QHR’s recurring revenue is strong and sustainable, says Cantor’s Kew

QHR’s (QHR Technologies Stock Quote, Chart, News: TSX:QHR) Q2 wasn’t exciting, but it was another solid quarter of recurring revenue growth and EBITDA margins, says Cantor Fitzgerald analyst Justin Kew.

Last week, QHR reported its Q2, 2013 results. The company earned $255,914 on revenue of $8.2-million, which was a 19% increase over last year’s Q2.

CEO Al Hildebrandt summarized the Kelowna-based company’s current priorities.

“This most recently completed quarter is our second consecutive quarter with greater than $1.0-million of EBITDA,” he said. “We continue to focus on developing our strong and stable business model around recurring revenue. Our recurring revenue was 75 per cent of total revenue for the quarter and 86 per cent of total expenses for the quarter.”

Kew says the quarter was a bit soft, but generally in-line with his expectations, He says he is encouraged by the company’s strong pipeline and backlog of physicians. This, he says, gives him confidence that the company’s recurring revenue will continue to growth at a healthy pace. In a research update to clients this morning, Kew maintained his BUY recommendation and $1.20 target price on QHR Technologies.

QHR Technologies, which is beginning to enter the U.S. market, has become an aggressive consolidator in the Canadian electronic medical records space. Last summer’s acquisition of Open EC Technologies was the company’s twelfth in just nine years. QHR’s success mirrors larger trends: a recent report from MarketResearch.com said the U.S. EMR market is expected to grow from $2.17-billion in 2009 to more than $6-billion in 2015; an estimated compound annual growth rate of 18.1%.

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