Deal momentum continues for VitalHub, says Beacon

Gabriel Leung of Beacon Securities likes the growth prospects for VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSXV:VHI), maintaining a “Buy” rating and $5/share target price for a projected return of 65 per cent in an update to clients on Friday.

Founded in 2015 and headquartered in Toronto, VitalHub develops SaaS-based solutions for health and human service providers in the hospital, regional health authority, mental health, long term care, home health and community and social service sectors in Canada, the United Kingdom, and the United States.

Leung’s latest update comes after the company announced a multi-year licensing agreement with Staffordshire and Stoke-on-Trent Integrated Care Systems yesterday, where the company SHREWD’s real-time decision-making tools will empower the ICS in its pursuit of improving the efficiency of care delivery by enabling operational visibility across the system.

“SHREWD’s real-time decision-making tools will empower the ICS in its pursuit of improving the efficiency of care delivery by enabling operational visibility across the system,” Leung said.

The agreement is for three years, and it will see VitalHub deploying its SHRED Resilience and SHREWD COVID-19 modules from Transforming Systems, the company’s wholly-owned subsidiary, with Leung forecasting value in the $300,000 ARR range, while believing the deal highlights VitalHub’s increasingly large footprint in the UK healthcare system.

“We are delighted to expand our offerings across the Stafford and Stoke-on-Trent region, serving more than 1.1 million patients,” said Dan Matlow, CEO of VitalHub Corp in the company’s January 13 press release. “As one of our single largest licensing transactions to-date, this sale serves as a further demonstration of the market pull for our products and services, and the considerable need we continue to address across the NHS.”

“Our SHREWD platform continues to address emergent needs across the healthcare system, specifically several of the challenges resulting from the pandemic. By providing healthcare organizations and operators with real-time visibility, across entire regions, we can help improve load capacity and balancing, ensuring overrun systems can continue to operate and serve patients in need,” Matlow said.

To begin the new year, the company also announced a significant licensing transaction between its Intouch with Health subsidiary and Royal Berkshire NHS Foundation Trust for Intouch’s patient flow platform. The Trust purchased a number of VitalHub modules, including the Flow Manager, Self Check-In, Mobile Appointment Manager, Patient Calling, Wait Time Manager, Activity Manager, and HL7 Integration with Cerner, which satisfies the Trust’s criteria to work with a technology provider capable of offering digital solutions across the whole of outpatients and not just a point solution.

In addition, the company recently announced a contract through another subsidiary, S12 Solutions, with the Northamptonshire Healthcare NHS Foundation Trust, in which S12 will help the Trust move towards its goal to digitally transform paper-based processes.

Meanwhile, in Canada, VitalHub announced a five-year licensing agreement with the Ontario HIV Treatment Network for the use of its TREAT EHR platform in support of its partner AIDS service organizations, who will use TREAT as a record management tool.

Based on recent discussions with management, Leung said the company’s pipeline of opportunities remains robust, including several tuck-in and larger opportunities to augment its organic growth. According to Leung, the company has about $16 million in cash and $10 million in an unused acquisition debt facility which can be expanded.

Overall, Leung believes the company’s recent transactions have put the company in a solid position to meet its growth targets.

“When combined with deal flow announced during the December timeframe, we believe the company is well on track to meet and possibly exceed our near-term growth forecasts,” Leung said.

Leung believes the company will experience decent growth over the next couple of years, forecasting revenue of $24.4 million in 2021 to imply a year-over-year increase of 76.8 per cent. In 2022, Leung forecasts revenue of $29 million to imply year-over-year growth of 18.9 per cent.

In terms of valuation, Leung forecasts the EV/Revenue multiple to drop from the reported 7.1x in 2020 to a projected 4x in 2021, then to a projected 3.4x in 2022.

Meanwhile, Leung forecasts a doubling of the company’s EBITDA in 2021, with the $4.6 million estimate implying a margin of 18.9 per cent for 2021. In 2022, the implied margin grows to 21.4 per cent with an estimate of $6.2 million, with Leung also noting the potential for the company to drive additional operating leverage to produce margins between 25 and 30 per cent as the company looks to scale its recurring revenue base.

From a valuation standpoint, Leung projects the EV/EBITDA multiple to drop from the reported 42.9x in 2020 to a projected 21.3x in 2021, then dropping off again to a projected 15.8x in 2022.

• VitalHub’s stock has yielded a return of 4.1 per cent over the last 12 months, reaching a 52-week high of $3.71/share on June 3, a gain from its 52-week low of $2.72/share on February 26.