It is estimated that 10,000 people turn 65 every day, and this trend is expected to continue for the next 15 years. The population is aging in greater numbers than ever and that means durable medical equipment grows more essential every day … but the market is incredibly fragmented.
With more than 6,000 unique “mom and pop” providers scattered across the United States, a company that can capitalize upon this market and streamline it would be in pole position to reap the benefits of the mobility, respiratory, and sleep aid market segments, which are on track to share an estimated value of $84 billion (USD) by 2028.
Based out of Wilder, Kentucky, USA,
Quipt Home Medical Corp. (TSX-V: QIPT, NASDAQ: QIPT, Forum) is a U.S. based leader in the home medical equipment industry, that aims to specialize in end-to-end respiratory care. Quipt utilizes an interconnected health care platform, which leverages a sophisticated technology infrastructure and strong regional distribution footprint to streamline all phases of the delivery process. Known for their service intensive model, ongoing patient education and in-home respiratory therapy services Quipt is able to operate a successful patient-centric ecosystem throughout the organization.
This operating engine serves to convert low margin businesses to high margin businesses through operating efficiencies and cost saving synergies.
Most of these independent providers have not spent a lot of resources, be it time, money, or work, toward technology implementation within their businesses. Identifying this gap in the market, the Quipt Home Medical team has performed great strides in what it calls its interconnected healthcare platform, which is inclusive of telehealth, dating back several years prior to the COVID-19 pandemic.
(Image via Quipt Home Medical Corp. Click to enlarge.)
This is not a roll-up waiting to happen, this is an operating engine that converts low margin businesses to high margin businesses through operating efficiencies and cost savings synergies.
Quipt Home Medical continues to lead the industry in technology deployment and its use of data mining tools to drive efficiencies and profitability. For example, the company offers a robust subscription-based model for resupply, which provides meaningful revenue synergies on the acquisition front.
Q3 2021: A record for the company:
When the company published its Q3 2021 fiscal financial results, it reported revenue at
$26.2 million (USD) compared to $18.6 million (USD) for the Q3 2020. This represents a 41% increase in year-over-year revenue. Compared to Q3 2020, the company experienced organic growth of 7% and has seen 11% organic growth so far this year, compared to at the same time last year.
The company’s customer base also increased 74% year over year to 64,578 unique patients served in Q3— up from 37,128 unique patients that time in 2020.
(Image via Quipt Home Medical Corp. Click to enlarge.)
The company’s chief executive officer and chairman, Greg Crawford explained in a news release that this record quarter is a direct result of the team’s ability to leverage ongoing technology implementation and workflow processes to improve its operations. Strength in the underlying business combined with secular tailwinds and a bullish regulatory landscape provides an extraordinary opportunity to scale aggressively.
“We have been extremely busy this year, entering five new states (Florida, California, Missouri, Arkansas and Mississippi), as we expand from a regional homecare provider into a national provider, within the United States. For the first time, we will utilize the Quipt brand name post-integration of acquisitions where it makes sense, marking the start of a longer-term plan to transition certain local market brands to Quipt, which we strongly believe will be a driver of future organic growth. The platform we have allows for organic and inorganic growth to be efficiently layered on to generate economies of scale. We have the substantial financial resources and operating expertise to build on the highly scalable platform we have, and we expect to be active on the acquisition front over the remainder of the year.”
Growing the business:
The company is clearly taking full advantage of its unique position to seize on exceptional healthcare industry dynamics
. In early October 2021, Quipt Home Medical acquired a business with operations in Mississippi with 12-month annual revenues of approximately
$2.7 million.
The acquisition adds two locations, over 4,000 active patients, more than 10,000 unique orders, and 590 unique referring physicians. The acquisition also provides Quipt with important insurance contracts and decades of operating experience. The acquired business offers a full suite of products with a focus on respiratory care.
The acquisition provides immediate access to additional markets in which Quipt intends to leverage its existing infrastructure to create cross-selling and patient growth opportunities. In addition, Quipt will add patients to their existing subscription-based resupply program. Quipt expects to generate strong revenue from this initiative.
Key numbers from the newly acquired entity:
- 150,000 current active patients
- 19,000 referring physicians
- 62 locations across 15 states
Quipt acquired the business for approximately $1.95 million in cash. The acquisition is expected to increase Quipt’s annual revenues by approximately $2.7 million.
CEO Crawford commented on the news, saying that the company continues to focus on accretive acquisition candidates that fit its stringent acquisition criteria to build scale across the United States.
“Our proven integration strategy allows us to make tuck-in acquisitions like this to fill in attractive geographies, obtain important insurance contracts, add to our active patient base, and build out our referring physician network. With the closing of this transaction, we have reached a significant milestone of 150,000 active patients and 19,000 referring physicians.”
On the heels of our entrance into Mississippi in July, this transaction further strengthens the company’s overall interconnected healthcare network in the region and mirrors its expansion progress in Missouri, both of which will serve as a foundation for other new states, where Quipt can grow organically and through economical bolt-on acquisitions.
As we look at the last 90+ days, the company has completed five acquisitions with combined revenue of more than $13.5 million, expanding into four new states.
Chief Financial Officer, Hardik Mehta added,
“This acquisition signifies our core strategy, which is to strategically expand our markets economically as we work towards our long-term goal of becoming a national provider of home healthcare in the United States.”
It also builds upon an earlier acquisition by the company, of a business with operations in Missouri, reporting unaudited trailing 12-month annual revenues of approximately $5.5 million, and Adjusted EBITDA of
$1.1 million (USD) expected, post integration.
Financial picture:
The company is proving to be strong, stable, and growing with 75% Recurring Revenue Growing top-line revenue over 30%, with solid organic growth at 10%, Adjusted EBITDA Margin over 20%, and a robust balance sheet of more than $50 million in liquidity, of liquidity inclusive of undrawn $20 million (USD) credit facility and $33 million (USD) in cash, with no debt outside a convert which is forced convert to equity.
Quipt stock has risen 14.7% year-to-date and 39.9% since this time, last year.
(Quipt Home Medical Corp. stock – Oct. 2020 to Oct 2021. Click to enlarge.)
Looking ahead:
Named to the 2020 TSX Venture 50 Group of Top Performing Companies last year, the company is looking to grow to new highs for the remainder of 2021 and into 2022.
The Quipt team projects a continued growth trajectory, growing revenue at over 35%. This robust growth trajectory, coupled with its robust balance sheet of mor than $53 million (USD) of liquidity, which can be utilized towards its strong M&A pipeline, potentially opening the door to national contracts or insurance firms.
(Image via Quipt Home Medical Corp. Click to enlarge.)
Meet the team:
Leading the charge at Quipt Home Medical is a management team with more than 50 years of combined industry experience.
Greg Crawford serves as CEO and chairman, since December 2017. Greg Crawford has over 25 years of healthcare services experience. Greg brings substantial operating, integration, and M&A experience to his role as Quipt's Chief Executive Officer. A hands-on problem solver, Greg has demonstrated significant skill at growing HME businesses both organically and by acquisition and has been the force behind the financial strength and growth of Quipt since taking the helm.
Hardik Mehta is the company’s Chief Financial Officer was an investment banker and finance advisor at investment banking and advisory firm,
Silverstone Capital Advisors for nearly 10 years. He has significant acquisition, transaction finance, accounting and negotiating experience and has been an advisor on more than 30 M&A and funding transactions.
Jerry Kirn is the vice president of operations and has more than 20 years of experience in the home medical industry. He provides support, training and creates operational efficiencies throughout the company, as well as day to day leadership to all locations. Having served in many different roles throughout his career, he most recently as a partner for a start-up company which grew to over $1 million in sales in just under 10 months.
Tom Roehrig, the executive vice president of finance is a seasoned Corporate Executive and CPA with more than 30 years of extensive hands-on experience in building, leading, and advising fellow management and boards of directors. He was previously a chief accounting officer of a publicly traded US company and brings deep experience in financial reporting, debt and equity financings, inventory management, and acquisition transactions.
David Bachelder is the executive vice president of operations and is a results-oriented healthcare executive with a proven ability to achieve optimal performance, compliance, and profits across multi-site operations. David is highly experienced in managing multi-million-dollar budgets, financials, sales, operations, and clinical compliance. He served as regional vice president for one of the largest home medical equipment companies in the industry. David will be key in our ongoing plan to optimize operations, technologies, systems, and processes. Given his strong background and industry experience, the company sees him as instrumental to our future growth and assist us in building our operating footprint throughout the United States.
David Chester leads the company’s M&A and Integration team. He is a healthcare executive with 21 years’ experience with a specific focus on the Home Medical Equipment and Services Industry. He came from one of the largest home medical equipment companies in the industry, where he served as director of acquisitions.
To learn more about the rest of the leadership team, click
here.
Investment summary:
A premier provider of clinical respiratory equipment, thanks to its in-demand offerings, efficient delivery costs and innovative technology, Quipt is ready to become a national leader of durable medical equipment.
From mobility assistance to airway management equipment, Quipt Home Medical is there to help treat health issues with in-demand services.
As the country shifts its focus on post-pandemic care and continued wellness, meeting healthcare needs at home is a top priority in today’s health care environment.
Quipt continues to expand its growing presence across the country, recent acquisitions made by Quipt Medical could turn to growing profit margins, which would be great news for investors’ portfolios.
(Image via Quipt Home Medical Corp. Click to enlarge.)
The company’s motto is - exceeding expectations, enriching lives, and with its diverse product offering within this potential $84 billion (USD) market, it is making that happen. From its active acquisition focus with $20 million (USD) credit available for further growth to Organic Revenue Growth of around 10% a year and its Robust Pipeline of Acquisition Targets in Fragmented Marketplace, this is one stock that is undervalued relative to peers in the medical space at 6.2x FY22 EV/EBITDA v 10.3x FY22 EV/EBITDA.
Investors would be wise to do deeper due diligence on Quipt Home Medical and not let the opportunity slip through your fingers before this stock really takes off.
For more information about the company, visit
quipthomemedical.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.