- Quipt Home Medical (QIPT) improves the home management of chronic illness through telehealth systems and streamlined, automated distribution
- The company serves over 270,000 patients through 32,500 referring physicians across 26 U.S. states, making it the fifth-largest home medical equipment provider in the country
- Its FY 2022 was highlighted by a 36.6-per-cent increase in revenue and a 46.4-per-cent increase in equipment resupply, backed by over US$4.8 million in net income and US$26.3 million in positive cash flow from operations
- Quipt intends to become a U.S. coast-to-coast medical equipment provider
- Its stock is up by over 287 per cent over the past five years
With inflation at 5.9 per cent in January, public companies are feeling the crunch of higher prices.
With the Bank of Canada (BoC) raising its benchmark interest rate to 4.5 per cent in tow, and with it the cost to borrow money, the current macro environment is especially difficult to remain operational at an optimal level without adequate capital on hand.
This is why, during turbulent times such as the present moment, many investors tend to limit their pool of prospective allocations to the cash-flowing and the cash-rich.
With this thesis in mind, The Market Herald’s Cash-Rich Report introduces you to profitable companies with coffers fortified to weather a multitude of headwinds.
Today’s profile features Quipt Home Medical (QIPT), a healthcare services company improving the home management of chronic illness through telehealth systems and streamlined, automated distribution.
Quipt’s diversified primary services include medical equipment, c-pap therapy, home ventilation, oxygen therapy, power mobility and ambulatory aides.
It provides these services to over 270,000 patients through 32,500 referring physicians across 26 U.S. states – making it the fifth-largest home medical equipment provider in the country – with approximately 80 per cent of its business focused on respiratory care.
Automated distribution and order intake occur through Quipt’s all-in-one technology platform, which offers real-time project management and patient monitoring to reduce hospitalizations and improve health outcomes.
Margin of safety
With 10,000 people in the U.S. turning 65 every day, 16 million COPD patients in the country, 24 million with undiagnosed sleep apnea, and over 150 million suffering from at least two chronic conditions, Quipt enjoys a broad patient base in need of continuous care.
The nature of its customers has allowed the company to reach 82 per cent recurring revenue, including 18 acquisitions since 2018, which have contributed over US$148 million in annualized revenue of its current run rate of US$220 million.
Quipt achieved a 32-per-cent increase in its patient base and a 36-per-cent increase in equipment resupply in Q1 2023, backed by US$4.8 million in operating cash flow and net income of US$325,000.
This follows a 36.6-per-cent increase in revenue over FY 2022 backed by a 46.4-per-cent increase in equipment resupply, over US$4.8 million in net income and US$26.3 million in positive cash flow from operations.
Acquisitions with predictable cash flows, as evidenced by 82 per cent of Quipt’s payors being public and private insurers, as well as its dependable patients, insulate the company from the mild recession the BoC is predicting later this year due to historically hawkish monetary tightening.
Fortified with US$3.6 million in cash as of December 2022 and a history of disciplined debt use with consistent quarterly pay downs covered by free cash flow, the company is making its own luck as it pursues U.S. nationwide scale.
Looking ahead
Quipt’s inorganic growth is part of its plan to become a U.S. coast-to-coast medical equipment provider. This will involve the acquisition of a wider product portfolio, diversification toward private/patient payors, and expansion targeted on synergistic verticals and regions with a high prevalence of COPD patients.
Quipt’s recent US$80 million acquisition of Great Elm Healthcare, which owns and operates respiratory-related medical equipment, came at a reasonable 5.2x multiple on adjusted EBITDA, especially considering its 70,000 patient base, free cash flow generation and US$60 million in net YoY revenue (88 per cent recurring) from August 31, 2022.
Potential investors should be on the lookout for additional value-accretive acquisitions that contribute to the company’s cash-rich operations and enhance its core respiratory-focused expertise. As a general rule, it likes to see annual EBITDA margins of at least 10 per cent before seriously considering an opportunity.
Quipt Home Medical (QIPT) is up by over 287 per cent over the past five years while commanding only a C$300 million market cap. Its trajectory validates its inorganic growth strategy, at least in the general investing public’s eyes, justifying full consideration of the company’s potential role in your portfolio contingent on goals, risk tolerance/capacity, and time horizon.
