Traders News Source Editor Mark Roberts Had An Opportunity to Interview CEO, Pradyum Sekar of Skylight Health Group Inc. (NASDAQ: SLHG)

Traders News Source Editor Mark Roberts Had An Opportunity to Interview CEO, Pradyum Sekar of Skylight Health Group Inc. (NASDAQ: SLHG)

Traders News Source Editor, Mark Roberts Had An Opportunity to Interview CEO, Pradyum Sekar of Skylight Health Group Inc. (NASDAQ: SLHG)

Full Transcript Below

Mark Roberts, Interviewer

Pradyum Sekar, CEO Skylight Health Group

Thank you for taking the time to answer questions for our readers. Could you give our audience a brief overview of Skylight as it is today?

As it stands today, Skylight Health is an under-valued play on the U.S. healthcare space, focused on collecting higher reimbursement from the government and insurance providers, while improving patient health outcomes. We do this by transitioning the patients from a fee-for-service model to a value-based-care model, allowing us higher revenue per patient, allowing our doctors and clinics to use centralized services and capital, and allowing our patients to receive more effective and encompassing care.

What has been the process for identifying a potential target for acquisition?

A large part of our growth is through acquisition. In the last 12 months we have successfully completed 8 acquisitions, contributing more than $35 million in annualized revenue growth. The fragmented marketplace allows us acquire clinics for attractive multiples of 3x-7x times EBITDA. We choose our targets based on location and patient population, specifically looking for clinics with a strong number of patients who are eligible to transition from a fee-for-service model to a value-based-care model, allowing us the potential for exponential revenue growth post-acquisition.

Do you take measures to retain the professional teams at the medical centers you acquire?

Prior to partnering with us, independent practices typically experience the same roadblocks: increased administration and costs, increased network competition, lack of new physical owners, and the inability to shift their models from shrinking fee-for-service rates to the growing value-based-care model due to the time, costs, and expertise associated with the process. By joining our national platform, we alleviate these major challenges and provide access to capital, technology, improved contracting, and participation in value-based programs. The doctors and nurses in the practices we acquire entered their profession because they have a strong desire and gift to help patients – they don’t want to be stressed with the evolution of the business side. We take care of the business aspects and allow them to do what they love: practice medicine. The medical teams at the centers we’ve acquired have shown increased levels of satisfaction post-acquisition so we haven’t had to deal with staff leaving, but from a level of business security, we do put contracts in place to ensure a transition phase if a doctor does decide they’d like to leave the medical practice to embrace a new chapter in their lives.

You are transitioning the medical centers you’ve acquired from an FFS to a VBC model. How will that transition impact them both operationally and financially?

A fee-for-service model reimburses doctors on every patient visit. It’s a volume game that forces doctors to see highest number of patients possible. Visits are shorter and typically only one issue can be address simply due to lack of time. This type of system often fails to address underlying conditions and problems, and results in health outcomes that could have been prevented. A value-based-care model is reimbursed on quality over quantity, understanding that the primary care physician is the first point of entry the patient has into the medical system, and encouraging them to take the steps now the avoid unnecessary problems in the future. This change in reimbursement is being driven by insurance providers who have access to a plethora of data, and have noted that a lot of expensive surgeries, hospital visits, and prescriptions, could have been avoided by proper examination. Insurance providers are willing to reimburse primary care doctors more money up-front to avoid extremely expensive and unnecessary payouts that should have been prevented. As a result, the reimbursement in a value-based-care model is appox. $10,000 – $12,000 per patient, per month, compared to $200 – $400 per patient, per month in the current fee-for-service model.

No need to be specific, but is Skylight currently evaluating any acquisitions that could come to fruition in 2022?

We currently have a pipeline of over $100 million in revenue that we are evaluating. The timing on these acquisitions is to be determined, but there is no shortage of attractive targets.

Oak Street seems to be a direct competitor of Skylight and has experienced rapid growth, yet they are not profitable. Do you see your growth yielding a different result?

While Oak Street Health is one of the largest players in the value-based-care space, they have a very different business model than we do. Their model is to build value-based-care practices from scratch, or de novo, which can timely and expensive. Our model is to acquire practices and convert them to a value-based-care model, so we have the advantage of time and capital on our side. We are still in growth mode and using capital to advance quickly and strategically, but it is a goal of ours to reach break-even in 2022, and achieve profitability in 2023.

Can you tell us more specifically how your partnership with Collaborative Health Systems functions?

Our JV with Collaborative Health Systems (CHS) is a strategic partnership to integrate essential value-based-care services into Skylight’s growing enterprise of primary care practices. CHS is a wholly owned subsidiary of Centene Corporation (NYSE:CYC); a publicly traded company with a $50 billion market cap. CHS is at the forefront of profitably executing on value-based care, having generated over $475 in Medicare savings since 2012. This partnership enables us to leverage the scale, infrastructure, and expertise of CHS, allowing us to fast-track our timeline of value-based contracts by approximately 24 months. We see tremendous value in combining their expertise with Skylight’s aggressive growth plan, with the end result ultimately being improved patient outcomes.

Have any institutional investors approached you about potentially taking a substantial position in Skylight?

We have started to see the transition from retail to intuitional investors. We currently have 6 analysts that cover the stock; 4 in Canada and 2 in the US.

How will your company fund operations through the balance of 2022?

While we do have control over operations, we don’t have control over market conditions or macro impact. We’re fortunate to have access to forms of non-dilutive capital that we can tap into for growth if market conditions are unfavorable for financing.

What is your current (at 12-31-21) debt to equity ratio and what level of debt to equity do you think is acceptable for Skylight?

Skylight does not currently carry any traditional debt. We issued a preferential preferred offering in December, 2021 bringing in $5.75 million in non-dilutive capital.

Can you tells us when we should expect you to release your Q122 earnings report?

Skylight Health will report Q122 in July.

Skylight shares traded as high as $6.95 a year ago. Can you make a case to investors that supports a valuation near the year ago level?

The market conditions were very different a year ago. Unfortunately, that hasn’t improved in 2022, with the S&P erasing 8.8% last month alone, and down over 13% in 2022, its worst start to the year since World War 2. Technology and healthcare stocks have led that decline, with tail-winds from covid fall out, raising interest rates and fall-out from the Russia/Ukraine war. It’s been painful to see our stock price decline, but with so much the downward pressure being macro, my team and I have stayed focused on building a quality business that can sustain an economic downturn. Despite a tough year in the markets, our business has never been stronger. When the market eventually turns around – and it will – I believe we’ll surpass our previous highs and reward investors with tremendous upside.


The Traders News Group


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