Vasudha Sharma | April 19, 2018 | SmallCapPower: According to the U.S. Census Bureau, the graying of America is inevitable over the next two decades. People age 65 and older are going to outnumber children for the first time in the history of the United States by the year 2035. A similar trajectory is forecasted for Canada. The 2016 census reported that for the first time in the survey's history, the population of seniors surpassed that of children in Canada. In fact, the aging of Canada's population is forecasted to only accelerate as the baby-boomer generation retires over the next decade.
Adults aged 65+ are more susceptible to chronic illnesses or dementia, for example, and require continued care and assistance with their daily activities. But chronically ill seniors have, by default, been sidelined by the formal healthcare system of countries such as the U.S. or Canada, given that hospitals are running at capacity with excruciatingly long wait times. In this backdrop, at-home caregiving services have become a highly-sought-after option for seniors and their families for the convenience and peace of mind it offers.
Nova Leap Health Corp. (TSXV:NLH), a North American provider of personal home care and support services, is rapidly growing in this space by consolidating small-sized, high-quality players. The Company's business is to acquire private-pay non-medical and skilled home care companies and transform them into market-leading caregivers.
Chris Dobbin, President, Director and CEO of Nova Leap Health explains, "The demographics speak for themselves. Everybody knows there is an aging population. And the reality is that people need support, and we can provide that support within their home, which is where they would rather have us. And we can do it for as minimal as a couple of hours a week to 24×7 care."
Skilled Home Care Services
Nova Leap Health and its subsidiaries specialize in non-medical Home Care and skilled Home Healthcare. As part of Home Care, they provide support services to help elderly clients maintain an independent and healthy lifestyle. They assist them with activities of daily living, such as bathing, dressing, grooming, meal preparation, housekeeping, errands, transportation and medication reminders. Dementia-care is a key part of their offering.
"We spend a lot of time on Dementia training. We think that's a critical area that we have to invest in going forward. And there is a specific program that we employ for that aspect. And we haven't seen other providers invest in that area as much as we plan to. We ensure our staff is fully trained to handle folks who have Dementia-related symptoms," states Mr. Dobbin.
Their Home Healthcare segment is essentially skilled care to help an individual get healthy while at home. They provide skilled nursing, pain management, caring for wounds and prescription management.
"We are primarily what you would call a private pay or a private duty operator, meaning that we charge on an hourly basis directly to our clients or to the Department of Veteran Affairs or to long-term care insurance. We have not focused on the Medicare or Medicaid space within U.S.," explains Mr. Dobbin.
Acquisitive Growth Strategy
The home-care industry is one of the fastest growing in the U.S. with a market size of $89.2 billion. The industry, however, is highly fragmented with over 90% of the companies being run as sole proprietorships. Therefore, with no dominant player, the market is ripe for the picking.
Nova Leap's growth strategy is focused on deliberate geographical acquisitions to drive top-line growth and improve operating margins. Currently, it is targeting several home-care providers scattered across northeastern U.S.
"We're buying locally-operated businesses, which have been in existence for 10 to 15 years within the area they operate in, with a good name, a good staff and a good client base. We've been targeting primarily rural areas where we've operated, so there's less competition, great access to caregivers and staff. So, it's a smart approach to having geographic concentration. You'll notice we've concentrated primarily into New England. And the demographics being such there, we expect large opportunities in that area. So, we continue to expand there," says Mr. Dobbin.
Robust Recurring Revenue Streams
After making three acquisitions at the end of 2017, in February 2018, Nova Leap Health completed the acquisition of Massachusetts, New England-based Family Tree Home Care for $2.1 million. This acquisition will result in an 80% increase in annualized recurring revenues for the Company. Soon after, in March 2018, Nova Leap acquired a second home-care services company, Home Health Solutions located in Holyoke, Massachusetts, for $1.2 million. And, in the same month, Nova Leap Health announced its first acquisition in Canada – a definitive agreement to acquire a private home-care services company in Eastern Canada. And with this, Nova Leap's annual revenue run rate is expected to exceed US$11 million.
"We indicated to the market in 2017 that we expect to exit 2018 with at least a US$10 million revenue run rate. With our recent acquisitions, we will exceed our previously-indicated revenue target for 2018," says Mr. Dobbin.
Today, Nova Leap Health is approaching a cash-flow positive operation with scale. It recently announced a brokered private placement with Gravitas Securities Inc. and Haywood Securities Inc. to sell over 13 million of its common shares at a price of $0.30 per share. The aim is to raise capital of up to C$4 million and use it to fund its recent acquisition in New England and Eastern Canada along with making provisions for working capital and general corporate purposes.
'An Attractive Investment Opportunity'
Various acquisitions have taken Nova Leap's employee count to 350 in Canada and the U.S. and the Company is closing in on 471,000 annualized recurring home-care service hours. "Investors should know that we are a very fast-growing company and the operations we've acquired are integrating well. We have tremendous employees who are in the business for the right reasons," says Mr. Dobbin.
Increased employee investment, including training, focused sales and marketing efforts, billing rate increases, expansion of geographical coverage, and improved referral sources are all inherent elements of its acquisitive growth strategy.
"Our stock-price performance has been excellent over the course of the last year. We have gone from 20 cents to roughly around 40 cents. So, our stock price has doubled as we've acquired businesses in a fairly short period of time. And given our current pipeline of opportunities and the fact that we are executing on our existing operations, I think we will remain an attractive investment opportunity for investors in the market," says Mr. Dobbin.
The National Health Council claims that generally incurable and ongoing chronic diseases affect approximately 133 million people in the U.S., representing more than 40% of the total U.S. population. This translates to approximately 75% of all hospitalizations. Home-Care services can save patients billions of dollars every year by treating them in their own home with one-on-one care. This is a nascent sector in the U.S. and Canada. And as an emerging player in this industry, Nova Leap Health represents an attractive investment opportunity with a favourable risk/reward profile.
To find out more about Nova Leap Health, please visit the company's Investor Hub.
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