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Enercare Inc.
(ECI-T) C$19.10
Q4/16 First Look Event
Enercare reported Q4/16 revenue of $293.2mm (up 107% y/y), versus our estimate of $288.2mm and consensus of $287.0mm.
Acquisition Adjusted EBITDA for the quarter was $72.7mm (up 25% y/y), versus our estimate of $67.0mm and consensus of $69.5mm.
The company announced a 4% increase in its dividend to $0.96/share (annualized), from $0.924/share previously.
The company will host a conference call this morning at 10:00 a.m. ET (647-427-2311 or 1-866-521-4909).
Impact: POSITIVE
Results came in ahead of our expectations in what is considered a seasonally weaker period for the recently acquired Service Experts business, on the slightly higher than anticipated revenue, with expenses broadly in line with our forecast.
The company's Home Services rental portfolio added 11,000 units in the quarter (up 10% y/y) versus 8,000 units lost to attrition (down 6% y/y), making Q4/16 the sixth consecutive quarter of net unit growth.
In the sub-metering business, contracted units increased by 15% y/y in Q4/16, installed units increased by 6% y/y, and billable units increased by 13% y/y, with billable units still only representing ~50% of contracted units, continuing to offer material embedded growth for the segment.
Service Experts began roll-out of the rental program for HVAC units and water heaters in Canada in October 2016 and completed the rollout in February 2017, with an initial rental mix of ~20% in Ontario and ~10% in Western Canada. The company also began a rental pilot program in two U.S. states in Q1/17 and expects to add two additional states in H1/17. We expect adoption of the rental program in these new areas to be slow, but believe that this roll-out will ultimately be incremental to earnings, given the higher DCF value of a rental versus a sale.
Enercare continues to focus on driving organic growth, increasing its weighted average rental rate in Home Services by 3.1% in January 2017 and introducing new products and services including a financing plan and, in late December, an electrical protection plan pilot program. Management plans to continue investing in platforms for innovation and growth (including smart home products) in 2017
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