Skylight Health Group Reports Second Quarter 2022 Financial Results and Upsizes Financing

Revenue Growth of 134% Year over Year, 108% Growth Compared to the Previous Quarter and Secures entry into Full-Risk Value Based Care in 2022

TORONTO, Aug. 15, 2022 (GLOBE NEWSWIRE) -- Skylight Health Group Inc. (NASDAQ: SLHG; TSXV: SLHG) ("Skylight Health" or the "Company"), a multi-state primary care management group in the United States, today announced its financial results for the second quarter ended June 30, 2022.

   -- Doubles revenue to $16.1 million vs $7.7 million in the previous quarter 
      and 134% Year over Year. 
 
   -- Gross profit margin of 25%, down from the previous quarter of 44% 
      primarily driven by the Capitated revenue from full-risk Value Based Care 
      ("VBC") contracts with the acquisition of NeighborMD ("NMD"). Capitated 
      revenue has lower Gross Margins but much higher dollar contribution. 
 
   -- Adjusted EBITDA loss improved by 19% from the previous quarter to $5.4 
      million ($4.4 million excluding the latest acquisition) compared to $6.7 
      million in the previous quarter. 
 
   -- Accelerates its 3 year journey to Medicare Advantage ("MA") full risk 
      into 2022 with the acquisition of NMD and the joint venture ("JV") with 
      Collaborative Health Systems ("CHS"). The Company has entered fully 
      capitated Medicare Advantage risk contracts in Florida with more than 
      2,400 lives. 
 
   -- As of the date of this release on an unaudited basis, the Company has 
      already reduced its annual cost base by over $10 million and expects 
      further operational improvements by year end. 
 
   -- Over $70 million revenue run rate on a proforma basis and trending 
      towards adjusted EBITDA break-even by the end of 2022. 
 
   -- Due to increased demand, the Company has agreed to upsize its 
      non-brokered private placement of convertible debenture units (the 
      "Debenture Units") offering from $2 million to $2.345 million and expects 
      to close on or about August 17, 2022. 

Prad Sekar, CEO Skylight Health said, "We could not be more pleased with our second quarter results. We doubled our top line while reducing our costs and improving adjusted EBITDA. We set an aggressive plan in Q1 to work on operational efficiencies, right-size costs and make material reductions on our annual cost basis. Exiting Q2 we already forecast a further improved adjusted EBITDA for Q3 as we remain committed to working towards adjusted EBITDA break-even by end of 2022. Additionally, we accelerated our journey to VBC by 3 years through the acquisition of NMD and our partnership with CHS. It is a proud moment for all of us at Skylight to continue executing in a positive direction even with the headwinds of a macro market and economy. We remain committed to our goals and are beyond excited for the quarters ahead."

Financial Highlights:

   -- Revenues for the three and six months ended June 30, 2022, revenues were 
      $16.1 million and $23.8 million, respectively, compared to $6.9 million 
      and $9.1 million, respectively, for the three and six months ended 
      June 30, 2021 (excluding revenue from discontinued operations of 
      $3.0 million and $5.9 million, respectively), an increase of $9.2 million 
      and $14.7 million, respectively. This increase was primarily as a result 
      of partial revenue from the acquisition of NMD in Q2 2022. The Company 
      also achieved organic growth of 4% compared to Q1 2022 within its 
      fee-for-service and other revenues segment; 
 
   -- Gross profit was $4.0 million and $7.4 million, respectively, for the 
      three and six months ended June 30, 2022, compared to $3.8 million and 
      $5.0 million, respectively, for the three and six months ended June 30, 
      2021 (excluding gross profit from discontinued operations of $2.3 million 
      and $4.5 million, respectively); 
 
   -- Gross profit margin was 25% and 31%, respectively, for the three and six 
      months ended June 30, 2022, compared to 55% for both the three and six 
      months ended June 30, 2021 (discontinued operations gross profit margin 
      was 77% for both the three and six months ended June 30, 2021). The 
      margins in Q2 2022 were lower due to the change in how Gross profits are 
      calculated in a traditional fee-for-service model versus a VBC or 
      capitated model at risk. The Company believes the gross profit margins 
      are in line with the industry standards and will establish a new baseline 
      as the capitated segment will be expected to contribute significantly to 
      growth in the future. Gross Margin dollar contribution is significantly 
      greater in capitation. Please refer to further details in the 
      Segmentation section of the Company's MD&A; 
 
   -- Adjusted EBITDA for the three and six months ended June 30, 2022 was a 
      loss of $5.4 million and $12.1 million, respectively, compared to a loss 
      of $3.4 million and $5.2 million, respectively, during the three and six 
      months ended June 30, 2021. Compared to Q1 2022, the Company has seen an 
      improvement in Adjusted EBITDA prior to the NMD acquisition from 
      pre-disclosed initiatives to cost saving and integration efforts. 
      Adjusted EBITDA for Q1 and Q2 2022 for the Company prior to the 
      acquisition of NMD was $6.7 million and $4.4 million respectively. The 
      Company anticipates that it will continue to see further improvements in 
      the coming quarters; 
 
   -- Net loss from continuing operations during the three and six months ended 
      June 30, 2022 was $5.2 million and $13.5 million, respectively (three and 
      six months ended June 30, 2021: $5.8 million and $9.1 million, 
      respectively, excluding net income from discontinued operations of 
      $1.0 million and $1.8 million). In Q1 2022, Net loss from continuing 
      operations was $8.3 million, the significant improvement in Q2 2022 was 
      primarily due to reductions in salaries and wages, professional fees, 
      office and administration costs, foreign exchange gain and gain in fair 
      value of financial liabilities; 
 
   -- The Company still has an unutilized US $10 million debt facility. 

Operational Highlights:

   -- Entered into a JV partnership with CHS, a population health management 
      services organization and wholly owned subsidiary of Centene Corporation, 
      to integrate essential VBC services and contracts into Skylight Health's 
      growing enterprise of primary care practices. 
 
   -- Closed on the acquisition of NMD, to add 9 new practices in the Florida 
      market, and entered full risk on 2,400 Medicare Advantage lives with 
      Humana and CarePlus. Purchase price consideration was $10.2 million (US$ 
      8.0 million) for an annualized revenue contribution from NMD of an 
      estimated US$35 million. 
 
   -- Appointment of Farooq Akhter as interim CFO. Mr. Akhter joined Skylight 
      in 2019 and has been part of the Company's transformational growth. He 
      played a key role as Vice President, Finance supporting operational and 
      capital markets efforts. 
 
   -- Closed a $25.5 million (US$ 20.0 million) debt facility with FLC Credit 
      Partners ("FLC"), a New York based lender. Post the closing of NMD, the 
      Company still has $12.8 million (US$ 10.0 million) available in the 
      facility. With the JV and NMD acquisition in place, the Company is now 
      ready to begin transitioning Medicare Advantage lives within its current 
      practices, realizing a growth of US$200-$400 to US$10,000-$12,000 per 
      member per year under current capitated payor contracts. 

Second Quarter Performance:

Q2 2022 was focused on executing the Company's plans to get to adjusted EBITDA break-even. Efforts made in Q2 2022 have resulted in an adjusted EBITDA improvement of approximately $1.3 million compared to Q1 2022. Excluding the NMD acquisition, this improvement was approximately $2.3 million. These efforts will continue to extend into Q3 and Q4 2022. Exiting Q2, the Company reduced its annualized adjusted EBITDA from the start of the quarter by nearly 50% and expects to see a continued reduction in Q3 and Q4. These are driven by activities in the earlier part of the year being fully realized during these Quarters. Concurrently, the Company expects adjusted EBITDA will continue to improve each following quarter demonstrating the company's execution and pathway to break-even.

The Company is pleased to announce that while cost-saving initiatives have been the primary focus, it has continued to see a normalized patient volume since its loss of COVID-19 related cases industry wide at the start of Q1 2022. Further the visits are of higher acuity thereby improving the per visit charges associated with fee-for-service visits. Increased revenue from its existing business prior to the acquisition of NMD was also driven by a growth in its research division.

Moving forward, the Company is most excited about the growth it can organically expect to realize from the foundation laid in 2021 and 2022 year to date. While historically the Company has been focused on growth primarily through mergers and acquisitions ("M&A"), the Company has now built sufficient scale and size to benefit from strong organic growth.

The existing infrastructure of practices, providers and support teams means the Company can expect to add meaningful revenue and EBITDA without the need to rely heavily on M&A. These areas of growth come from continued expansion of its FFS business model, and more importantly, from the growth of its managed care business line including Medicare and Medicare Advantage programs at risk which generate capitated revenue.

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August 15, 2022 18:36 ET (22:36 GMT)