Business Highlights Q4 2023 - Message from the CEO
Dear shareholders and investors,
I am pleased to report Premier Health’s results for our fourth quarter ended September 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 $90.4M for the year ended September 30, 2023, compared to $80.5M in 2022 ($23.4M for the fourth quarter ended September 30, 2023, and $22.1M for the same period in 2022). The increase in revenues was a result of the consolidation of Canadian Health Care Agency (CHCA) for a full year. Otherwise, a gradual return to contractual rates following the end of special measures rate restrictions and the impact of Quebec’s January call for tenders compensated for a decrease in our number of billable hours in the province over the fiscal year. As a result, the Company was able to maintain its general level of revenue in the province as well as an average gross margin of 25.8% overall for the period, slightly above our 25% objective.
On a quarterly basis, administrative expenses increased over the quarter in relation with transaction expenses. This resulted in an adjusted EBITDA of $2.1M for the three-month period ($2.2M for the same period in FY2022). Net loss for the quarter was $1.9M compared to nil for the same period in 2022. A total of 209,421 hours were billed over the quarter. We recorded a goodwill impairment loss of $1.5M for our Code Bleu agency, because of expected effects of Bill 10. The other Quebec agencies required no adjustment.
For the twelve-month period, the Company recorded an adjusted EBITDA of $8.2M and a net loss of $1.7M, compared to $5.8M, and a net loss of $0.1M respectively for the same period last year. Higher EBITDA was a result of the full period consolidation of CHCA while the lower net profitability follows the goodwill impairment recorded in Q4 and higher financial expenses resulting from the successive interest rate increases since last year.
Recent Developments
Completion of Solutions Staffing’s acquisition
We completed the previously announced acquisition of Solutions Staffing inc. (SSI) on November 9th. As a result of the transaction, Solutions Staffing has become a wholly owned subsidiary of the Company and will continue providing specialized healthcare staffing services in Western provinces. As per the Agreement with the shareholders of Solutions Staffing, the Company acquired all the issued and outstanding shares of SSI on a cash and debt free basis for a total consideration of C$21.0M plus net working capital and taxes adjustments of C$1.8M paid at closing, and a variable deferred cash consideration payable over two years ranging from nil to C$6M depending on the achievement of EBITDA objectives by SSI. An amount of C$1.2M is also payable based on the actual collections of certain receivables.
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, including its government approved training program, pool of resources, and technology platform. Premier Health’s medium-term objective has always been to become a national service provider. The acquisition of SSI in British Columbia is an important milestone toward achieving this goal. We are very excited with the opportunity to continue growing SSI’s travel nurse operations with its experienced and talented management team.
Refinancing of existing credit facilities
Concurrently with the closing of SSI’s acquisition, the Company also closed a $50 million financing previously announced on October 30, 2023. The financing was aimed at closing the acquisition of SSI as well as refinancing its current revolving facility and term loan. The new structure is composed of five facilities, all of which were disbursed at closing of the Transaction. The financing is described in greater details in this quarter’s MD&A.
Indigenous Service Canada contract win
CHCA has been retained as a primary contractor in Ontario, and as back-up stream in Manitoba and Alberta, to provide nursing services and care primarily in rural, remote, isolated, and semi-isolated communities. The contract has an initial term of 4 years, for an estimated minimum value of $23.4M and includes 4 1-year extension options, that if exercised, could increase to total value of the agreement materially over the full 8-year period. CHCA has been acting as a primary contractor for number of years for Indigenous Services Canada (ISC) under existing contractual agreements maturing in mid-December of this year. This new contract is for all that matter a continuity of CHCA’s existing relationship with ISC. The contract is to transition in early 2024 and is expected to provide revenue stability for our business unit over the contractual period and a good opportunity for organic growth. Indigenous Services Canada works collaboratively with partners to improve access to high quality services for First Nations, Inuit, and Métis communities. ISC’s vision is to support and empower Indigenous people to independently deliver and address the socio-economic conditions in their communities.
Cree Board of Health and Social Services of James Bay contract award
Earlier in June, the Cree Board of Health and Social Services of James Bay (CCSSSJB) proceeded with an important call for tenders for independent labor for nursing and assistance. The June call for tenders covered several profiles within this region of Quebec that is outside of Bill 10’s scope. Premier Health’s subsidiaries active in these northern regions in the province of Quebec participated in the call for tenders to provide these specialized services. Both Premier Health Nordik and Solutions Nursing were retained as services providers. The contract is for an initial three-year period and includes renewal options. 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, our subsidiaries are already service providers under existing contracts with the CCSSSJB and based on service history we estimate the overall impact for the two business units to approximate a total $5M per year for a minimum period of 3 years. The results of the call for tenders are generally very positive for the company.
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 and other healthcare professionals 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.
Both our Premier Soin and Code Bleu business units performed well with revenue increases over the same quarter last year. The increase in revenues is attributed to higher average hourly rates charged following a gradual migration to the recent Quebec 8017-50-51 call for tender that came into force in June. We estimate this was the biggest call for tenders for this type of services carried out so far. In June 2023,retained establishments 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. We recently received a six-month extension notice for these contracts and therefor our two business units will be able to offer resources at similar terms and conditions for the additional period. Code Bleu and 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.
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. The decrease in billable hours also follows a recent trend of last minutes cancellation of previously confirmed work shifts by serviced establishments. While we are starting to observe a stabilisation of this trend, we are facing head winds in Quebec and expect limited organic growth in the province in the medium term. The government is still articulating its healthcare strategy and trying to operationalize its newly adopted regulations and management infrastructure. While we are convinced that agencies play a critical role in the continuity of service, political forces are at work with a government in power facing a common front of unions and a drop in popularity. What we do best is to offer a level of flexibility to professionals that the health system cannot offer, both in terms of schedules and experiences. Accordingly, our strategy consists of being as competitive as possible in terms of conditions and pricing when answering call for tenders and ensure we have the resources and agility to deliver the service. To that effect, the government proceeded in November with a new call for tenders for work-to-order contracts awards. Call for tenders 2023-8179-51-52 covers 20 different types of professionals, for all administrative regions of Quebec, integrating the notion of hourly rates ceilings indicated in the decree 1481-2023 of Bill 10. This will create a more levelled playing field in the Quebec market that we believe will benefit larger, well-organized agencies to the detriment of those who thrived on excessive rates.
Travel Nurse Segment
The travel nurse segment includes Canadian Health Care Agency, Premier Soin Nordik, Solutions Nursing as well as newly acquired Solutions Staffing, four 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.
Over the quarter, hours billed at Premier Soin Nordik decreased slightly while we saw an increase at Solutions Nursing. This translated in stable revenues for the quarter when compared to the previous period for this business segment in Quebec. Premier Soin Nordik and Solutions Nursing were both awarded work-to-order contracts by the Cree Board of Health and Social Services of James Bay (CCSSSJB) as part of an important call for tenders for independent labor for nursing and assistance launched in June. Our strategy is to increase our service offering for remote regions to allow us 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. 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. Advance Life Support training is now part of our training portfolio, increases the clientele at our training center and our visibility for Expanded Role training, which is increasingly in demand. 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) remained stable over the quarter at the level they were when we acquired this business unit in 2022. Revenues and hours billed suffered slightly from 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. The new 4-year contract award is expected to provide revenue stability for our business unit over the contractual period as well as a good opportunity for organic growth.
Moving Forward
Agencies offer a level of flexibility that the health system 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 under rigid union rules. At this level we believe that agencies play a vital role.
We advocate a clear regulatory framework for private agencies. Such an environment would improve the competitive landscape and favor those like us who have the ability to work within well-defined regulatory frameworks. Call for tenders ensure competitive and predictable hourly rates across the network and can increase the quality and continuity of the services offered (by using benchmarks such as insurance, history of service breakdowns and complaints, sharing of information, etc.). In fact, the Province of Ontario is currently exploring different benchmarks that we believe could eventually eliminate some of the smaller agencies, some of which are responsible for harmful business practices that damage the reputation of our industry overall.
The Quebec government is still articulating its healthcare strategy and trying to operationalize its newly adopted regulations and management infrastructure. The recent call for tenders in the province, which includes Bill 10’s 1481-2023 decree, imposes price caps for hourly rates for each submitted category. This will clearly challenge the viability of agencies which business model is based on lower volumes, high hourly rates, and high pay for nurses. As a matter of fact, we believe this is precisely what the Quebec government is after. In a market where the single most important factor for personnel to work in an agency is flexibility, we anticipate their personnel to gradually migrate to larger agencies like ours, where they will have access to work shifts and stability. Under this scenario, we could see some pressure on the company’s gross margins, offset by an increase in hours billed. We believe this is exactly where our infrastructure comes into play and gives us an important edge.
We have recently concluded our acquisition of Solutions Staffing in British Columbia. On a combined basis, we estimate our revenue base in Quebec to represent less than 40% of total revenues going forward. 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.
We have had a good track record of acquiring solid organisations and Solutions Staffing is no exception. We are excited to team up with Solutions Staffing’s management, its staff and their nurses and professionals in creating a national player.
I wish you all the best,
Martin Legault Chief
Executive Officer