Nova Leap Health Corporation is actively pursuing M&A opportunities. That’s one of the main takeaways of a public letter that the company’s CEO and president, Chris Dobbin, recently penned to shareholders.
Nova Leap is a Canada-based home care organization that has been growing in the U.S. The company has operations in Nova Scotia and 11 different U.S. states.
Nova Leap’s aggressive approach to M&A should come as no surprise to those who have been watching closely. The company even managed to close three deals in different markets over the course of three straight Fridays in 2021.
In the letter, Nova Leap listed “acquisitions” as one of the primary areas where the company plans to allocate capital this year.
“Nova Leap has created borrowing capacity with the repayment of all long-term bank debt,” Dobbin wrote. “Management plans to leverage some of this capacity for M&A opportunities in addition to cash generated from operations, where appropriate.”
Aside from M&A, investing in current home care operations is another area where Nova Leap plans to allocate capital in 2024.
“Our objective is to increase revenues and hours of service at existing home care locations by hiring experienced sales personnel that can bring in new business to complement existing operational teams,” Dobbin wrote.
Additionally, Nova Leap wants to repay $117,000 of promissory notes left from past acquisitions on schedule.
The company also used the letter to identify what the company believes were the highlights of 2023.
The company reached a record annual consolidated adjusted EBITDA of $1.477 million. This topped the last three years combined, and was a 124% increase compared to 2022 results.
Nova Leap also considered paying off all long-term bank debt during the year, ahead of schedule, a highlight.
Plus, Nova Leap’s accounts receivable collection rate was 99.7%. The previous year’s range was 99.7%-99.9% between 2020 and 2022.
Nova Leap also saw insider ownership grow. During the fourth quarter, insider ownership went up to 40.61%. Insider ownership was 38.9% at the end of 2022 and 36.2% at the end of 2021.
On the flip side, Nova Leap has also experienced challenges.
“Simply put, our largest challenge in 2023 was revenue growth,” Dobbin wrote. “We saw significant achievements in major financial categories such as gross margin percentage, adjusted EBITDA, cash flows, operating income and debt reduction, but revenues fell below expectations. It is a focus in 2024.”
One of the reasons that revenue growth has been a pain point for Nova Leap is because of the nature of home care.
“On an individual basis, our home care agencies would all be considered small businesses,” Dobbin wrote. “At the local level, hours of service are driven by a recurring revenue model where caregivers are generally scheduled to assist clients on the same schedule each week for as long as they require care. These small businesses are greatly impacted by either obtaining or losing clients requiring high hours of service.”
Ultimately, Dobbin believes that the company’s plan to bring on experienced sales personnel will move the needle on Nova Leap’s results over time.
“As we examined our collection of agencies, we found that the natural attrition of clients was being offset by agencies that had successful sales personnel that were able to market our services to a broader base of referral sources than those agencies without a sales role,” he wrote.
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