Dear Nova Leap Health Corp. (“Nova Leap” or the
“Company”) Shareholders:
All amounts are in United States dollars
unless otherwise specified.
This annual letter to shareholders allows me
some time to reflect on the past year as well as to provide some
insight as to what the future may hold. At the time of this
writing, we provide services across a large geographical area
covering both rural and urban centers. I hold an enormous sense of
gratitude towards our staff that provide compassionate home care on
a daily basis and to the families that allow us into their homes as
part of their life’s journey. Nova Leap’s story has always been,
and remains, about family. Since our inception, we have had the
privilege of serving thousands of families across two countries and
of attracting a team committed to one of life’s most fulfilling
duties – helping others. While Nova Leap has grown to be one of the
larger home care companies operating in the United States and
Canada, our mission, our values and our approach remains the same
today as it did when we started – one family at a time.
“Say what you mean, and mean what you say”
A significant contributor and investor in Nova
Leap used to utter that phrase quite frequently and it had me
thinking about the lack of trust that exists within the microcap
investor space. In the earlier days of Nova Leap, I would travel
extensively across the U.S. and Canada trying to raise capital for
our growth plans and to let investors know that we existed. One of
the comments that I would hear frequently from investors on my
second or third trip to see them was that I had done what I said I
would do. I was surprised by the comment. It was very much a
compliment because, in their own shared experiences, that was not
normally the case. I was beginning to understand the uphill battle
we faced as a start-up public company coming from an area not well
known to investors.
A month ago, I was contacted by a family office
that was doing due diligence on Nova Leap. For those that know me,
I’m blunt and get to the point. I’m happy to share what I believe
in and have little interest in trying to give someone what they
want to hear. As much as investors are trying to figure out whether
Nova Leap may be a fit for their portfolio, I’m trying to figure
out whether the person on the other end of the line is someone we
want as an investor. After a lengthy conversation with the normal
Q&A, the investor on the other end of the call said “those were
all the right answers but I’ve heard that before”. It struck me
that, even after eight years of expansion, there is a lack of trust
and skepticism that remains towards companies involved in the
microcap space.
To that end, this letter serves as a historical
record of a point in time. Potential future investors a decade from
now will be able to review my annual letters to get a sense of my
thinking of the time and to research the resulting outcomes. It is
my hope that, over time, we will distinguish ourselves both as a
company and as a leadership team that can be viewed positively
within the broader capital markets.
Nova Leap continues to be in excellent financial
condition and is actively seeking M&A and expansion
opportunities.
From my perspective, the financial highlights
from 2024 are as follows:
- We entered the year in a very
strong financial position as an operating free cash flow positive
company with no long-term bank debt;
- We exited the year in a very strong
financial position as a profitable, operating free cash flow
positive company with very manageable acquisition related long-term
bank debt;
- We achieved record annual
consolidated Adjusted EBITDA of $1.562 million, the second
consecutive year of record results, and a 5.75% increase over 2023
results. At the current exchange rate, 2024 Adjusted EBITDA was
approximately CAD$2.2 million.
- As a result of Nova Leap’s
consistently strong financial performance, we entered into an
amended credit facility that will provide up to an additional $7
million to support continued growth;
- With the amended credit facility,
strong balance sheet and operational cash flow, we re-engaged our
acquisition program by announcing acquisitions to enter Florida
along with further expansion across Massachusetts and Nova
Scotia;
- Nova Leap’s accounts receivable
collection rate of 99.4% remained exceptional and consistent with
the prior years range of 99.7% - 99.9% between 2020 and 2023;
and
- Insider ownership grew as it has
annually from 36.2% in 2021 to 41.64% at the end of 2024.
In summary, 2024 was a year in which the
leadership team at Nova Leap demonstrated its ability to re-engage
its acquisition program while continuing to ensure the Company
remains in excellent financial condition.
Allocation of capital plans utilizing Free Cash
Flow
Management has three primary objectives
pertaining to allocating capital for 2025 as follows:
- Investing in current home care operations - Our objective is to
increase revenues and hours of service at existing home care
locations through the following initiatives:
- Staggered hiring of additional office staff to complement
existing office and regional growth plans;
- Replicating the success of local office revenue service lines
across the broader organization; and
- Opening of new office locations to build upon the success of
existing offices with one new office slated to be open in the
Midwest towards the end of Q2;
- Acquisitions – Nova Leap recently closed two acquisitions.
Management will continue to evaluate additional opportunities to
acquire established home care operations.
- Debt repayment – Management intends to repay
acquisition-related debt on schedule as it has in the past.
A fourth consideration is beginning to emerge.
Although the stock price has, at times, risen over the past year,
it remains at a level that we believe does not accurately reflect
anywhere near the value of the Company. Should the stock price
remain at or near current levels, I believe we will give much
stronger consideration to a share buyback strategy utilizing the
Company’s free cash flow. We will weigh such a decision against the
broader capital allocation strategies highlighted above and will
make an announcement regarding a Normal-Course Issuer Bid, if the
strategy is deemed appropriate.
Our focus on organic revenues is showing signs
of improvement:
Last year, I wrote of the challenge we had with
2023 revenues and highlighted it as an area of focus for 2024. It
has been the only major financial category where we haven’t made
meaningful headway after having improved gross margin percentage,
Adjusted EBITDA, cash flows, and operating income all while paying
off the Company’s bank debt.
Our drop in revenues from 2022 to 2023 was the
first time in the Company’s history that we had a material decline.
It was also during a period where we were exiting the pandemic and
the availability of labor in our industry was at an all time low.
Circumstances have changed and availability of labor is certainly
more plentiful that it was two years ago. While 2024 revenues were
down 1.6% from 2023, the past four quarters have been flat.
Acknowledging that we remain a distance from generating the types
of organic revenue growth we are striving for, I believe we are
making some headway. We have spent the past year analyzing the
needs of our business and have begun making significant investments
in key personnel. The goal is that these investments will, in turn,
lead to the organic growth outcomes that we are seeking.
Why we like buying small home care companies
Since the latter part of 2016, we have been
purchasing small, independently owned home care companies. We plan
on buying a lot more in the years to come as part of our overall
growth strategy. Our focus on these smaller companies is
intentional. We recognize that M&A contains inherent risks and
we are not fooling ourselves into thinking that every acquisition
we make is going to work out in the manner we hope. We’ll make
mistakes along the way as we have with some of the acquisitions
that have been made to date. However, we believe that we’ll get
more right with the acquisitions than we will get wrong and believe
we have proven such with our track record.
There are companies within our industry that are
substantially larger than the acquisitions that we have made to
date and substantially larger than Nova Leap. We believe the best
approach is to continue focusing on the smaller businesses that
attract lower multiples than the larger ones. If a small
acquisition doesn’t work out, neither the management team nor
shareholders will be happy but it would not set the company back
significantly. However, if we were to undertake a larger
acquisition and it did not go as planned, the resources we would
need to dedicate to fixing a problem would be substantial and it
could set us back years. From that perspective, it is simple risk
mitigation and sticking with what we do well. For owners that may
be interested in selling their business to Nova Leap, please refer
to the “What we offer other home care business owners” section of
my March 7, 2024 letter to shareholders.
How we view the use of debt
Since our early days, we have been fortunate to
have a lender to support our acquisition program, where required.
We believe the appropriate and prudent use of leverage is an
effective way to grow the organization. We’re generally comfortable
with leveraging up to 3X (times) Adjusted EBITDA on a consolidated
basis. While there could be situations where we could exceed that
amount for a short period of time, that figure should provide
shareholders an indication of our comfort level.
Some comments on scale as an advantage and
operational leverage
Scale provides a tremendous advantage because it
allows for investment in people and technology. Both lead to an
acceleration of growth. When Nova Leap was just starting out, it
was a typical entrepreneurial company with a very small group of
individuals wearing multiple hats. We were working out of a tiny
office that used to serve as a storage area with one window that
would barely open and temperatures that would approach 100 degrees
in the summer. It was a sweat box. The limiting factor wasn’t the
heat, it was the ability of so few people to try and accomplish so
much.
As the Company has expanded, we have provided
opportunities for people to move up through the organization and to
attract amazing, experienced individuals from outside of the
organization. That combination of talent allows us to do so much
more today than has ever been possible. The cross sharing of ideas,
the replication of successful initiatives from one office to
another, the implementation of new technologies including
artificial intelligence, the standardization and automation of
processes, compliance and oversight all contributes to a platform
for growth. As a comparison, most of the agencies that we have
acquired, with only a few exceptions, have all been very stable
stand alone companies that were never able to break through a
certain plateau, held back only by resource limitations.
The scale described above should allow for
operational leverage. As we have allocated resources in place and
structured the Company to grow, we have the ability to expand or
acquire new businesses without significant additional resources
meaning that most of the Adjusted EBITDA/cash flow that we are
acquiring from new businesses should hit our bottom line. Over
time, as we acquire more cash flow positive businesses and
successfully integrate them to our platform, that should lead to
Adjusted EBITDA margin expansion from the 6.1% we finished at in
2024 to north of 10%. I believe we will continue to make
significant progress in that regard over the next couple of
years.
Nova Leap as a public company and managing from
a position of strength:
I want to reinforce what I wrote in last year’s
letter to shareholders. Although Nova Leap is a public company,
Management makes decisions considering the long-term implications
to the Company. In this regard, we make decisions more in line with
a private enterprise without regard to how the impact of those
decisions may impact financial results from one quarter to the
next. In other words, we’re willing to allocate capital that may
have a shorter term negative impact on Adjusted EBITDA with an
expectation that it will create Adjusted EBITDA in a sustained
manner longer-term. An example of this is starting a brand new
location as I indicated we will in the Midwest towards the end of
Q2.
The leadership team is managing the business
from a position of strength. Nova Leap generates operating free
cash flow which we can allocate to the areas we believe most
appropriate to create value. The business is easy to understand,
the industry should continue to expand for the next several decades
based on an aging demographic, the cash flow is fairly predictable,
and the market is very fragmented with thousands of operators
forming what I believe to be an endless pipeline of
opportunities.
If the stock market closed for the next five
years, I would think that shareholders would remain comfortable
that the underlying business would remain strong and would continue
to operate as it has. Perhaps the fact that insiders increase their
ownership percentage in the company each year is the strongest
indication of such comfort. Thank you for your ongoing support.
Yours truly,
Chris Dobbin, CPA, ICD.DPresident & CEO
FORWARD LOOKING INFORMATION:
Certain information in this press release may contain
forward-looking statements, such as statements regarding future
expansions and cost savings, and plans regarding future
acquisitions and business growth, including anticipated annualized
revenue or annualized recurring revenue run rate growth and
anticipated consolidated Adjusted EBITDA margins. This information
is based on current expectations and assumptions, including
assumptions described elsewhere in this release and those
concerning general economic and market conditions, availability of
working capital necessary for conducting Nova Leap’s operations,
availability of desirable acquisition targets and financing to fund
such acquisitions, and Nova Leap’s ability to integrate its
acquired businesses and maintain previously achieved service hour
and revenue levels, that are subject to significant risks and
uncertainties that are difficult to predict. Actual results might
differ materially from results suggested in any forward-looking
statements. Risks that could cause results to differ from those
stated in the forward-looking statements in this release include
the impact of the COVID-19 pandemic or any recurrence, including
staff and supply shortages, regulatory changes affecting the home
care industry or government programs utilized by the Company (such
as ERC), other unexpected increases in operating costs and
competition from other service providers. All forward-looking
statements, including any financial outlook or future-oriented
financial information, contained in this press release are made as
of the date of this release and included for the purpose of
providing information about management's current expectations and
plans relating to the future, and these statements may not be
appropriate for other purposes. The Company assumes no obligation
to update the forward-looking statements, or to update the reasons
why actual results could differ from those reflected in the
forward-looking statements unless and until required by securities
laws applicable to the Company. Additional information identifying
risks and uncertainties is contained in the Company's filings with
the Canadian securities regulators, which filings are available at
www.sedarplus.com
For further information: Chris
Dobbin, CPA, ICD.DDirector, President and
CEO
E:cdobbin@novaleaphealth.com
CAUTIONARY STATEMENT:
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Nova Leap Health (TSXV:NLH)
과거 데이터 주식 차트
부터 2월(2) 2025 으로 3월(3) 2025
Nova Leap Health (TSXV:NLH)
과거 데이터 주식 차트
부터 3월(3) 2024 으로 3월(3) 2025
