Qipt Home Medical Fiscal Q4 2024 Update - QIPT.to
Quick update after fiscal Q4 2024
*Disclosure: I own shares in QIPT. I am not a professional. Please do your own due diligence.
Price: $3.45 CAD / 2.41 USD
MC: 102.4 million USD
EV: 172.7 million USD
1 year performance: -44% (down about 20% since profiled)
I had this post completed yesterday, but forgot to schedule it. My apologies.
QIPT reported earlier this week and held a call. Results were behind of my expectations and the stock was down 15% the day after reporting.
*all numbers in USD unless stated otherwise
Quarter Recap
Revenue came in at 61.3 million vs expectations of 63.8 million.
EBITDA came in at 13.4 million. 1 million below estimates.
The company had 153,000 patients vs 147,000 a year ago.
Both equipment set-ups and respiratory set-ups increased year over year.
Recurring revenue for the year was 78%
Sequential organic growth of 1%
This was in the 10-k under Legal Proceedings.
The Company has received a civil investigative demand from the Department of Justice (“DOJ”) through the U.S. Attorney’s Office for the Northern District of Georgia pursuant to the False Claims Act regarding an investigation relating to the Company’s submission of claims relating to CPAP equipment. The Company is cooperating with the investigation. The DOJ has not indicated to the Company whether it believes the Company engaged in any wrongdoing. In April 2024, the Company received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) to provide certain documents related to the Company and the DOJ investigation, CID, and financial reporting and disclosure matters (“SEC Subpoena”). Further to the SEC Subpoena, the SEC concluded its investigation in November 2024 and, based on the information it had as at such time, the SEC advised that it did not intend to recommend an enforcement action by it against the Company. Additional governmental agencies could conduct independent investigations relating to this investigation or separate unrelated matters. No assurance can be given as to the timing or outcome of the DOJ’s investigation or that no action may ultimately result from the SEC’s investigation.
Call Notes
Operating expenses at 49.8% of revenue vs 48.7% last year.
Acquisitions contributed 8.6 million in revenue.
Professional fees related to the CID investigation and the loss of the foreign private issuer status contributed 3.3 million.
Comments on the call said they return to consistent historical organic growth. Sounds like fiscal Q2 will be the more material quarter for organic growth given the lap in comps and the CPI rate adjustment.
Now at 135 locations across 26 states
They transitioned to GAAP from IFRS.
Bad debt is now reported within the revenue line not operating expenses. So it looks like revenue is lower than it would have been comparably.
Customer base is up 10%.
M&A update:
More targets with slightly less competition.
More available in larger DMEs and hospital based DMEs.
Valuation
I have QIPT trading at 6ish EV/FCF. That is me netting out the equipment loans and leases. It may really be 7-8x.
Closing Thoughts
I’m a bit torn on what to do with QIPT. I can see the potential in the company and the business. It isn’t a big position, but it’s meaningful enough to move the needle when it performs well or poorly. I am debating averaging down, but I also want to be too exposed to the position.
The investigation commentary seems positive to me. At least it’s not any more negative than prior quarters in my opinion. Here are the things that need to happen for me to make money in QIPT (as I see it):
Time for the business to lap tougher comps that include the 75/25 rate adjustment expiry, frictional costs from the cyberattack, CPI rate adjustments, no acquisition related expenses and CID related expenses to roll off.
Management to not do a raise for an acquisition at these valuations.
Conclusion of the CID investigation and it not being so large that it kills the business.
Let me know what you think.
Thanks for reading.
Dean
* long QIPT.to