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spk01: Good day and thank you for standing by. Welcome to the MCI One Health Technologies fourth quarter and fiscal 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Dr. Alex Dobrnowski. Please go ahead.
spk04: Thank you, Operator. Good afternoon and welcome everyone to MCI One Health's 2021 Fourth Quarter and Fiscal Year-End Financial Results Conference Call. As the Operator mentioned, I'm Dr. Alex Dobronowski, CEO, and joining me today on the call is Scott Nierambierski, our Chief Financial Officer. Our financial results press release is now available online and audited Fourth Quarter and Fiscal Year Consolidated Financial Statements will be available shortly on CDAR. 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. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only of the date of this presentation. We truly appreciate everyone for joining today and your time and attention. And I'd like to start today's call by providing some detailed commentary on the quarter, fiscal year end, and also provide key highlights on each of our business functions, namely our healthcare services capabilities, our corporate health services units, and importantly, our technology and data functions. I'll then like to go into detail on our strategy and also expand on our outlook as we proceed further into 2022. After which, our CFO, Scott Nierendierski, will provide a financial summary of our fourth quarter and fiscal year 2021 results, plus add further detail on the overall outlook of each of our core business functions. After this, we'll have time for a question and answer period. With regards to the fourth quarter and fiscal year 2021 key highlights, I'm pleased to share that MCI One Health continued the momentum off our third quarter, and we have had a strong and productive finish to the year. Apart from achieving strong quarterly and fiscal year revenue, we also continue to execute a number of important initiatives that in combination accelerate our two strategic objectives. One is growing our high-performance healthcare network and continuing to execute on our data initiatives. Now, with regards to our data and technology functions, I'm excited to report that our efforts and investments made in previous quarters have begun to deliver material results as we are continuing to generate and grow technology and clinical data-driven revenues. This is highlighted by tremendous growth of our subsidiary, Pure Health, which experienced a record year with year-over-year growth in excess of 70% with an expansion of our AI-enabled algorithms to screen for more than 80 rare diseases. We successfully screened over 5 million patient records in 2021, And this revenue stream contributed 3.4% to the company's overall revenue mix, contributing $1.6 million of data revenue, demonstrating our core competency and capabilities in data analytics. Further to this, on the technology front, MCI One Health has entered into a three-year agreement with a global leader in data science and security to enable a data backbone that provides the foundation for our smart referral system to dramatically shorten the time between primary care and specialist referral visits. This partnership will significantly accelerate our data strategy and disease screening, referral optimization, and other custom data and precision medicine initiatives. Throughout 2021, we invested heavily in improving our foundation, modernizing our healthcare clinic capabilities, adding talented and expert team members. We recently announced and welcomed Jennifer Foster to our executive team at COO, highlighting our deeper capabilities with regards to operations excellence. We continue to invest in our technology and cybersecurity infrastructure, and importantly, added a number of healthcare services and specialists to our ecosystem, leading to the culmination of what I call our high-performance healthcare network. We have built a first-of-its-kind model in community healthcare that is now demonstrating efficiency and improving patient access in ways that has not been demonstrated before in Canadian healthcare. as a major operational highlight and a critical component of our hub and spoke model. And as previously reported, we closed our acquisition of the Polyclinic group of companies, adding specialists in primary care medical practices, a clinical research organization, a concierge medical channel, and a host of other diagnostic and medical services. This has allowed NCI One Health to further optimize patient care, access, quality, and of course, add value. The synergies now for our patients across an entire clinic group are robust, and synergy contribution is now substantial, as the businesses are integrated with revenue synergies being realized in the fourth quarter and into 2022. From a revenue perspective, I'm pleased to share that NCI One Health completed the fourth quarter with strong results. Revenue for the fourth quarter of 2021 increased 27% to $13.9 million over the same period in 2020, and revenues for the year are up 24% to 47.8 million. This has been largely driven by the ongoing recovery of patient volumes, growth of our corporate health services function, material growth in our data-driven revenue streams, and revenue contributed by our acquisitions plus significant success on other important initiatives such as physician recruitment and retention. With regards to patient volumes in specific, volumes were up 12% year over year, excluding increases from our acquisitions, and growth of 15% if acquisitions are included. As expected, we had a record year for telehealth and virtual care sessions, with greater than 300,000 patients accessing our clinicians via telephone and also our patient experience virtual care platform, NCI Connect. With regards to our corporate health services offering, I'd like to highlight that this function delivered a record year, adding 87 new customers and also experiencing more than 70% revenue growth year on year, setting the stage with a strong foundation of growth into 2022. Changing tack for a moment, I'd like to make a few comments with regards to our strategy. As an MCI One Health, we remain firmly committed to our mission to make healthcare more accessible, affordable, and ultimately safer. We have two objectives. The first is to continue to build our high-performance healthcare network, our healthcare services, and data flywheel, whereas we will continue to add additional specialists and diagnostic services, focus on growing our corporate and executive health services, support growth of our clinical research organization, and this is on top of our already established foundation of primary care services. This allows us to keep capturing considerable network and revenue synergies, all the while providing our patients with more options, faster access, and higher quality continuity of care. Execution of this plan has resulted in our business evolving from what was a traditional brick and mortar clinic group as recently as early 2020 into one that is technology-focused and is high growth and generating higher margin revenue. On the outlook front, we expect to continue total company revenue growth in the first half of fiscal 2022, and we will accomplish this through more organic growth of our health services and in health service provided to corporate customers as we expand our customer base, increase the number of available offerings, and also growth through network and revenue synergies with our acquired companies. plus considerable focus on growth of our data-driven revenue streams, including expansion into markets outside of Canada. Further to this, we will continue to execute on our robust pipeline of M&A opportunities to expand our health service offerings and also enter new markets to deliver more services to our large and growing patients and physician base. I'd like to turn the call now over to our CFO, Scott Naraberski, who will review the financials for the fourth quarter at fiscal year 2021. Thank you, Scott.
spk03: Thank you, Alex. Good afternoon, and thank you for joining our fourth 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 and MD&A for descriptions of these measures, as well as a reconciliation of non-IFRS measures to our statutory IFRS reporting. The filing document should be up on CDAR fairly shortly. As a reminder, in the third 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 reflects the way we think about the business. In our financial statements and MD&A filed on CDAR, we provided further details to help you understand the underlying cash costs of each expense category, as well as how the new reporting of costs and expenses compares with the prior by nature reporting of these items. Let's turn to the results. The following comments will compare 4Q 2021 with 4Q 2020. Revenue grew 27% year on year, driven really by four factors. Higher patient volumes at MCI organically and the addition of polyclinic, addition of executive medical concierge services, strong recovery and other services that we offer such as physiotherapy, chiropractic, et cetera, et cetera. The addition of clinical research revenue and record revenue from CURE in the technology area. Adjusted gross margin increased by 660 basis points, reflecting the positive impact of record revenues from CURE, the addition of higher margin revenue streams in executive medical concierge and clinical research, as well as solid corporate health service margins during the quarter. Operating expenses grew 71% year-on-year on the reported numbers basis, but up 21% year-on-year, excluding the impact of stock comp and depreciation and amortization changes. Growth and expenses was focused on supporting, one, multiple high-margin revenue initiatives, two, the build-out of MCI's high-performance clinic network, three, the acquisitions of Cure and Polyclinic, and four, public company expenses related to management, legal, audit, IR, branding, and awareness. Specific growth efforts on which we focused investments included investment in MCI's massive data lake to support the company's data-driven initiatives across its more than 2.5 million record database, which continues to grow and deepen, as well as efforts to grow CURE's 1 million-plus records that it currently supports outside of MCI. Work initiated with one of the world's leading data structuring and data analytics vendors began in the fourth quarter. And this is really an exciting effort that we can talk a little bit more of in the Q&A period. But the initial effort will power our smart referral platform, which should enable shorter and smoother access of patients between GPs and specialists in the MCI ecosystem. And it will also accelerate data-driven revenues in 2022, both from MCI's network as well as the networks that CURE serves. Investment in physician recruiting was another area of focus for investment and it led to a very large uptick in the number of physicians recruited. This effort continues in Q1, and the physicians that we've recruited recently, we've recruited probably more physicians in a single period than we've ever done in the company's history, which is exciting for us. I think basically what's happening is physicians are realizing that we provide a lot of benefit in supporting their ability to focus on healthcare rather than running an office. Finally, we made further investments to enhance and roll out corporate health services nationally and via the company's Alberta clinics. And then we've begun our initial efforts to accelerate growth in executive medical concierge services and clinical research services, which are supply constrained at the moment. Turning to adjusted EBITDA, we made progress during the quarter as adjusted EBITDA was minus $1.5 million. for the quarter versus minus 1.8 million in the year-ago period, as well as a similar amount in the prior quarter in September. So we're making progress there. Again, healthy margin revenues from technology, clinical research, and privately insured services such as executive medical layering into the mix is improving our overall margins and improving our EBITDA along the way. Finally, net loss for the quarter was minus 4.8 million, or 10 cents per share, and that includes $0.03 per share from $1.7 million of stock-based comp and another $0.01 per share from changes in contingent consideration that occurred during the quarter. For 2021 versus 2020, revenue grew 24%, again, driven by higher patient volumes, the 70% growth in corporate health services, and, of course, the contributions of acquisitions from CURE and Polyclinic. Adjusted gross margins decreased for the full year by 120 basis points, and that was really just due to the fact that our higher growth, higher margin elements didn't factor into results until the second half of 2021. Operating expenses for the year grew 128% year-on-year on reported numbers, but only 51% year-on-year, excluding the impact of stock comp and depreciation amortization changes. Growth and expenses was focused again on supporting the aforementioned growth initiatives, including health technology, the build-out of the high-performance clinic network, the acquisitions of Cure and Polyclinic, and our public company expenses. Adjusted EBITDA for the year was minus $4.6 million for 2021 versus positive $2.3 million for 2020, driven by heavy investment to support the growth initiatives. Net loss for the year was minus $15.5 million, or $0.33 per share, but that included $0.13 of stock comp as well as another penny from acquisition-related costs. MCI exited the quarter with 7.1 million in cash, nothing drawn on its revolving credit lines. The decline in cash was driven mostly by 1.4 million used in operations, 0.8 million used for investments in R&D and the company's IT infrastructure to support the growth in health technology, and then cash used in financing just from net lease payments under IFRS 16. I'll close now with a brief outlook. If 2021 was an investment year, 2022 is the harvesting year where the company is seeing the benefits in these investments. We remain very optimistic about revenue growth from multiple sources, including technology-driven efforts with the work being done with the leading data infrastructure partner, Cure Health, which moves from on-premise solution to a cloud solution in early 2Q, which will make the platform substantially more accessible to all doctors, as well as substantially cheaper to operate. The third factor with is accelerating growth in high-margin executive medical and clinical research operations, and finally, a substantial increase in the number of physicians in the MCI ecosystem in both Ontario and Alberta. Acquisition opportunities remain healthy, so there's still plenty of opportunity to layer in more specialty health, clinic, and technology services to ensure we are meeting the demands of MCI's patients, corporate customers, and life science customers. Financially, what this means is Revenue growth should nicely outpace OpEx growth, and CapEx levels should decline somewhat from the 2021 levels, returning the company to positive EBITDA and cash flow during the 2022 year. With that, I'd like to turn it back to the operator, Victor, to open the line for questions. Thank you.
spk01: Thank you. And as a reminder, to ask a question, you will need to press star 1 on your telephone. And to withdraw your question, just press the pound key. Once again, that's star one for questions. One more for questions. Our first question will come from Rob Goff from Echelon. You may begin.
spk02: Thank you very much for taking my question. My first question would be to ask for greater perspectives on the three-year data and technology agreement. Is that one where you are receiving capabilities from the data partner? They are in turn receiving access to data, or how does money cross hands in that relationship?
spk04: Sure. Hi, Rob. Hope you're doing well. Thank you very much for the question. And just to clear that up, so we're working with a company that has data analytics capabilities And you can picture the use of these capabilities as an accelerant to what we're already doing. There's no commercial efforts that they're participating in that we would then share revenue with or revenue would go through them to us. It's just simply they're accelerating what we're already doing. So let me give you an example. As we right now create technology, right, for rare disease screening, their technology can help us do these things faster.
spk02: Okay, in terms of the relationship there, are you compensating them for these capabilities, or how does the exchange work?
spk04: That's correct. That's correct. We have a commercial agreement. Okay.
spk02: Thank you, Alex. And could you also talk to the corporate health revenues where there was a tapering in the fourth quarter? Is that COVID-related, or how would you look at that?
spk03: Sure, Rob. I mean, basically, this thing was growing triple digits for the last five quarters, or actually longer than that, seven quarters. And I think what you're seeing there is, you know, you come up against tougher comparisons year on year, really, is what's happening. Certainly, it'll ebb and flow a little bit with COVID. But the new services are, you know, rolling out, especially, you know, in Alberta and across nationally, and there's There's some very nice new customer wins, so we're still very, very optimistic about the growth there for 2022. Okay.
spk02: So you would be seeing growth looking into Q1?
spk03: I haven't seen too closely, you know, what's going on in Q1, but definitely they're adding more customers this quarter.
spk02: Okay. Thank you, Scott. And with respect to CURE, I believe it was roughly 3.4% of total revenue. How do you see that unfolding or building momentum looking into 2022?
spk04: Rob? Yeah. With regards to cure health, so again, I'm echoing some of Scott's comments on the theme from last year, which was heavier in investments, right, and building out the foundation for, you know, that penultimate step into 2022 for further growth. So our expectation and outlook in 2022 is to continue strong growth. There is a very sizable market, right, both not just in Canada but also beyond, and we will continue focused efforts to make sure that we capitalize on that market opportunity.
spk03: Yeah, one thing I would add to that, Rob, is we have repeat customers, and with each repeat buy, the dollar volume that they are buying is going up. So where they were starting in the tens of thousands for a contract, now they're pushing half a million and sometimes north of half a million dollars per contract. So that's progressing quite nicely. And we would expect that to continue since most of the large pharma are customers already.
spk02: Thank you. I will jump back in here.
spk01: Thank you. And once again, that's star one for questions, star one. Our next question will come from Doug Taylor from Canaccord. Your line is open.
spk00: Thanks. Good evening. Good evening. I'd like to ask, I guess it's likely for Scott, if you could just maybe expand a bit on the shift into harvest mode and the outlook for achieving positive cash flow in 2022. Could you help us bridge you know, the current results to that objective and, you know, where we are expecting to see, you know, gains made and maybe from revenue growth or gross margin expansion and is OpEx flat, declining, or just increasing slower than revenue? I mean, that'd be very helpful, I think.
spk03: Sure, sure. So, absolutely. So, we'll go from the top to the bottom. Revenue growth is is key and it's happening on both organically the clinics as they continue to grow volumes. It's also happening from the acquired clinics. So that's all in the public, you know, health domain. Then secondly, corporate health continues to grow. And then thirdly, the new technology initiatives, particularly on data from CURE, as well as with the data analytics partner, contribute to that growth. And then finally, as part of the polyclinic, and we've started, you've seen us call it out on this call, we'll be talking a lot more about executive medical concierge service, as well as the clinic research organization there, because those are, you know, higher growth, higher margin streams of revenue. So that's the revenue picture. The collective mix of all that should lead to higher gross margins, because they're considerably higher margin streams businesses than the traditional public health. And then on the OpEx front, we would still expect a little bit of growth, but you're pretty much getting a leverage, you know, against prior investments in R&D as data comes to fruition from the new data analytics partner and as CURE continues to build on the base that it built in 2021. And then you'll get the addition of you know, leverage on both marketing and, in particular, G&A. So we have the infrastructure in place to grow this company, you know, by 40%, 50% without really having to change the G&A structure. And we have the capacity both in the clinics and through the virtual health platform to grow the revenue, again, with very little OpEx friction. So we would expect to get a lot of leverage in 2022.
spk00: And would you expect to hit that threshold and, you know, is that achievable in the first half of the year or do you think that's something that's going to come later in the year? And then I guess a related question was how do you feel about your balance sheet resources against, you know, that timetable?
spk03: Yeah, I think we definitely have the opportunity to hit that towards the end of the first half of the year. Yep, for sure. You know, as all these efforts layer in. And then insofar as the resources are concerned, you know, We have cash on hand. We also have unused lines of credit. And basically, it's a matter of us executing against the revenue initiatives at this point. So we feel comfortable with that.
spk00: Thank you for your time. Thanks, Doug.
spk01: And once again, that's star one for questions, star one. One more for questions. I see we have a follow-up from the line, Rob Gough from Echelon. Your line is open.
spk02: Thank you again. Just looking for a bit more perspective on the gives and takes in terms of clinic and virtual, like physical clinic and virtual visits, any impact of COVID restrictions or activity in the quarter and what you might be seeing.
spk04: Yes, Rob. Sorry, I was on mute for a moment there. Yeah, so Rob, as the waves of the pandemic, as we survived those waves, right, of course there was an impact on in-person patient volumes, but there was always an uptick on those consultations done both virtually and through telehealth. So I think as each wave has progressed and as we've gone through each one, we've become more resilient as an organization to actually make sure that we're seeing the patient demand and answering the demand through more telehealth calls and virtual care calls. And going forward now, as it comes through that last wave, I think we feel we're in a very strong position, right, to make sure that we're not just so only enhancing our ability to see our patients virtually, but also, you know, our doctors are back more and more in our clinics.
spk02: Okay. Thank you, guys. Good luck.
spk01: Thanks, Rob. And once again, that's star one for questions, star one. I'm not showing any further questions in the queue at this moment. And no further questions in the queue. I'll turn it over to the speakers for any closing remarks.
spk04: Sure. Thank you, operator. With the full and successful integration of our acquisitions and now with accelerating growth and technology, Our transition from a traditional care services delivery model to one that is more personalized, holistic, and most importantly, data and technology driven has now been achieved. As Scott mentioned, our outlook remains highly positive across all our business functions. And to summarize, once more, we have a growing base of higher margin revenue, accelerating growth in our data-driven initiatives, and we continue to have a very strong balance sheet. Now, we're firmly committed to continue to drive excellence in healthcare in Canada and set an example of how patient access to quality care can be improved. And further to this, we are committed to deliver on our strategy and continue to deliver value for our shareholders. I'd like to thank everyone for joining us on the call today and thank our investors, our shareholders for their support. I'd also like to thank my executive team, management teams, my board, and all of our employees and clinical staff for their continued efforts. Thank you very much.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.
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