Original Alert Email – June 27th, 2017 to Equity Grade Subscribers
SPECIAL REPORT: Assure Holdings Inc. (TSXV: IOM)
Recent Price: $2.07
Today we are writing to alert you to a newly listed company that is quickly turning out to be an earnings machine. Their projected earnings are so strong that a PE of just 20 could see this stock trading at more than $10. This company: Assure Holdings (TSXV: IOM) closed today at $2.07, certainly meeting our criteria for a growth stock.
Let’s dig a little deeper and get to know this new company that is beginning to gain a loyal following and gaining traction with both institutional and European investors. Assure’s wholly owned subsidiary: Assure Neuromonitoring is a US-based company that provides intraoperative neuromonitoring (IONM) services. The standard of care in the United States is to provide IONM services to monitor the nervous systems of patients undergoing invasive surgeries such as spine, ear, nose and throat and others, to monitor the activity and warn the surgeon if they are getting close to certain neural structures, thereby preventing damage to nerves, spinal cord and parts of the brain.
With the threat of medical malpractice always in the air and the escalating insurance fees covering surgeons, IONM has become as necessary to a neurosurgeon as it is for you and I to wear a seatbelt while riding in a car. The problem is that this standard of care has been tricky for neurosurgeons to implement into their business as it relies upon various parties for equipment, monitoring, technicians and medical billing. Assure fixes this problem by providing a fully integrated platform that allows them to partner with a surgeon and provide them with a complete solution that includes the very important medical billing side of US medical care.
When we look at who founded the Company, it’s not surprising to find that it was founded by someone who knows a little something about back injuries and the necessary quality of care needed. Assure was founded by former NFL Quarterback, Preston Parsons who was an NFL quarterback for six years including playing with the Denver Broncos from 2005 until 2007. We’ve had the pleasure to meet with Preston and can say he’s just the sort of leader a company like this needs. He’s personable, has an infectious energy and really understands the challenges that surgeons face from the highest standard of care that he experienced every day while playing in a sports league that relies so heavily on talented surgeons to get players back on the field with limited downtime.
Who helps Mr. Parsons ensure that Assure is well run and setup for the phenomenal business growth ahead of it? Matthew Willer is Assure’s CEO and he comes from strong business pedigree with each of his last three companies under his stewardship, growing by over 1000% and he was instrumental in taking all of them from inception to mid-market status within 5 years or less. We often speak about executive chemistry and this is so important to get right with a small-cap, publicly-traded companies. You need both the steak and the sizzle and Assure has a great high performing leadership team that are highly incentivized to exceed growth targets…more on this in a bit.
Let’s dig a little further into Assure’s business and growth prospects. Currently, the Company has setup partnerships with surgeons based in Colorado and has an exclusive with MTS billing that any surgeon who wants to use their billing service must use Assure for their IONM service. Just in this one state, Assure exited the year with 10 surgeons, the company grossed USD$5,529,648 in revenues in 2016 with an EBITDA of USD$4,353,024 and an EPS of USD$0.17.
In just Q1 of 2017, Assure has blown the doors off doing gross revenues of USD$3,914,790, EBITDA of USD$3,612,094 and an EPS of USD$0.13! They nearly did 2016’s annual 12-month numbers in just 3 months of 2017 while adding another 5 surgeons. We don’t believe the general market has yet to comprehend the staggering growth ahead. If Assure were to finish the year doing similar quarterly numbers and an EPS of USD$0.13 each quarter (we’re told Q3 and Q4 are best for their business) and they don’t add any additional surgeons this would be over USD$0.50 of earnings and if valued at a 20X multiple (industry peers are between 10 and 40) this could mean a USD$10 share price based upon current share structure (Assure trades on the TSXV in Canadian dollars so based on a USD equivalent this could mean a $13 share price).
Assure has plans for significant expansion moving into other US States including: Washington, California, Utah, Texas and Louisiana. To accomplish this, Assure recently hired George Sims as director of business development. Mr. Sims brings over 26 years of U.S. regional and national experience in the medical device industry to the Assure team having spent time with Stryker, Smith & Nephew and Orthofix and has long established relationships in the surgical field in these States pegged for expansion.
Currently, Assure is growing by about 5 new surgeons a quarter meaning they’ll likely exist 2017 with approx. 30…they exited 2016 with 10 and generated over USD $5M in gross revenues. The sheer amount of growth ahead of Assure is exactly what we look for when seeking companies to highlight in Equity Grades.
Now back to Management’s incentivization, Mr. Parsons owns both individually and through a wholly owned corp. over 20M shares out of the approximately 35M outstanding. That’s nearly 60% insider ownership from Mr. Parsons and another key metric that we look for when assessing companies. Mr. Parsons also has another 5M performance shares that he’ll be awarded if audited net income for 2017 exceeds USD$7.5M. We like to see these types of mechanisms as they reward performance which aligns with shareholders. Net income for 2016 was over USD $4M meaning there’s a high probability he’ll achieve this milestone before getting out of the 2nd quarter. This will mean some additional dilution next year but rewards the Company a focus on high growth.
What is the total addressable market? There’s approximately 3,700 neurosurgeons in the US. What is a surgeon worth to Assure? From our math, it appears that each surgeon over 12 months is worth approx. USD$1.6M in top line revenues. What market penetration can they get? If they get 10% that’s 370 surgeons and would produce over half a billion dollars in annual revenues.
Yes, the numbers get just stupid. But they get even better yet…Assure has identified several other surgical verticals, outside of spine, that present tremendous expansion opportunities including cosmetic surgery, which just happens to be a business thriving in the little old state of California, and yes, this is one of Assure’s key new states for expansion.
Now, how did a Company like this find its way to the TSX Venture? A Company like this would usually be snapped up by US Private Equity or go public on a US Exchange. It just so happened to land on the desks of James Beesley and Ali Hakimzadeh of Sequoia Partners. They are known as true capital markets experts in the Healthcare space. Ali spent 11 years with Canaccord as an Investment Banker covering Healthcare and Biotech. When these guys find a company of merit, they are about the best in the business at structuring a company for a successful go-public listing and ensuring it is financed by strategic institutional investors that don’t usually invest in small caps.
Literally everything that these guy’s touch has turned to go gold and Assure is likely to be their next big success. Again, it’s as much about the people as it is the business.
Assure was just recently listed on the Frankfurt Stock Exchange and we hear rumours of some sort of US listing. All these new eyeballs and potential shareholders are likely to see the share price move up considerably in the coming days and weeks. As such, there is some urgency here and we wanted to alert you now.
In our opinion at just over CAD $2/share, Assure Holdings Inc. (TSXV: IOM) certainly “Makes the Grade.” We will be buyers in the market.