Letter from the CEO Dear shareholders and investors,
I am pleased to report Premier Health’s results for our first quarter of FY2022, and to update you on the status of our operations and recent developments.
Results and Operations
The company’s revenues reached $18.4 million for the quarter ended on December 31, 2021 ($13.4 million for the same period in FY2021). The revenues were impacted by a certain level of absenteeism amongst healthcare professionals on our platform because of Omicron variant related isolation requirements and were accordingly slightly below our budget expectations. This translated in an adjusted EBITDA of $1.5 million ($1.3 million for the same period in FY2021) and a net income of $0.3 million ($0.4 million for the same period in FY2021). Our average gross margin of 24% for the period was close to our objective of 25%. However, the lower revenues impacted our EBITDA margin in the context where we are increasing management and technology related expenses in expectation of a larger geographical footprint. We expect a certain level of volatility of our gross margin and EBITDA margin as we continue our acquisition program in other markets.
Over the quarter, our 3 main business units performed in line with our expectations. There are approximately 1,000 healthcare professionals currently active on our platform and the company reached a total of 239,772 billable hours in the first quarter, representing 96 percent of our objective of 250,000 hours billed quarterly.
COVID-19 Update
At the time of my last communication, a fifth wave of the COVID-19 epidemic was gathering momentum across Europe, and regional health systems were starting to acknowledge the emergence of the Omicron variant. A mere three months later, Omicron infections make up more than 90 percent of Canada’s recent COVID-19 cases and authorities globally are seeing signs that this fifth COVID-19 Omicron wave has peaked in parts of the world, including Canada. Furthermore, scientists are currently observing the behavior of yet another sub-variant that is rapidly spreading in some countries. This BA-2 sub-lineage of Omicron, which was first detected in November of last year, has many similarities to the initial Omicron variant but does exhibit differences, including in some mutations that may affect transmissibility. The emergence of new variants that are less severe and ultimately similar to a common cold could signal a transition of the virus from pandemic to endemic. This implies altering materially existing response protocols again. The speed at which governments and healthcare organizations need to adapt puts an enormous amount of pressure on management, personnel, and other resources. We believe that our adaptation capacity in this situation was greatly improved by the flexibility and robustness of our technology platform.
We were expecting the state of health emergency imposed by decree by the government of Quebec to be lifted after the holidays. In normal circumstances, Quebec health establishments may solicit independent agency staff only from agencies selected after a tender process carried out by the Government Acquisitions Center (CAG). Premier Soin’s contractual agreements were all awarded following such tender processes. To ensure the continuity of services as well as user safety in this context, however, the Ministry of Health consented to the solicitation of independent staff from non-qualified agencies. This does not impact our business units materially and we expect the situation to revert to normal business practices soon after the health emergency is lifted.
Healthcare workforce solutions
During the first quarter, we implemented additional software applications to better manage the recent isolation protocols as well as the augmentation of Omicron variant absenteeism levels. The increased absenteeism is affecting all levels of care, including our organization as mentioned earlier, and we initiated bilateral discussions with governmental authorities to improve the coordination of resources in this context with the objective of providing continuous care to the population. As part of these discussions, our Code Bleu business unit recently negotiated special 12-week mandates to facilitate the synchronisation of available resources. We are also planning long-term deployment protocols to cover situations including future COVID-19 waves and potential annual vaccination campaigns. We believe that the situation is evolving on a weekly basis and that our best approach is to adapt immediately to these changes.
Our long-term strategy is to operate independent business units under a single umbrella. The main objective of this strategy is to be close to the communities where services are provided to better understand the local dynamic of regional markets and refine our offering and business protocols. Following the acquisitions completed in FY2021, in the last few months and in line with this strategy, we increased our management capabilities by hiring general managers for our main business units. We recently implemented key performance indicators in each business unit to identify areas where additional operating efficiencies can be gained. We believe this is an efficient way to eventually leverage our existing resources to maximize organic growth.
The Premier Soin Nordik business unit continued its organic growth steadily during the quarter with an increased deployment of resources in Northern Ontario, Northern Quebec, and James Bay. During the quarter, Premier Soin Nordik also signed contractual arrangements with 5 additional hospitals in Northern Ontario. This unit is focused on Canada’s northern regions and, as such, provides services to provincial and federal governments. Due to the nature of the healthcare services provided and the implied geographical challenge, contractual arrangements provide for specialized personnel and longer stays. Remote region mandates require specific training for which our organization is recognized by both levels of government as well as medical personnel in general. We recently had a surge of demand for our virtual training platform from nursing students. We believe this provides the company with an excellent branding opportunity as well as a definitive strategic advantage for future recruitment.
Non-ambulatory transport services
The delivery of services is meeting our expectations and terms of ramp up and number of transport segments. Technology-wise, we are constantly gathering data to improve our operational efficiency. Each transport segment performed represents a series of data points that help us fine tune the transport business protocols to optimize our platform. We estimate that we will reach our cruising speed by mid-year.
We are still experiencing COVID-related supply chain issues, which resulted in our new vehicle deliveries being postponed due to a lack of industrial computer chips. We are now expecting our first 3 new transport units to be delivered in March. PHA needs approximately 40 specialized transport units to perform the estimated 28,000 transport segments per year. Meanwhile, the utilization of used vehicles acquired to perform the services continues to have an impact on this business unit margins due to higher maintenance costs. We expect to resume our initial deployment strategy once we take possession of the new fleet and the business unit’s performance to be in line with our performance indicators at that point in time.
Technology
We welcomed our new Chief Technology Officer, Eric Dupont, during the first quarter. Eric previously participated in PHA’s technology roadmap as a senior consultant and accordingly joined Premier Soin with an excellent knowledge of our business and platform. Eric has already instigated several initiatives to pave the way for our Canadian expansion. We started the design and deployment of a knowledge management platform and business intelligence tools to manage requests for proposals and long-term contracts in multiple jurisdictions. This will enable Premier Soin to centralize and streamline RFP processes occurring simultaneously in different jurisdictions. We also initiated a migration to a more robust ERP system upstream of an expected wider geographical operational footprint, and the ongoing deployment of our AI / Big Data recruiting platform joint venture is going well. Finally, we are currently completing the testing phase of a new version of our mobile application with a roll-out expected before the end of February. This new version provides for improved ergonomics and flexibility, two important features as we start deploying our services outside of the province of Quebec.
Moving Forward
We are actively pursuing our three development axes, namely technology, recruitment, and acquisitions. In the short term, we expect a good level of stability in demand for our services over what is now expected to be a 24-month COVID recovery period, over which healthcare organizations will address the increasing backlog of non-critical surgeries and other care services, while healthcare workers will also generally need to recuperate from physical, mental, and emotional exhaustion. Recent discussions with the Ministry of Health point in the direction of a better collaboration going forward, that could result in an increased level of coordination of internal and external resources for the different healthcare organizations. We feel this is an important step to plan efficiently eventual recurring vaccination campaigns or potential future pandemics.
Our short-term technology roadmap is aimed at positioning ourselves to manage a coast-to-coast operation. We continue to believe that technology is an important barrier to entry in our market and a very important growth vector.
We are actively seeking acquisition opportunities in other Canadian provinces. Ontario and British Columbia represent the two biggest markets in Canada for our type of services and we were able to gather enough data points to build an interesting pipeline of acquisition opportunities and a deployment strategy that has the potential to lead us into becoming an important actor in the delivery of care in the country. At this point, the company has the critical mass and the liquidities to be an active consolidator. We have an excellent track record in terms of integration and so far, we see no factors that could mitigate our growth path across the country in the foreseeable future.
I wish you all the best,
Martin Legault
Chief Executive Officer
Premier Health of America Inc.