SunLink Health Systems Reports Decrease in Revenue and Operating Loss, Announces Merger with Regional Health Properties

SunLink Health Systems, Inc. reported a net revenue of $7.935 million for the three months ended December 31, 2024, a decrease of 6.8% from $8.510 million in the same period of the previous year. For the six months ended December 31, 2024, revenues totaled $15.858 million, down 7.1% from $17.065 million in the prior year. The company experienced an operating loss of $1.012 million for the quarter, compared to a loss of $433, and a loss of $2.206 million for the six months, up from a loss of $883, reflecting increased costs and reduced revenues.

The decline in revenue was attributed to lower retail pharmacy scripts filled and decreased durable medical equipment (DME) orders, despite a 5% increase in institutional pharmacy scripts filled during the quarter. The company’s cost of goods sold represented 58.2% of net revenues for the quarter, slightly up from 56.0% in the prior year. Salaries, wages, and benefits also increased due to higher labor costs associated with current market conditions and pandemic-related challenges.

In terms of strategic developments, SunLink announced a definitive merger agreement with Regional Health Properties, Inc. on January 6, 2025. Under the agreement, SunLink will merge into Regional in exchange for shares of Regional common stock and newly authorized preferred stock. This merger is subject to shareholder and regulatory approvals. Additionally, the company sold its IT subsidiary, SunLink Health Systems Technology, in January 2025, which was classified as held for sale in the financial statements.

Operationally, SunLink's pharmacy business continues to face challenges from the aftermath of the COVID-19 pandemic, including difficulties in hiring qualified staff and rising supply costs. The company reported cash and cash equivalents of $8.020 million as of December 31, 2024, indicating a strong liquidity position to support ongoing operations. The company anticipates capital expenditures of approximately $800,000 for durable medical equipment and $50,000 for upgrading its drug compounding facility over the next twelve months.

Looking ahead, SunLink expects to navigate ongoing market challenges while focusing on the successful completion of the merger with Regional Health Properties. The company remains cautious about the potential impacts of inflation, labor costs, and supply chain disruptions on its operations and financial performance in the coming quarters.