Dear shareholders and investors,
I am pleased to report Premier Health’s results for our third quarter ended June 30, 2023, and to update you on the status of our operations as well as recent developments.
Results and Operations
The company’s revenues reached $23.6M for the third quarter ended June 30, 2023 ($22.4M for the same period in FY2022). The increase in revenues was a result of a gradual return to contractual rates following the end of special measures rate restrictions as well as a slight overall increase in our number of billable hours over the quarter. The Company was able to maintain its general level of revenue in the province as well as an average gross margin of 27.4% for the period, above our 25% objective. On a quarterly basis, administrative expenses were in line with the same quarter last year. This resulted in an adjusted EBITDA of $2.7M for the three-month period ($1.6M for the same period in FY2022). Net income for the quarter was $0.5M compared to $0.4M for the same period in FY2022. Over the quarter approximately 843 healthcare professionals were deployed through our platform monthly for a total of 217,113 hours billed for the three-month period.
For the nine-month period ended June 30, 2023, the Company recorded revenues of $67.0M, an adjusted EBITDA of $6.2M and a net income of $0.2M, compared to $58.4 M, $3.5M respectively and a net loss of $0.1M for the same period last year. The improvements in profitability over the first nine months of the fiscal year are driven mainly by a slightly higher gross margin and proportionally lower administrative expenses when compared with the same period in 2022.
Q3 Important Developments
Acquisition of Solutions Staffing Inc.
Premier Health’s medium-term objective has always been to become a national service provider. The recent signature of a share purchase agreement for the acquisition of Solutions Staffing Inc. (SSI) in British Columbia is an important milestone toward achieving this goal. The company’s national service provider strategy is based on three important elements.
First, the Canadian Medical Association (CMA) has recommended a series of potential actions to stabilize the provincial health systems across Canada, and amongst other measures, it has recommended the establishment of a pan-Canadian licensure model to facilitate the mobility of medical professionals and the creation of a national health human resources strategy to plan for the recruitment and retention of health workers. We consider that having a pan-Canadian platform will enable us to align our activities with these recommendations. Second, in the context where healthcare policies and budgets are a provincial responsibility, we see divergences in provincial healthcare policies and system management strategies, as well as political cycles that can have local impacts, and we believe that diversification is paramount to revenue stability. Finally, we anticipate that building a multi jurisdiction platform in our own market, addressing different business processes, with multiple cultures and languages will represent a valuable exercise that can eventually be easily leveraged outside of Canada.
In that context, we are very excited with the opportunity to continue growing SSI’s travel nurse operations with its experienced and talented management team. SSI’s approach is to offer professional nurses and healthcare workers the opportunity to use their considerable experience in a flexible environment that is adapted to their needs and aspirations, while supporting clients through extensive procedures and policies as well as a dynamic company philosophy. SSI has a remarkable pool of Registered Nurses, Licensed Practical Nurses, and Allied Healthcare Professionals, ready to help organizations meet their staffing challenges. Solutions Staffing is active in British Columbia, Alberta, Saskatchewan, Northwest Territories, Nunavut, and Yukon. For its fiscal year ending September 30, 2022, SSI had unaudited revenues of C$74.0M, an EBITDA of C$6.7M and a net income of C$4.9M.
Quebec healthcare independent workforce call for tenders
In January of this year, the government of Quebec proceeded with a major call for tenders for independent labor for nursing and assistance. Call for tenders in the province of Quebec are carried out by the Government Acquisitions Center whose role is to provide public bodies with the goods and services they need with the objective of optimizing government acquisitions in compliance with the applicable contractual rules. The January call for tenders covered several profiles and regions within the province of Quebec for an initial six-month period, subject to the exercise of 3 renewal options for a period of six months each and a two-month transition option. We estimate this to be the biggest call for tenders for this type of services carried out so far. In June 2023, retained bidders were awarded work-to-order contracts and were ranked in function of their respective pricing. Work-to-order contract are usually used to meet needs that are recurring but for which the number of requests for services, or the frequency are uncertain and have been historically used by the provincial and federal government for these types of services.
Premier Health’s subsidiaries active in the province of Quebec participated in the call for tenders to provide their respective services. Our subsidiaries have different regional (urban centers, regions, northern regions) and profile (per diem, travel nurse) focuses and proposed services according to their respective resources’ profiles and operating costs. All our subsidiaries were awarded work-to-order contracts and ranked at different levels depending on their competitivity for the offered services by profile and by region.
It is difficult to quantify the impact these contracts will have on the company’s revenues due to the nature of the work-to-order contracts and the uncertainty of renewal options. However, we anticipate the overall impact of the results of the call for tenders to be generally positive for the company. First, it enables us to offer our services within a predetermined framework and on a competitive basis. In our opinion, this favors better organized staffing agencies and results ultimately in a competitive cost for the government. In addition, we estimate that only 50% of the staffing agencies active in Quebec were awarded contracts which implies that professionals involved with non-retained agencies will gradually migrate to retained agencies.
Per Diem Segment
The Per diem segment includes Placement Premier Soin and Code Bleu, two of our Quebec subsidiaries that offer their respective services for nursing and assistance by profile and by region. Per diem (“by the day”) nurses work on an as-needed basis, sometimes for multiple health care institutions, and are typically assigned shifts at the last minute and paid directly tied to worked hours.
Since the start of the year, most of the COVID special measures decrees have been removed and accordingly we have been able to gradually go back to contractual rates which were obtained pre-pandemic through competitive calls for tenders. The increased rates have compensated partially for lower volumes observed since last year. The lower numbers of hours billed are due mainly to the lower availability of staff, which we believe followed an increase in the number of agencies within the province of Quebec over the COVID period. We are starting to observe a reversal of this trend and expect to see gradual improvement on that front over the next 12 months. The impact of the recent call for tenders and the resulting June work-to-order contracts awards should also accelerate the trend for the retained agencies in general.
Our Placement Premier Soin business unit performed well over the quarter with a 17% increase in revenues versus the previous period while the gross margin was in line with our 25% target. The recent hiring of an experienced manager contributed to improve the alignment of objectives and priorities. Placement Premier Soin’s management recently implemented revised business protocols specifically to increase its efficiency in filling cancelled work shifts, therefore reducing the loss of billable hours. The measurable impact of these actions was a 14% increase in actives resources on the platform and a resulting increase in hours billed, notably with Registered Nurses (RN) and Auxiliary Nurses.
Results were also positive at our Code Bleu business unit that posted a 4% decrease in billable hours but an 11% increase in revenues for the quarter. This was accompanied by an increase in the gross margin that is temporary by nature and expected to remain close to our 25% target in the longer term as the impact of the recent contract awards are recorded. The decrease in billable hour follows a recent trend of last minutes cancellation of previously confirmed work shifts by serviced establishments. The management of Code Bleu is currently analysing the situation to be able to address this issue in the short term. Newly hired general manager has also started implementing revised business protocols to improve efficiency at different levels.
Code Bleu and Placement Premier Soin offer similar services but the weighting of different type of professionals active on the platform as well as the geographical focus may vary from one business unit to the other resulting in different revenue profiles.
Travel Nurse Segment
The travel nurse segment includes Canadian Health Care Agency, Premier Health Nordik, and Solutions Nursing, three of our subsidiaries that offer their respective services to the federal and provincial governments for nursing and assistance mostly in remote regions. Travel nurses are healthcare professionals who work in temporary positions, carrying out short- and medium-term assignments that require travel, especially in remote areas.
Hours billed at Premier Health Nordik increased over the period resulting in a 19% increase in revenues for the third quarter. This was due to a more efficient placement of existing resources including more frequent interaction with resources to favor renewal and extensions of their commitments, and a focus on longer mandates. Solutions Nursing’s hours billed also increased back to 2022 levels resulting in a 48% increase in revenues for the period. This material increase is the result of an important hiring and training campaign started in the first quarter that enabled the business unit to increase the number of active mandates as well as the contractual arrangements covering an additional provincial administrative region in the northern territories. Premier Health Nordik and Solutions Nursing were both awarded work-to-order contracts and ranked at different levels based on their respective service offering following the recent Quebec call for tender. Going forward, we anticipate that the demand for independent labor for nursing and assistance in northern regions will remain high and not be affected by the operationalization of Bill 10 in the province of Quebec.
Revenues at Canadian Health Care Agency (CHCA) have decreased over the quarter by 11%, back to the level they were when we acquired this business unit in 2022. The decrease in revenues and hours billed is related to the termination of corporate contracts linked to COVID, as well as an increase in nurses’ relocations requests by Indigenous Services Canada, CHCA’s main contractor. Mid mandate relocations are a difficult process for nurses who committed for long stays in remote regions and result in frustration, delays, and mandate cancellation with the ensuing impact on average hours billed. Corrective measures taken over the quarter included offering relocated nurses alternative mandates in other regions and provinces. We expect this issue not to have a permanent impact on this business unit’s capacity to grow organically in the future.
We are still facing head winds in Quebec and expect limited organic growth and continued uncertainties in the province in the medium term. The government is currently articulating its healthcare strategy and will eventually have to operationalize its newly adopted regulations and management infrastructure. This will take time, but in the interim, the Ministry of Health evaluates the Quebec healthcare independent labor requirements to be approximately $1.32 billion annually and we are confident that our Quebec based subsidiaries have the capacity to continue offering competitive services according to their respective profiles and regions. We see divergences in provincial healthcare policies and system management strategies and in that context, we anticipate the progression of our revenue base to come from further diversification outside of the province of Quebec.
We expect to conclude the acquisition of Solutions Staffing before the end of our fiscal year end. This will have a meaningful impact on the company going forward. Post transaction, on a pro forma basis, we anticipate our revenue base in Quebec to represent less than 40% of total revenues. With a geographically diversified revenue base and an excellent management infrastructure in place, both in British Columbia and Ontario, we anticipate a better capacity to look for smaller regional opportunities. We are continuously seeking transaction opportunities in other Canadian provinces and our objective is to further diversify our activities to decrease the weight of Quebec in the company’s revenues below the 25% threshold.
The healthcare sector in North America is currently experiencing the compounded effect of an aging population, an important wave of early retirements, and some lasting effects of the pandemic. These circumstances, like a perfect storm, produced a general physical, mental, and emotional exhaustion amongst healthcare workers, early retirements, and career changes in the sector, that resulted in a general a shortage of personnel. Generally speaking, demand for our services is expected to remain strong for the foreseeable future.
Our short-term technology roadmap is aimed at positioning ourselves to manage a coast-to-coast operation. Our strategy is to position our platform as a service to subsidiaries to facilitate onboarding of new business units, with the objective to provide regional-specific business protocols, recruiting methods, and branding. We continue to believe that technology is an important barrier to entry and an important element of differentiation as a consolidator.
We have had a good track record of acquiring solid organisations and Solutions Staffing is no exception. We are excited with the prospect to welcome the management, the staff and their nurses and professionals in our team in the short term.
I wish you all the best,
Chief Executive Officer