QIPT Irrationally Sells Off on Wise ATM
Quipt Home Medical ( QIPT 0.00%↑ ) reported its 2Q fiscal year 2023 earlier today. The report was overall stellar, but the stock has irrationally sold off on fears because the company issued an ATM of $40M. Our followers should not be surprised since I reported just a few weeks ago that QIPT would likely do this and explained why it makes a lot of sense.
Before explaining it again, let’s be clear: QIPT stated today, as well as several weeks ago, that they have no intent to start raising any extra money now. Rather, this ATM is wise and good housekeeping, most especially because it minimizes the possibility of the company needing to conduct a large capital raise all at one time, which inevitably means the raise will come at a discount—like the one they just did last month. So, by putting this ATM in place, QIPT is being investor-friendly. Anyone following the company knows (or should know) that part of their model is to occasionally raise funds to make accretive acquisitions. And these acquisitions are even more accretive if QIPT does not have to give a discount to make the raise all at one time (it should be noted, of course, that QIPT also plans to leverage debt and use cash flow as well—their model will require a mix of various funding types).
In sum, QIPT made a smart, investor-friendly decision to have this ATM at the company’s disposal. It will allow them to raise equity from time to time at much more favorable prices, thus making future acquisitions even more accretive than they have been in the past. And, for this…investors sold down the stock. Good move by QIPT, bad move by sellers; but good possible buying opportunity for those who believe in QIPT and their long-term plan.
Now, as for the numbers, the revenue growth speaks for itself. Let me highlight two key bullish points from the quarter.
Margin expansion: QIPT’s AEBITDA margins expanded to 22.5% from the quarter and 22.3% now on the fiscal year, well ahead of what the company projected. They expect to continue or improve this pace as the year progresses.
Organic growth: this is tricky as some investors can easily misread/misunderstand QIPT’s presentation. To be more accurate, QIPT tends to report organic growth on a sequential (i.e. quarterly) basis rather than on an annualized basis. Therefore, their sequential organic growth in Q2 of 2.5% is more than their guidance for 8-10% on the year. Their organic growth is picking up, as they projected.
All in all, QIPT’s results have been extremely impressive. It’s frustrating, no doubt, that their stock price dropped due to the raise in April, and after recovering a good chunk of those losses has now dropped again for what I believe is an irrational reason. The company is actually trying to prevent a situation whereby they need to offer a discount to raise funds. The stock should be up on this news, in my opinion; especially since they have been perfectly clear on more than one occasion that they have no current plan to raise funds at this time.
I expect QIPT shares to recover yet again in the days/weeks ahead and for the company to continue to grow its business organically and inorganically in 2H2023 and beyond.
For current analysis and research on QIPT please join us on the Breakout Investors Platform, specifically Aaron Warwick’s Room.