Revenue Growth of 184% Year over Year and 103% Growth Compared to the Previous Quarter
TORONTO, ON – August 16, 2021 – 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, 2021.
Second Quarter Highlights:
Revenue increased 184% to $10.5 million, driven by acquisitions and organic growth, compared to $3.7 million for the same period last year, and up 103% from $5.2 million for the first quarter of 2021;
- Organic growth from existing Primary Care clinics of approximately 13% during the quarter;
- Adjusted EBITDA was a loss of $1.5 million, driven by investments into people, technology and professional fees tied to acquisitions;
- On April 5, 2021, the Company completed the acquisition of Rocky Mountain in Denver, CO and on June 23, 2021, Doctors Center in Denver, CO;
- The Company acquired 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;
- Executed clinical trial contracts expected to generate revenue with strong margin potential;
- Net loss from operations was $3.5 million, with approximately $0.9 million in one-time expenses tied to the Nasdaq up list, professional fees and the large Rocky Mountain acquisition and $1.1 million in non-cash items; and
- Cash balance of $11.8 million as of June 30, 2021.
“We are excited that we achieved our largest revenue quarter in the history of the Company. The second quarter continued the transformative growth that started in the first quarter of this year,” said Prad Sekar, CEO of Skylight Health. “We’ve identified two key growth areas that will remain a focus for the last half of the year and onwards: the growth through strategic acquisitions and the participation of value-based care under the Medicare Shared Savings program for our traditional Medicare patients beginning in 2022.
Revenue increased 184% 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 six months ended June 30, 2021. The third quarter of 2021 will be the first period that includes a full three months of contribution by Rocky Mountain and Doctors Center 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 13% from prior acquisitions driven by improved revenue cycle management, provider access and patient flow post acquisition, compared to the first quarter of 2021.
The Company ended the quarter with the addition of new clinics, providers and patient panels. As of the end of the second quarter, the Company had approximately 88,000 lives vs 21,000 lives compared to the previous quarter. Eligible managed care lives represented over 15% of that population. Traditional Medicare patients will begin participation in the CMS MSSP program starting January 2022. This platform will help validate Skylight’s business model of shifting fee for service practices into value-based care arrangements.
Net loss was driven by approximately $0.9 million in one-time expenses that were tied to the efforts to see through the Nasdaq up list. These included professional fees and other marketing efforts. Other one-time expenses including professional fees attached to the closing of Rocky Mountain which the Company recognized as its largest acquisition to date. While the Company is focused on acquisitions of all sizes, it is focused on smaller independent practices. Net loss also consisted of approximately $1.1 million in non-cash items.
Adjusted EBITDA loss of $1.5 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 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 Second Quarter 2021
- Acquired 100% of the Colorado based Primary Care Clinic Group, Rocky Mountain on April 5 for total cash consideration of $13.8 million. The clinic group has 7 locations and reported $20.0 million in revenue and $3.0 million EBITDA in 2020.
- Executed one new clinical research trial agreement in Massachusetts through partnership with ClinEdge.
- The Company received approval from The Nasdaq Stock Market LLC to list its issued and outstanding common shares under the symbol “SLHG” effective June 7. In addition, effective June 7, 2021, the Company’s shares on the TSX-V began trading under the new symbol “SLHG”.
- Closed a bought deal offering with a syndicate of underwriters led by Raymond James Ltd. with full exercise of the Underwriters’ 15% over-allotment option, 1,970,360 common shares of the Company at a price of $7.00 per common share for gross proceeds of $13.8 million.
- Acquired 100% of Florida based primary care group Doctors Center Inc on June 23. The clinic group has 4 locations and reported $3.2 million in revenue and expected EBITDA margin of 10%.
Key Subsequent Events of the three months ended June 30, 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.
- 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. The Company expects to see the ACO benefit all current and future Skylight primary care practices for traditional Medicare patients at the start of the 2022 contribution year.
Q2 2021 Financial Highlights
| (in 000s of dollars) | Three Months Ended June 30 | Six Months Ended June 30 | ||
| 2021 | 2020 | 2021 | 2020 | |
| Revenue | 10,514 | 3,701 | 15,687 | 6,632 |
| Cost of sales | 3,770 | 1,088 | 5,390 | 2,118 |
| Gross profit | 6,744 | 2,613 | 10,297 | 4,514 |
| Total operating expenses | 10,240 | 2,633 | 16,463 | 5,524 |
| Operating loss | (3,496) | (20) | (6,166) | (1,010) |
| Adjusted EBITDA* | (1,517) | 381 | (2,094) | (222) |
*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 8:30am EST on the morning of August 17, 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.
