Neupath Health Inc.

joining us this morning for New Paths Q3 results. The company will be making a presentation and discussing their business and their financial results. And then we will be taking questions from the audience. So please type your questions into the Zoom Q&A. function, and I will read those out to management. Please try to keep the questions clear and tight. It makes everything a lot better. Sometimes it's literally hard to understand what the question is. And with that, we're gonna get the show officially on the go here. NewPath is Canada's largest provider of health care services for the treatment and assessment of chronic pain, back injuries, sports-related injuries, and concussions. The company just released its Q3 results with over 26% revenue growth and adjusted EBITDA up 98%. CEO Joe Wolowitz and Stephen Lemieux, the president, are here to discuss the results. I'm Martin Gagel with Market Radius Research. Please remember, this is neither a recommendation nor investment advice. Gentlemen, welcome back and congrats on another strong quarter.

Thanks, Martin, and thanks for the intro there. I'm Joe Wolowitz. I'm the CEO of New Path Health, and I'm joined here by Stephen Lemieux, our president. And I apologize for those of you who know the story, I'm going to go over a little bit just background. So for those who are new to the story can get a little sense of what we do. So as Martin mentioned, we are Canada's largest network of chronic pain treatment facilities. Next slide, Martin. We will be making forward-looking statements today. I encourage all investors to have a look at our AIF and all our other documents filed on CDAR. We do also use non-IFRS measures. And just so everyone knows, all our details are in the financials and there's nothing, everything's there. And if you have any questions, just give us a call. So why invest in NewPath? Well, first and foremost, we do run, I mentioned regulated healthcare facilities. So in the past, we've talked a little bit about Sometimes some of our peers talk about clinics. These are regulated facilities, so we are a private provider of public health operating healthcare facilities that augment and supplement the public system. These require specialized personnel and training and very expensive equipment and a decent amount of capex, although we've put that behind us, I think, for the most part now. We've had a great organic growth profile, as you can see from our numbers. We've not made any material acquisitions in some time. The numbers are really driven by patient visits and doctors adding more time and spending more time with us. As of today, unfortunately, this is a large growing market. There's lots of people out there who are underserved and need our help. More importantly, we think that as the business has grown stronger, we have lots of opportunity for inorganic growth. Finally, growing cash flows. You can see the balance sheet. A few years ago, we had over $5 million net debt. We're now down to under $2 million, $1.7 million. So we've been really rejigging that balance sheet and using that cash flow to buy back stock and other things. So we're able to invest in new initiatives. So what do we do? People always kind of wonder, what does chronic pain treatment mean? And there's kind of people can imagine a bunch of different ways, but I think this helps to simplify a little bit. We do injections. For example, Botox. If you have a migraine, you may get a Botox injection, which, you know, for people don't know that Botox can be used for the treatment of chronic migraine. Things like prolotherapy and PRP for sports injuries. You know, you get nerve blocks for people who have sciatica. You know, these are things that you can do in addition to We do things like infusions, IV infusions of lidocaine for people with systemic pain. Ketamine can also be used for pain. And I just want to be clear, this is not a field trip kind of situation. What happens when you get ketamine in our clinics, it's usually lower dose than you would get for the psychological treatment. So these are lower dose for the treatment of chronic pain. Then, of course, there's other things, you know, radiofrequency ablation is a very important treatment modality for people with chronic lower back pain. We have physical therapy on site in Edmonton. We have one of our doctors actually does acupuncture. You know, we do cognitive behavioral therapy. We make that free, freely available to our patients. We do sessions every couple of months. And then, you know, we have a massage therapist comes in once in a while. So, you know, there's all these things that are ancillary to what we do, but the core business is really kind of injections, infusions, and things like radiofrequency ablation. Next slide, please. There. So for those of you who don't know, we are currently in Ontario and Alberta. We're in Ontario from Ottawa to Windsor and most places in between operating under two brands in Medic and New Pass Center for Pain and Spine. In 2021, we entered the Alberta market with our HealthPoint acquisition, which led to our expansion to Red Deer. And that site began operations really 23, but really accelerated in 24. It is one of our fastest growing sites now. And Steve, I'll pass it over to you.

Thanks, Joe. So just looking at our results for the quarter, as Martin mentioned, our Q3 revenue is up approximately 26%. And this is mainly driven by higher patient volumes at all of our clinics across all of our brands. On the year to date, we're up roughly 20% to $65 million compared to $53 million last year. And that, again, that's mainly driven by higher patient visits. And we did have a one-time revenue pickup we talked about in our Q2 results. On the next slide, looking at our adjusted EBITDA. So strong adjusted EBITDA growth both in the quarter and year to date. And this is really driven by our operational improvements. So looking at optimizing the available time that doctors give us to maximize the amount of patients we can get through the clinics. IT investments to help improve doctor's efficiency with respect to using artificial intelligence in their EMR systems, and as well as optimizing our real estate footprint to get the most out of the square footage we have, expanding where we need and contracting at clinics where we have additional space. And to our balance sheet, as Joe mentioned, our balance sheet is in great shape. We finished the quarter with $4.6 million in cash. Our net debt is 1.7 million. And we've been growing that cash balance while we've been investing in our facilities across the country. And this puts us into a great position to start growing the business. We've got a good cash balance that's growing and we've got a great partner with national banks. So we have the availability to increase our leverage and use acquisition lines to move forward as we continue to look at opportunities to grow our business in new markets. And with that, I'll turn it back to you, Joe.

Sure. So I think, you know, people, for those who've been following us, we've been talking about this for some time, you know, step one, increased capacity utilization, better use our facilities. So in that case, we've been, you know, and one of the best ways, of course, is to onboard new doctors at underutilized clinics, doctors adding hours. We always say add doctors, but it isn't really quite that way. If a doctor's working one day a week and they add, you know, two more days, that's three days a week. You know, that significantly increases our ability to serve our patients better. Um, you know, and as well, adding new services, you know, we did, um, we started with arthrosomid, um, this year, uh, we been doing PRP and prolotherapy for some time and we're adding the ketamine infusions, you know, adding these new services, uh, you know, augments our revenues. You know, for example, we've done approximately a hundred, um, arthrosomid procedures already, you know, at $4,200, uh, an injection, you know, it's, it's been a significant part of our revenue, uh, given that we just started in March, um, you know, expanding our network. So as we know, we, We expanded to Alberta, we expanded to Red Deer. We're looking at additional opportunities to expand both within our two core provinces as well as additional provinces. And then finally, you know, we've always talked about other specialties, you know, radiology, orthopedics, things that would be able to, that fit hand in glove. You know, every patient that comes in our clinic has probably had imaging done. So it's a great idea to kind of think about some of those. And if you're a candidate for surgery, you know, we can send you over there. If you're referred for surgery, you're not a candidate, maybe you still have pain that needs to be treated. So there's kind of, these are the three areas that, we view as important for the future. So inorganic growth, that's really kind of our now, our focus. Steven joined on May 1. And what we've been doing with that, we got our national bank new credit line in place at the end of March. So Steven on May 1. So now we've been spending a lot of time evaluating a lot of new opportunities for using our existing cash flows and our balance sheet to be able to allow for some token acquisitions. Lots of things, you know, we won't, I know some of our peers talk about the actual numbers and when they're going to close and whatnot. You know, we know we have certainly more than a dozen things on our desk right now that we're actively evaluating. And, you know, always timing is very difficult to predict. So we're super excited about our ability to do so, given our financial state and looking at all of these things here. New, nicer facilities in our core markets, new facilities and new markets, like, for example, the cities in Ontario and Alberta that we're not in. as well as things like BC, Quebec, et cetera, where we can get in as well on a different location. Next slide, please. So I want to talk about the cap structure too, because this is interesting. I talked about how we cleaned up our balance sheet, but we really cleaned up our entire cap structure. When I took over, we had some high yield debt, we had related party debt, we had broker warrants, we had other warrants. It's clean. We have common shares. options, RSUs, and that's it. And we've cleaned that up over time and we got rid of all the debt. We have one bank facility. So we have a bank facility debt, sorry, one debt facility, shares, options, warrants, or RSUs, but that's it. And so I'm really proud of kind of cleaning this up. We've been busy buying back the stock. As you can see, over the last year, you've seen me buying in the market. You've seen the companies been buying in the market. We continue to believe if you look at our last nine months, year to date, If you look at trading in 12 months, sorry, adjusted EBITDA of almost $6 million. We're trading at, well, as of two days ago, $23 million in terms of enterprise value. So we think the board and myself, both as a shareholder, board member, and as an executive, are very comfortable that the company is undervalued here. We're very pleased to continue with that, returning capital to shareholders in that manner. Next slide, please. So for those who don't know, I joined about three years ago, took over as CEO, but I was with the company since I joined the board of directors in 2020 as part of the RTO. So I've been almost 30 years in healthcare with multiple successful companies in the pharma and biotech space. Jeff, our CFO, he was a controller until he was our controller, was promoted to CFO in 21 on an interim basis. And we love him so much. We asked him to step up and take that full time. And then Steven, we brought him back in 25. Steven?

Yeah, rejoined the company back in 25 as well. I've been CFO at a variety of pharmaceutical companies on both sides of the border. And I'm just excited to join the team here at NewPath again and continue to grow and build it.

So next slide. So I think that just kind of give people, we don't give guidance, but just kind of give people a good sense of our outlook and what we see. You know, we think continued high, single, low, double digit organic growth for the base business is very achievable over the next 12 months. We're seeing it, you know, the increased position hours resulting in more patient volume growth, which is really, I'd say probably the fundamental thing we want to keep an eye on. You know, this arthrosomid has been great. We're looking at other procedures that like that, where we can kind of add in new novel therapies that just make our service offering more unique and differentiated from our peers. You know, we're under the hood, you know, we're tinkering, drug costs, scheduling of staff, you know, we're making, you know, right-sizing clinics, you know, everything's kind of, we keep tinkering away to work on all the pieces of our expense structure. And then, you know, finally, you know, we're going to we definitely expect over the next 12 months we'll be executing on a couple of these transactions. So in summary, we are Canada's leader in chronic pain treatments. We're a private provider of public health, as I mentioned, which means we support and augment the system. We're not a private pay business. These are regulated facilities. There's a large market for this. We have, I think in Edmonton now, our 18-month wait list. I have a few clinic in Ontario with probably 1,200 patients that's waiting to be seen. We have a lot of people who are waiting to get care from us. And the bad news is if they go to the public system or go to a public hospital, it's even worse. So we're all trying to better serve patients. And we think that we'll be able to do that over the next 12 months. In terms of health policy, I think that the comment there is really around the idea of what we do. And I always say this to investors who don't know us, is what we do, you can also get done in the hospital, right? You know, we're kind of hospital-like, so to speak. The difference is that, you know, I'm downtown Toronto today and, you know, if you want to fight traffic and pay, you know, $30 for parking and get to the hospital and you wait two years to get it, you know, through the wait list, whereas we're providing it in the community in Brampton and Mississauga and Scarborough and, in Oshawa, you know, where people, you know, can actually readily access this. So I think we're providing better access to patients, and that's what I think the government would like to see, things that are not required to be done in hospital, done out of hospital. And that's, you know, whether it's Doug Ford, whether it's other premiers talking about how do we do some of these procedures, like... corneas or cataract surgery, you know, things like things that don't need a hospital shouldn't be done in hospital. And I think you're going to see more and more. Canada is probably 10 plus years behind other countries in doing this. And I think we're just at the nexus of that. You know, we've had really turned this business around, you know, management here. I think we've, you know, I told you two, three years ago that I was going to turn this around. And I think, you know, you can kind of see what we've done and just judge for yourself. I, you know, we know we're undervalued because we know what our multiples are and we know what the multiples are of the acquisitions we're looking at. So we're going to continue to return to capital shareholders in the manner we see fit. And I think that's it. That's from our MD&A. Great. Thank you.

All right, gentlemen, thanks for that overview. And I just want to make sure just you are a private provider of public services. You're largely government paid, although some of that knee procedure you do, I believe, is a private pay thing. But for the vast majority of services, you get paid by the provincial government, correct?

Yes. Currently, Alberta Health and OHIP primarily cover 90% seven to 99% of our revenues. Um, it's changing now, you know, as, or like PRP is a, is a procedure that's done for, for like sports injury. For example, you've probably heard of a hockey player, you know, a baseball player who's got injured and they get a PRP shot. You know, those are things that I think the, the, as we call the aging, you know, warriors here, you know, people like to, you know, keep active in their, in their older age. do those kinds of procedures, the government doesn't pay. So we were able to provide that to patients, you know, for a fee, things like arthrosomate. And I think we'll start seeing some more of that. I don't see this ever going to a full private pay, but basically we're not allowed to provide anything that the government provides, you know, for a fee. So if the government doesn't want to do that, or it doesn't see value in that, or is unable to pay for it, you know, then certainly you'll see those kinds of procedures. And that's, Not just in chronic pain. It's everywhere. There's procedures government just refuses to pay for. There's drugs for cancer they won't pay for. And then patients have to find their own way around that. All right.

I noticed on your cap table, things have, as you highlighted, cleaned up. And what's very noticeable is your warrants. I didn't see any, or you said that there are no more warrants on the cap table. What happened there?

Yeah, so if you look in our filings, you'll see the details there. But basically, we paid a very nominal fee to retire those warrants and get rid of them. It's essentially in line with what we're doing with our buyback. It's trying to minimize... We didn't want to dilute shareholders almost 10% at a price of 25 cents. I think we are very confident where the stock is today. We're undervalued. We think we're even more undervalued at 25 cents. So being able to pay a nominal fee to retire those does two things. One, it minimizes dilution for the rest of our shareholders. And two, it removes an overhang, I think, that was out there, a perceived overhang. So we're very pleased to have done that at a very really a very low price. And if you look at the number, it was about $180,000. So if you do the premium to $0.25, you'll see that it was a very nominal fee and very attractive use of capital for the company.

And as well as signaling you don't need that capital right now, your cap structure and table is just AO.

Yeah. And that too. Yes. As we mentioned on our other slide with the balance sheet, we're very comfortable with where we're at right now.

Yeah. You've been growing organically quite substantially over the last few years with essentially the same footprint. You've optimized it a little bit. Can you talk about your capacity utilization and how much more internal growth can you do before you just start hitting up against the natural limits of walls and doors and that without having to open new locations?

Well, that's a good comment. So first I'll just say that, you know, one of the things you've heard from me over the last two years is we've been really kind of consolidating our sites. And so we had, you know, we had closed Toronto, we closed Oakville, we shrunk Mississauga, we shrunk London. But now you're seeing two other things. So we now grew Windsor and we grew Brampton because they're at capacity. And so they're busy. And so when we look at our capacity utilization, it's across a network of 12 sites. What we've done is with those other closures, we've been able to consolidate physicians into sites that helps on the capacity utilization. But now we're at the point where some of the sites actually need a little bit, a little extra space. And so we're going to do that. We probably have in January, we have two more sites. We'll probably be adding a few treatment rooms because as you can see, our organic growth is there. That being said, just in terms of capacity utilization, there's different ways to look at it. You know, we've historically looked at it more as like kind of an operational capacity utilization, not a footprint based utilization, which is kind of a little different. And so what I want to message to investors is we have more than enough footprint to grow organically uh, over the next few years. And we're going to provide some updates on that, provide more detail in the, in the new year, we'll, we'll be talking a little more about footprint and operational capacity. So people can kind of better understand that, but basically bottom line is, you know, for example, if I have a site, but there's no doctors there, then, you know, the functional or operational capacity isn't there. Right. So, um, We'll, we'll provide more detail on that in new year, but I think when you see our, our capacity utilization, I think some people had some concern about being over 80%, you know, then it gets to be a problem recruiting and retaining doctors. We don't have that. One, we've been expanding, as you know, with Brampton and Windsor, I mentioned, for example. And two, that physical space, we have a lot of physical space still available. We just have to use it better. So I'm not worried about the growth profile organically for now.

Is the rate limiting factor right now the number of physicians that are there and it's a matter of hiring and that'll expand your total capacity and just then tweaking how it's used and so forth? Do I have that right?

Yeah, Martin, you do like, so like we said in the past, like we've got, there's a lot of patients that need to be served here and really finding doctors has been the biggest priority of the business. We do have, we do work with recruiters and through our physician network to expand the doctor footprint. We do have probably about half a dozen new doctors that will start soon. into the new year it does take time from when the doctors leave their existing contracts to when they can start joining us and some will come on one day a week and then expand to two or three days but that's what we're doing we're looking at like it's new doctors both in our in Edmonton at the clinic and we have there as well at HealthPoint and as well across some of the clinics we have in Ontario

And Martin, just on that, you know, we do have like, for example, like people do ramp up, right? Like, so even though we have a backlog, you know, a doctor will start, like we had a few people started earlier this year in 2025, you know, in the Q1 and Q2. And now you're seeing kind of them ramping up their practice. So, you know, it does take a little bit of time for people to ramp up their practice when they join.

All right. There's an audience question here. I think we've largely covered it, but if there's anything else you'd like to add, can you please talk about how you at the clinic level optimize retention of staff while incentivizing growing revenues and margins?

So I think on the staff, so what we do... So we do pay attention to the culture we have at every clinic, and every clinic's culture is different. It's kind of like they're each their own little family, so you really have to focus on making it a good place to work, get good interaction. You really want your... MOAs and your nurses and the doctors all working together understand how the doctors work. And the more we can do that, and we put clinic managers in some of our clinics as well to run it so they can learn how the doctor practices, make sure they can optimize that schedule. And then working with our technology group as well to look at different ways they can use AI. How can we make charting more efficient? And those little steps, but if they can add one or two patients a day to a doctor's schedule, then that helps grow our revenue organically, makes the workflow in the clinic much more efficient. And you can see that in our, the numbers we've been reporting over the last few quarters.

And just to add to that, you know, we do have like from a staff point of view, you think about, you know, for sure, like we have a radiation tech, a rad tech or a nurse or an MOA, you know, they can work in hospitals, right? The difference is that, you know, like my daughter working 12 hour night shifts, you know, it's not for everybody. And so, you know, there isn't an environment to be able to work in the community and community care setting, which is, you know, I would say from an hour, you know, the way the hours work, it's definitely, we pay almost the same as hospitals, but, you know, they have a slightly better uh work profile for people who are looking for that and so that's kind of the the environment but i think the idea that these are small little islands so they work together in teams we've been busy trying to work on training as well so we've had some you know we do our surveys of staff um we did one last year and you know some one of the things came up was opportunities for training and learning so we've been adding that so we we are able to kind of respond to them in a in a in a manner and try and get them to feel part of the team So those are ways we retain. And we don't have a lot of turnover, to be honest, on the staff side, which I'm very proud of, you know, because, I mean, everyone's short staffed on nurses and MOAs and rad tech. So, you know, we're very pleased that the turnover has been relatively modest.

All right. Changing the topic back to your cap table, you have been buying back shares, and I believe your share buyback program expires in the near term. Given the recent rise in the share price, are you continuing the share buyback? What sort of action should investors expect from the company right now?

Well, I think that the message right now is that the board and management all believe that we continue to be extremely undervalued and we're more than we'll reevaluate that over the coming weeks. But, you know, definitely we think returning capital shareholders in this manner is a great way. Great use of funds.

With your inorganic growth strategy, obviously you've said that you expect to have some acquisitions over the coming year. Can you discuss a little more about what the pipeline looks like, how you're seeing the visibility in that sector right now?

On the inorganic side, Martin?

Yes, on acquisitions. On acquisitions.

Yeah, so we probably have approximately about a dozen or so opportunities that we're looking at from various stages, like early discussions into the LOI phase. But we're looking at growth opportunities within both the province of Alberta and Ontario, as well as some of the new markets, like Joe mentioned, like into BC, Saskatchewan, and we're looking at Quebec as well. I'd say there's a healthy interest. The appeal for some of these smaller doctors who are managing a clinic business as well as managing supply channels, HR, their finance, the appeal of being able to go focus more on medicine and less focus on all the back office administration has been some of the appeal for some of the doctors that we're in current discussions with.

All right. With all the budgetary talks going on right now, is there any risk about changing in the method of payment that could be negative on you or positive on you to try to find a more efficient manner to deliver health care in the various provinces?

Go ahead, Joel.

I was just going to say, look, I think that one way I step back and look at this is that these changes happen all the time, sometimes for good and sometimes not as beneficial. And so we've managed through that over time. And so I think that we're comfortable. We know that there is a We don't believe there's a strong interest on the part of payers to see these patients in the street, right? This is the challenge. And these, these, I mean, when I, when I talk about patients, you know, people often think about chronic pain. They're like, oh, you know, you got a back injury, you know, a person's got a, you know, shoulder injury, uh, you know, was playing squash, ran into the wall, you know, like it's not that these are people who are probably out of work, who don't have insurance, who have been out of work for some time. There's a lot of our patients who are really suffering, and I don't think there's a strong interest in the government side to really play with that in a big way. And certainly we see that. You can answer the question yourself if I say, where do you think these patients end up if they're not getting treatments from us? And I think the answer is probably not anything any public payer wants to see going forward. All right.

We've covered a lot of topics here. There are no more audience questions at this point. Are there any final comments or areas you'd like to highlight on before we wrap it up here this morning?

No, I think, you know, in summary, you know, I think just look, you know, we've told you we're going to deliver. We're starting to deliver. You're starting to see what happens when doctors start adding time with us. When the micro scale starts bubbling up to the top, when each of our clinics is running really smoothly, you see that kind of, you know, come up to the top. And so I think we're pretty pleased that all of our clinics are doing pretty well. Some are doing better than others. But, you know, it's we see great opportunity in just on the inorganic side as well to be able to add to that.

All right, gentlemen, thank you very much. Congratulations on a solid quarter. And I look forward to seeing future progress from New Path.

Thank you. Thanks, Martin. Thanks, Martin.