MCI Onehealth Technologies Inc.

Ladies and gentlemen, thank you for standing by and welcome to the MCI One Health Technologies Incorporated third quarter 2021 results conference call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone keypad. And if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Alexander Dobrynowski. Thank you. Please go ahead, sir.

Good afternoon and welcome everyone to MCI One Health's 2021 Third Quarter Financial Results Conference Call. I'm Alex Dobrynowski, Chief Executive Officer, and joining me today on the call is Scott Nierimbierski, our Chief Financial Officer. Our financial results press release is now available online, and I encourage everyone to download a copy of our interim third quarter consolidated financial statements from CDAR.com. Other than historical performance, our discussion today may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. These forward-looking statements involve risks both known and unknown, assumptions and other factors that many of which are outside of MCI One Health's control that may cause the actual results, performance, or achievements of MCI One Health to differ materially from the anticipated results or achievements implied by such forward-looking statements. We truly appreciate everyone for joining today, and I'd like to start today's call by providing some detailed commentary on the quarter and also provide key highlights. I would then like to go into further detail on our strategy and expand on what we have accomplished to date and also expand on our outlook as we proceed into 2022. After which, our CFO, Scott Nierimbierski, will provide a financial summary of our third quarter 2021 results, plus add further detail on each of our core business functions. And after this, we will have time for a question and answer period. With regards to this quarter's key highlights, I'm pleased to share that MCI One Health continued the momentum off of our second quarter, and we've had a strong and productive Q3. We remain ahead of our targeted schedule on execution and we are ahead of our plan. Apart from achieving strong quarterly revenue, we also completed a number of important objectives that in combination continue to accelerate our two strategic objectives, growing our high performance healthcare network and continuing to grow our data technology initiatives. As a major operational highlight, As previously reported, we closed our acquisition of the Polyclinic Group of Companies, establishing now a new flagship clinic group for our entire network. The Polyclinic Group is a specialist in primary care medical practice that also has a clinical research organization, a concierge medical channel, and a host of other diagnostic and medical services. The founders have built an innovative healthcare model that allow MCI One Health to further optimize patient care access, increasing quality, and adding value. This is a focal point in what I call our high performance healthcare network. The synergies for our patients across our entire clinic group are robust, and synergy contribution is expected to be substantial as the businesses are integrated, with revenue synergy opportunities already being realized in the fourth quarter. On a separate note, We are continuing to generate technology and clinical data-driven revenues, further marking our transition from healthcare services delivery to data and technology focus. These initiatives are supported by our BrightOS ecosystem and led by our acquisition from Q1 Cure Health. Now, Cure Health signed its largest contract to date with a quantum in the range of $500,000. signed in October with a global top 10 pharmaceutical manufacturer. And further to this, CURE has secured strategic partnership agreements with key EMR providers, increasing the availability of the CURE platform for more than 15,000 physicians across the country. There's significant opportunity here to scale both domestically and internationally. From a revenue perspective, I'm pleased to share that MCI One Health completed the third quarter with strong results Revenue increased 29% over the same period in 2020, driven by the ongoing recovery of patient volumes, ongoing growth from our corporate health services, and revenue contributed by our recently closed acquisitions. Total revenue for the quarter was $12.6 million compared to revenue of $9.8 million in the same period in 2020. A theme that has continued with regards to our strong revenue performance has been the ongoing adoption of telehealth and virtual care. whereas our doctors have completed over 450,000 telehealth and virtual care consultations since the start of the pandemic, and now with over 90,000 visits completed in Q3, continuing to exceed 49% of all patient consultations with ongoing adoption of our patient experience platform, MCI Connect. With regards to our corporate health services offerings, I'd like to highlight that our customer base is now approaching 600 corporate customers This is 40% growth this quarter, and this also includes over 40 insurance companies. Substantial progress on this front as we prepare to grow these services nationally. I'd like to make now a few remarks on our clinical care services channel. Our healthcare system, including both hospital and community-based networks, have been under considerable strain due to the pandemic. That notwithstanding, though, our patient volumes grew approximately 31% year-on-year excluding increases for many acquired businesses in 2021. Our patient volumes continue to improve, and the last of our clinics have resumed full operations coming out of the pandemic restrictions from earlier this year. This is also signaling that both patients and physicians are more comfortable with virtual channels and coming back into the clinic, and further highlighting that pent-up demand for health services continues to grow. This backlog of patient care needs to be addressed And MCI One Health is uniquely positioned to provide this care and help with this demand and get patients the access they need. Our expectation is that our patient volumes will continue to grow in the coming quarters. Now, changing tack for a moment, I'd like to make a few comments with regards to our strategy and outlook. At MCI One Health, our mission is an important one. And quite simply, it's to catch disease earlier possible. and in turn make healthcare more accessible, affordable, and ultimately safer. And we have two objectives. The first is to continue to build our high-performance healthcare network, whereas we have added specialist and diagnostic services, corporate and executive health services, a clinical research organization to our already established foundation of primary care. This allows for exceptional network and revenue synergies all the whilst providing our patients with more options and higher quality continuity of care. Further to this, having this deeper health services offering allows us to achieve our second main objective, and this is to continue to grow our clinical and commercial data initiatives. This is how we advance care to be truly personalized and truly intelligent, and this is how we can catch disease earlier. NCI One Health is advancing on this mission, and execution of our plan has resulted in our business evolving from what was a traditional brick-and-mortar clinic group into one that is technology-focused and is high growth and generating higher margin. Back to total company revenue growth in the first half of fiscal 2022, and we will accomplish this through two main efforts. The first through organic growth of all of our health services and in services provided to corporate customers as we expand our customer base and increase the number of available offerings, plus growth through network and revenue synergies with our recently acquired companies. The second is through executing on our robust pipeline of M&A opportunities, namely strategic acquisitions to accelerate our technology roadmap, and acquisitions of specialty clinics to expand our health service offerings, plus enter new markets to deliver more services to our large and growing patient and physician base. I'd like to turn the call now over to our CFO, Scott Nirenberski, who will review the financials for the third quarter of 2021.

Good afternoon, and thank you for joining our third quarter conference call. I'll provide a brief summary of key financial measures, some of which may include non-IFRS terms, Please refer to our financial statements in MD&A for descriptions of these measures, as well as the reconciliation of non-IFRS measures to our statutory IFRS reporting. In addition, this quarter, MCI One Health Technologies changed its grouping of expenses into more commonly used functional categories, more consistent with our public peers, and which better reflect the way we think about the business. You'll see a more simplified reporting of costs and expenses into four categories, cost of sales, R&D, sales and marketing, and general administrative expenses. In our financial statements and MD&A filed on CDAR, we've provided further details to help you understand the underlying cash costs of each expense category, as well as how the new reporting of cost expenses compares with the prior by nature reporting of these items. So with that, revenue grew 29% year-on-year driven by four factors. Higher patient volumes at MCI organically, the addition of two months of the polyclinic, continued strong growth in corporate health of over 40%, the addition of data revenue from CURE, two months of results from Canadian phase onward, our clinical research offering, and Executive Concierge Canada, our Executive Concierge medical practice offering. On the gross margin front, gross margins declined from 31% to 28.3% due to corporate health margins, which were impacted simply by the timing of expenses from 2Q to 3Q. As said, corporate health continues to grow very nicely in the current quarter, and margins are in line with previous expectations, which you've become used to. Operating expenses grew year on year to support the growth for 2022 data-driven revenue and clinical services, as well as to support future acquisitions. Specifically, R&D expenses associated with platform development in support of the company's data strategy, enhancements to MCI Connect, as well as investment in CURE Health to expand the platform and take it into the cloud. Sales and marketing expenses associated with the ramp-up in efforts to support growth in sales for 2022 include further enhancements to MCI Connect, the addition of CURE, the addition of two months of Polyclinic, and then branding and awareness and partnership development. G&A expenses grew significantly. primarily due to corporate development costs for the expansion of the company's senior management team that we've previously discussed, being a public company, higher legal and audit expenses, two months of polyclinic expenses, and of course the addition of Cure Health. Adjusted EBITDA was minus $1.8 million for the quarter versus $2.2 million in the year-ago quarter, largely driven by increase in operating expenses and the previously mentioned timing of corporate health expenses. Net loss for the quarter was minus 5.4 million or 11 cents per share, but includes 2.1 million or 4 cents per share of share-based comp and one-time items. MCI exited the quarter with 10 million of cash and nothing drawn on its revolving credit lines. The declining cash was driven primarily by $1.2 million used in operations, $6.3 million invested largely due to the acquisition of Polyclinic, and $2.2 million in financing was used in financing activities, approximately $900,000 from stock buyback and then higher net lease payments associated with the assumption of the polyclinic leases. I'll close with a very brief outlook. We remain optimistic about revenue growth for acquisitions and the ability to deliver on organic growth and growth from revenue synergies with recently acquired companies. In fact, we're already experiencing network revenue synergies and data-driven revenue from MCI Polyclinic and Cure Health. which illustrates that the investment in operations to support these growth initiatives has begun to pay off. As such, and further to Alex's comment, we would expect revenue growth to outpace costs and expenses in 2022, resulting in higher gross and EBITDA margins. We would also expect to return to cash flow positive in 2022. With that, I'll turn it back to the operator. So, Jeff, please open the line for questions.