Nova Leap Health - On the right trackNova Leap Health - A few points and figures from the latest Q3 report that show me that NLH are on the right track Operating expenses Q2-Q3 Cost of service
Q2: 4,512,126
Q3: 4,595,117
-83,000
Need to worry about the cost increase? Not when the organic revenues are significantly higher.
Revenues Q2-Q3 Service revenues
Q2: 6,986,758
Q3: 7,141,654
+154,896
Of course, some salary inflation may be included in increased operating expenses, but it is likely that staff were increased, which in turn contributed to the increased revenue.
Home health care services - Increased number of jobs (US) in the last 5 months June: +11,000
July: +3,400
August: -1,800
September: +10,600
October: +6,000
Total: Increased by 29,200 new jobs
(Source: homehealthline.decisionhealth.com)
Corporate and administrative expenses Head office and operations management
Q2: 1,795,934
Q3: 1,664,527
+ 131,407
General & administrative
Q2: 644,748
Q3: 556,513
+ 88,235
Total of 219,642 saved in corporate and administrative expenses in one quarter is impressive.
Employee Retention Credit (“ERC”) ”As of September 30, 2022, an ERC amount of $659,495 is outstanding …”
Considering that in Q2 they collected 917,474, the odds feels strong that they will get the remaining sum during Q4, which will further strengthen the financing.
Gross profit ”Gross profit margin as a percentage of revenues remained strong at 35.7% in Q3 2022, an increase from gross profit margin of 35.4% in Q2 2022;”
Very promising that they can maintain this high margin.
Cash and cash equivalents Q2: 794,123
Q3: 2,207,432
And still full access to the unutilized revolving credit facility of $1,094,331 (CAD$1,500,000).
The reason for the increase can be found mainly in these lines:
”During Q3 2022, the Company closed a non-brokered private placement, through the issuance of 6,814,445 common shares at a price of CAD$0.35 per share for gross proceeds of $1,818,432 (CAD$2,385,056). Insiders subscribed to 82.18% of the private placement”
Loans Demand loans
Q2: 2,713,219
Q3: 1,530,063
Non-revolving demand loans
Q2: 1,600,000
Q3: 640,000
CEO in Q3 report: ”While we made noted improvements to the business described above, we also took the opportunity to extinguish approximately half of the Company’s outstanding bank debt while simultaneously increasing the Company’s cash position. Once the remaining ERC receivable is collected and applied to the outstanding debt, the demand loan balance will fall below $900K. By the end of 2023, we are expecting the outstanding balance on existing demand loans to be approximately $265,000.”
They really pay off their loans at a fascinating high speed.
Insiders ”Insiders, including management and board directors, led a non-brokered private placement which resulted in an increase in insider ownership, which currently sits at approximately 38.8%. This was in addition to the open market purchases that occurred during the quarter. Insiders continued to make significant investments in the Company and no insider has sold a single share since incorporation.”
No explanation needed here.
That you can buy the share significantly under non-brokered private placement at $0.35 (CAD), where insiders subscribed to 82.18% of the private placement for a sum of 1,491,115 million dollars, especially considering what insiders owned and have bought at a much higher price before.
And remember this: 2019 - Q3
Revenues: $4,424,350
Adjusted EBITDA: $324,676
2022 – Q3 Revenues: $7,141,654
Adjusted EBITDA: $325,497
You can look at these numbers in different ways. If you have the history with you, I think it is easier to be hopeful that the company can get back to these EBITDA margins from Q3 2019. Before COVID-19 but also before an acquisition that was previously written off completely and is seeking high compensation for. But that there is room for improvement for Adjusted EBITDA, and there with an additional potential just in organic growth improvement, I think it is important to emphasize.
2022 – Q2: ”However, a significant portion of the decrease in Q2 2022 revenues from Q1 2022 revenues, and the corresponding impact on Adjusted EBITDA, relates to the loss of significant client service hours in one of our New England agencies for which we have filed a lawsuit on July 5, 2022 seeking $1.2 million in past and projected future profits against the previous owner and a related corporate entity for breach of certain covenants that formed part of the acquisition agreement;
https://www.globenewswire.com/NewsRoom/AttachmentNg/a52b6ee2-3979-4b4e-a6c8-18348a310a43”
Imagine if you receive this money, which I understand is not a particularly high requirement. Calculated very low, you have revenues of absolutely at least $28-30 M (USD) in 2023. Then we are talking about a company with zero(!) debt and $3.5 - 4.5 M (USD) in cash, without including new acquisitions and thus not the credit line either next year.
Market cap today: $16.8 M (USD) at share price $0.26 (CAD).
https://www.youtube.com/watch?v=88gGyQJUsYk
Nova Leap Health is still a Buy, says Echelon ”At press time, Quenneville’s C$0.90 target represented a projected one-year return of 246 per cent.”
https://www.cantechletter.com/2022/11/nova-leap-health-is-a-buy-says-echelon/
Cormark Securities researcher Kyle McPhee and Liam Dotchison reiterate "BUY" rating 14 November at $1.00, for there one year taget price. Almost 400% upside. https://cormark.bluematrix.com/sellside/MAR.action?tickerList=173 Nova Leap Health: Top 10 Undervalued Healthcare Providers & Services Industry Stocks (NLH) Close price: $0.27 (CAD) Value today: $0.63 (138.77% upside) https://www.theglobeandmail.com/investing/markets/stocks/NLH-X/pressreleases/11638569/nova-leap-health-top-10-undervalued-healthcare-providers-services-industry-stocks-nlh/