Reflecting on Our Journey at Nova Leap Health
Dear Shareholders of Nova Leap Health Corp. (“Nova Leap” or the “Company”):
This annual letter provides me with an opportunity to reflect on our past year and share insights about the future. At this point in our growth, we are proud to deliver services across various settings, both in rural and urban areas. I am continually grateful for our compassionate staff and the families who welcome us into their lives. Nova Leap’s story is deeply rooted in family. Since our beginning, we have served countless families across two countries, building a dedicated team focused on helping others. Though Nova Leap has grown to become one of the significant players in home care services in the United States and Canada, our mission, values, and approach remain centered on caring for each family one at a time.
Building Trust in a Challenging Investment Climate
One valuable lesson I’ve learned over the years is captured in the phrase, "Say what you mean, and mean what you say." This sentiment resonates strongly within the microcap investment landscape. Throughout my travels across North America, promoting Nova Leap to potential investors, I have frequently encountered skepticism regarding our capabilities. However, I have also heard reassuring feedback from investors who recognized our commitment to delivering on our promises.
Recently, a family office reached out to express interest in Nova Leap. My transparent communication style allows me to assess whether potential investors align with our values. Despite eight years of steady growth, skepticism persists, a reflection of broader concerns about companies within the microcap sector.
This letter serves as a historical document for our stakeholders. Looking ahead, I hope that future investors will reflect on these letters to gauge our journey and the outcomes of our decisions. It is crucial that we establish ourselves as a trustworthy entity within the wider capital markets.
Financial Strength and Strategic Growth Initiatives
Despite economic challenges, Nova Leap's financial health remains robust as we actively explore mergers, acquisitions, and expansion opportunities. Here are the notable financial highlights from a recent fiscal year:
- We started the year strong, boasting positive cash flow without any long-term bank debt.
- We concluded the year on a high note, having become a profitable entity with manageable acquisition-related long-term debt.
- We reached record annual consolidated Adjusted EBITDA of $1.562 million, marking a 5.75% increase from the previous year. At current exchange rates, this represents around CAD$2.2 million.
- Our consistent financial performance has facilitated an amended credit facility worth up to $7 million to fuel further growth.
- With a solid balance sheet and operational cash flow, we have recommenced our acquisition program, targeting markets in Florida along with expansion efforts in Massachusetts and Nova Scotia.
- Our collection rate on accounts receivable has been exceptional at 99.4%, consistent with historical averages.
- Insider ownership has increased progressively, rising from 36.2% in earlier years to 41.64% by the end of the previous year.
In summary, our leadership team has demonstrated the ability to revitalize our acquisition strategy while maintaining excellent financial conditions.
Future Capital Allocation Plans
As we plan for the upcoming year, we have prioritized three primary objectives for capital allocation:
- Focus on enhancing our current home care operations to increase revenue and service hours.
- Gradual hiring of additional office staff to support growth across existing offices.
- Opening new offices, with plans for a new location in the Midwest by the end of the second quarter.
Additionally, we have recently finalized two acquisitions and are continuously evaluating further opportunities to acquire established home care operations to strengthen our market position.
We are also committed to timely repayment of acquisition-related debt, ensuring our overall financial discipline. As our stock price occasionally fluctuates, we are contemplating the possibility of a share buyback strategy, using our free cash flow effectively. If we proceed, we will ensure that such decisions align with our broader capital allocation strategies.
Emphasizing Organic Growth Potential
Last year, I emphasized the need to focus on organic revenue growth. While revenue experienced a marginal decline recently, we have spent considerable time determining the core needs of our business. We are making strategic investments in key personnel to facilitate the desired growth outcomes.
Recognizing that our industry is experiencing a labor market rebound, we align our strategies to tap into this abundance of talent. Although we remain on the path toward the organic growth we seek, I believe we are making meaningful strides through our thoughtful investments.
The Value of Acquiring Smaller Companies
Since late 2016, Nova Leap has strategically pursued small, independently owned home care companies. Our growth strategy includes focusing on these smaller firms, as they often attract more favorable valuations than larger entities. While challenges and risks accompany any acquisition, our track record suggests that we will be more successful than not when acquiring smaller businesses.
Should any smaller acquisition not deliver as anticipated, the impact will be manageable. Conversely, larger acquisitions carry higher risk, which we seek to mitigate through our current strategies. We can maintain our focus on operating efficiently and achieving optimal results.
The Strategic Use of Debt
Our partnership with lenders has supported our acquisition endeavors from the start. Prudent and strategic leveraging up to three times Adjusted EBITDA is our preferred approach. While certain situations may require temporary adjustments beyond this threshold, our general comfort level remains around this figure.
Leveraging Scale for Operational Efficiency
Achieving scale affords us numerous advantages, particularly in investing in personnel and technology—key drivers for accelerated growth. In our early days, we operated with limited resources, but our expansion has allowed us to attract talented individuals who pave the path for successful initiatives.
Through our growth and operational efficiencies, we are set to experience improved Adjusted EBITDA margins and further invest in growing our revenue streams.
Managing Nova Leap's Future from a Position of Strength
As a public company, our management team prioritizes long-term sustainability in our decision-making. We strive to allocate capital in ways that create value over time, even if that may temporarily impact short-term financial results. As we look ahead, our focus remains on generating consistent cash flow and identifying opportunities within the fragmented market landscape.
The ongoing increase in insider ownership exemplifies our confidence in Nova Leap's future. Thank you for your unwavering support as we embark on this journey together.
Yours truly,
Chris Dobbin, CPA, ICD.D
President & CEO
Frequently Asked Questions
What is the primary focus of Nova Leap Health Corp.?
Nova Leap focuses on providing compassionate home care services while expanding its geographical reach across North America.
How does Nova Leap plan to grow in the future?
The company aims to grow through strategic acquisitions, expanding existing operations, and investing in new office locations.
What were Nova Leap's financial highlights in the past year?
Notable achievements include record Adjusted EBITDA, strong cash flow, and an improved accounts receivable collection rate.
How does Nova Leap view acquisitions?
Nova Leap strategically targets small, independently owned home care companies to enhance its operations while managing associated risks.
What is the significance of insider ownership growth?
The increase in insider ownership reflects the management team's confidence in the company's future performance and stability.
