Skylight Health Group Inc. (TSXV:SLHG; OTCQX:SLHGF) (“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, 2022.
- Increased revenue to $20.8 million
compared to $16.1 million in the previous quarter and 152% growth
Year over Year.
- Net loss from continuing operations
reduced by 16% from the previous quarter to $4.3 million
compared to $5.2 million in the previous quarter.
- Adjusted EBITDA loss reduced by 27%
from the previous quarter to $3.97 million compared to $5.4 million
in the previous quarter.
- Established new Medicare Advantage
(“MA”) plans in Florida with expected 2023 participation in ACO
Reach with traditional Medicare members moving to full-risk.
- 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.
Prad Sekar, CEO of Skylight Health, said, “We
are pleased with our third quarter results, taking another major
step towards achieving the goals we set for 2022. We increased our
top line while reducing our costs and improving adjusted EBITDA. In
Q1, we set an aggressive plan to work on operational efficiencies,
right-size costs, and make material reductions on our annual cost
basis. Exiting Q3, we forecast further improvement in adjusted
EBITDA for Q4 as we remain committed to working towards adjusted
EBITDA break-even by end of 2022. We accelerated our journey to VBC
by three years through the acquisition of NMD and our partnership
with CHS and are now fully equipped to grow our number of lives at
risk. 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 nine months ended September 30,
2022 were $20.8 million and $44.6 million, respectively,
compared to $8.7 million and $17.7 million, for the three
and nine months ended September 30, 2021 (excluding revenue
from discontinued operations of $2.8 million and
$8.7 million, respectively), an increase of $12.1 million
and $26.9 million, respectively. This increase was primarily a
result of a full quarter of revenue from the acquisition of NMD in
Q2 2022. The primary driver included the new capitated business
segment from value-based-care, where the Company earns a fixed or
capitated fee per member per month at a significant premium to
traditional FFS;
- Gross profit was $3.8 million and $11.2 million,
respectively, for the three and nine months ended
September 30, 2022, compared to $4.7 million and
$9.8 million, respectively, for the three and nine months
ended September 30, 2021 (excluding gross profit from
discontinued operations of $2.2 million and $6.7 million,
respectively);
- Gross margin was 18% and 25%, respectively, for the three and
nine months ended September 30, 2022, compared to 55% for both the
three and nine months ended September 30, 2021 (discontinued
operations gross margin was 77% for both the three and nine months
ended September 30, 2021). The margins in Q3 2022 were lower
due to the change in how Gross profits are calculated in a
traditional FFS model versus a VBC or capitated model at risk. The
Company expects to see improvements in its gross profit margin in
the near term through patient marketing efforts and improvements to
the medical loss ratios and accurate coding for its lives at
risk;
- Adjusted EBITDA for the three and nine months ended
September 30, 2022 was a loss of $3.97 million and
$16.1 million, respectively, compared to a loss of
$4.3 million and $9.5 million, respectively, during the
three and nine months ended September 30, 2021. Compared to Q2
2022, the Company has seen an improvement in Adjusted EBITDA from
its cost-saving and integration efforts. The adjusted EBITDA of Q2
2022 was a loss of $5.4 million. The Company anticipates that it
will continue to see improvements in the coming quarters. The
Company is committed to continuing working towards adjusted EBITDA
break-even by the end of the year;
- Net loss from continuing operations during the three and nine
months ended September 30, 2022 was $4.3 million and
$17.8 million, respectively (three and nine months ended
September 30, 2021: $4.9 million and $14.0 million,
respectively, excluding net income from discontinued operations of
$0.8 million and $2.6 million), the improvement in Q3
2022 was primarily due to reductions in professional fees, foreign
exchange gain and gain in fair value of financial liabilities. In
Q2 2022, the Net loss from continuing operations was $5.2 million.
The significant improvement in Q3 2022 was primarily due to
continued operational efficiencies, reductions in salaries and
wages, professional fees, office and administration costs and
foreign exchange gain. The Company anticipates that it will
continue to see improvements in the coming quarters.
Operational Highlights:
- The Company closed the non-brokered private placement (the
“Offering”), issuing 2,355 units of unsecured convertible
debentures (“Debentures”). The principal sum of Debentures issued
totals $2.35 million. The Debentures have a maturity date of thirty
(30) months from the date of issuance and shall bear interest at
the rate of 8% per annum, paid quarterly in shares.
- Skylight Health Research continues to see momentum and growth
through 2022. Since April 2022, two studies have been completed and
one new study has been awarded. Four studies are currently ongoing
at three clinics, and the newest study awarded will be conducted at
three clinics launched in September 2022. Two awarded studies are
on hold with the sponsors and are pending launch. Continued success
has been seen through Skylight’s partnership with ClinEdge. This
vital partnership was expanded further in September 2021 when
ClinEdge was acquired by Elligo. Skylight Health Research has also
recently partnered with Endominance for their Microbiome, Anxiety,
& Cognitive Orientation (MACO) study to assist with their
patient recruitment.
- Announced the expansion of one of its current Medicare
Advantage (“MA”) plans AvMed from South Florida into Central
Florida, increasing value-based care coverage. Additionally, the
amendment to expand coverage also includes a shift in the current
reimbursement model from fee-for-service to a value-based care
capitation fee with shared savings opportunities. Since the
announcement, the Company has also secured new MA contracts with
Alignment and Ultimate health plans in Florida for 2023.
- Announced an update on the addendum to its current Medicaid
contract into Colorado’s new Alternative Payment Model 2 (APM 2)
for effective start date January 2023. The Company continues to see
opportunities to expand value-based contracting efforts beyond
traditional Medicare and Medicare Advantage. The Company currently
has over 20K Medicaid members in Colorado.
- Announced a strategic commitment of US$ 5 million in the form
of a convertible debenture from a multi-billion dollar
growth-oriented healthcare institutional investment firm in the
United States. The financing is set to close in two tranches. The
first tranche of US$ 3.37 million has been completed as of the date
of this release, and the second tranche for the remaining US$ 1.63
million is not closed yet.
- Announced its common shares (the “Shares”) commenced trading on
the OTCQX Best Market on October 13, 2022 under the symbol “SLHGF”
following a voluntary delisting from Nasdaq. The Company’s common
shares will continue to trade on the TSX Venture Exchange under the
symbol “SLHG.V”. The Company’s shares are eligible for electronic
clearing and settlement in the United States through the Depository
Trust Company (“DTC“).
Third Quarter Performance:
Q3 2022 was focused on executing the Company’s
plans to get to adjusted EBITDA break-even. Efforts made in Q3 2022
have resulted in an adjusted EBITDA improvement of approximately
$1.5 million compared to Q2 2022.These efforts will continue to
extend into Q4 2022. 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. A growth
in its research division also drove increased revenue from its
existing business prior to the acquisition of NMD.
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 value-based-care contribution in
Medicare and Medicare Advantage growth. 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.
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. The
Company’s marketing efforts currently are focused on membership
growth in its Florida practices existing health plans Humana,
CarePlus, AvMed, Preferred Care and new plans including Ultimate
and Alignment. 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 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.
Q3 2022 Financial Highlights**
(in 000s of dollars) |
Three months ended September 30 |
Nine months ended September 30 |
|
2022 |
2021 |
2022 |
2021 |
Revenue |
20,849 |
8,697 |
44,638 |
17,748 |
Cost of sales |
17,088 |
3,948 |
33,480 |
7,989 |
Gross profit |
3,761 |
4,749 |
11,158 |
9,759 |
Total operating expenses |
9,362 |
10,118 |
31,007 |
23,970 |
Loss from continuing operations |
(5,601) |
(5,369) |
(19,849) |
(14,211) |
Net loss from continuing operations |
(4,324) |
(4,911) |
(17,799) |
(13,964) |
Net income from discontinued operations |
─ |
789 |
─ |
2,633 |
Net loss |
(4,324) |
(4,122) |
(17,799) |
(11,331) |
Adjusted EBITDA* |
(3,970) |
(4,314) |
(16,069) |
(9,547) |
*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 November 17, 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.
Date: |
November 17, 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 Third Quarter 2022 Financial Results |
Series A Preferred Stock Cash Dividend and Share
issuance
The Board of Directors of the Company has
authorized, and the Company has declared, a dividend on its 9.25%
Series A Cumulative Redeemable Perpetual Preferred Shares (the
“Series A Preferred Shares”) for the month of December 2022. The
Series A Preferred Shares trade under the “SLHGP” stock ticker
symbol. In accordance with the terms of the Series A Preferred
Shares, the Series A dividend will be payable in cash in the amount
of $0.1927 per share on December 20, 2022 to the shareholders of
record of the Series A Preferred Stock as of the dividend record
date of November 30, 2022.
The Company also announces the issuance of
581,438 shares to an employee pursuant to the terms of the
employment agreement. The shares are issued at $0.64 per share
being the 10-day VWAP for the Company. All issued shares will be
subject to a four-month hold from the date of issuance and is
subject to TSXV approval.
ABOUT SKYLIGHT HEALTH GROUP
INC.
Skylight Health Group (TSXV:SLHG; OTCQX:SLHGF)
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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