Skylight Health Group Inc.

Thank you everyone for standing by. This is the conference operator. We would like to welcome you to the Skylight Health second quarter 2021 financial results conference call. The results for the period ending June 30th, 2021. As a reminder, all participants are in listen-only mode. After today's speakers conclude the presentation portion of the call, should time permit, they will move to a question and answer period. If you wish to ask a question, you may queue at any time by pressing star then one on your telephone keypad. You will hear a tone acknowledging your request. To withdraw your question, please press star then two. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. As always, I would like to remind you that listeners are cautioned that today's call and the responses to any questions may contain forward-looking statements, including certain statements which concern long-term earnings objectives. These should be considered in conjunction with the cautionary statement contained in the Skylight Health earnings release and in the company's MD&A and other filings. Forward-looking statements are subject to risk and uncertainties and assumptions. Accordingly, all actual performance could differ materially and undue reliance should not be placed on such statements. Skylight Health does not undertake to update any forward-looking statements except as required. All currencies discussed on the call will be in Canadian dollars unless otherwise stated. This conference call is being recorded today, Tuesday, August 17, 2021, at 8.30 a.m. Eastern. and will be posted on Skylight Health's website within 24 hours after the conclusion of today's call. I would now like to turn the conference over to Skylight Health's Chief Executive Officer, Mr. Pradyam Shekhar. Please go ahead.

Thank you, Gaylene, and a good morning to everyone, and thank you for joining us today for our second quarter conference call for the period ending June 30th, 2021. I am happy to announce with me this morning is our Chief Financial Officer, Andrew Olinsky, who will provide you with a more detailed overview of our financial performance in a moment. After the close of markets yesterday, we released our second quarter 2021 results. The news release for these results, financial statements, and the management discussion and analysis for this period are available on our website, skylighthealthgroup.com, and have been filed on CDAR and EDGAR. I'm going to go over a quick description of our business and some of the operational highlights from the quarter. I'll then turn it over to Andrew to review the financials, and then I'll be back to talk about some of the opportunities that lie ahead for us. Skylight Health Group is a healthcare services and technology company working to positively impact patient health outcomes. Skylight operates a US multi-state primary care health network comprised of clinics providing a range of services from primary care, subspecialty, allied health and laboratory diagnostic testing. We are focused on helping small and independent practices shift from a traditional fee-for-service model to a value-based care model using proprietary technology, data analytics and infrastructure. Value-based care leads to improved patient outcomes, reduced cost of care and drives stronger financial performance from existing practices. We are all extremely proud of our results this quarter. revenue was up 184% year over year and 103% sequentially. We saw both top-line revenue growth from acquisitions made during the first quarter and second quarters in 2021 and from those in Q4 2020. We continue to grow at the operational level, with each new acquisition being accretive to our growth. Over the quarter, we saw organic growth from Q1 of approximately 13%, resulting from the improvements to provider and patient access revenue cycle management, and leadership to the clinical level. We closed on two acquisitions during the quarter, including Rocky Mountain in early April and Doctor Center in late June. Based on expected calendar year contribution, we will be increasing revenue guidance for 2021 to 41 million from 40 million. Our focus in the second quarter was both continuing to validate the acquisition model and strengthening our infrastructure for rapid growth. This included investments in human capital, technology, and operations. We bolstered our management team and operations teams to support all functional and subject matter areas relevant for our future growth. We are pleased that we stand today as a stronger and disciplined operating team led by experienced management in the U.S. primary care market. From a corporate perspective, the second quarter was a major milestone for us as we commenced trading on the NASDAQ in June. which will expand our visibility in the marketplace, improve liquidity, broaden and diversify our shareholder base, and enhance long-term shareholder value. We made several investments in the second quarter that were relevant to corporate activities outside operations. These included professional fees tied to the NASDAQ listing and acquisitions made. As well as in the marketing and business development costs, most of these are tied to one-time initiatives, primarily around building a national Skylight brand. While we may see some of this continue into the third quarter, most of these as well as professional fees will begin to normalize in the following quarters. We ended the quarter strong with the addition of new clinics, providers, and patient panels. As of the end of the second quarter, we had approximately 88,000 lives versus 21,000 lives in the first quarter. Of the 88,000 lives, qualified managed care patients were approximately 15%. We expect that a percentage of these lives will begin participation in the Medicare Shared Savings Program starting 2022 with the acquisition of the ACO we did in Q3 this year. We continue to be in active conversations with commercial payers for other managed care programs, including Medicare Advantage and Managed Medicaid. I will cover more of this later in the call. I'd now like to turn the call over to Andrew to review our financial results in more detail.

Thank you, Brad, and thank you again to our attendees for joining us today. As Brad mentioned, we are very pleased with the company's performance to continue the year. The second quarter financial results reflected the impact of the acquisitions that we've made during the last nine months. The health of our balance sheet remains strong, and we continue with our plan of acquisitions and integrations. Starting with the income statement, our revenue came in at 10.5 million for the quarter, which, as Brad said, was a 184% increase when compared to the 3.7 million reported in the same period of 2020. And when we compare that to the first quarter of 21, our revenue was up 103%. These significant increases were the result of the acquisitions of our primary care clinics made during the last three quarters. In addition to our revenues growing from acquisitions, Prad mentioned over the last nine months, we've also seen quarter-over-quarter growth of 13% for the clinics that we acquired in Q4 2020 and Q1 2021, i.e. this excludes the acquisition of Rocky Mountain and the doctor center made in Q2 of this year. As a result of our most recent acquisition of the doctor center, we are raising our revenue guidance to $41 million for the rest of this year. In addition to this full year fiscal guidance, we plan on exiting 2021 at an annualized revenue run rate of $50 million. This projection accounts for the closed acquisitions, but excludes any potential future transactions for which we currently have LOIs in place. Moving to gross profit, our margin came in at 64% for the second quarter compared to 71% in Q2 of last year, and 69% for the previous quarter. This is within our historical margin range of approximately 60 to 70%. With the continued focus on acquiring primary care businesses, we would expect our margin to decrease slightly as this line of business has a slightly lower margin than our legacy business. However, we also expect to counter this reduction with our transition to value-based care. With higher economic contracts from payers and value-based care, we expect to keep gross margins strong as we shift into those agreements in the coming years. Moving to EBITDA, Our adjusted EBITDA loss was the result of the continued investments in corporate activities that Prad mentioned earlier. And these increased costs primarily related to salaries and wages, marketing and business development, and professional fees. All of these are reflective of the current growth stage of our company, and I'll go through the outlook for each of them now. Salary costs increased as expected in Q2. And while we expect that these costs would increase with any further acquisitions, We also expect to see this rate of organic growth continue in Q3 as we invest in human capital to support the ACO that we acquired earlier this quarter. We now have a strong leadership team in place and the expertise that we believe will ensure our growth aligns with the value that we expect to earn from future contracts. With regards to professional fees, they contain a number of one-time items, such as our exchange listing costs and the large acquisition of Rocky Mountain made earlier in the quarter, which accounted for the increase over the prior quarter. This is the reason that we removed them from our EBITDA as a result of their one-time nature. The remaining balance of professional fees are reflective of the larger size of our company and our current U.S. listing, as well as the continued smaller acquisition of the doctor's center and the diligence that we continue to deploy while evaluating other potential transactions. As these fees are driven by our acquisitions, we would expect these costs to be reflective of the volume of this work, but we would also expect for them to improve going forward as we continue to refine our acquisition activity. And lastly, with regards to our marketing and development costs, these costs decrease in the second quarter as expected, and we expect them to decrease again in Q3, at which point they would be at normalized levels onwards. Regarding our balance sheet, we ended the quarter with just under $12 million in total cash compared to a cash balance of just over $20 million as at the end of 2020. This slight reduction in cash in the quarter was primarily due to purchase consideration paid in the quarter of just over $16 million in working capital adjustments, offset by gross proceeds raised of just under $14 million from a bought deal. And we continue to have a strong working capital surplus of just over $7 million. Subsequent to the quarter, a portion of this cash was used to settle deferred payments from prior acquisitions and to settle the cost of current investments. And our current cash position is still strong at just under $9 million. The remaining large increases on our balance sheet with regards to our assets and liabilities with the results of acquisitions made since late 2020. And with that, I will turn the call back to Pratt.