Blackmont Research on Healthscreen Solutions
19 February 2009Here is the research published this morning from GMP Blackmont after Fund III portfolio company Healthscreen Solutions released their Q1 results yesterday morning.
GMP Blackmont analyst Lawrence Rhee (MDU-TVX) - BUY
Good Start to F2009 with Positive EBITDA One Quarter Earlier
Healthscreen reported good FQ1/09 results, where the company reported its first positive EBITDA quarter, one quarter ahead of our expectations.
Total revenue was $3.1 million, in-line with our estimate and up 67% year over year. Physician Services revenue was $1.8 million, more than double its performance last year. However, Physician Services revenue was down 12.4% sequentially primarily due to seasonality.
Some of the decline in Physician Services revenue was due to the suspension of new sales of PrevCareMD for December 2008 as management attempts to offer this service in a more “cash flow-friendly” way as payment from the Ontario government occurs only once per year (May). We believe management will likely reintroduce PrevCareMD within the next several quarters, bundling this service with its other Physician Services offerings.
Aided by headcount reductions, Healthscreen reported its first positive EBITDA quarter of $0.04 million, ahead of our EBITDA loss estimate of ($0.15) million. EBITDA margin in the Physician Services business was 6.6%, while EBITDA margin in the software business was 12.3%. We believe Healthscreen is well positioned to generate positive cash flow in H2/09.
We have revised F2009 estimates primarily to reflect initiatives announced by management that impact PrevCareMD sales to new physicians. We reiterate our Speculative BUY recommendation and $0.50 per share target price, derived from a DCF valuation.
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