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spk00: Ladies and gentlemen, thank you for standing by. And welcome to MCI One Health Technologies, Inc. First Quarter 2022 Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star and one on your telephone. If you require any further assistance, please press star, then zero. I would now like to hand the conference over to your speaker for today, Nolan Reed, Vice President of Marketing and Communications. You may begin.
spk02: Good afternoon and welcome, everyone, to MCI One Health's 2022 First Quarter Financial Results Conference Call. I'm Nolan Reed, Vice President of Marketing and Communications, and joining me today on the call is Dr. Alexander Dobrynowski, Chief Executive Officer, and Scott Nirenberski, our Chief Financial Officer. Our financial results press release is now available online. and I encourage everyone to download a copy of our first quarter consolidated financial statements from CEDAR.com, which will be up very shortly. 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 as the date of this presentation. These forward-looking statements involve risks both known and unknown, assumptions and other factors, 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. I will now hand over the call to our CEO, Dr. Alexander Dobrynevsky.
spk04: Thank you, Nolan. We truly appreciate everyone for joining today, and I would like to start today's call by providing some detailed commentary on the quarter, inclusive of key highlights on each of our business functions, namely our growing high-performance healthcare network, our corporate health services unit, and our technology and data initiatives. I would then like to go into further detail on our strategy and also expand on our outlook of the coming quarters, after which our CFO, Scott Nirenberski, will provide a financial summary of our first quarter 2022 financial results, plus add further detail on the overall outlook of each of our core business functions. After this, we will have time for a question and answer period. We're very pleased with our first quarter of 2022. As last year was a pivotal year for MCI One Health, with the overarching theme being investment and improvement. Whereas we completed two very substantial acquisitions, invested heavily into R&D, we grew our data-driven revenues, we added significant scale to our business, added to our leadership and technology teams, and we are now targeting to be a cash flow positive entity by the third quarter of this year. With regards to the first quarter 2022 key highlights, I'm pleased to share that MCI One Health continued the momentum off our fourth quarter in 2021. We've had a very productive start to the year. Apart from achieving strong quarterly revenue, we also continue to execute on a number of important initiatives that in combination accelerate our two strategic objectives. The first is growing our high-performance healthcare network, and the second is executing on our data and personalized medicine initiatives. This then allows us to achieve our mission of increasing access, decreasing costs, and and improving the quality of healthcare in Canada. With regards to our data and technology commercial efforts, I'm excited to report that our investments made in previous quarters have continued to deliver results. We now, as an organization, have entered a new phase, whereas in partnership with one of the world's leading data analytics companies, we now have our data lake secured, fully accessible, and we are maturing five separate data insight pilots which we are expecting that all will convert into commercial engagements in the second and third quarters of this year. These opportunities are being finalized with top pharmaceutical companies, life science companies, precision medicine companies, and top tier university centers. These data efforts are being executed in parallel to the rare disease screening programs that our subsidiary, CURE Health, is growing. Further to this, on the technology front, we previously announced that we had entered into a three-year agreement with a global leader in data science and security. We have now made material progress with regards to our smart referral system to dramatically shorten the time between primary care visits and specialist referral visits for patients. This partnership will continue to accelerate our data strategy and disease screening, novel referral optimization, and other custom data and precision medicine initiatives. As I mentioned, throughout 2021 and into the early parts of 2022, we invested heavily in improving our foundation modernizing our healthcare clinic capabilities, adding talented and expert team members, investing in our technology and cybersecurity infrastructure, and importantly, adding 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 efficiencies and improving patient access in ways that has not been demonstrated before in Canadian healthcare. We've now fully integrated our two acquisitions from 2021 and the synergies for our patients across our entire clinic group are robust and synergy contribution is now substantial with revenue synergies being realized in the first quarter and now beyond. Now back to key highlights. From a revenue perspective, I'm pleased to share that MCI One Health completed the first quarter with strong results. Revenue for the first quarter in 22 increased 30% to 13 million over the same period in 21. This has been largely driven by the ongoing growth of patient volumes, material growth in our data-driven revenue streams, and revenue contributed by our acquisitions, plus significant success with other important initiatives, such as physician recruitment and patient care pathway optimization. We're seeing terrific growth in patient visit volumes, which are significantly on the rise from the increasing availability of MCI-1 health services across multiple platforms, including our clinic network, MCI Connect and telehealth, and from added convenience for the patients that come to us from our corporate relationships. Bonds were up 12% versus the same period from last year. Importantly, we're seeing not just more patients, but returning patients getting the comprehensive care they deserve, efficiently and effectively delivered by the integration of specialist healthcare directly within the MCI network. Our high-performance healthcare network is delivering on our goal more preventative medicine with continuity of care that creates a more satisfying patient journey. Another important highlight of the quarter is that we have had a doubling of specialist visits through in-network care, pathway optimization, and significant advancement in the rollout of our smart referral system that leverages our new data backbone. With regards to physician recruitment, we are excited to report that we have successfully recruited just over 40 new physicians since September 2021, a run rate at the moment of five to six new physicians added to our network per month. We expect this trend to continue in the coming quarters. With regards to highlights from our corporate health solutions division, we added 20 new corporate health customers in the first quarter of 22, including a program for a national retailer and new national insurance programs for Bupa Global, Falk, as well as launching new insurance medical services in Ontario to groups such as Sun Life. Additionally, MCI Corporate Health Solutions was awarded the tender for Metrolinx. We also saw strong growth of our executive concierge health program, resulting in a 12% increase in total membership in the first quarter. Further to this, our clinical research organization, Canadian Phase Onward, currently has nine client-sponsored research studies underway, with a strong clinical trial pipeline ahead that we'll be executing on in coming quarters. Now, subsequent to this quarter, and similarly to previous waves of the pandemic, the Omicron wave required great diligence and effort to deal with by our physicians, nurses, and clinical support staff. I'd like to thank our staff for their resilience, and on a lighter note, since March, we have seen week after week growth in patient volumes in our base business of healthcare services, and also in our data initiatives as our clinical staff are now more engaged and available for us to make progress on this front. It is in light of this recent growth that I'm confident in our abilities to be a cash flow positive entity by the third quarter of this year. Now, I'd like to make a few comments with regards to our strategy. At NCI One Health, we remain firmly committed to our mission to make healthcare more accessible, affordable, and ultimately safer. And as I mentioned, we have two objectives. The first is to continue to build our high-performance healthcare network, or in other words, our healthcare services and data flywheel. As this allows for us to keep capturing considerable network and revenue synergies, all the whilst providing our patients with more options, faster access, and higher quality continuity of care. Further to this, having this deeper health services offering allows us to achieve our second main objective, and that is to continue to build a much richer and deeper patient profile for each of our patients. By having a higher quality data profile, this is how we advance care to be truly preventative. As our theme in 2021 was investment and improvement, the theme for 2022 is growth and scaling, and we expect to continue to accelerate total company revenue growth in the next few quarters of fiscal 2022. And we will accomplish this growth through organic growth of all our business units with considerable focus on executing our data-driven commercial pipeline, plus we will be continuing to execute on our robust pipeline of M&A opportunities. Now, I'd like to turn the call over now to my CFO, Scott Nierenberski, who will review the financials for the first quarter of 2022.
spk05: Thank you, Alex. Good afternoon, and thank you for joining our first quarter conference call. I'll provide a brief summary of key financial measures, some of which include non-IFRS terms. Please refer to our financial statements in MD&A. for descriptions of these measures, as well as reconciliation of non-IFRS measures to our statutory IFRS reporting. Documents should be up shortly on CDAR. As a reminder, in the third quarter of 2021, we changed our 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 that MDNA filed on CDAR, we provided further details to help you understand the underlying cash costs of each expense category, as well as held a new reporting of cost expenses compared with the prior by nature reporting of these items. The following comments compare 1Q 2022 over 1Q 2021. Revenue grew 30% year on year driven by four main factors, growth in publicly insured services from 12% higher patient volumes, the addition of new physicians, COVID recovery, and the acquisition of Polyclinic. In addition, We layered in executive medical concierge services, and we also layered in, of course, the clinical research organization called Canadian Phase Onward from Polyclinic. Corporate health service revenue growth was minus 13% due to weaker COVID testing. However, corporate health has recently signed on several new customers, and most notably Metrolinx, which is the second largest transportation authority in Ontario. So we expect growth to resume and reaccelerate as we exit this quarter that we're currently in. There are many new services being offered, and there's also layering of new customers coming in. So we're pretty excited about the offering there. Finally, Cura had a weaker quarter due to the timing of new contracts and existing contract extensions, as well as the extremely strong fourth quarter that it had last year. But the pipeline remains quite robust, and there's more projects to look at every day. Adjusted gross margins of 32.7% were lower than 33.9% a year ago, reflecting mixed shift towards government-insured services during the quarter. Further points on gross margin are as follows. Corporate health services gross margins remained very healthy and at similar levels to prior quarters. Executive medical gross margins also remained very healthy and similar to prior quarters. And clinical research organization gross margins also remained extremely healthy and consistent with prior periods. Operating expenses grew 47% year-on-year on reported numbers and 41% year-on-year excluding the impact of stock comp and depreciation and amortization. Growth in expenses was largely driven by R&D spending, inclusion of acquisitions, which more than offset the reductions in corporate overhead. Specifically, the company incurred $1.8 million in research costs, which accounted for a majority of the expense increase. The research costs were to support MCI's smart referral system, which launched in Q1, as well as the launch of MCI's data lake to service large data-driven customers beginning in 2Q 2022. As a separate note, we capitalized an additional amount of development on the balance sheet. So capitalized development went from $1.6 million to $2 million during the quarter to ready the data lake. Finally, the inclusion of CURE and Polyclinic, which were not in the mix in Q1 of 2021, also contributed to higher expenses. MCI made excellent progress on reducing corporate overhead, excluding the investment in research costs and the impact of acquisitions. Corporate overhead actually shrank by 13%, reflecting the company's cost control initiatives, and there are more on the way. Finally, adjusted EBITDA was minus 2.4 million for the quarter versus minus 0.6 million in the year-ago first quarter and minus 1.5 million in the prior quarter, largely driven by the mixed shift to health services from government-insured services and the previous mentioned revenue dynamics in corporate health and cure. Net loss of minus 4.2 million, or nine cents per share, includes two cents of share losses from 1.1 million in share-based compensation. Turning to the balance sheet, MCI exited the quarter with $3.4 million in cash and nothing drawn on its revolving credit line. The decline in cash was driven by cash used in operations of $2.6 million, cash used in investing of $0.4 million largely due to software development costs and IT infrastructure to support the growth in health technology data-driven efforts, and then cash used of $0.7 million due to net lease payments under IFRS 16. We are pleased to announce that our founders, and majority shareholders are providing additional liquidity in the form of a $5 million loan facility as needed to support the rollout of our new data-driven initiatives, strategy, and growth of the company. With this facility, the company will have access to at least $10 million in liquidity to support its strategy and growth initiatives through the end of 2023 on an as-needed basis. I'll close with a brief outlook. As Alex mentioned, if 2021 was an investment year, 2022 is the year of harvest. We continue to remain very optimistic about revenue growth from multiple sources and most notably our data-driven initiatives. As Alex pointed out, the pipeline from the data lake has now gone to 4 million from literally nothing at the beginning of the year, and new potential customers are asking for samples that were not even being asked for a month ago. So the pipeline is building as we move through the year. Cure Health's move to the cloud is underway and should be fully deployed by the end of this quarter, which should substantially increase accessibility to the platform and substantially reduce the cost to deploy it in environments. Accelerating growth in high-margin exec med and clinical operations should also play a role in the back half of the year. And finally, we're extremely pleased with the onboarding of new physicians. As Alex pointed out, 40 new physicians in both Ontario and Alberta collectively are We saw 14% growth in the quarter alone, and we'll have more adding to the mix in each month throughout the rest of 2022 and beyond. So we're pretty comfortable that volumes should climb pretty nicely as we move through the entire year on the clinical side, regardless of the channel by which we service the patients. We have further initiatives on cost control we're executing to make our operations network more efficient. and better align our capacity to the way our patients and customers want to access the healthcare system. Financially, what this means is revenue growth should outpace OpEx growth. CapEx levels should decline from 2021 levels and return the company to cash flow positive later in the summer. With the additional liquidity on hand, MCI is on solid footing to execute its plan. I'd like to now turn the call back over to the operator for question and answer period. Thank you.
spk00: Thank you. Ladies and gentlemen, as a reminder to ask the question, you will need to press star then 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Rob Gough with Techline. Your line is open.
spk03: Thank you very much for taking my question, and it's very encouraging to hear all the points of progress. One of which would be the five pilots. Could you perhaps give a bit more color with respect to those pilots? They're transferring to commercial contracts where you seem very confident and building on the $4 million in the pipeline.
spk04: Sure. Rob, thanks so much for the question and good to speak to you. Now, as I mentioned, Rob, last year was a really heavy investment year, especially on the technology side of things, right, where we did a big overhaul of our IT infrastructure. We standardized the way that our physicians are using the EMR, and then we made sure we could stand up our data lake securely, right, make sure that it's accessible and the data is of relevance and quality. So that needed to be done first. And in the background, we were already engaged with a number of different groups in essentially answering their questions on what data that we steward will be useful for them, what insights rather. And now we're in a process of actually retrieving our data, validating it, and that process now is moving forward very positively. And when that process concludes, we will then move into an actual commercial arrangement with these organizations. I use the moniker here, Data Insights as a Service, because that's exactly what it is, where these third parties are asking to answer some concerning healthcare questions, and we have enough depth and breadth to our databases where we can actually start answering these questions. And I just wanted to make sure that we were clear, right? This is never is there any actual patient information that's exchanged. It's all, we only use de-identified information. and we only actually provide these third parties with insights from that data. Each one of these five groups, the insights we're providing is very different and I can walk you through an example where for one group we're looking particularly at those that suffer from chronic migraine and how better could therapeutics be used to alleviate them of their symptoms going forward. And then all the way through on kind of the other side of the spectrum is actually you know, a project where we're looking at our operational ability as well, right, where we will deploy technology, particular diagnostic technology around arrhythmias with, sorry, cardiac arrhythmias. So, Rob, I think that answers your question, but I guess from a timeline perspective, in this quarter, we are looking to now convert these relationships into commercial relationships. And from a quantum perspective, each one of these quote-unquote pilots, you'd be looking at a quantum between 100,000 to 250,000 to accomplish, and that's what we would be charging for per. And that's also per quarter. And lastly, these are also pilots for companies that are both in Canada and the U.S.
spk03: Okay, thank you. And so with respect to the $4 million figure, is that like over the first 12 months of deployment, or what is the term associated with the $4 million in that pipeline?
spk04: That is over a 6- to 12-month timeline, Ross.
spk03: Could I ask about the impact on margins associated with those revenues?
spk05: Yeah, absolutely, Rob. I mean, the vast majority of that will fall through because essentially, you know, the platform is up and running. The costs have already been incurred, at least on the development side, and it's really, you know, a minor amount of, call it, platform charges like Amazon essentially, right? And so you're looking at the cost, especially that would no more than five to 10% and the rest will just fall through, absorb our existing operating expenses. So it's a, it's very, very high margin, incremental margin.
spk03: In putting the timeline together there, if I may, Scott, you talked about turning our cashflow positive Q3 into And the monetization seems like a Q3 event, so you would be basically cash flow positive before realizing on the pipeline?
spk05: You'd realize some of it, but certainly not all of it. It wouldn't be $4 billion, obviously, or you'd go really cash flow positive. But definitely, you'd realize a few hundred thousand dollars of it over the next, call it four months.
spk03: And perhaps just one more before I jump back in the queue. Could you talk to the growth of physicians adding onto the network, virtual versus physical, and your thoughts on these people coming to you?
spk04: Yeah, Rob. Look, so one of, I guess, our foundational and core competencies, right, is to be able to recruit physicians, right? And, and look, that's not an easy thing to do. You know, and especially during during times like this, right, either during or post pandemic, and I think we have, we have a really strong team now in a solid formula of recruitment. And remember, there's there's two major aims here. Number one is we're recruiting a certain profile of doctor to and that extends into into specialist care as well. And we want to make sure that there's a cultural fit, too, because as a technology-focused healthcare services company, we need to make sure that our staff and all of our team members, right, are aligned with the longer-term vision. So that's part of the mix here, too. Now, we've demonstrated some quick competency in this capability, and we're looking, actually, to accelerate that pace of adding physicians as well. So we're going to add to the critical mass, that critical base of physicians, and thus will allow us to service more patients, optimize those patients' care pathways, right, and actually make a bigger dent in improving health care here locally.
spk05: Yeah, just to add on that too, Rob, if we recruit internally versus find external recruiters, it's about one-fifth the cost to bring on a physician. So it's extremely efficient to do it that way. and we have the right team in place that's doing it right now. So this is going to be a layer-on effect. You're going to see, you know, it basically began towards the end of the quarter because, you know, I could hire a physician today, but it might be six months before they join. So you'll continue to see it layer on through the rest of the year in both of our principal geographies. Very good. Thank you.
spk04: Thank you, Rob.
spk00: Thank you. As a reminder, ladies and gentlemen, that's star one to ask the question. I am showing no further questions. I would now like to turn the call back to Alex for remarks. One moment. Sure. Rob has recued. One moment. Sure.
spk03: I couldn't let the call go without a question on CURE. Perhaps if you could dive into the progress there.
spk04: Sure, Rob. So look, CURE had a very strong fourth quarter, and also CURE's capabilities and growth are dependent on leading on physicians as well, right? So when you go back into a wave of the pandemic, that can affect physician involvement. And thus the importance of our cloud platform launch, which is estimated and targeted now to be June the 1st. And that removes some of the requirements to be using physician time as we currently do. So we're expecting now Cure Health to re-accelerate its growth. And then also because we interface mostly with pharma as a customer, there is a cycle to the spend of pharma as well. And that can dictate at times the pace of those screening initiatives that come through the pipeline or delay rather. And Rob, we've also increased the number of pathologies that we can screen for where we were reporting previously 60 rare diseases and now we're north of 80. which now allows us to engage with more, a diverse amount of pharma customers and also life science companies, et cetera. So our expectation, Rob, is that here is going to re-accelerate its growth and be back on track for a stellar year.
spk03: Thank you. In your comments, you addressed that the M&A pipeline is robust. Could you talk to what your priorities may be there and where valuations may be now versus 12 months ago? Sure. Yep.
spk05: So I can take that one. You know, priorities around expanding the healthcare services offerings, right? So there's definitely some interesting specialty clinics out there that are nice high margin clinics where we have an opportunity to fill in, you know, either expand areas that are really important, say, for instance, cardiology, or add completely, right, to things that we don't already offer. So those are priorities. In terms of valuation, yeah, I would say that generally speaking, valuations are lower. I will tell you, you know, they're still asking for the same multiple, but it's not too hard to point them in the general market direction and say, well, things have changed.
spk03: Yes.
spk05: Okay. Well, thank you guys for encouraging me. Thank you, Rob. Yes, thanks, Rob.
spk00: Thank you. Over to Alex for closing remarks.
spk04: Sure. Thank you, operator. Our outlook remains highly positive across our business functions, and despite the current geopolitically turbulent and inflationary economic environment, we do not see any material challenges that would impair our ability to deliver on our strong outlook in 2022. To summarize, we have a growing base of higher margin revenue, ongoing growth in our data-driven initiatives, And with the strong patient revenue outcomes we've generated and the steady progress we've made in integrating our business units, this has been the inspiration for our founding shareholders to commit additional funding that guarantees the runway to ensure the success of our data-driven revenue pillar in the months to come. We are firmly committed to drive excellence in healthcare in Canada, and we are committed to delivering on our strategy and value for our shareholders. I'd like to thank everyone for joining us today on the call, our investors, our shareholders for their support. And, of course, I would like to thank my executive team, management teams, and all of our employees and clinical staff for their continued efforts. Thank you.
spk00: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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