Look for organic growth in the second half of the year from Protech Home Medical (Protech Home Medical Stock Quote, Chart, News TSXV:PTQ), says analyst Doug Cooper of Beacon Securities, who in an update to clients on Thursday reviewed the company’s latest quarterly results.
In-home monitoring and chronic disease management company Protech announced its fiscal first quarter 2020 financials on Wednesday, which featured an 11 per cent increase in revenue over a year prior to $22.8 million and adjusted EBITDA up 18 per cent year-over-year to $4.4 million. (All figures in US dollars except where noted otherwise.)
Over the quarter, Protech saw a 24 per cent uptick in unique set-ups/deliveries compared to a year earlier, going from 50,943 to 62,999, while its customer base grew 25 per cent from 31,199 unique patients served to 39,070. Cash flow from continuing operations grew to $4.4 million from $2.5 million a year earlier, while the company finished the quarter (ended December 31, 2019) with $8.4 million of cash on hand compared to $6.2 million a year earlier.
On the quarter, Protech’s CFO Hardik Mehta said, “We are extremely pleased that our Adjusted EBITDA margin remains strong and we are growing across the company. This continues the trend in demonstrating year-over-year operational improvements and revenue growth at a rate estimated to be in excess of the industry growth rate. Our acquisition pipeline remains strong and our focus is on highly accretive acquisitions posting current annual revenue in the $6 million to $20 million range.”
Cooper said the quarter’s revenue and EBITDA were “a little lighter than our expectations” but in truth the real news was the two acquisitions over the quarter: Cooley Medical, effective October 1, and Acadia Medical, effective December 1. Cooper argued that while the two contributed about $2.35 million in revenue this time around, the upside is still to come in terms of organic growth spurred on by acquisition integration.
“Starting from a revenue base of $20.5 million in Q1/FY19, the addition of [the Cooley and Acadia acquisitions] would equal $22.8 million of revenue, which is the total that the company reported. As such, PTQ recorded minimal organic growth in the quarter. We believe this is reflective of the company’s efforts to integrate the two ‘turnaround’ acquisitions. They should be fully integrated by the end of Q2 (March). As such, we would expect a return to PTQ’s organic growth rate of five to seven per cent in 2H20,” Cooper wrote.
“Based on the Q1/FY20 results, we believe the company is on track to achieve our FY20 forecasts. We would expect 2H20, in particular, to see stronger organic growth and margin expansion,” Cooper said.
The analyst is calling for fiscal 2020 revenue and EBITDA of $101.1 million and $19.2 million, respectively, with adjusted EPS a loss of $0.04 per share. With the new report, Cooper maintained his “Buy” recommendation and $2.50 target price, which as of publication represented a projected one-year return of 216 per cent.