Skylight Health Group (OTC: SHGFF) Reports Record First Quarter 2021 Financial Results

Revenue Grew 76% Year over Year and 62% Sequentially

TORONTO, May 31, 2021– Skylight Health Group Inc. (TSXV:SHG; OTCQX: SHGFF) (“Skylight Health” or the “Company”), a multi-state primary care management group in the United States, today announced its financial results for the first quarter ended March 31, 2021.

First Quarter Financial Highlights:

• Revenue increased 76% to $5.2 million, compared to $2.9 million for the same period last year, and up 62% from $3.2 million in the fourth quarter of 2020.
• Gross profit margin was 69% for the quarter, compared to 65% for the same period last year, and 68% for the fourth quarter of 2020.
• Adjusted EBITDA improved 35% with a loss of $1.3 million, compared to a loss of $2.1 million in the fourth quarter of 2020, and a loss of $0.6 million the same period last year.
• Cash balance of $15.3 million as of March 31, 2021.

“The Skylight Health team delivered an exceptionally strong quarter with revenue up over 76% compared to the same period last year, and 62% compared to the fourth quarter of 2020,” said Prad Sekar, CEO and Co-Founder. “We exited Q1 profitable at the clinical level, and the investments made in the first quarter continue to be reflected in our strong on-going growth. We spent the first quarter putting the right leadership team in place to continue the shift to value based care payment models, which we believe will significantly improve patient economics in the upcoming quarters. This recruitment and alignment of employees is an investment in human capital that we are confident will drive strong shareholder value in return.”

Revenue increased 76% from the same period last year due to additional revenue being contributed by the clinics acquired during the fiscal year ended December 31, 2020, and the quarter ended March 31, 2021.

US clinical operations generated positive net income of $49.5 thousand and Adjusted EBITDA of $0.3 million demonstrating that primary care clinical acquisitions continue to be immediately accretive.

The Company closed on two acquisitions during the quarter, Apex Family Medicine LLC (“Apex”) on January 4, 2021, and River City Medical Associates (“RCMA”) on February 3, 2021. As such, the Company’s second quarter will be the first period that includes a full three months of contribution by RCMA. Further, the subsequent acquisition of Rocky Mountain in the second quarter will contribute to expected revenue growth in Q2 2021. The Company remains committed to a strong growth by acquisition model fueled by a strengthened balance sheet and robust pipeline.

Skylight Health has seen a rise in expenses in three major categories: share-based compensation, professional fees, and marketing activities. Of its $2.7 million net loss, non-cash items represented $1.8 million. These include depreciation and amortization and share-based compensation, connected to the recruitment of key leadership, management and operational hires as part of its employee stock option plan.

Within Adjusted EBITDA loss of $1.3 million, approximately $1.1 million was spent on professional fees and marketing and business development expenses to build a national healthcare brand. The Company’s Adjusted EBITDA is expected to continue to improve with expected acquisitions in the future that bring positive cash flow.

Outlook

Skylight Health remains focused on growth, both organically, and through acquisition, as it rapidly captures market share within the US healthcare network. The Company continues to prioritize the integration of health technology solutions to help small and independent practices shift from a traditional fee-for-service (FFS) model to value-based care (VBC) through proprietary technology, data analytics and infrastructure. This organic growth through an increase in insurable services represents a predominant portion of revenue and is where the Company expects to see its strongest growth in future periods. The Company expects that by year end, the large majority of investments made at the start of the year will result in both a higher growth of revenue driven organically and by acquisition and will also result in stronger EBITDA recognition. The Company is focused on competing aggressively for market share growth in three areas: acquisition of primary care practice groups, development of its single system of operation and clinical leadership, and conversion from fee-for-service to value-based-care. With the growing demand for accessible and affordable medical services in the US, the Company is well positioned to meet this growing opportunity while creating significant shareholder value.

Operational Highlights for First Quarter 2021

• Commenced trading on the TSX-V under the symbol “SHG” in January.
• Acquired 100% of Colorado based primary care services group Apex for total cash transaction of $2.3 million on January 4, 2021. Apex reported unaudited financials of $2.9 million in revenue in 2020.
• Acquired 100% of Florida-based RCMA with 6 clinic locations on February 3, 2021. River City reported unaudited financials of $6.5 million in revenue in 2020.
• Appointed Grace Mellis to the Board of Directors, bringing over 28 years of experience with almost a decade as a former Managing Director at JP Morgan Chase. Former CFO and VP of Corporate Finance at Greendot Corporation, a US$3.1 billion market cap NYSE listed company.
• Appointed Dr. Georges Feghali as Chief Medical Officer, bringing over 30 years of experience as former CMO of TriHealth, which does over $1.7 billion in revenue, and Emirates Hospital Groups, where he participated in doubling the company’s revenue in one year from AED 500 million in 2017 to AED 1.1 billion in 2018.
• Appointed Andrew Elinesky as Chief Financial Officer, former SVP and CFO at McEwen Mining, a publicly traded company listed on NYSE and TSXV, bringing over 20 years of experience with debt and equity financings and M&A.
• Named Patrick McNamee as Chairman of the Board, former EVP and COO of Express Scripts (NASDAQ:ESRX), a $120+ billion technology-driven pharmacy benefit management company where he had an average of 27% EPS growth over his 9 year-tenure. Former President and CEO of Health Insurance Innovations (NASDAQ:HIIQ), a turn-around story where he increased share price from $4 to $58 in 23 months. Mr. McNamee succeeds Norton Singhavon who remains involved as an active member of the Board.

Key Subsequent Events of the three months ended March 31, 2021

• Acquired 100% of the Colorado based Primary Care Clinic Group, Rocky Mountain on April 5, 2021 for total cash consideration of $13.8 million. The clinic group has 7 locations and reported $23.5 million in revenue in 2020.
• Partnered with ClinEdge to bring clinical research to primary care practices in Massachusetts, adding 50+ years of experience in the Company’s research team.
• The Company received conditional approval from The Nasdaq Stock Market LLC to list its issued and outstanding common shares under the symbol “SLHG” with an anticipated listing during the week of June 7, 2021.
• Closed a bought deal offering with a syndicate of underwriters led by Raymond James Ltd. as sole book runner, Stifel GMP as co-lead, and a syndicate of underwriters including Beacon Securities Limited, Echelon Wealth Partners Inc, and Bloom Burton Securities Inc with full exercise of the Underwriters’ 15% over-allotment option, 9,857,800 common shares of the Company at a price of $1.40 per common share for gross proceeds of $13,800,920.
• The Board of Directors approved a share consolidation on a 5:1 basis, in order to meet Nasdaq listing requirements, which took effect on May 28, 2021.

Q1 2021 Financial Highlights

^{*Adjusted EBITDA is defined as earnings before interest, tax, depreciation, and amortization, adjusted by significant nonrecurring, nonoperational expenses and partially offset by the cash impact of certain accounting treatments during the period. Please see the Company’s Management Discussion & Analysis for a detailed reconciliation to operating loss.}

Conference Call

The Company will host a conference call at 9:00am EST on the morning of June 1, 2021 to discuss the financial results. If you would like to participate in the call, details can be found here or you can dial in to 1-800-319-4610. Please dial in approximately 10 minutes prior to the start of the call. An audio replay of the conference call will be available on www.skylighthealthgroup.com within 24 hours after the live call has ended.

About Skylight Health Group Inc.

Skylight Health Group (TSXV:SHG; OTCQX:SHGFF) is a healthcare services and technology company, working to positively impact patient health outcomes. The Company operates a US multi-state primary care health network comprised of physical practices providing a range of services from primary care, sub-specialty, allied health, and laboratory/diagnostic testing. The Company is focused on helping small and independent practices shift from a traditional fee-for-service (FFS) model to value-based care (VBC) through tools including proprietary technology, data analytics and infrastructure. In a FFS model, payors (commercial and government insurers) reimburse on an encounter-based approach. This puts a focus on volume of patients per day. In a VBC model, payors reimburse typically on a capitation (fixed fee per member per month) basis. This places an emphasis on quality over volume. VBC will lead to improved patient outcomes, reduced cost of delivery and drive stronger financial performance from existing practices.

For more information, please visit www.skylighthealthgroup.com or contact: