Skylight Health Group Inc.

Revenue for Q2 2022 was just over $16 million, more than double Q1 2022’s $7.7 million. Fee-for-service and other revenue was $8.7 million versus $7.7 million in Q1, and capitated revenue contributed $7.4 million, reflecting two months of Neighbor MD revenue. Cost of sales was $12.1 million and gross profit margin was 25%, compared with $4.3 million and 44% in Q1. Net loss from continuing operations was $5.2 million versus $8.3 million in Q1, and adjusted EBITDA loss was $5.4 million versus $6.7 million in Q1; management said normalized adjusted EBITDA loss would have been $4.4 million, or $4.9 million excluding certain acquisition effects. Cash at quarter-end was $2.3 million. For guidance, management reiterated adjusted EBITDA breakeven by exit 2022, said Q3 should reflect a full quarter of acquisitions and that cost savings should be fully realized by the end of Q3; on the call, management also referenced a $70 million exit revenue run rate and said 2023 organic revenue growth could be 25% based on current traditional Medicare lives, with about 10% EBITDA contribution.

Pradyum Sekar framed the quarter as evidence that Skylight is improving execution, with finance and operations more tightly aligned and cost rationalization beginning to show through. He emphasized that the company has already reduced annual cost basis by over $10 million and expects further efficiencies to support a path to adjusted EBITDA breakeven by exit 2022. Strategically, he leaned heavily into Medicare Advantage, capitation, and the CHS/Neighbor MD platform as the basis for scaling value-based care and future growth.

Farooq Akhter focused on the P&L mechanics of the new mix. He said fee-for-service and other revenue was $8.7 million, capitated revenue was $7.4 million, cost of sales was $12.1 million, gross margin was 25%, net loss from continuing operations was $5.2 million, and adjusted EBITDA loss was $5.4 million; he also said normalized adjusted EBITDA loss would have been $4.4 million and that cost rationalization efforts should be fully realized by the end of Q3. On cash, he said the company ended with $2.3 million, used $3.5 million of cash in operations in Q2, used $9.9 million in investing mainly for Neighbor MD, drew $11.6 million from the FLC debt facility, and is pursuing convertible debenture financing to improve short-term liquidity while prioritizing cash conversion.

Analysts pressed for detail on incremental cost cuts, the implied assumptions behind an exit revenue run rate of $70 million, and the path to EBITDA positivity. Management said most cost actions started in Q2, many initiatives take 30 to 90 days to work through, and the biggest benefits should show by late Q3 or early Q4; they also said Q2 only included two months of Neighbor MD, so Q3 should show a full quarter. On the JV and ACO Reach, management said CHS is actively involved, provides 25% downside protection on downside performance, and is helping with care management, accurate coding, and membership growth ahead of 2023 participation.