligible managed care lives
represented over 15% of that population. During the quarter, the
Company placed a heavy emphasis on the integration of Rocky
Mountain and Doctors Center, both acquired in Q2, to improve
workflows, provider access and shared services. This focus yielded
organic growth both from improved revenues as well as cost
synergies. While the Company saw some near-term improvements, it is
focused on further centralizing shared services, which it expects
will drive additional revenue and cost synergies across all current
and future practice locations.
Net loss was driven by approximately $1.9
million in non-cash items and $1.1 million in professional fees
related to accounting, legal and consulting fees. Adjusted EBITDA
loss of $2.6 million was a result of investments made primarily in
human capital, technology and infrastructure. While the Company is
focused on managing EBITDA, it expects that investments needed to
be successful in a full risk and total cost of care reimbursement
model will be offset by improved patient economics driven by higher
margin payor contracts as validated by its peers. As a result, the
Company expects to continue to make investments in this growth
opportunity and believes that it has sufficient capital on hand to
see this investment through to realize increased margin
contribution.
Outlook
Skylight Health remains focused on growth, both
organically, and through acquisition, as it rapidly captures market
share within the US healthcare network. The Company continues to
prioritize the integration of health technology solutions to help
small and independent practices shift from a traditional
fee-for-service (FFS) model to value-based care (VBC) through
proprietary technology, data analytics and infrastructure. This
organic growth through an increase in insurable services and new
patients represents a predominant portion of revenue and is where
the Company expects to see its strongest growth in future periods.
The Company expects that by year end, the large majority of
investments made at the start of the year will result in both a
higher growth of revenue driven organically and by acquisition and
will also result in stronger EBITDA recognition. The Company is
focused on revenue growth which it believes is how its peers are
measured and expects to continue to compete aggressively for market
share growth in three areas: acquisition of primary care practice
groups, development of its single system of operation and clinical
leadership, and conversion from fee-for-service to
value-based-care. With the growing demand for accessible and
affordable medical services in the US, Skylight Health is well
positioned to meet this growing opportunity while creating
significant shareholder value.
Operational Highlights for Third Quarter
2021
- On July 7, the Company appointed
Dr. Kit Brekhus as Chief Medical Officer (“CMO”). Dr. Brekhus
brings a wealth of experience to Skylight Health, a passion for
improving patient care, and building large value-based care
networks.
- On July 13, 2021, the Company
acquired 100% of the interest of ACO Partners LLC, a new
Accountable Care Organization (“ACO”) that will begin participating
in the Medicare Shared Savings Program offered by the Centers for
Medicare and Medicaid Services (“CMS”) effective January 1, 2022,
for a total cash consideration of $312.9 thousand (US$250.0
thousand). Subsequently, the Company determined it would not
receive approval on the ACO application to the CMS by January 31,
2022. The cash paid on closing date of $78.2 thousand (US$62.5
thousand) has been recorded in trade receivable as of September 30,
2021.
- On August 26, 2021, the Company
appointed Mohammad Bataineh as President, taking over from Kash
Qureshi who will shift to Chief Corporate Officer, and will retain
executive leadership and remains an Executive Member of the Board
of Directors.
- On September 16, 2021, the Company
acquired 70% of the membership interest of Pennsylvania based
Primary Care Clinic Group, Aspire Health Concepts, Inc. for a total
cash consideration of $2.0 million (US$1.6 million). The clinic
group has 2 locations and expects incremental annualized revenue of
over US$2.5 million with 8% EBITDA.
Key Subsequent Events of the three
months ended September 30, 2021
- On October 7, 2021, the Company
announced the execution of a Participation Provider Contract with a
leading national healthcare organization who is a recipient of a
Direct Contracting Entity (“DCE”) license, with the Company’s
participation beginning in 2022.
- On October 12, 2021, the Company
appointed Greg Sieman as senior vice president of marketing and
communications.
- On October 29, 2021, the Company
announced the execution of a Definitive Agreement with New Frontier
Data to divest 100% of assets related to its legacy businesses
Canna Care Docs and Relaxed Clarity (“Legacy Business”). Terms of
the transaction will be a total cash consideration of US$8.6
million. Payment terms will include cash on closing of US$4.0
million, with the remainder of the balance paid over three
installments at 12 months, 18 months and 24 months from the date of
closing. Skylight expects to use the cash proceeds to further
acquire primary care practices in its pipeline. The transaction is
expected to close no later than November 30, 2021, subject to
customary closing conditions, exchange approval and board
approvals.
Q3 2021 Financial Highlights
(in 000s of dollars) |
Three Months Ended September 30 |
|
Nine Months EndedSeptember
30 |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Revenue |
12,203 |
|
3,310 |
|
27,890 |
|
9,942 |
|
Cost of sales |
4,609 |
|
964 |
|
9,999 |
|
3,082 |
|
Gross profit |
7,594 |
|
2,346 |
|
17,891 |
|
6,860 |
|
Total operating expenses |
11,468 |
|
2,562 |
|
27,931 |
|
8,086 |
|
Operating loss |
(3,874) |
|
(216) |
|
(10,040) |
|
(1,226) |
|
Adjusted EBITDA* |
(2,594) |
|
331 |
|
(4,688) |
|
109 |
|
*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 operating loss.
Conference Call
The Company will host a conference call at
8:00am ET on the morning of November 16, 2021, to discuss the
financial results. If you would like to participate in the call,
details can be found here. 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.
ABOUT SKYLIGHT HEALTH GROUP
INC.
Skylight Health Group (NAQSAQ: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 value-based
care (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:
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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