SunLink Health Systems, Inc. Announces Fiscal 2024 Fourth Quarter and Annual Results

Rhea-AI Summary

SunLink Health Systems (NYSE American: SSY) reported financial results for Q4 and FY 2024. Key highlights include:

- Q4 loss from continuing operations: $652,000 ($0.09 per share)

- Q4 earnings from discontinued operations: $4,940,000 ($0.70 per share)

- Q4 net income: $4,288,000 ($0.61 per share)

- FY 2024 loss from continuing operations: $2,311,000 ($0.33 per share)

- FY 2024 net loss: $1,527,000 ($0.22 per share)

- Sale of Trace Extended Care & Rehab for $6,522,000, with a gain of $5,584,000

- Revised agreement for sale of Trace Hospital Assets

- Consolidated net revenues for Q4: $7,913,000

- Consolidated net revenues for FY 2024: $32,440,000

The company continues to experience adverse effects from the COVID-19 pandemic, including workforce shortages and inflationary pressures.

Positive

• Sale of Trace Extended Care & Rehab facility for $6,522,000 with a gain of $5,584,000
• Q4 net income of $4,288,000 ($0.61 per share) compared to a net loss in the previous year
• Reduced operating loss in Q4 2024 ($675,000) compared to Q4 2023 ($1,112,000)
• Increased gross profit margin on pharmacy revenue in Q4 2024

Negative

• Q4 loss from continuing operations of $652,000
• FY 2024 loss from continuing operations of $2,311,000
• FY 2024 net loss of $1,527,000
• Decrease in pharmacy net revenues for Q4 2024 by 1% compared to Q4 2023
• Operating loss of $2,411,000 for FY 2024 compared to operating profit of $74,000 in FY 2023
• Ongoing adverse effects from COVID-19 pandemic, including workforce shortages and inflationary pressures

Insights

Financial Analyst

The Q4 and FY2024 results for SunLink Health Systems (SSY) present a mixed financial picture. Key points:

• Q4 loss from continuing operations narrowed to $652,000 ($0.09 per share) from $1,021,000 ($0.15 per share) year-over-year.
• Q4 net income of $4,288,000 ($0.61 per share) was primarily driven by a $5,584,000 gain from the sale of Trace Extended Care & Rehab facility.
• FY2024 resulted in a net loss of $1,527,000 ($0.22 per share), an improvement from the $1,795,000 loss in FY2023.
• Annual consolidated net revenues decreased slightly to $32,440,000 from $34,280,000.

The company's strategic divestitures, including the sale of healthcare facilities, have significantly impacted the financial results. While these transactions have provided short-term gains, they also signal a shift in the company's operational focus. The ongoing challenges from the COVID-19 aftermath, including wage pressures and supply chain disruptions, continue to affect operations.

Investors should closely monitor the company's ability to stabilize its continuing operations, particularly the pharmacy business, which now forms the core of its revenue stream. The pending sale of Trace Hospital Real Estate, if completed, could provide additional cash infusion but further reduces the company's healthcare asset portfolio.

Healthcare Industry Analyst

SunLink's strategic decisions to divest healthcare assets reflect broader industry trends of consolidation and operational streamlining in the face of ongoing challenges. The sale of Trace Extended Care & Rehab and the pending sale of Trace Hospital Assets indicate a significant shift away from direct healthcare facility operations.

Key considerations for the healthcare sector:

• The $6,522,000 net proceeds from the senior care facility sale provide short-term financial relief but reduce long-term revenue potential from healthcare operations.
• The impairment loss of $1,974,000 on Trace Hospital Assets highlights the challenging valuation environment for rural healthcare facilities.
• The transition to a primarily pharmacy-focused business model may offer more stable revenue but limits exposure to the broader healthcare services market.

The ongoing impact of COVID-19 on operations, particularly workforce shortages and inflationary pressures, aligns with industry-wide challenges. SunLink's experience underscores the difficult operating environment for smaller healthcare providers and the trend towards specialization or consolidation with larger entities to achieve operational efficiencies.

ATLANTA--(BUSINESS WIRE)-- SunLink Health Systems, Inc. (NYSE American: SSY) today announced a loss from continuing operations of $652,000 (or a loss of $0.09 per fully diluted share) for its fourth fiscal quarter ended June 30, 2024 compared to a loss from continuing operations of $1,021,000 (or a loss of $0.15 per fully diluted share) for the fourth fiscal quarter ended June 30, 2023.

Earnings from discontinued operations were $4,940,000 (or earnings of $0.70 per fully diluted share) for the fourth fiscal quarter ended June 30, 2024 compared to a loss from discontinued operations of $405,000 (or a loss of $0.06 per fully diluted share) for the fourth fiscal quarter ended June 30, 2023. During the quarter ended June 30, 2024, the Company’s indirect subsidiary, Southern Health Corporation of Houston, Inc. (“Southern”) sold its Trace Extended Care & Rehab senior care facility and related real estate in Houston, Mississippi for net proceeds of $6,522,000 and recorded a gain on the sale of $5,584,000. Southern’s results are included in discontinued operations for the year ended June 30, 2024.

Primarily as a result of the sale of Trace Extended Care & Rehab, net income for the quarter ended June 30, 2024 was $4,288,000 (or $0.61 per fully diluted share) compared to a net loss of $1,426,000 (or a loss of $0.20 per fully diluted share) for the quarter ended June 30, 2023.

On January 22, 2024, Southern reached revised agreements for the sale of Trace Regional Hospital, a vacant medical office building and three (3) patient clinics in Chickasaw County Mississippi, (collectively “Trace Hospital Assets”) to Progressive Health of Houston, LLC (“Progressive”) pursuant to which (i) Southern sold certain personal and intangible property to Progressive for $500,000 under to an asset purchase agreement (“Trace Hospital Assets Sale"), (ii) entered into a six-month net lease of the real property of the hospital, medical office building and the clinics property (the "Trace Real Estate Lease") for $20,000 per month, (iii) entered into a contract to sell the Trace Hospital real estate (the "Trace Hospital Real Estate") to Progressive for $2,000,000 and (iv) engaged Progressive under a management agreement to manage the operations of Trace Hospital pending receipt of certain regulatory approvals, which was received February 29, 2024. The Company recorded a loss of $962,000 on the Trace Hospital Assets sale during the year ended June 30, 2024, which included sale expenses of $174,000. The completion of the Trace Hospital Real Estate sale has been extended by mutual agreement to October 4, 2024. As a result of the transactions ("Revised Agreement"), SunLink reported an impairment loss of $1,974,000 at December 31, 2023 to reduce the net value of the Trace Hospital Assets and Trace Hospital Real Estate to the estimated sale proceeds under the Revised Agreement. An impairment reserve of $1,695,000 remains at June 30, 2024 for the Trace Hospital Real Estate. There can be no assurance the completion of the sale of the Trace Hospital Assets Real Estate will be achieved.

Consolidated net revenues for each of the fiscal quarters ended June 30, 2024 and 2023 were $7,913,000 and $8,010,000, respectively, which consists primarily of pharmacy net revenues. Pharmacy net revenues for the quarter ended June 30, 2024 decreased $97,000, or 1%, from the same period last year as a result of lower pharmacy scripts dispensed. The quarter ended June 30, 2024 includes $34,000 of prior period sales tax credits relating to such sales tax refund claims.

SunLink reported an operating loss for the quarter ended June 30, 2024 of $675,000 compared to an operating loss for the quarter ended June 30, 2023 of $1,112,000. The decreased operating loss this year compared to last year resulted primarily from increased gross profit margin on pharmacy revenue.

SunLink reported a loss from continuing operations of $2,311,000 (or a loss of $0.33 per fully diluted share) for its twelve months ended June 30, 2024 compared to earnings from continuing operations of $198,000 (or $0.03 per fully diluted share) for the twelve months ended June 30, 2023.

Earnings from discontinued operations were $784,000 (or $0.11 per fully diluted share) for the twelve months ended June 30, 2024 compared to a loss of $1,993,000 (or a loss of $0.28 per fully diluted share) for the twelve months ended June 30, 2023, primarily due to the Trace Hospital Assets and Trace Extended Care & Rehab transactions and Trace Hospital Real Estate impairment charge described above.

SunLink reported a net loss of $1,527,000 (or a loss of $0.22 per fully diluted share) for its twelve months ended June 30, 2024 compared to a net loss of $1,795,000 (or $0.26 per fully diluted share) for the twelve months ended June 30, 2023.

Consolidated net revenues for each of the twelve months ended June 30, 2024 and 2023 were $32,440,000 and $34,280,000, respectively. Pharmacy net revenues for the twelve months ended June 30, 2023 included $2,615,000 from the reversal of reserves for certain sales taxes previously accrued. The Company determined during that quarter that, based on discussions and correspondence from taxing authorities and consultation with external legal counsel, it was more likely than not that such accrued sales taxes would not be payable. The twelve months ended June 30, 2024 includes $471,000 of prior period sales tax refunds. Excluding the effect of the sales tax refunds and reversal of sales tax accruals, net revenues decreased less than 1 % in the twelve months ended June 30, 2024 compared to the prior year.

SunLink reported an operating loss for the twelve months ended June 30, 2024 of $2,411,000 compared to operating profit for the twelve months ended June 20, 2023 of $74,000. The operating profit during the comparable twelve month period last year resulted primarily from the reversal of accrued sales tax reserves.

COVID-19 Pandemic

The Company continues to experience adverse after-effects of the COVID-19 pandemic in the quarter ended June 30, 2024 and believes such effects will likely continue to affect its assets and operations in the foreseeable future particularly from salaries and wages pressure, workforce shortages, supply chain disruption and broad inflationary pressures. Our ability to make estimates of any such continuing effects on future revenues, expenses or changes in accounting judgments that have had or are reasonably likely to have a material effect on our financial statements is very limited, depending as they do on the severity and length thereof; as well as any further government actions and/or regulatory changes intended to address such effects.

SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate a pharmacy business and an information technology business in the Southeast. For additional information on SunLink Health Systems, Inc., please visit the Company’s website.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the company’s business strategy. These forward-looking statements are subject to certain risks, uncertainties, and other factors, which could cause actual results, performance, and achievements to differ materially from those anticipated. Certain of those risks, uncertainties and other factors are disclosed in more detail in the company’s Annual Report on Form 10-K for the year ended June 30, 2024 and other filings with the Securities and Exchange Commission which can be located at www.sec.gov.

SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2024 FOURTH QUARTER AND ANNUAL RESULTS
Amounts in 000's, except per share
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
		Three Months Ended June 30,																Twelve Months Ended June 30,
			2024								2023							2024							2023
							% of Net								% of Net							% of Net							% of Net
			Amount				Revenues				Amount				Revenues			Amount				Revenues			Amount				Revenues
Net revenues			$	7,913				100.0	%		$	8,010			100.0	%		$	32,440			100.0	%		$	34,280			100.0	%
Costs and Expenses:
	Cost of goods sold			4,382				55.4	%			4,929			61.5	%			18,253			56.3	%			18,571			54.2	%
	Salaries, wages and benefits			2,624				33.2	%			2,609			32.6	%			10,561			32.6	%			10,156			29.6	%
	Supplies			44				0.6	%			36			0.4	%			153			0.5	%			140			0.4	%
	Purchased services			298				3.8	%			319			4.0	%			1,130			3.5	%			1,107			3.2	%
	Other operating expenses			735				9.3	%			744			9.3	%			3,014			9.3	%			2,598			7.6	%
	Rent and leases			92				1.2	%			96			1.2	%			367			1.1	%			372			1.1	%
	Depreciation and amortization			413				5.2	%			389			4.9	%			1,373			4.2	%			1,262			3.7	%
Operating profit (loss)				(675	)			-8.5	%			(1,112	)		-13.9	%			(2,411	)		-7.4	%			74			0.2	%
	Interest Income - net			23				0.3	%			74			0.9	%			93			0.3	%			87			0.3	%
	Gain on sale of assets			0				0.0	%			17			0.2	%			2			0.0	%			30			0.1	%
Earnings (Loss) from Continuing Operations before
	Income Taxes			(652	)			-8.2	%			(1,021	)		-12.7	%			(2,316	)		-7.1	%			191			0.6	%
Income Tax benefit				0				0.0	%			0			0.0	%			(5	)		0.0	%			(7	)		0.0	%
Earnings (Loss) from Continuing Operations				(652	)			-8.2	%			(1,021	)		-12.7	%			(2,311	)		-7.1	%			198			0.6	%
Earnings (Loss) from Discontinued Operations, net of tax				4,940				62.4	%			(405	)		-5.1	%			784			2.4	%			(1,993	)		-5.8	%
	Net Loss		$	4,288				54.2	%		$	(1,426	)		-17.8	%		$	(1,527	)		-4.7	%		$	(1,795	)		-5.2	%
Earnings (Loss) Per Share from Continuing Operations:
	Basic		$	(0.09	)						$	(0.15	)					$	(0.33	)					$	0.03
	Diluted		$	(0.09	)						$	(0.15	)					$	(0.33	)					$	0.03
Loss Per Share from Discontinued Operations:
	Basic		$	0.70							$	(0.06	)					$	0.11						$	(0.28	)
	Diluted		$	0.70							$	(0.06	)					$	0.11						$	(0.28	)
Net Loss Per Share:
	Basic		$	0.61							$	(0.20	)					$	(0.22	)					$	(0.26	)
	Diluted		$	0.61							$	(0.20	)					$	(0.22	)					$	(0.26	)
Weighted Average Common Shares Outstanding:
	Basic			7,041								7,032							7,038							7,019
	Diluted			7,041								7,032							7,038							7,022
	SUMMARY BALANCE SHEETS		June 30,				June 30,
			2024				2023
	ASSETS
	Cash and Cash Equivalents		$	7,170			$	4,486
	Receivable - net			3,371				2,592
	Current Assets Held for Sale			1,959				1,920
	Other Current Assets			3,164				3,276
	Property Plant and Equipment, net			2,809				2,717
	Long-term Assets			2,139				8,277
			$	20,612			$	23,268
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Current Liabilities		$	4,213			$	4,869
	Noncurrent Liabilities			426				982
	Shareholders' Equity			15,973				17,417
			$	20,612			$	23,268

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240930244290/en/

Robert M. Thornton, Jr.

Chief Executive Officer

(770) 933-7004

Source: SunLink Health Systems, Inc.

FAQ

What was SunLink Health Systems' (SSY) Q4 2024 financial performance?

SunLink Health Systems reported a Q4 2024 net income of $4,288,000 ($0.61 per share), compared to a net loss of $1,426,000 in Q4 2023. This included a loss from continuing operations of $652,000 and earnings from discontinued operations of $4,940,000.

How much did SunLink Health Systems (SSY) sell its Trace Extended Care & Rehab facility for?

SunLink Health Systems sold its Trace Extended Care & Rehab senior care facility and related real estate in Houston, Mississippi for net proceeds of $6,522,000, recording a gain on the sale of $5,584,000.

What were SunLink Health Systems' (SSY) consolidated net revenues for FY 2024?

SunLink Health Systems reported consolidated net revenues of $32,440,000 for the fiscal year 2024, compared to $34,280,000 in the previous fiscal year.

How has the COVID-19 pandemic affected SunLink Health Systems (SSY)?

SunLink Health Systems continues to experience adverse effects from the COVID-19 pandemic, including workforce shortages, supply chain disruptions, and broad inflationary pressures, which are expected to affect its assets and operations in the foreseeable future.