Dear shareholders and investors,

I am pleased to report Premier Health’s results for our second quarter ended March 31, 2024, and to update you on the status of our operations as well as recent developments. 

Results and operations

The company’s revenues reached $46.3M for the second quarter ended March 31, 2024 ($21.8M for the same period in 2023). This material increase resulted from the consolidation of Solutions Staffing for a full quarter. As expected, the consolidation also had an impact on our average gross margin, which decreased to 18.4% due to SSI’s different direct cost structure. On a quarterly basis, administrative expenses were impacted by non-recurring expenses of over $1M. This resulted in an adjusted EBITDA of $2.6M for the three-month period ($1.9M for the same period in 2023). Net loss for the quarter was $1.5M compared to nil for the same period in 2023. Over the three-month period ended March 31, 2024, 411,657 hours were billed on a consolidated basis.

Recent developments

January 2024 call for tender’s award in Quebec

The Quebec government acquisition center launched a call for tenders at the end October 2023 that was aimed at filling more than 16 million hours of work to be carried out by labor from private agencies across Quebec. The call for tender was split into two specific awards covering two different types of geographic regions of the province, thus separating northern regions and territories from urban areas. The durations of the contracts, linked to these specific regions, are also pegged to independent workforce reduction objectives described in Quebec’s Ministry of Health and Social Services’ (MHSS) 2023-2027 strategic plan. Our four subsidiaries active in Quebec were retained as service providers in January.

The particularity of the urban area award is that it is based on maximum hourly rates per types of roles, a situation like what was imposed by decree in 2022 as part of the Covid special sanitary measures. Premier Soin and Code Bleu, both focused on per diem placement but offering different types of professionals, are active mainly in urban areas and thus started providing services under hourly rates caps in April 2024. Premier Soin Nordik and Solutions Nursing, are active in northern regions and territories in which some areas are outside of the scope of Bill 10 and continue to engage in competitive RFP processes.

Administrative expenses optimization

With the consolidation of Solutions Staffing, Premier Health has reached a size threshold where cost optimizations have become possible. Management has the goal to centralize a certain number of administrative services to standardize processes and quality control across the subsidiaries and decrease administrative expenses. The Company has recently proceeded so in April with a 5% reduction of its administrative workforce and has identified several additional measures that will be operationalized during the next few quarters. The negative impact of this reduction related to severance and contract terminations is not expected to be material but is anticipated to improve net EBITDA margins before year end.

Internalization of technology development

With the recent hiring of a new CTO, the company is moving forward with the internalization of technology development. This strategy will enable Premier Health to develop its platform and applications in a more agile mode and to have better control over quality and speed of execution. We expect the financial impact to be neutral in the short term but anticipate an acceleration of the deployment of critical features including AI based automation of processes that will increase efficiencies and impact financial performance positively in the medium term.

Per diem / locum tenens segment

The per diem and locum tenens segment includes 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”) and locum tenens (“to substitute for”) 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, or to occupy temporary vacant positions.

Per diem business units’ revenues have been fluctuating and trending downward from one quarter to another. This is due in part to seasonality, but more importantly to the constantly evolving situation in the field, directly at healthcare facilities.  Local facility managers are coping with MHSS directives on one side and system overloads and backlogs on the other, trying to maintain delivery of service to the population. This induced volatility has an important impact on the demand for our services that will vary greatly in function of local circumstances translating into situations ranging from high demand for temporary personnel to numerous work shift cancellations. For the second quarter ended March 31, 2024, Per diem’s revenues for the quarter were 14.6% lower than the same period last year. Fortunately, the performance and versatility of our technology platform enabled us to adjust and communicate with our personnel in real time to reduce the impact of this volatility. The two business units posted an average gross margin of 28.5%, materially above our target, compensating for the decrease in billable hours and revenues, and in line with the same period last year. 

Code Bleu and Premier Soin offer similar services but are independently managed, the weighting of different type of professionals active on the respective platforms are materially different, and geographical focus also varies from one business unit to the other, resulting in different revenue profiles. Both business units are now currently operating within the parameters of the new January 2024 award. This recent call for tenders did not introduce performance security guarantees, minimum insurance coverage, or track record thresholds, measures we believe would greatly improve accountability and quality of service. However, it integrated the notion of hourly rates ceilings indicated in decree 1481-2023 of Bill 10. Accordingly, we expect agencies active in Quebec, including our two subsidiaries, to experience some pressure on gross margins as the Quebec market evolves toward a “volume” market, as experienced in other Canadian provinces in the past. However, we also believe this will favor larger, better-organized agencies like ours to the detriment of those who prospered on excessive rates.

In that context we anticipate that a fair number of smaller agencies, unable to cope with the new regulatory framework, will disappear over a ~24-month period. Personnel working for these small players will either migrate to bigger, better organized agencies, go back to the public system, or leave the sector altogether. Accordingly, we see this as a recruiting opportunity for our per diem eventually resulting in organic growth at our Quebec business units assuming recruiting momentum picks up.

Quebec’s Ministry of Health & Social Services has a system management dashboard that shows use of independent workers historically represented between 3% and 5% of the overall workforce (4.76% is the latest data available as of March 9, 2024). Dashboard numbers indicate that the use of independent workers has stabilized around that level since the introduction of Bill 10. Our per diem business units’ hours billed in the province represent less than 15% of Quebec’s ultimate 2026-2027 target.

Travel nurse segment

The travel nurse segment includes Canadian Health Care Agency, Premier Soin Nordik, Solutions Nursing as well as Solutions Staffing, four of our subsidiaries that offer their respective services to the federal and provincial governments for nursing and assistance including in remote regions. Travel nurses are healthcare professionals who work in temporary positions, carrying out short- and medium-term assignments that require travel.

Over the quarter, hours billed at our travel nurse units fluctuated from one unit to the other for diverse reasons, but overall, the outlook for the travel nurse sector is very positive. Premier Soin Nordik and Solutions Nursing, our two Quebec based travel nurse business units, were not materially affected by the operationalization of Bill 10 and we anticipate that the demand for independent labor for nursing and assistance in the province’s northern regions will remain high, as it is the case with most Canadian northern and remote regions. Travel nurse business units were able to attract additional professionals in their network over the quarter including educators and social workers, a trend toward diversification that we are monitoring closely. The increased collaboration between CHCA and other units over the period decreased the revenue volatility by stabilizing employee placement rates. This also helped Premier Soin Nordik gradually develop activities in Northern Ontario and positioned itself for future federal government awards.

Revenues at Canadian Health Care Agency (CHCA) decreased slightly over the quarter. This was a temporary situation due to the transition to a long-term contract award by Indigenous Services Canada, CHCA’s main contractor. Due to new federal training requirements, the transition from ISC’s new contracts with CHCA was longer than anticipated. This resulted in a timing issue in adjusting nurses’ salaries versus being able to apply the new contract rates from April 29^th. However, the new 4-year contracts are starting to transition currently and are expected to provide revenue stability for our business unit over the contractual period and eventually a good opportunity for organic growth.

This quarter, Solutions Staffing was consolidated for the full period for the first time and contributed to the Company’s overall revenue increase but more importantly to organic growth. We believe that leadership and common vision within the company’s management and employees have contributed to its success. SSI is active in jurisdictions outside of BC in Western Canada and the Atlantic provinces and has continued its efforts to develop its extra British Columbia relationships. We are still in the process of combining our teams and processes and are very enthusiastic about the opportunities this will create for the respective organizations.

Canadian landscape

Costs and services delivery

As is the case in many OECD countries, COVID has put temporary healthcare staffing in the spotlight. Before that, most Canadians were not aware of the use of private sector temporary staffing by the different provincial institutions and in the collective mind of the population, healthcare in Canada is “free”. Reality is quite different. According to the most recent OECD data available (2022), the annual health care cost in Canada is US$6,319 per capita, of which US$4,506 is either government paid or compulsory. Simply put, every year a family of four will incur health care related out-of-pocket expenses of C$10,000 with the government paying an additional C$25,000. These costs are practically identical to those of Denmark, Australia, and Sweden, but some segments of the Canadian population are nevertheless experiencing challenges in health care services delivery.

This is in part due to several human resources challenges. There is a growing shortage of healthcare professionals in Canada, including physicians, nurses, and specialists. This shortage is particularly acute in rural and remote areas, leading to difficulties in providing timely and adequate care. A significant portion of the healthcare workforce is nearing retirement age, leading to concerns about succession planning and ensuring that there are enough qualified professionals to replace those who are retiring. High workloads, long hours, and stressful working conditions can also lead to burnout and decreased job satisfaction contributing to turnover in the workforce. Staffing agencies providing temporary personnel play an important role in ironing out some of the temporary staffing challenges and offer an alternative to health professionals considering leaving the sector due to the challenges mentioned above.  Addressing these human resources challenges requires coordinated efforts from all stakeholders with the common goal of developing sustainable solutions that will support a skilled, diverse, and resilient healthcare workforce.

Canadian policy makers’ challenges

Even if they account for a small percentage of the overall system workforce, temporary nurses and part-time staff play a vital role in ensuring that healthcare facilities are adequately staffed. However, health care policy makers in Canada are faced with challenges when it comes to managing the use of temporary personnel. Management and use of temporary healthcare staffing varies between provinces due to differences in resources availability, policies, labor laws, and regulatory frameworks. Key differences include:

Licensing and certification requirements: Each province has its own licensing and certification requirements for healthcare professionals, including temporary staff, having an impact on the availability and mobility of healthcare workers across provinces.

Union agreements: Different union agreements are affecting factors such as pay rates, benefits, and working conditions and have an important impact on the use of temporary healthcare workers.

Government policies: Provincial government policies and initiatives related to healthcare workforce planning, recruitment, and retention can influence the demand for temporary healthcare staffing and the regulations surrounding its use.

Private vs public facilities: The balance between private and public health care facilities differ between provinces affecting the prevalence and utilization of temporary healthcare staffing in different settings.

Regional healthcare needs: Variations in population demographics, healthcare demands, and regional healthcare needs can lead to differences in the demand for temporary healthcare staffing across provinces.

Regulatory oversight: Provinces may have varying levels of regulatory oversight and monitoring of temporary healthcare staffing agencies, impacting the quality and standardization of temporary staffing practices.

Overall, while these differences in provincial jurisdictions can result in varying practices, regulations, and opportunities for temporary healthcare workers in different parts of Canada, there are similarities in challenges in terms of cost management, quality and continuity of care, and overall efficiency in healthcare delivery.

Staffing agencies’ role as a stakeholders

Addressing the challenges associated with the use of temporary personnel in healthcare is essential for ensuring that patients receive high-quality care and that healthcare facilities operate efficiently. We support the development of clear policies and guidelines, providing adequate training and support, enhancing communication and collaboration, and incentivizing recruitment in underserved areas. Health care policy makers in Canada can effectively manage the use of temporary personnel and overcome the perceived challenges associated with temporary staffing in the healthcare system. As a company, we value the nurses and other medical personnel’s wellness and security and we act accordingly by providing them with flexibility, financial peace of mind, training, and appropriate tools. This is a priority for us. This is the foundation on which we can ensure that the quality of care provided by our personnel is consistent in all environments.

Moving Forward

Our business model, digital platform, and mobile app are perfectly aligned with the gig economy framework and global service trends in general. We offer a level of flexibility that public health systems cannot offer, both in terms of schedules, experiences, and remuneration options. It is this flexibility that makes it possible to stem the exodus of certain individuals who cannot function in rigid health networks. At this level we believe that we play a vital role in these ecosystems. It is also this flexibility that gives us the agility to adapt quickly to changing environments.

The Quebec government is going ahead with the operationalization of Bill 10 and Bill 15 with a single employer approach. In this context our strategy is to continue participating in RFPs in Quebec as the situation evolves while being on the lookout for recruiting opportunities. We estimate the percentage of our consolidated revenue directly affected by these newly adopted measures to represent approximately 20% currently. With a geographically diversified revenue base and an excellent management infrastructure in place, both in British Columbia and Ontario, we have the capacity to further diversify our revenue stream with other regional opportunities. We have had a good track record of acquiring solid organizations and we intend to capitalize on this.

I wish you all the best,

Martin Legault
Chief Executive Officer