Patient Home Monitoring
VieMed
Google Finance
Filing
Filing Vimed
Sept. 12, 2017
Q3 2017, Year end September
Current Price: $0.32, Share outstanding 380m. Cap: $120m
1.Basic Information
(1) History .
The company was founded by Michael Dalsin and Roger Greene at around 2009(??). It IPO'd through a reverse merger at 2010. At that time it has around 60m shares and both of them holds 14% of total shares. The company wasn't doing much until 2014, Dalsin and Greene started acquisition very aggressively. It was ended badly around the second half of 2015 with Dalsin was forced to leave CEO role. Totally the company issued over 300m shares from 2013 to2016.
At June 2015, it acquired a company called Viemed, also as Sleeping Management LLC. The founders of the company are Casey Hoyt(Son), Max Hoyt(Dad) and Michael Moore. At that time Viemed generates $42.5m in revenue and $18m in EBITDA, while PHM generates $70m in revenue and $12m in EBITDA. The price PHM paid for Viemed is $36m in cash + 42.75m shares. After the acquisition and Casey became PHM's new CEO and Moore became president.
At Sept. 2015, PHM acquired Patient Aid Inc. for $32m cash + 2.7m shares. Patient Aid generates $17m in revenue and $6m in EBITDA. Patient Aid was founded and run by Greg Crawford since 1994. After joining PHM for 6m, he was appointed as new COO. He exchanged $11.4m payment from PHM for 33m shares.
At Sept. 2016, the company initiated a plan to split into 2 companies. The first one is called Viemed which I think is just the original Viemed with around $40m in annual revenue. Hoty and Moore will lead the company. The second on is called Apparo Home Care which is the rest of the company, with an annual revenue around $100m.
Now at Sept. 2017, the company still haven't finished the split yet. It submitted document at Feb. 2017. It expects to be approved by end of current quarter. However, in previous two quarters, it said the same thing. It says in the Q3 conference that it is still waiting for the last government agency approval.
(2) Business-related:
Viemed:
Major in Respiratory Disease Management. It provides non-invasive ventilators retnal and related services to respiratory patients such as COPD so they can stay at home or long term care center. It reduces patient's frequency needs to visit the hospital which is very common for COPD patients. This business has a very high margin of close to 90%. It seems most patients rent those devices since Medicaid only cover device rental while not purchase. Before 2016, it seems to cover $1500/month device rental per patient. However, at Jan. 2016, CMS cut the reimbursement by 35% which reduced to $1000/month.
The company lists two ventilators in its website:
A. PHILIPS RESPIRONICS TRILOGY 100 VENTILATOR, it was quoted USD$5,800 at following website:
http://stores.ventilatorsplus.com/Philips-Respironics-Trilogy-100-Ventilator_p_533.html
B. Astral 150 Adult and Pediatric Ventilator, it was quoted at $16k at following website:
https://www.rehabmart.com/product/astral-150-adult-and-pediatric-ventilator-43313.html
I think the company might pay kickbacks to doctors or hospitals etc, also might need to visit the patient home from time to time. Overall even after the rate deduction, the $1000/month rental is quite a good price for the company. If using $10k as medium price, it is less than 12 months of rental.
Before being acquired by PHM, Viemed already has a revenue base of $40m/year. At Dec. 2015 quarter, it had a revenue of $13.6m and $4m EBITDA. However, at Jan. 2016, Medicaid(CMS) cut ventilator reimbursement by 35% which seems from $1500/month to $1000/month. The following quarter, Viemed revenue and EBITDA decreased to $10.2m and $0.6m. Since March 2016 to June 2017, it grew customer number close to 10%/quarter. At June 2017, revenue and EBITDA are $14.6m and $3.3m respectively.
For the first 3 quarters of 2016, Viemed generated around $10m in EBITDA. If using $2m CapX, $1.5m for the corporate expense, $0.5m interest expense, it generates around $6m real income.
Apparo:
Other home care equipment sales and rental. It includes Patient Aid and all the other small companies the company acquired. It rents and sells medical equipment for home use. At Dec. 2015, its revenue and EBITDA are $26.6m and $3.5m. It turns to negative in the following quarters. At June 2017, its revenue and EBITDA are $18.8m and $3.8m.
Since 2016, Apparo's equipment sale decreased a lot while service revenue seems stable. The Hollywood care shutdown might cause this.
For the first 3 quarters of 2016, Apparo also generated around $10.5m in EBITDA. If using $9m CapX, $2.5m Corporate expense, $1.0m interest expense, it generates $-2m in real income.
The company:
The company has a close to 10% bad debt expense, don't know it related to Apparo only or both. The reason for this is the insurance deductible must be paid by the patients and seems the company can't get the patient pay those or intentionally not collecting them.
For the first 3 quarters, the company recorded around $11m in depreciation which is $2m for Viemed and $9m for Apparo. It incurred $13m in CapX( $6m CapX + $7m leasing). It is hard to estimate how much the
maintenance cost of each segment.
(3) Management.
Michael Dalsin and Roger Greene: The crazy acquisition guys. They totally messed up. The acquired business generate heavy losses starting the second half of 2015.
Hoyt and Moore: These guys managed the Viemed quite well, especially after Jan. 2016 when the reimbursement got cut by 35%, they were able to grow business back to the previous level in one year. The growth rate is more than 10% each quarter. Very impressive.
Crawford: He was praised by the company for integrated all those acquired businesses and improve all the financials. However, currently, the Apparo segment is still losing money.
(4) Debt and Credit Facility.
The company has $6m term debt. 7.5% interest. Mature at Dec. 2019.
The company has $15m financial leasing obligation at June. 2017.
(5) Insider holding, options, Insider trading info, share buy back.
The company hasn't file MIC document for 2016 and 2017. Based on 2015 number, Dalson and Greene should both hold 10m shares.
At the time of Viemed acquisition, there are 42.75m shares issued to Viemed, I guess Casey, Moore and Casey's dad might each counts 1/3 which is $14m.
Crawford might just hold the 33m shares he got when he stepped in as COO.
If removes Casey's dad's holding, the 5 insiders hold 10+10+14+14+33=81m shares. Which is around 21%, it is consistent with Mar 2016 release.
(6) Employee numbers
(7) Industry comparison.
It seems Viemed is one of or the biggest non-invasive ventilators in the US. While on home care part, it seems quite fragmented.
(8) Major events
2. Financial data.
3. Valuation
(1) The Viemed segment is the bright spot of this company. Currently it has a run rate of $60m/year revenue and around $8m/year real profit. It has over 10%/quarter growth in last 4 quarters. If the company can grow 25% per year for next 3 years, it could double current revenue and profit. Using $16m/year profit and 15 P/E, it can support a $240m market cap at that time. Using 400m shares, it support $0.60/share price at 3 years later.
(2) The Apparo part although counts 60% of revenue, it is not a good business, it might be able to improve and turns to a growth story again. But currently, it is still losing money. If it was not to split off, it is a burden to the company. However, since it will be split off, it might get a $0.10/share price after the split. Those reduce the Viemed price to around 20c.
4. Risk
(1) The split takes quite a while and we don't know when it will happen and whether it will be canceled. In case the split doesn't happen, the company might still improve its result and grow. It will be much less attractive but still acceptable.
(2) After the split, Viemed might be less profitable since there are some expenses to be a public company and maybe more headcount as well.
(3) The maintenance CapX is an estimate of the current depreciation. It might not be accurate. It could be significant.
(4) Crawford will hold quite some shares on Viemed. He might get a board seat and Dalsin might be a member as well. Those acquisition guys are not good for the business.
5. Conclusion
The split creates a pretty attractive price for Viemed which is very managed and high growth business. However, there are some concerns about the future like the split and how the company will be managed etc.
6.Links
Nov. 21, 2017
Current Price $0.295, Cap: $111m
(1) The company will host the shareholder meeting on Dec. 15, 2017 and expect to finish the split soon after. The new Vimed will trade CVE. The rest actually will remain as PHM. Will not use the Apparo name. Both Dalsin and Greene will not be director of any of the new company.
(2) Hoyt and Moore both hold around 19m shares. Crawford holds around 36.5m shares. Together they hold close to 20%.
(3) New Viemed share will trade on 10 for 1 basis which means 38m to 40m shares outstanding after the split.
(4) For Vimed, the first half of 2017, it actually had a net income of USD$4m. But since some salary was cut during the first quarter. So, it is safe to be $3.5m. For the full year, could be USD$7m which is close to my CAD$8m estimation.
(5) On EBITDA basis, first 2Q 2017 EBITDA is USD5.4m, but since Q1 is not real, based on Q2 USD$2.4m, the full year might be USD$10m. Using USD$2.5m CapX. There is actually no debt but $7m cash. Don't know about the tax since it is always profitable so it might need to pay tax after the split. Still, it supports a CAD$8m/year real income estimate.
(6) The viemed is as expect and worth more than the two company combined at least. And it has high growth rate. Wait to see how the market reacts after the split.
Dec.22, 2017
Current Price 0.21, the spin-off CVE:VMD price is $2.5.
(1) At yesterday the stock is still trading at $0.30. Today the combined value is about $0.46/share. More than 50% gain in one day. The market is so unreasonable.
(2) Based on VMD's Q3 number, it generates USD$4m in net income for Q3 alone. Very impressive. Assuming $20m annual income by 2020, 15 P/E. 40m shares. It may worth $7.5/share by then.
