Quipt Home Medical Q1 F25 Update - $QIPT.to
Quick update after Q1 F25
*Disclosure: I own shares in QIPT. I am not a professional. Please do your own due diligence.
Price: $4.21 CAD/$2.95 USD
MC: 127 million USD
EV: 199 million USD
1 year performance: -36%
QIPT reported after the close yesterday and held a call this morning. Results were in line with of my expectations and the stock was down about 3-4% today.
*all numbers in USD unless stated otherwise
Quarter Recap
Revenue cane in at 61.3 million. Down 2%.
EBITDA came in at 14.0 million.
Revenue last year was 62.6 million. There were 3 reasons identified for the lower results.
75/25 blended rate relief expiration in January 2024.
Some regions experienced a withdrawal of Medicare Advantage members due to a capitated agreement engaged with other providers in the industry.
In nov 2024 a disposable supply contract was not renewed.
Total of around 8 million with 1.5 million coming in this quarter.
In the MD&A they stated: “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.”
Call Notes
Respiratory care at 77% of total revenue mix.
They stated that they believe the GLP-1 drugs will be as a long-term tailwind. And that they are not seeing any headwinds in the near term.
Net Debt to adjusted EBITDA at 1.5x.
They are aiming for 2% sequential growth for the remainder of the fiscal year. This aligns with their stated goal of 8-10% organic growth.
No impact at this point from DOGE.
Valuation
I have them at around 3.5x EV/EBITDA. It’s definitely at the lower end of the range.
Closing Thoughts
I think it’s worthwhile to take a step back and look at the original post I made on QIPT. You can find it here. It’s been about 9 months and the share price is down 5ish%. Hard to own when everything else is ripping. I identified the following risks:
Impact from GLP-1 drugs.
They stated that GLP-1 drugs are likely a tailwind.
Using stock as currency at low valuation.
Given the recent activity from KWM and Forager, I don’t see this as a big risk. They are major shareholders and I don’t think management would get away with a dilutive acquisition here.
DOJ investigation.
The investigation is not completely closed, but I think the risk of a large fine that would impact the balance sheet is less likely than ever.
Reimbursement risk.
With the expiration of the 75/25 rate relief and that we haven’t heard anything about competitive bidding, I don’t think we are likely to see any regulatory changes. Of course, with DOGE anything can happen.
In my mind, this is a better buy today than when I first profiled it. Yes the price is similar, but they are should start to see revenue growth next quarter or the one after and consistent margins. The major shareholders are more involved, the investigation risk is lower and I don’t see any change to reimbursement rates. I continue to hold.
Hat tip to Inflexio Research for doing more work than me on QIPT.
Thanks for reading.
Dean
* long QIPT.to