Dear shareholders and investors,
I am pleased to report Premier Health’s results for our fiscal year ended September 30, 2022, and to update you on the status of our operations as well as recent developments.
Results and Operations
The company’s revenues reached $80.5M for the year ended September 30, 2022 ($66.6M for the same period in FY2021). The increase in revenues is related to the consolidation of the Canadian Health Care Agency (“CHCA”) acquisition completed in April 2022. Chronic changes in the Quebec government’s directives regarding independent health care workers and general absenteeism amongst healthcare professionals had a negative impact on hours billed. The Company was nevertheless able to maintain its level of revenue in the province as well as an average gross margin of 24.9% for the period, in line with our 25% objective. On a quarterly basis, administrative expenses decreased compared to the last quarter in part due to lower non-operational transaction expenses. This helped decreased the negative impact of previous quarters and resulted in an adjusted EBITDA of $2.2M for the fourth quarter and $5.8M for the 12-month period (respectively $1.7M and $5.9M for the same periods in FY2021). Net income for the year was -$0.1MM compared to $1.5M for the same period in FY2021. Over the year approximately 3,000 healthcare professionals were deployed through our platform on a monthly basis for a total of 962,565 hours billed.
Quebec Healthcare Solutions
The October elections in Quebec resulted in the appointment of a majority government for which one of the mandates is to improve the province’s healthcare situation. During the year preceding the election, the current Health Minister announced a series of measures that included approximately $1 billion in bonusses to nurses accepting to commit to work full-time for one year, with the objective to reduce compulsory overtime, an important dissatisfaction factor, as well as to decrease the use of independent labour. The Ministry of Health and Social Services (MSSS) is now publishing a complete and transparent dashboard that monitors the performance of the network. According to recent MSSS data (October 22, 2022), the performance of these measures ranged from positive to neutral. Staff employed in the network shows a moderate increase following the special bonus announcement at the end of September 2021 but a 2.3% decrease from the announcement date until today, implying a temporary impact of the measure. For the period ranging from April 2021 to October 2022, use of independent labour ranged from 2.80% to 5.25% and currently stands at 3.82%, representing a slight increase of 0.64% for the last twelve months. The MSSS was thus successful in limiting the use of independent labour below a 5% threshold that can be viewed as marginal in the complex healthcare environment. Peaks in overtime, absenteeism in the network, and need for labour, namely over the year-end Holiday period, the summer vacations as well as early spring show correlation with the demand for our services.
We experienced our share of challenges in 2022. The series of measures imposed by the Quebec Ministry of Health had a destabilizing effect on our industry in general. The temporary nature of these directives and chronic changes in motus operandi for the use of independent work force resulted in a decrease in efficiency of personnel placement over the period. That translated into available nurses that could not be placed in a healthcare system that desperately needed them and a decrease in billable hours for nurse agencies active in the province. The state of health emergency declared on March 13, 2020, stipulated that special measures of the Minister of Health and Social Services made under the Public Health Act would remain in force until December 31, 2022. Bill 28, providing for the end of the state of health emergency on December 31, 2022, was passed on June 1, 2022. Accordingly, we expect a gradual return to normality in 2023, the most important aspect of it being a return to tender processes and long-term contractual relationships instead of OTC contracts with minimal intermediation and regulations. We believe this will favour bigger and better organized agencies that offer a much lower risk profile and should also decrease the average cost paid by the Ministry of Health for this type of services. We are currently experiencing a return to normal on the volume of hours with various establishments of the province and there are currently 4 long-term contracts due for renewal through tender processes in 2023. We believe we are well positioned to continue playing an important role in the Quebec market going forward.
Our northern regions business units performed in line with our expectations. Contractual agreements in northern regions are gradually resuming as we move toward a return to normality. Over the past fiscal year Premier Health Nordik signed new contractual arrangements with eleven hospitals, mainly in Northern Ontario and was recently awarded a 2-year contract for an approximative value of $500,000. In parallel, Solutions Nursing has experienced a record level of registration for its extended role training program over the last quarters and this trend is not showing any signs of slowing down. Typically, nurses acquire the required training with the objective to accept permanent or temporary assignments in northern regions within 12 months following the training. Solutions Nursing is currently reviewing its strategy for the renewal of an important contract in Northern Quebec due for 2023 with the objective to play an increased role in this region. We anticipate this growth in registrations and the increase in existing and potential contractual relationships to have a positive impact on future organic growth for our two specialized business units.
Canadian Health Care Agency
The Ontario agency was acquired in April and contributed to the company’s results for the last 5 months of the fiscal year. We now anticipate over 25% of our revenues to be generated outside of Quebec going forward. The integration of CHCA is going as planned with a solid and well-established management team. CHCA is an important service provider to Indigenous Services Canada (ISC), who’s responsibility is to improve access to high quality services for First Nations. Most of CHCA’s contractual relationships are based on long term RFP awarded contracts, some of which are expected to be renewed in FY2023. The agency is also providing services to provincial entities namely in Manitoba and British Columbia where registered nurses placement by the agency has recently increased materially. This follows CHCA’s strategy to replace COVID related corporate client revenues with longer term institutional relations as well as adding up an element of geographical diversification. The grant of an important federal government contract for the 2024-2026 period is currently under review and the technology portfolio is now expected to be part of the selection process. The rationale behind this preference for agencies with available technology platforms is to increase efficiency with the ultimate objective to better serve the northern populations. With the ongoing integration of this business unit on our platform, as well as its historical track record, we believe CHCA is particularly well positioned for the 2024-2026 contract award.
As part of its integration process, the agency is also going through a rebranding exercise to better capitalize on the quality of personnel and service developed over the years. This includes rolling out a new web site, an increased presence on digital media platforms as well as an increase in recruiting activities. So far, the short-term impact has been to boost demand for training to the highest level since the creation of the agency over 20 years ago. The Cambridge based agency provides us with a good management infrastructure in Ontario that will serve as a base to continue our expansion in this province. This is a strategy we are expecting to follow in other provinces as well.
We spent considerable amounts of resources over the year to improve the efficiency and robustness of our systems. These efforts are put forward to ensure that our business units use similar systems, performance indicators, and business processes to facilitate integration and generate synergies where possible.
We onboarded a new programming partner with additional resources to accelerate the development of our platform and launched our new mobile application at the end of the year. The mobile application was already a very attractive scheduling and reporting tool for healthcare professionals in our network. The new features and enhanced user experience further facilitate reporting with the capacity to take snapshot of documents and signatures to facilitate time sheet management and approvals. These features also simplify our billing process by decreasing the number of exceptions and anomalies that eventually require escalation. Platform side, we recently started using AI tools to further streamline our operational processes to increase the efficiency of personnel placement. The objective of using AI is to maximize the pool of healthcare professionals already on our platform to counterbalance the effect of absenteeism and the general rarity of professionals in the market.
Finally, we successfully deployed SAP for all our accounting and financial management processes. This brings all our agencies in Quebec and Ontario on the same accounting and reporting system. It will also facilitate and de-risk the integration of future acquisitions.
The acquisition of Cambridge based Canadian Health Care Agency and the hiring of a general manager for Ontario signalled the start of a second phase of our growth strategy in that province. With a revenue base that represents a material geographical diversification of our revenue sources and a management infrastructure in place, we have adapted our acquisition strategy to also include smaller regional opportunities in the province. In the context where healthcare policies and budgets are a provincial responsibility, political cycles can impact our sector locally and we believe that diversification is paramount to revenue stability. We are continuously seeking transaction opportunities in other Canadian provinces.
Across Canada in general demand for healthcare personnel is very high and expected to remain so at least over the anticipated COVID recovery period, while healthcare organizations will address the increasing backlog of non-critical surgeries and other care services. General physical, mental and emotional exhaustion of healthcare workers, early retirement, and career changes in the sector result in a general a shortage of personnel, a situation not expected to be resolved in the short term. We see divergences in provincial healthcare policies and system management strategies. In that context we anticipate a progression of our revenue base outside of the province of Quebec but limited organic growth in the province in the short term, and until the recently re-elected government articulates its healthcare strategy.
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 and an important element of differentiation as a consolidator. We believe that the 2022 challenges we faced in our main market are behind us and that our activities outside of the province of Quebec will drive organic growth. So far, we had an excellent track record in terms of integration, and we see no factors that could mitigate our growth path across the country in the foreseeable future.
I wish you all the best,
Chief Executive Officer
Premier Health of America Inc.