Quipt Home Medical (fiscal) Q3 2024 Update
Quick update after fiscal Q3 2024
*Disclosure: I own shares in QIPT.to. I am not a professional. Please do your own due diligence.
Price: $4.13 CAD / $3.06 USD
MC: 130.4 million USD
EV: 200.4 million USD
1 year performance: -44%
QIPT reported last night and held a call this morning. Results were a little behind my expectations and the stock was down 14-15%. It’s down about 10% at time of writing.
*all numbers in USD unless stated otherwise
Quarter Recap
Revenue of 64 million vs 60.3 million.
Up 6.1% year over year.
Organic growth of 3%.
EBITDA at 14.2 million vs 13.9 million.
Margin of 22.3%.
Bad debt charges up to 5% mainly due to Change Healthcare cyber attack.
Number of patients up to 153,223 from 140,515.
Number of set-ups 216,137 vs 202,587.
Recurring at 82% of total revenue.
Call Notes
Sounds like the majority of the weakness was the roll-off of the 75/25 blended rate.
They are targeting 8-10% organic growth over the long term.
Expecting to have FCF margin before debt service of 6-8%.
Mentioned the OMI acquisition of Rotech a bunch on the call.
They feel this EBITDA margin is a reasonable expectation moving forward.
Not seeing negative impact from GLP-1 drugs at this point.
M&A
They mentioned that they see deals at the sub 20 million revenue mark at 4-6x EBITDA.
After acquisition they get another turn in synergies.
Valuation
I have them at just over 3.4x EV/EBITDA here, which is pretty cheap. They don’t have a ton of organic growth and I am not expecting margins to run higher, so forward looking they are maybe at 3x EV/EBITDA. OMI acquired Rotech for 6.3x EV/EBITDA recently.
Closing Thoughts
Why do I pick companies that are frustrating to own/hold. It’s pretty clear that QIPT should be doing a buyback here. Though they are not growing fast, they are growing and I think deserve a higher multiple. I am concerned to hear them mention M&A like 15 times on the call, but not anything around a buyback. Usually I’m a bit more flexible with buybacks vs. growth but this seems so painfully obvious to me. I think if they continue to have some growth and the share price stagnates they get taken out.
I still hold my shares, but need to reflect on it a bit.
Thanks for reading.
Dean
* long QIPT.to and grumpy