Q3: Crushed it: 60.3% EBITDA Growth w Bad Debt Down to 6%...What a Quarter, clearly I was too conservative! From the top to the bottom line looks good, Just going to start off by saying how far the Beacon Analyst is now behind the story with his 0.40/share Price Target with only a 12.1M FY’19 EBITDA target. (I am at 18.5M EBITDA now). Numbers and Price Target needs to go higher. Lets Dig in;
Revenue
19.72M in revenue up 5% YoY but under the hood looks even better. Organic Patients served up 6% and coupled with continued 20% growth in higher margin Respiratory Resupply Setups is critical to future growth.
Organic growth with a Currency kicker looking out 12 months I like it! Could set up a period of double digit revenue growth in FY 19 even before you consider acquisitions.
Profitability
3.6M in EBITDA up 60.3% QoQ trumps the profitability growth that VMD.TO is putting up, already hitting their 18% EBITDA margin target the exact Q after putting the target out there and ahead of schedule, management is dialing in the business quicker then they even projected.
Lets just take a minute and appreciate the operating efficiency this company has been able to put up post VMD spin. EBITDA margins by Quarter (Q3: 18.3% Q2: 11.9% Q1: 8.1%). 120% expansion in EBITDA margins in only 3Qs!!! Are you serious. Scary thing is I think there could be another 500+ basis points in margin expansion in the next 12 months.
Of course have to look at Bad Debt. Looks great, Bad Debt down to 6% of Sales down QoQ and YoY. A/R collections has been a key leg to the recovery.
Looking Ahead
We will have to see how the call goes but this story is just getting going. The street has to take serious now managements guide to mid to low 20% EBITDA margin in FY19 which is a game changer.
Using a 22% margin on a 85M Revenue top line gets me to an EBITDA estimate of 18.5M. You put a 8-10x EBITDA multiple on that and you get a price range of 0.35 – 0.44/share or 0.395/share at the mid point or 200% upside with a multiple re rating.
Congratulations Greg and Team, great Q. Organically the business is doing great and talk on acquisitions is just gravy.
LONG