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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.
Quipt Home Medical Corp. QIPT QIPT announced that it has executed a non-binding letter of intent (LOI) today to acquire an arm’s length private respiratory care company in the Midwestern United States reporting unaudited trailing 12-month annual revenues of approximately $13 million, $1.6 million in net income, and positive Adjusted EBITDA. The Company is also pleased to provide an outlook for the 2022 calendar end.
The target has a heavily weighted respiratory product mix, serving as a leader in the respiratory home care services space for over 25 years in a major metropolitan hub within a Midwestern U.S. state. The target has several difficult-to-obtain insurance contracts and would significantly enhance Quipt’s presence in the Midwest with a new location, covering an entire service area of a major metro hub. The target would be expected to increase Quipt’s active patient count by over 15,000, which would bring Quipt’s total to approximately 170,000 active patients. The target has a strong management team in place, and like Quipt, the target offers high-quality service, equipment, and supplies.
Moreover, the target has great diversification amongst referral sources, and a very strong and diversified payor base resulting in long recurring revenue cycles which fit hand in hand with Quipt’s business model. Furthermore, the target does not have current exposure to ventilation therapy, providing Quipt a significant growth opportunity to introduce its clinical ventilation therapy program as well as complimentary clinical respiratory products and services. In addition, the target would add patients to Quipt’s existing subscription-based resupply program, and Quipt expects that it would derive strong revenue synergies from this initiative.
According to the LOI, Quipt expects to close the acquisition for cash at a reasonable multiple that would immediately be accretive to Quipt’s Adjusted EBITDA and net income. As part of the proposed acquisition, the company would not assume any long-term debt of the target. Closing of the acquisition is subject to final due diligence, final negotiation and execution of a definitive purchase agreement, all closing conditions being satisfied or waived and all necessary approvals and is expected to occur within the next 60 days.
The acquisition would be expected to increase Quipt’s annual revenues by approximately $13 million and $1.6 million in net income. Leveraging existing infrastructure, Quipt would expect to achieve additional revenue generated from organic growth, cross-selling and corporate synergies.
“This is an extremely exciting growth period for Quipt as we see continued acceleration within the existing business and a plethora of strategic acquisition opportunities that we hope will help us scale into attractive markets across the United States,” said Greg Crawford, Chairman and CEO of Quipt.
“This acquisition target is very powerful as it services a significant metro hub in the Midwest and after closing, we plan on quickly integrating their business operations and leveraging the Company's payor contracts across our existing Midwest locations. We anticipate that this acquisition would be immediately accretive to Quipt’s Adjusted EBITDA, overall profitability and would add approximately $13 million to the top-line and $1.6 million in net income. Additionally, we expect to see cross-selling growth from lathering on our clinical ventilation therapy program as an extension to their existing respiratory product mix. We expect to remain very active as we close out 2021 and enter 2022 and look forward to sharing our progress.”
Outlook for Calendar End 2022 (Fiscal Q1 2023)
Based on the current business, market trends and completed and prospective acquisitions, the Company is providing guidance for its run-rate revenue for end of calendar 2022 (fiscal Q1 2023) of $180 to $190 million with $38-$43 million in Adjusted EBITDA (defined below).
Chief Financial Officer, Hardik Mehta added, “This target is a prime example of our ability to execute on our stated three-tiered acquisition strategy and we look forward to a potential closing on this exciting respiratory care company that strategically assists us in further penetrating the favorable Midwest region. We are also taking this opportunity to significantly increase the guidance of our run-rate revenue by end of calendar 2022. This considerable increase stems from the ongoing strength of the business, favorable industry dynamics and robust acquisition pipeline. As a reminder our balance sheet remains very solid with over $30 million in cash and an untapped $20 million credit facility, giving us ample flexibility as we continue on our strategic path.”
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
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