With eight acquisitions completed since the start of 2017 in the U.S. and Canada, Nova Leap Health Corp. (TSXV: NLH) is one of the fastest growing home care companies in North America. Headquartered in Halifax — the capital of the Canadian province of Nova Scotia — Nova Leap touted its latest acquisition target on Tuesday.
While the up-and-coming home care company isn’t ready to share details on that acquisition until it closes, the move will eventually propel Nova Leap into the South Central U.S. market, president and CEO Chris Dobbin told Home Health Care News. So far, Nova Leap has grown its predominantly private-pay home care model in Nova Scotia and the East Coast.
For additional background: In the first quarter of 2019, Nova Leap reported revenues of $3.91 million, marking the company’s seventh consecutive quarter of revenue growth. In the same quarter, Nova Leap’s gross margin checked in at 33.2%.
Nova Leap’s target acquisition in the South Central U.S. posted unaudited revenues of about $1.42 million in 2018.
Similar to other industry leaders, Dobbin’s entrance into the home care space was prompted by the personal experience of coordinating care for a family member — in his case, a father-in-law with Parkinson’s disease. Today, the company Dobbin founded is still shaped by that journey, as Nova Leap strives to separate itself from competitors by providing mandatory, paid dementia training for its caregivers.
Nova Leap’s ultimate goal: to become the largest independent, dementia-focused home care provider in North America, according to Dobbin.
HHCN recently caught up with the CEO to learn more about Nova Leap’s latest deal, its overarching growth plans and its ongoing acquisition strategy.
You can find that conversation below, edited for length and clarity. Other key points discussed during Dobbin’s interview with HHCN included Medicare Advantage and industry headwinds.
HHCN: Before talking about Nova Leap’s growth and recent acquisitions, can you walk me through the backstory? How did you get into the home care space?
Dobbin: A number of years ago, my father-in-law was diagnosed with Parkinson’s. Toward the later years of his life, my mother-in-law decided to get home care to support him. He was at the point in time where he definitely needed it.
But it was also for her own benefit — to give her a break from a stressful situation.
After he passed away, my wife and I — along with a business partner — saw an opportunity to acquire a home care company about an hour outside of where we live in Nova Scotia. We bought that business and provided care to roughly 140 families along the Northern Corridor of Nova Scotia.
We went from this personal situation to providing home care services to a large population of people. It opened our eyes in terms of the need that existed in the market and, quite honestly, the need that will be around for the next 40 or 50 years because of demographic shifts.
We also noticed there was this gap in the market around dementia care. A lot of providers have really nice people who can provide care — but who haven’t been trained as well as they could be. We had a vision that we could bring a dementia-training focus to our caregivers.
We came up with a plan to capture the market in that respect, ultimately deciding to go the public route. In Canada, there’s a fairly streamlined way to go public through the Capital Pool Corporation (CPC) program.
2016 was a bit of a go-public year for us, getting to a full listing on the TSX Venture Exchange. Since the latter part of 2017, we’ve been fairly active in acquisitions.
That’s a bit of our backstory.
You started in Nova Scotia and have rapidly grown since then, especially along the U.S. East Coast. In fact, in 2018, Nova Leap saw an 877% revenue increase. How have you done that?
There are a few ways we sort of generate leads. We have an industry where you have smaller home care businesses operated or founded by individuals out of personal experience. They might be looking for a succession plan.
You have a lot of these small, successful businesses where the owners are looking to exit. Sometimes they’re represented by brokers or investment bankers. We get approached on a fairly regular basis, but we reach out directly, too, particularly to competitors in the areas we enter.
Part of our growth has come from where our focus has been in New England. For us to grow, it’s vital that we demonstrate success. Every time we make an acquisition, we have to make sure it continues to be successful.
We rely on the people we inherit through acquisitions. When we make a deal, we’re looking to keep the people who have been part of the operating team in that office — nurses, schedulers and so on. We’ve been fortunate to have terrific staff continuity.
Identifying the appropriate target is important. More important is making sure we keep good people in place, giving them opportunities throughout our broader organization.
When Nova Leap comes in, does it maintain the local brand?
We maintain the local brand — with a couple of exceptions where we’ve purchased smaller businesses and made a change. For the most part, we keep the same brand.
We operate a fairly decentralized model, meaning we have local operators in the markets we serve. They make the day-to-day decisions running those businesses. We feel the high-performing businesses [we acquire] are successful for a reason — the local feel, the local people.
It’s not about us coming in. It’s about keeping health care local.
HHCN has seen a lot of news about Nova Leap acquisitions over the past few years. For readers who haven’t been following, can you sum up all those deals? How many deals have there been exactly?
In the tail-end of 2017, we made two acquisitions. In 2018, we made five. So far in 2019, we’ve already made one, so there are eight total deals. We just announced another one, bringing the total to nine once this new one closes.
Have any of those been particularly exciting for you?
I’m excited about them all. They’re all really good businesses with great people behind them. We’re most excited about growing a business that provides meaningful service to people.
Let’s talk about the recent news, announced on Tuesday. Nova Leap is expanding into the South Central U.S. That’s an entirely new geography for your company, correct?
It’s too early at this point to share specifics because we haven’t announced the name or location publicly yet. We won’t do that until the transaction closes, and there are still a couple of final hurdles to work through before that happens — mostly due diligence and license approval.
This acquisition goes back to a few different things. One: Our long-term goal is to become the largest independent private-duty operator in North America with a dementia focus. That’s our goal.
Why are we expanding into the South Central region right now? Early on, it was important for us to concentrate our business, which we did in New England, obviously. As part of that geographic concentration, it was important for us to demonstrate that we can buy these businesses and successfully integrate them across a larger platform.
Because we had acquired so many [companies], that became even more important. We have been able to do that. Clearly, revenue has been increasing. Gross margins have been increasing. Operating cash flow has been improving. EBITDA has been improving.
We’re able to bring dementia training programs to agencies that historically haven’t had them, providing paid training to our caregivers.
We just felt that we were at a position where we had success with our platform in New England. We haven’t had many issues and things have gone really well. We’re in a good position to expand into a new market, and we’re always on the lookout for new opportunities.
The target in the South Central region checked all the boxes as to what we’re looking for. We’re going to look to replicate what we’ve done in New England in this new market — the same scale and growth.
And that won’t be the end. Our plan is to continue expansion in both the U.S. and Canada. The U.S. will certainly form a dominant part of our portfolio, given the size of the market.
When I hear paid training for caregivers, I think of the role upskilling plays in retention strategies. When you upskill workers and give them career ladders, they’re more likely to stay with you. Has Nova Leap seen that?
We’ll be announcing a new [training] program or platform across all our agencies in the near future.
We believe in mandatory dementia training for our caregivers that is paid. Will it ultimately lead to longer tenure for our caregivers? I don’t know for sure. But I think it’s so important that we invest in our caregivers. Without them, we don’t have a business.
What’s your ideal acquisition target?
There are two types.
We look at the smaller owner-managed businesses, where you have an owner looking for a succession plan. Generally, those businesses — at least the ones we’ve acquired — have been between $1.8 million and $3.2 million U.S. in revenue. They’ve been in that range, though we can definitely look at ones that are larger.
The owner is looking for a succession plan, not looking to stay with the business, already has a good operating team in place. These businesses have a 10- to 15-year track record, have been historically profitable in a secondary market.
The other is a situation where you have an owner that’s not looking to exit but wants to grow the business. Maybe he or she needs some help around strategy and capital. We look at those situations too, which are more private equity-like.
What barriers to growth have you identified?
Industry-wide, access to great caregivers is obviously a challenge. That can be restrictive to organic growth because you’re talking about not being able to keep up with 100% of the demand that existing in a particular point in time.
That’s probably the biggest challenge restricting organic growth. From an overall macro-perspective, I’m not sure we can ever run out of opportunities to expand or acquire during my lifetime.
The need is so great — and all levels of government are trying to push home care to reduce health care system costs.
What are your thoughts on emerging Medicare Advantage (MA) opportunities?
We’re examining it. We’re not quite sure where it’s going to fit within our model at this point in time. We’re still trying to figure it out and whether it’s something we want to go after. I certainly know lots of agencies that have decided to do it based on volume.
What’s next for Nova Leap?
More growth. That’s what I would say. We’re early on in our evolution. We plan to continue with our growth and are always looking for more opportunities.