Stockbroking | Wealth Management | Corporate Advice

x

Resizing text on the web

To increase or decrease the magnification of a web page, press Ctrl and '+' (plus) to zoom in or Ctrl and '-' (minus) to zoom out. To return the page to its original size, press Ctrl + 0.

You can also scroll the mouse wheel up and down while holding Ctrl to increase/decrease zoom level.

Blog

ResMed Inc: Expands long-term care SaaS portfolio

Derek Jellinek

Key points

  • RMD has acquired privately-held MatrixCare, a Bloomington, MN, US-based leading provider of out-of-hospital software, for US$750m.
  • Valued at 25x EBITDA, the deal doesn't come cheap, but is both GM and EPS accretive out of the gate, appears to complement the current SaaS offerings in home medical equipment, home health/hospice, and helps to diversify risk.
  • We believe this acquisition establishes RMD as a leading provider of SaaS solutions across a broad spectrum of key out-of-hospital care settings: HME/DME, hospice, home health, skilled nursing, senior living, life plan communities and home care.
  • We have increased our FY19-21 underlying earnings estimates by up to 4% and revised our price target (Morgans clients can log in to view).
  • We maintain our Add rating. 

Watch the video 

 

Expanding the out-of-hospital software portfolio

RMD has acquired MatrixCare, a privately-held, Bloomington, MN, US-based leading provider of out-of-hospital software, for US$750m (funded primarily with debt). MatrixCare offers complete software solutions (eg electronic health record integration, patient engagement channels, and back-office functions such as point of care, lead and referral management, claims processing, payroll and nutrition management, among others) for more than 15,000 US based health organisations.

This helps them efficiently manage risk in care delivery across four key segments:

  1. Skilled nursing facilities
  2. Life plan communities
  3. Senior living homes
  4. Seniors who receive home care private duty services.

The more than 600 employee company, with offices in Minnesota, Florida, New York, and India, has pro forma CY18 turnover of cUS$122m and EBITDA of cUS$30m. The deal is expected to close by YE18 and should be GM and EPS accretive on an underlying basis (post deal net debt cUS$950m; leverage 1.1x ND/EBITDA).

An end-to-end solution to streamline services across care settings

The acquisition of MatrixCare is the largest push by RMD to gain scale and efficiencies in health informatics to drive better outcomes for providers and patients since its US$800m acquisition of Brightree in Feb-16.

While the deal doesn't come cheap (25x EBITDA), it is both GM and EPS accretive, appears to complement its current SaaS offerings in home medical equipment, home health/hospice, delivered through Brightree and HEALTHCAREfirst, and should help to lower risk and diversify revenue streams.

Notably, we believe the acquisition firmly establishes RMD as a leading provider of SaaS solutions across a broad spectrum of key out-of-hospital care settings: HME/DME, hospice, home health, skilled nursing, senior living, life plan communities and home care.

Underlying earnings moving higher by up to 4%

Our FY19-21 underlying earnings forecasts increase by up to 4%, while the EPS gain is somewhat lower offset by higher interest costs and lower share count as the buyback program has been suspended.

Add retained

We believe the MatrixCare acquisition further solidifies RMD's leading connected care offering, and when coupled with stable pricing and moderating opex, support ongoing operating leverage and a solid earnings trajectory.

More information

Morgans clients can login to view our detailed report and share price target for ResMed Inc (RMD). Alternatively, please contact your nearest Morgans office for access.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.