Results 2018-2022 - Expectations 2023 Part 1
Results 2018-2022 - Expectations 2023
Revenues Service revenues
Revenue is billed (or invoiced) at an hourly rate specified in client agreements and recognized at the time services are rendered.
2018: 10,362,179
2019: 17,404,715
2020: 17,309,407
2021: 21,279,083
2022: 28,205,104
Operating expenses Cost of service
Cost of services is comprised of hourly employee compensation, related payroll taxes, benefits and workers compensation insurance.
2018: 7,041,936
2019: 11,559,882
2020: 11,438,005
2021: 14,067,940
2022: 18,229,636
Results Results from service
2018: 3,320,243
2019: 5,844,833
2020: 5,871,402
2021: 7,211,143
2022: 9,975,468
Gross profit margin percentage
2018: 32,0%
2019: 33,6%
2020: 33,9%
2021: 33,9%
2022: 35,4%
Corporate and administrative expenses Head office and operations management expense includes total compensation for all home care agency office staff as well as total compensation of Head Office employees and directors of the Board.
Head office and operations
2018: 2,424,628
2019: 3,504,215
2020: 3,818,614
2021: 5,273,165
2022: 6,943,245
General & administrative
2018: 1,056,727
2019: 1,433,358
2020: 1,590,781
2021: 1,933,490
2022: 2,373,901
Amortization and depreciation
2018: 442,728
2019: 618,670
2020: 544,224
2021: 861,464
2022: 1,355,920
Stock based compensation
2018: 159,897
2019: 401,420
2020: 313,861
2021: 374,404
2022: 364,512
Total 2018: 4,083,980
2019: 5,957,663
2020: 6,267,480
2021: 8,442,523
2022: 11,037,578
Other income (expenses) COVID-19 relief programs
2018: Not reported
2019: Not Reported
2020: 2,221,071
2021: 5,151,029
2022: 0
Finance expense
2018: (312,923)
2019: (460,729)
2020: (448,122)
2021: (401,122)
2022: (270,994)
Foreign exchange (loss) gain
2018: 366,560
2019: (259,856)
2020: (199,624)
2021: (69,885)
2022: 933,550
Acquisition related expenses
2018: (330,488)
2019: (117,699)
2020: (203,286)
2021: (343,885)
2022: (255,188)
Impairment loss
2018: 0
2019: 0
2020: (800,000)
2021: (605,682)
2022: (514,403)
US-NH/VT Cash Generating Unit (CGU), the 2019-2021 acquisitions of turnaround business and the 2021-2022 lawsuit of the New England acquisitions.
Other expenses
2018: Not reported
2019: Not reported
2020: (48,414)
2021: (25,841)
2022: (37,416)
Total 2018: (276,851)
2019: (838,284)
2020: 521,595
2021: 3,704,614
2022: (144,451)
(Loss) income before income taxes 2018: (1,040,588)
2019: (951,114)
2020: 125,517
2021: 2,473,234
2022: (1,206,561)
Total income tax (expense) recovery 2018: 79,317
2019: (104,701)
2020: 1,130,781
2021: (712,521)
2022: 370,816
Net (loss) income 2018: (961,271)
2019: (1,055,815)
2020: 1,256,298
2021: 1,760,713
2022: (835,745)
Part 2
2023 - (Low) Expectations without acquisition
Service of revenue 29,897,409 (6% organic grow*)
6% should certainly not be unreasonable considering the Omicron wave Q1 2022, the jobs in the market are increasing along with the needs are increasing (read previous post). Cost of service 19,134,342
Results from service 10,763,067
Gross profit margin 36%
Corporate and administrative expenses Head office and operations
7,000,000
General & administrative
2,500,000
Amortization and depreciation
1,175,303*
Stock based compensation
322.000 (average last 5 years)
Demand loans 2022: 1,378,244 “The Company’s debt position improved significantly during the course of the year and we remain on target to end 2023 with approximately $290,000 of bank debt.” 1,088,244 + 87,059 (8%* rate) = 1,175,303 (think the total rates will be lower then 8%) Total
10,997,303
Other income (expenses) COVID-19 relief programs: 659,495
Finance expense: (200,000) (these numbers have been falling for the last 3 years, guess it will continue)
Foreign exchange (loss) gain: 0 (impossible to count on today)
Acquisition related expenses: (100,000) *
Impairment loss: 0
Other expenses: (22,333) (average last 5 years)
Historically some of these costs have been reported over 2 years after an acquisition, but should be lower than the 255,000 in 2022 when no acquisitions were made in the last 16 months. Total
321,673
Income (loss) before income taxes 87 437
Difficult to forecast "Total income tax (expense) recovery" based on a pattern over the last 5 years (see above in part 1). But if you look and compare the 2020 result 125,517 on income before income taxes, it gave an income tax recovery that generated a net income that landed at 1,256,298. If you were to calculate almost exactly times 10 of my calculation example, it could mean a net income of 874,000 for 2023.
“The Company had a cash balance of $1.273 million as of December 31, 2022, as well as full access to the unutilized revolving credit facility of $1.108 million” “In Q4 2022, a goodwill impairment loss of $514,403 was recorded in one of the Company’s New England agencies where a lawsuit was filed in Q3 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.” Outcome (2023-12-31)
Revenues (YoY): $29,9 M (without a single acquisition in 2023)
Cash balance: $2,153 M ($3,353 M full lawsuite win)
Demand loans: $0,29 M
Market cap (today): $12.54 M
From the number of pins on the latest map (latest investor presentation) on the number of home care that Nova Leap Health owns, I get it to 23. Counting over the goodwill losses in 2020-2022 over a turnaround case and law suite case in, you can shorten the list to 21. Divided number/market cap gives a value of $0.59 M per individual home care company and a divided debt (demanded loans) of $0.013 M to these. And that is without counting the company's Total assets, which at the last report was 23,948,563 (2022-12-31).
When NLH then starts taking one or more loans, compounding can really happen if you manage to keep "Head office and operations" to a low % (according to salary increases of a couple of percent per year) now that the Regional Managers are in place. Is this possible? Considering the companies' statement and marginal increase in 2022, I think the answer is yes:
Head office and operations (2022)
Q1: 1,734,417
Q2: 1,795,934
Q3: 1,664,527
Q4: 1,748,367
Even though this investment in Regional Managers starting in 2021 has been costly for the company's growth opportunities since then, it must not be forgotten that "Gross profit margin percentage" has increased from 32% in 2018 to almost 36% in recent quarters. And this even though the company has lived through a pandemic for two years in between.
"Amortization and depreciation" will also decrease as the repayment plan of the new loans will be longer than the ones you are now paying back in total. If the loan interest rate goes down in the future, it is an additional profit. 10% EBITDA on future acquisitions in a market that is growing strongly organically and the snowball is rolling.
Note! For full transparency, both I personally and via Betula Kapital own shares in Nova Leap Health. The writing contains a lot of numbers, so feel free to double-check that these are correct when/if you do your own analysis. Then I would like to apologize for any linguistic mistakes as English is not my first language. betulakapital@mail.com