Protech Home Medical

  • Simplifying the Patient Experience!

  • 859-300-6455

    cole.stevens@myphm.com

  • 1019 Town Drive

    Wilder, KY 41076

PROTECH ADDS $13 MILLION IN ANNUALIZED REVENUES WITH A 25% ADJUSTED EBITDA MARGIN, AND OVER $2.5 MILLION IN NET INCOME, WITH THE HIGHLY ACCRETIVE ACQUISITION OF SLEEPWELL, LLC


  •   8:00AM EST

PROTECH TO AUGMENT SLEEPWELL RE-SUPPLY BUSINESS WITH EXISTING TECHNOLOGY DRIVEN SUBSCRIPTION MODEL PROTECH STRENGTHENS SOUTHEAST GEORGIA POSITION AND ENTERS DAYTON OHIO MARKET AND INCREASES PROTECH

Cincinnati, Ohio – October 26, 2020 – Protech Home Medical Corp. (“Protech” or the “Company”) (TSXV: PTQ), (OTCQX: PTQQF), a U.S. based leader in the home medical equipment industry, focused on end-to-end respiratory care, is pleased to announce that it has acquired Sleepwell, LLC (“Sleepwell”), a company based in Georgia, reporting unaudited trailing 12-month annual revenues of approximately $13.0 million, adjusted EBITDA of approximately $3.25 million, net income of approximately $2.5 million and no debt. The acquisition of Sleepwell was originally announced by Protech on September 8, 2020 when it executed a non-binding letter of intent.

Acquisition Details

Excluding the impact of future acquisitions, and organic growth derived from continuing operations, we are pleased to share the following selected financial and operating metrics for Protech following the closing of Sleepwell:

      Run-Rate Revenue of $120-$125 million
      Run-Rate Adjusted EBITDA of $26-$30 million
      110,000 current active patients
      17,000 unique referrals
      48 locations across 10 U.S. States

Sleepwell is a leader in sleep services in the State of Georgia, with significant penetration in the Southeastern corridor of the region. Resembling Protech’s mission, Sleepwell and its 34 employees have a keen focus on delivering superior service through patient care and education, providing high-quality equipment, and supplies. In addition to Georgia, Sleepwell also provides sleep services to patients in Dayton, Ohio, which represents a new market for Protech. The acquisition provides the Company with an attractive metro hub within the State of Ohio where it will leverage its existing first-rate infrastructure to create additional patient growth opportunities. Protech’s presence in the Southeast will greatly increase with five new locations, and the addition of three new markets including Dayton, and will increase Protech’s active patient count by over 15,000. Sleepwell has tremendous diversification amongst referral sources, a strong recurring revenue platform, and a very solid and diversified payor base.

Sleepwell is highly concentrated on sleep therapy with a very strong re-supply business, which Protech intends to significantly expand upon. In order to accomplish this objective, Protech will utilize its technology driven, patient centric model already implemented across the entire organization to run the Sleepwell re-supply program, which the Company expects will serve to significantly reduce fulfillment errors and increases overall volumes. Protech’s keen understanding and utilization of significant workflow processes has driven extraordinary operational efficiencies and will be a major contributor to accelerated growth for the future. Currently, Protech derives $25 million from its re-supply subscription model and anticipates that growing to over $30 million with Sleepwell fully integrated.

Protech is pleased to announce that Dave McLeod, 12-year DME veteran and owner of Sleepwell, will join the Protech executive team as Director of Sleep Services.

“I am extremely excited to join the Protech team in this important role at such a critical juncture in the company’s growth path” said Dave McLeod, Director of Sleep Services. “Sleepwell and Protech share the same vision of providing extraordinary patient care and education, rather than simply providing a piece of equipment to a patient. It was this patient centric model that really attracted us to join the Protech family. To that end, I felt so strongly about the future growth at Protech, I decided to structure the deal to take a substantial amount of the total consideration in shares to further align ourselves for the long term. I look forward to being a part of the future success of Protech.”

Under the terms of the definitive purchase agreement, subject to closing and hold back adjustments, Protech has acquired Sleepwell for a combination of cash and share consideration of approximately $9.3 million and $5.1 million, respectively. Post integration, it is expected that Sleepwell will increase Protech’s annual revenues by approximately $13 million and adjusted EBITDA by $3.4-$4.0 million. Leveraging existing infrastructure and payor contracts, Protech expects to achieve additional revenue generated from organic growth, cross selling and corporate synergies. The approximate $5.1 million in share consideration is being issued at $1.47 per share and is payable as to 2,517,857 common shares on January 4, 2021 (subject to a 4 month hold and 2,517,857 subject to an additional contractual 6 month hold thereafter) and up to 982,142 on August 31, 2022 (subject to a 4 month hold).

Management Commentary

“The closing of the Sleepwell acquisition comes at an important inflection point for Protech. On the heels of surpassing the $100 million annual revenue run-rate, we have quickly grown to a revised annual revenue run-rate of over $120 million, reflecting our continued aggressive stance towards building scale at a reasonable cost across the organization. Sleepwell helps reach this goal by aiding Protech in further penetrating existing markets in Georgia and opening new and exciting markets in both Georgia and Ohio. We are thrilled to welcome the Sleepwell team to the Protech family,” said Greg Crawford, Chairman and CEO of Protech. “We see a tremendous amount of synergies between our companies and believe the strong sleep re-supply business Sleepwell has in place presents us with significant upside as we deploy our technology therein with a goal of increasing overall efficiencies. The diversified payor mix, and deep referral source base will be very impactful for us and we are excited to scale our presence in the markets Sleepwell presently serves. Sleepwell, much like HTR, our prior acquisition, has a very strong margin profile and is immediately accretive to Protech’s EBITDA and overall profitability, which we continue to be aggressively focused on.”

Chief Financial Officer, Hardik Mehta added, “Sleepwell is an example of the larger, highly accretive acquisitions we are now focused on. With our pristine balance sheet and our untapped US$20 million revolving credit facility with CIT Bank, we are in the strongest position in the history of the company to aggressively and responsibly deploy our capital to achieve the increased scale we are after. Moreover, the level of profitability Sleepwell has in relation to our overall profitability will put us closer to achieving continuous positive net income which we are steadfast on reaching as an organization. With an annual revenue run-rate of over $120 million, we are rapidly nearing an inflection point, which will bode well in us achieving a higher contribution margin to the bottom line. We continue to have a robust pipeline of acquisition targets and are focused on larger revenue opportunities which would be highly accretive. As always, we will continue to stand firm with our guided acquisition approach and will not waver when the right deal on the right terms becomes available.”