>>> Quipt Acquires $60 Million in Revenues and $13 Million Adjusted EBITDA with Strategic Acquisition of Great Elm Healthcare, LLC
Quipt Home Medical Corp.
January 3, 2023
https://finance.yahoo.com/news/quipt-acquires-60-million-revenues-213000813.html
Quipt Reaches $220 Million in Annualized Revenues and $49 Million of Anticipated Annualized Adjusted EBITDA
CINCINNATI, Jan. 03, 2023 (GLOBE NEWSWIRE) -- Quipt Home Medical Corp. (“Quipt” or the “Company”) (NASDAQ:QIPT; TSXV:QIPT), a U.S. based home medical equipment provider, focused on end-to-end respiratory care, is very pleased to announce that it has acquired Great Elm Healthcare, LLC (“Great Elm”), a division of Great Elm Group, Inc. (NASDAQ:GEG) (the “Acquisition”), with an effective date of December 31, 2022. Great Elm operates a complete line of respiratory related durable medical equipment service locations across eight states in the Midwest, Southwest and Pacific Northwest. Based on an independent quality of earnings report, Great Elm had unaudited revenues for the 12 months ended August 31, 2022 of $60 million ?with an Adjusted EBITDA (defined below) of $13 million. As a reminder, all figures stated are in USD.
Transaction Highlights
Establishes Quipt as a leading respiratory-focused home medical equipment suppliers in the United States with significant scale, serving 270,000 patients with 32,500 referring physicians across 115 locations in 26 states.
The combination of Quipt and Great Elm has a combined Annualized Revenue (defined below) and Annualized Adjusted EBITDA (defined below) of $220 million and $47 million, respectively, based on Quipt’s reported audited results for the fourth quarter ended September 30, 2022 and Great Elm’s unaudited results for the 12 months ended August 31, 2022.
Pursuant to the membership interest purchase agreement dated January 3, 2022, the total purchase price is $80 million (subject to customary adjustments of Great Elm’s working capital, existing debt and expenses), comprised of $73 million in cash, $5 million in assumed debt, and 431,996 Quipt common shares at a deemed price per share equal to $4.63, representing a purchase price of 6.0x Adjusted EBITDA pre cost savings and synergies.
Quipt has identified $2 million in cost savings and synergies, which is expected to be captured over the first six months and is expected to result in Great Elm’s Anticipated Annualized Adjusted EBITDA (defined below) of $15 million, representing a purchase price of 5.2x Adjusted EBITDA post cost savings and synergies. The Anticipated Annualized Adjusted EBITDA is $49 million for Quipt.
Post-Acquisition, Quipt’s Recurring Revenue (defined below) are expected to increase from 77% for the fiscal year ended September 30, 2022, to 82%, on a pro forma basis.
Quipt to drawdown a total of $73 million from its $110 million senior secured credit facility (announced on September 19, 2022), maintaining a conservative balance sheet with net debt to Adjusted EBITDA of 1.96x on a pro forma basis.
Expected to be financially accretive to overall growth and cash flow.
Adds tremendous cross-selling opportunities in which Quipt may sell products in Great Elm locations, including ventilation and oxygen.
Adds significant opportunity to increase resupply revenue and margins once Great Elm’s sleep patients are onboarded to Quipt’s resupply program.
Great Elm's footprint is expected to create additional opportunities to expand Quipt’s access for accretive tuck-in acquisitions.
The combination of two leading clinical respiratory providers is expected to enhance Quipt’s patient-centric ecosystem across the entire company by further collaborating with key sales touchpoints, including healthcare providers like hospitals, doctors, rehab centres, and long-term care facilities.
With this Acquisition Quipt successfully surpasses its previously announced outlook of achieving Annualized ?Revenue by the end of calendar 2022 (Q1 2023) of $180-$190 million.?
Acquisition Commentary
Great Elm is a leading operator of respiratory related durable medical equipment service with 21 locations across eight states in the Midwest, Southwest, and Pacific Northwest, adding seven new states to Quipt’s current geographic coverage including Arizona, Alaska, Iowa, Kansas, Nebraska, Oregon, and Washington. The combination of Great Elm and Quipt positions Quipt to become a national HME provider with near coast to coast operations. The Acquisition adds 8,500 referring physicians bringing Quipt’s referring network base to over 32,500, and increases Quipt’s active patient count by 70,000, bringing Quipt’s total to 270,000 active patients. As a result of Great Elm’s significantly weighted respiratory product mix, respiratory products will now make up approximately 79% of Quipt’s product mix. By opening new markets and fostering connections with referral partners, patients, and payors, Great Elm considerably increases the Company’s scale and geographic reach.
Great Elm represents a turnkey platform acquisition for Quipt as it dramatically enhances Quipt’s operations and provides the Company with significant additional inorganic and organic growth opportunities. The advanced infrastructure of Great Elm, which includes strong leadership and strong internal processes, is expected to significantly expedite the integration process, and will greatly complement Quipt’s existing infrastructure. The Acquisition will also allow Quipt to cross sell its products in Great Elm locations with the opportunity to significantly increase revenue associated with Quipt’s subscription-based resupply program through the onboarding of Great Elm patients. Quipt has identified $2 million in cost savings and synergies, which is expected to be captured over the first six months.
Great Elm is focused on clinical excellence, and like Quipt, offers a high-quality, full-service line of respiratory equipment, and supplies. Great Elm has a diversified payor mix and several difficult to obtain insurance contracts. Additionally, Great Elm’s operating footprint aligns closely with regions that have a high prevalence of Chronic Obstructive Pulmonary Disease (“COPD”), a key target patient group of Quipt. The eight states in which Great Elm operates includes over 1.5 million1 people suffering from COPD.
Management Commentary
“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. I would like to use this opportunity to extend a warm welcome from the Quipt family to the entire Great Elm team. We are eager to get started. 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,” said Greg Crawford, Chairman and CEO of Quipt. “Great Elm represents a true platform investment for Quipt and provides us with the opportunity to serve pulmonary and neurological disease states by utilizing the patient-centric ecosystem we have built focused on ventilation therapy, oxygen therapy and sleep therapy. This creates immediate and actionable revenue synergies for us. Moreover, the valuable commercial insurance contracts, strong referring physician network, and significant patient base we have accumulated across seven new states will give us the ability to cross sell our products into these new geographies. The highly skilled and seasoned leadership team at Great Elm bolsters our ability to further enhance organic growth and margin expansion across the combined organization when joined with our current executive team. On a combined basis, we expect to have Annualized Revenue of $220 million and Anticipated Annualized Adjusted EBITDA of $49 million on a pro forma basis, putting us in a formidable position to continue to capitalize on the opportunities in front of us as we continue to increase shareholder value.”
Chief Financial Officer, Hardik Mehta added, “Our prudent capital deployment strategy has once again yielded fantastic results. We wanted to focus on closing our largest deal first and the acquisition of Great Elm is a major accomplishment, providing us with a turnkey acquisition at a prudent purchase price while maintaining our conservative balance sheet and allowing for financial flexibility on a go forward basis. We fully expect to be able to expand our senior credit facilities when opportunities arise, and we will continue to leverage technology and data driven decision-making to unlock additional profitability and to ensure we continue to improve upon our patient centric ecosystem. We look forward to a seamless integration process and believe the increased geography of our business will allow us to create additional opportunities to further expand on our proven acquisition and integration approach with highly accretive tuck-in acquisitions for our full suite of respiratory care products and services. The Great Elm acquisition is a fantastic way to start the new year and we look forward to keeping investors apprised of our continued success.”
The Company will post updated corporate slides at www.quipthomemedical.com.
ABOUT QUIPT HOME MEDICAL CORP.
The Company provides in-home monitoring and disease management services including end-to-end respiratory solutions for patients in the United States healthcare market. It seeks to continue to expand its offerings to include the management of several chronic disease states focusing on patients with heart or pulmonary disease, sleep disorders, reduced mobility, and other chronic health conditions. The primary business objective of the Company is to create shareholder value by offering a broader range of services to patients in need of in-home monitoring and chronic disease management. The Company’s organic growth strategy is to increase annual revenue per patient by offering multiple services to the same patient, consolidating the patient’s services, and making life easier for the patient.
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