Quipt Acquires Multi State Operator, Good Night Medical

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Acquisition Adds $7.5 Million in Annualized Revenues, 20% Adjusted EBITDA Margin Post Integration, and Over 10,000 Active Patients

Quipt Home Medical Corp. QIPTQIPT, a U.S. based leader in the home medical equipment industry, focused on end-to-end respiratory care, announced that it has acquired Good Night Medical, LLC, a business with operations across seven U.S. states, reporting unaudited trailing 12-month annual revenues of approximately $7.5 million ‎and with anticipated Adjusted EBITDA (defined below) of $1.5 million (20% margin) post integration. As a reminder all figures stated are in USD.

Acquisition Details

The acquisition encompasses locations across seven U.S. states including Arkansas, Georgia, Massachusetts, North Carolina, Ohio, Texas and California. The acquisition provides Quipt an expansionary opportunity into Massachusetts, North Carolina and Texas, which are new U.S. states for Quipt’s coverage sphere including important new commercial insurance contracts. 

The other four U.S. states are current areas of service for Quipt, which provide for actionable revenue and cost synergy opportunities as further scale is created in each operating region. 

The expansionary operating footprint aligns closely with regions that have a high prevalence of Chronic Obstructive Pulmonary Disease (“COPD”), a key target patient group; cumulatively the seven states Good Night Medical operates in contain some of the highest prevalence U.S. states. According to the National Institutes of Health (NIH), about 5 million people between the seven states have COPD[1]. 

The favorable demographics, additional insurance contracts, and infrastructure provides Quipt with the right set of circumstances to further accelerate its national expansion efforts as a leader in clinical respiratory care.

The integration process will include Quipt applying its proven subscription-based resupply program to each acquired business unit, as well as the highly intensive service model Quipt is known for. Consistent with the transactions Quipt has completed to date, Good Night Medical brings an experienced operational team.

Good Night Medical has been a leader in the respiratory home care services space for over 9 years and has several difficult to obtain insurance contracts that significantly enhance Quipt’s presence in each of Good Night Medical’s regions. Good Night Medical has 10,000 active patients, bringing Quipt’s total to approximately 180,000 active patients, and like Quipt, Good Night Medical offers high-quality service, equipment, and supplies.

Moreover, Good Night Medical has strong diversification amongst referral sources, and a payor base, with exposure to less than 30% from Medicare. Furthermore, Good Night Medical has no exposure to ventilation therapy, which provides Quipt an opportunity to grow as well as other complimentary clinical respiratory products and services. 

In addition, Good Night Medical provides Quipt the opportunity to add patients to Quipt’s existing subscription-based resupply program, and Quipt expects that it can derive strong revenue synergies from this initiative.

Under the terms of the definitive purchase agreement, Quipt acquired Good Night Medical for approximately $7 million in cash. It is expected the acquisition will increase Quipt’s annual revenues by approximately $7.5 million, and, post integration, Adjusted EBITDA by $1.5 million (20% margin).

Reiteration of Outlook for Calendar End 2022 (Fiscal Q1 2023)

Based on the current operations, market trends and completed and prospective acquisitions, the Company is reiterating its outlook for its annual run-rate revenue by the end of calendar 2022 (Fiscal Q1 2023) to be $180-$190 million with $38-$43 million in run-rate Adjusted EBITDA.

Management Commentary

“This acquisition of Good Night Medical is a prime example of the quality respiratory businesses we have in our robust pipeline. Good Night Medical strengthens our healthcare network across multiple states, enhancing our national coverage sphere over an area that includes about 5 million COPD sufferers in the United States. Furthermore, I believe that this acquisition will help us achieve long term cost saving goals that will drive our future margin acceleration by giving us increased scale across the organization,” said Greg Crawford, Chairman and CEO of Quipt. 

“We see several actionable synergies and believe our strong sleep re-supply business presents us with significant upside as we deploy our technology therein. Integration is the key to our ongoing financial and operating success as it allows us to continue the strong pace of closing strategic acquisitions, alongside the stringent approach to our due-diligence process that provides us acquisition opportunities that work towards our long-term strategic objectives. We are extremely encouraged about the growth path we are on, carving out a special segment of the homecare industry and we are well positioned to seize the growth opportunity ahead of us.”

“Additionally, I want to take a moment to provide an update on our sleep therapy business unit. As noted in our fiscal Q1 2022 financial news release, we have seen significant backlog, with nearly 8,000 patients waiting for a sleep device. It is important to understand that this backlog is extremely sticky with the entire industry experiencing supply constraints, and we view the revenue impact as delayed not lost. 

Furthermore, I am pleased to share that we began the month of April with the largest on hand inventory of CPAP devices since the recall commenced and I am cautiously optimistic as we move through the second half of the year that the supply pressures will continue to alleviate.”

Chief Financial Officer, Hardik Mehta added, “This acquisition allows us to build out our operating footprint within existing and new markets as we reach approximately 180,000 active patients, add $7.5 million in revenue, a meaningful EBITDA contribution, as well as providing us significantly enhanced infrastructure across seven states. We are pleased with the consistent performance across our entire operation year to date and are very well positioned as we move through 2022 and beyond to grow into a leader in respiratory homecare across the United States. The bullish regulatory environment, industry tailwinds, and need for respiratory homecare, gives us an incredible runway in strategically gaining market share in favorable geographies. Looking at our current pipeline, it remains very exciting, and we expect to remain very active over the near term with exciting targets that meet our stringent criteria and are thrilled to continue to execute on our growth pillars over the course of the year.”

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