RE:EBITDA vs. FCF vs. EPSI think the the answer to your EBIDTA question is that they moved to a model of not buying 100% of the practices. Instead, they buy a controlling interest such as 51%. This change has resulted in consolidated EBIDTA outpacing EBITDA to shareholders.
As most know, cash flow is the key to a successful business. Ask Shopify or Facebook or Amazon if they are concerned about cash flow or earnings. The reality is they are concerned about that they fuel by using their cash flow. They can dial up or down earnings just as CRH dialed down earnings with the loan payback. This company can continue to use their free cash flow to acquire controlling interests in the practices. No equity dilution will be necessary and the company will continue to grow nationally.
Overall, I did not love the results but I'd like to hear the colour on the conference call.
Bfw
PSDFinancier wrote: Hi all,
Whether you're short or long, I'd be focused on the decline in EBITDA margin and what drove that, as it is the EBITDA miss that is more meaningful. Would also be interested in better understanding why consolidated EBITDA is growing so rapidly whereas EBITDA to shareholders has grown at a considerably slower pace.
The EPS miss doesn't matter; given how important acquisitions are to this Company's strategy, you're going to have amortization from intangible assets and extraneous financing fees related to the refinancing of debt constantly messing with EPS and making it messy. Thus, any long or short should be more focused on FCFPS than EPS. Just look at the history of John Malone's entities in the cable space over the last 40 years, which used the same strategy that CRHM is employing in anesthesiology. They almost never generate positive EPS because of amort and financing fees, but their FCF generation is superb. CRHM will have a similar dynamic in its financial statements going forward.
Not happy with the EBITDA miss as a new long, but on the other hand, even with the CMS cuts flowing through, you can buy the stock at ~10x LFCF or 9.5x EBITDA to Shareholders. Frankly, you don't need a lot of growth to make money from these levels, and I think there's a lot of growth to come. We'll see whether the longs or shorts are right over the long-term, but I think the facts above suggest that the weakness we've seen in the stock has created a meaningful buying opportunity for patient, long-term investors.