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Quipt Home Medical has a 79 per cent upside, says Raymond James

In-line quarterly results have Raymond James analyst Rahul Sarugaser staying bullish on US-based home medical equipment provider Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:QIPT). Sarugaser delivered an update to clients on Tuesday where he retained an “Outperform” rating on the stock, saying profits are on the upswing for the company.

Quipt, which provides clinical respiratory equipment through a national care network, offering durable medical equipment (DME) such as CPAP and BiPAP units and non-invasive ventilation equipment, supplies and services, announced its first quarter fiscal 2023 financials on Tuesday for the period ended December 31, 2022.

The company posted a topline of $40.8 million, good for a 38 per cent year-over-year improvement, and adjusted EBITDA of $9.0 million, up 50 per cent year-over-year. Overall, Quipt said its customer base grew by 32 per cent year-over-year to 99,420 unique patients and unique set-ups/deliveries grew by 24 per cent to 146,350. (All figures in US dollars except where noted otherwise.)

More recently, Quipt made the major acquisition in January of clinical respiratory care company Great Elm Healthcare for $80 million. Looking ahead, management is expecting annualized revenue and adjusted EBITDA at $220 million and $49 million, respectively.

“The strong performance during the first quarter of the fiscal year is evidence of the ongoing operational excellence in which we take great pride. We are thrilled that our Adjusted EBITDA margin has reached 22 per cent as we get closer to critical scale, and we expect that margins will continue to increase in the future,” said CEO and Chairman Greg Crawford in a press release.

Looking at the fiscal Q1 numbers, Sarugaser said the $40.8 million in revenue was in-line with his estimate at $41.7 million but represented a miss compared to the consensus call of $44.0 million, while adjusted EBITDA at $9.0 million was in-line with both Sarugaser’s estimate at $8.8 million and the Street’s $9.1 million forecast.

“While our current view of QIPT’s growth trajectory is framed by the company’s Dec. 31 acquisition of Great Elm Health — QIPT’s largest deal yet, for total consideration of ~$80 million, adding ~$60 million in Rev., ~$13 million in EBITDA, and 70,000 patients across 21 locations in 8 states—and the company’s roadmap toward material organic growth during 2023—CMS CPI increases (+eight per cent for QIPT), unlocked caches of sleep equipment, new product offerings (e.g. diabetes supplies), penetration of newly hired sales teams, new insurance contracts — we’re encouraged to see QIPT’s base business grow steadily and profitably in these 1Q23 earnings,” Sarugaser wrote. 

Sarugaser said Quipt’s cash situation at $3.7 million appears to be thin but that the company has more than $30 million of undrawn credit available and is operating at a relatively conservative 1.96x net leverage ratio, which gives the company operational flexibility and potential capacity for smaller acquisitions. 

“We do anticipate QIPT focusing on integration during 1H23, but understand that management has a series of small tuck-in to ‘beefy’ scale transactions in the hopper, likely precipitating in 2H23 or early FY24,” he said.

Sarugaser maintained a 12-month target on QIPT of $11.00 per share, which at press time represented a projected return of 79 per cent. 

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