RE:Beacon report link - no mention of zero EPS and FCF $16.00 target....oh my. haha Appears link doesn't work...Copy below.
Beacon.
• QIPT announced strong and record Q3/FY22 (June 30) results after the close yesterday. Headline revenue was $36.7m, +40%, y/y and +9% sequentially with EBITDA of $7.7m (21% margin), +45% y/y and +10% q/q. • Q3 EBITDA margin of 21% continued the incremental improvement over the past 4 quarters from 19.2% in Q4/FY21 to 20.5% in Q1 and 20.8% in Q2. • Furthermore, of importance to note is that the quarter included only ~1 month of contribution from Access Respiratory and NorCal Respiratory and no contribution from Hometown Medical, which was acquired in July. As such, we believe it is important for investors to understand the company’s current revenue run-rate: a) Q2/FY22 Proforma Run-Rate (as per its Q2 filing): $35.5 million b) 2% sequential organic growth: $0.7 million c) 3-month contribution from NorCal: $0.8 million d) 3-month contribution from Access Respiratory: $1.6 million e) 3-month contribution from Hometown Medical: $1.7 million f) Total Q3 Proforma Revenue: $40.3 million g) Q3 Proforma EBITDA @ 21%: $8.45 million • In other words, we believe QIPT is on an annualized revenue/EBITDA run-rate of $161m/$33.8m. At a current price of C$7.00, the stock is trading at 5.6x run-rate EBITDA. Despite this multiple, which is well below even the lower band of the group’s historical range of 8-12x EBITDA, we believe QIPT’s growth is actually in the early innings. Our experience has shown that companies who achieve $100 million in revenue actually accelerate their growth thereafter (due to market share, brand awareness, in-place infrastructure). QIPT will likely be no different. While it took the company multiple years to breach $100m in revenue (which it did on a run-rate basis in Q3/FY21), QIPT will approach $200m level by the end of this calendar year if it achieves its targets. In our view, above average growth will be driven by the following factors: a) A Huge Demographically Driven Market: The respiratory/DME market in the US is a multi-billion market driven by an aging population. COPD is the 3rd leading cause of death in the US and QIPT now has state coverage that includes 5.5 million COPD patients. Furthermore, 70 million Americans suffer from chronic sleep problems with 25 million having sleep apnea. Given the correlation between Type 2 diabetes and sleep apnea, this number will continue to grow. QIPT’s primary product offerings (CPAP, oxygen, vents) is perfectly tailored to this growing market. Of note, Resmed (RMD – US, NR) noted on its recent conference call that the CPAP re-supply market is growing at 13%, almost 2x the general market. This is QIPT’s fastest growing vertical and a key to “juicing” growth from acquisitions (ie. putting acquired patients on re-supply). b) National Coverage: QIPT has steadily expanded its geographic footprint, which now encompasses 90 locations in 19 states. This includes coverage in states that have the highest prevalence of respiratory illness such as Louisiana, which was added through the acquisition of Access Respiratory. c) National Insurance Contracts: QIPT recently signed its first national insurance contract with United Health (UNH – US, NR), which will ease the onboarding of new patients. We expect similar contracts with other large insurers to follow. d) Cardinal Health (CAH – US, NR) Partnership: QIPT has a growing patient base of 200,000+ that is in need of disposable medical products, such as incontinence. This partnership enables QIPT to sell such products to its clients through Cardinal, which is one of the largest wholesale/distributors of such products in the US. We believe revenue potential is $10+ million, which could start next year. e) M&A: We expect QIPT’s aggressive strategy to continue. It recently signed a term sheet for an $80 million credit facility, which will clearly augment its M&A strategy. • In essence, the pieces are in place for QIPT to enter a period of dramatic growth. We have made some small changes to our FY22 (lower due to timing of acquisitions) and FY23 (higher given Q3 proforma run-rate) forecasts. We maintain our Buy recommendation and C$16.00 target price.