Dear shareholders and investors,

I am pleased to report Premier Health’s results for our first quarter ended December 31, 2023, and to update you on the status of our operations as well as recent developments.  

Results and operations

The Company’s revenues reached $37.0M for the first quarter ended December 31, 2023 ($21.6M for the same period in 2023). This material increase resulted from the consolidation of 52 days of revenues from Solutions Staffing Inc. (“SSI”) acquired on November 9, 2023. As expected, the consolidation also had an impact on our gross margin, which decreased to 20.7% due to SSI’s different direct costs structure. On a quarterly basis, administrative expenses were impacted by one-time acquisition expenses of $0.6M. This resulted in an adjusted EBITDA of $2.6M for the three-month period ($1.5M for the same period in 2023). Net loss for the quarter was $0.2M compared to a net loss of $0.4M for the same period in 2023. Over the three-month period ended December 31, 2023, 330,982 hours were billed on a consolidated basis.

Recent developments

Consolidation and integration of Solutions Staffing

The acquisition of SSI took place on November 9th and as a result our consolidated earnings for the first quarter do not include the full impact of SSI’s numbers (52 days out of 92 for the quarter). The complete impact of the acquisition will only be recorded in the second quarter of 2024, ending March 31st. Integration of the new business unit is in line with our expectation. More specifically, the management and overall team at SSI have proven to be competent, efficient, and motivated. As we move forward, we anticipate to gradually deploy our technology platform with the objective to eventually create top line synergies, including the possibility to deploy professionals across provinces, one of the key elements of our corporate strategy. PHA and SSI together now cumulate a registry of approximately 60,000 active professionals, including personnel specialized in remote areas practices. This represents one of the largest registries of skilled healthcare professionals providing relief staffing in Canada. Although SSI remains independently managed, as all our business units are, it now has full access to PHA’s resources.

Recent call for tenders in Quebec

The Quebec government acquisition center launched a call for tenders relating to the acquisition of independent labor services for 20 different types of health professionals in October 2023. The January 2024 call for tenders covers all of Quebec regions excluding northern regions and territories and accordingly primarily involve our two Per Diem subsidiaries, Premier Soin and Code Bleu. The particularity of this RFP is that it is based on maximum hourly rates par types of roles, a situation similar to what was imposed by decree in 2022 as part of the Covid special sanitary measures. The duration of the contracts, linked to 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. Premier Soin and Code Bleu independently deposited their respective offers before the January 29, 2024, deadline and are currently waiting for the adjudication of the call for tenders.

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. 

Premier Soin and Code Bleu business units’ revenues have been fluctuating 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 first quarter ended December 31, 2023, Premier Soin’s revenues were 23% higher than the same period last year, whereas Code Bleu’s revenues decreased by 7% over the same period. Fortunately, the performance and versatility of our technology platform enables us to adjust and communicate with our personnel in real time to reduce the impact of this volatility. Both business units showed a decrease in billable hours but were able to maintain gross margins and EBITDA in line with our expectations.

Code Bleu and Premier Soin offer similar services but are independently managed and accordingly 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. Both business units are currently operating within the parameters of the last RFP under an extension period that we expect to end after the adjudication of the recent January 2024 call for tenders.

The January 2024 call for tenders did not introduce performance security guaranties or track record thresholds which 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. We believe this will favor larger, better-organized agencies to the detriment of those who prospered on excessive rates. Accordingly, we anticipate that a fair number a smaller agency, 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, there is a recruiting opportunity for Premier Soin and Code Bleu as well as organic growth at our Quebec business units if recruiting momentum picks up. However, and depending on the outcome of future RFPs, Premier Soin and Code Bleu could experience some pressure on gross margins as the Quebec market evolves toward a “volume” market, as experienced in other Canadian provinces in the past.

Quebec’s MHSS has a system management dashboard that shows use of independent workers historically represented between 3% and 5% of the overall workforce. Recent dashboard numbers indicate that the use of independent workers has been increasing gradually since the introduction of Bill 10 to above 5% instead of decreasing. The MHSS has nevertheless targets for the reduction of hours worked by independent workers from 19.6M hours in 2023-2024, to 18.2M in 2024-2025, 10.9M in 2025-2026, down to 4.2M hours in 2026-2027. Premier Soin and Code Bleu currently bill approximately 600K hours a year, representing <15% of Quebec’s ultimate 2026-2027 target. 

Travel nurse segment

The travel nurse segment includes Canadian Health Care Agency (CHCA), Premier Soin Nordik, Solutions Nursing as well as SSI, 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 Premier Soin Nordik increased slightly while we saw an important increase at Solutions Nursing. This translated into a significant organic growth for the quarter when compared to the previous period for this business segment in Quebec, as well as an increased profitability for both business units. Premier Soin Nordik was able to attract additional professionals in its network over the quarter including educators and social workers, a trend toward diversification that we are monitoring closely. The increased collaboration with CHCA over the period had a positive impact for both business units by increasing employee placement rates. This also helped Premier Soin Nordik gradually develop activities in Northern Ontario and positioned itself for upcoming Federal government RFPs later this year.

Solutions Nursing is pursuing its strategy to increase service offering for remote regions to offer a better transition opportunity for resources who initially do not have experience in an expanded role or who are hesitant to commit to long term assignment in remote regions. This strategy is emphasized by the creation of additional training programs as well as partnership initiative with client organizations in new geographical regions. We expect this to have a significant impact on our outreach and retention track record. Solutions Nursing continues to develop a strong brand and maintain its reputation among communities by positioning itself as a reliable and flexible partner, increasing its collaboration for on-site training of new resources. Going forward, we anticipate that the demand for independent labor for nursing and assistance in the province’s northern regions will remain high and will not be affected by the operationalization of Bill 10 in the province of Quebec. 

Revenues at CHCA increased slightly over the quarter while hours billed still suffered from 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. However, and while we are transitioning into the 4-year contracts awarded by ISC in November 2023, mitigation measures were taken and CHCA started offering relocated nurses alternative mandates in other regions and provinces through Premier Soin Nordik. We feel that having the capacity to do that is one of the advantages of our business model and of having a national footprint. 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 a good opportunity for organic growth.

SSI has continued growing organically by all operational and financial metrics over the last quarter. We believe that leadership and common vision within the company’s management and employees have contributed to its success. SSI, because of the jurisdictions it operates in, has been able to develop strong partnerships and a high level of collaboration with its customers. In the course of the last 12 months, SSI onboarded 7 new client organizations, for a current total of 33, and increased its East Coast presence.  This translated in approximately 84,000 shifts worked for total hours billed of over 1,000,000, representing a 15% organic growth for that twelve-month period. Revenue and EBITDA increased accordingly. We are still in the process of combining our teams and processes and are very enthusiastic about the opportunities this will created for the respective organizations.

To gig or not to gig

According to the World Bank, the gig economy accounts for up to 12% of the global economy. In the United States only, Bureau of Labour Statistics’ data suggest that there are over 57M gig workers working between 11 to 30 hours a week. And what about Canada? Depending on the source, the number of Canadian involved in some fashion in the gig economy will vary from 10% of the active workforce (Statistics Canada) up to 28% of Canadian Adults (Angus Reid). To say that the gig economy is a reality is a fair statement.

The gig economy is a section of the economy characterized by short-term engagements, as opposed to permanent jobs. It’s often associated with jobs that are flexible, temporary, or freelance. Independent jobs can range from highly paid lawyers and consultants to lower income delivery drivers. The impressive statistics mentioned above are driven by an ever-larger number of individuals seeking increased flexibility, work-life balance, and income on one side, and organizations looking for new ways to optimize costs and increase business efficiencies on the other. Connections and interactions between workers and organizations are typically facilitated by digital platforms that are constantly evolving.

Our business model, digital platform, and mobile app fit precisely within this global reality. On a consolidated basis, PHA has a registry of approximately 60,000 professionals, of which 3,500 are active monthly, providing services to over 600 client locations in Canada, through its proprietary digital platform. 60% of our professionals are within the 18-40 years old age group that represent the bulk of gig economy workers. As well, a large proportion of these independent professionals choose this mode of work for personal, family, or logistical reasons. The use of a staffing agency and the appeal and ease of use of the digital platform including the mobile app allow them to practice their profession within their own constraints. Without that possibility, a large proportion of them would leave the healthcare system to work in other sectors (+/- 70% of independent health professionals according to an internal 2023 survey).

In the Canadian context of a shortage of health workers, we feel that we make a difference, and that the priority must be to encourage health professionals to remain active in the network, regardless of the mode of work they chose. At a higher level, we feel that we are very well positioned to address a much wider market and will continue investing in our platform.

Moving Forward

Our business model, digital platform, and mobile app are perfectly aligned with the gig economy framework. We offer a level of flexibility that 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.

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 to RFPs in Quebec as the situation evolves while being on the lookout for recruiting opportunities. We estimate the percentage of our consolidated revenue affected by these newly adopted measures to represent less than 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 organisations and will capitalize on this.

I wish you all the best,

Martin Legault

Chief Executive Officer