US in-home respiratory solutions company Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT) has started the year off with a bang by acquiring durable medical equipment company Great Elm Healthcare for $80 million. Reviewing the deal in a Wednesday note to clients was Echelon Capital Markets analyst Stefan Quenneville, who reiterated Quipt’s status as a Top Pick for Echelon in 2023.
“This deal meaningfully accelerates Quipt’s ambition of becoming a national player, increases its scale and insurance company relationships, and provides additional regional platforms for future tuck-in M&A as it consolidates the fragmented DME industry,” said Quenneville in his report.
“With supply chain issues improving, robust demand for respiratory equipment, and an attractive valuation relative to peers, we continue to view QIPT as a compelling opportunity for investors,” he said.
Headquartered in Kentucky, Quipt Home Medical has in-home monitoring and chronic disease management services including end-to-end respiratory solutions for patients in the US market. The company currently operates in 26 states in 115 locations and oversees about 400,000 unique deliveries and equipment setups annually to over 270,000 unique patients.
Quipt’s largest acquisition to date, Great Elm Healthcare is a division of Great Elm Group and is a respiratory-focused medical equipment provider with operations across eight states, seven of which are new to Quipt, and with a trailing 12 months revenue of $60 million and adjusted EBITDA of $13 million. Quipt will finance the purchase with $73 million in cash, $5 million in assumed debt and $2 million in QIPT shares. (All figures in US dollars except where noted otherwise.)
“We are extremely thrilled to start 2023 with the milestone acquisition of Great Elm Healthcare, which gives us significant coast-to-coast presence across the United States and firmly establishes Quipt as one of the top clinical at-home respiratory providers in the nation,” said Quipt Chairman and CEO Greg Crawford in a press release. “Over 1.5 million people in the jurisdictions serviced by Great Elm suffer from COPD2, and this acquisition positions us to make progress in this primary target market.”
As a result of the deal, Quenneville has altered his valuation on QIPT, now using an 8x multiple applied to his new 2023 adjusted EBITDA estimate which includes the impact of the acquisition. The result is a new target price of C$11.75 (previously C$11.25), which at the time of publication represented a projected one-year return of 80 per cent. Quenneville is estimating full fiscal 2023 revenue and adjusted EBITDA of $215.7 million and $47.7 million, respectively.