Quipt Home Medical Corp. (“Quipt” or the “Company”) (NASDAQ:QIPT; TSXV:QIPT), a U.S. based leader in the home medical equipment industry, focused on end-to-end respiratory care, is very pleased to announce that it has acquired NorCal Respiratory, Inc. (“NorCal Respiratory”), a business with operations in California, reporting unaudited trailing 12-month annual revenues of approximately $3.2 million and with anticipated Adjusted EBITDA (defined below) of $650,000 post integration. As a reminder, all figures stated are in USD.
Quipt is undertaking an ongoing national expansion effort with the goal of economically growing its operating footprint to serve as a leader in respiratory homecare across the United States. Quipt has built out a significant infrastructure platform which is highly scalable and allows the opportunity for the Company to efficiently integrate acquired businesses resulting in meaningful cost synergies and revenue growth opportunities.
Acquisition Details
The acquisition encompasses three locations in California, covering the northern portion of the state, bringing Quipt’s national location base to 90. The Company initially entered California in the middle of 2021 and added three more locations through the acquisition of Good Night Medical, LLC in April 2022. The Company is now able to cover a substantially larger area of patients, providing a second hub in the northern portion of the state for Quipt to grow its infrastructure. The acquisition adds over 600 referring physicians, bringing Quipt’s national referring network base to over 19,600, and increases Quipt’s active patient count by over 3,600, bringing Quipt’s total to approximately 184,000 active patients nationally.
Additionally, NorCal Respiratory has a strong management team in place focused on clinical excellence, and like Quipt, offers high-quality service, equipment, and supplies. NorCal Respiratory has several important insurance contracts and the expansionary operating footprint aligns closely with regions that have a high prevalence of Chronic Obstructive Pulmonary Disease (“COPD”), a key target patient group. According to the National Institutes of Health (NIH), over 1.3 million people in California have COPD1. The acquisition possesses a heavily weighted respiratory product mix standing at 98% with the opportunity to introduce Quipt’s robust ventilation therapy program to the current and future patient base.
The integration process will allow for Quipt’s best-in-class subscription-based resupply program to be firmly cemented creating an immediate revenue synergy. Moreover, NorCal Respiratory has strong diversification amongst referral sources, and its payor base. Under the terms of the definitive purchase agreement, Quipt acquired NorCal Respiratory for approximately $3.1 million in cash. It is expected the acquisition will increase Quipt’s annual revenues by approximately $3.2 million, and, post integration, Adjusted EBITDA by $650,000.
Management Commentary
“We are extremely excited to close the acquisition of NorCal Respiratory, providing us a further expansionary opportunity in California to grow our market share. California is an attractive market that we have been looking to further expand in with over 1.3 million COPD sufferers across the state, and we are thrilled to be able to do so on the heels of this acquisition,” said Greg Crawford, Chairman and CEO of Quipt. “Our ventilation program is an immediate cross selling opportunity for us, and we anticipate that our automated resupply program will provide an actionable revenue synergy for us. The 98% respiratory product mix and coverage sphere of NorCal make it a very strong acquisition for us, and we are laser-focused on efficiently integrating the business to drive cost synergies and further revenue growth opportunities that drive consistent financial results and margin stability. We have an unparalleled scalable platform, driven by the patient-centric ecosystem we have created, and this strategy is allowing us to grow market share both organically and inorganically, and we look forward to building our platform out across California. Our current pipeline contains a wide range of respiratory care targets in terms of size and scale, and we are incredibly enthused about our value proposition to potential sellers in the marketplace. We look forward to having compelling targets come through the funnel to closing, increasing our scale across the United States.”
Chief Financial Officer Hardik Mehta added, “This acquisition allows us to build out our operating footprint in California as we reach nearly 184,000 active patients, over 19,600 referring physicians, and add $3.2 million in revenue and a meaningful EBITDA contribution. We are pleased with the consistent performance across our entire operation year to date, including the return to 2% sequential organic growth in our recently reported fiscal second quarter. The bullish regulatory environment, secular tailwinds and need for respiratory homecare have us perfectly suited to continue to accelerate our growth prospects. We continue to follow our disciplined approach to M&A, adhering to a stringent acquisition criterion and believe it is this prudency that has led to our robust financial and operating performance. Like with NorCal, our focus will remain on closing more favorable acquisitions over the near term.”
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.
The M&A market for healthcare companies continues to strengthen in 2022 with strategic corporate buyers and private equity investors. Across the continuum of care, these buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
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