May 31st 2010
Coverage Initiated: $0.14 (Nov. 8/04)
QUICK FACTS SHEET
HIGHLIGHTS:
- strong gross margins expected to continue for the foreseeable future
- return to profitability in fiscal 2009 with stronger 2010 anticipated
- recently expanded or relocated several clinics in western Canada
- plans to expand with the opening of additional satellite clinics, particularly in B.C.
- potential takeover candidate
DISCUSSION:
Audiotech was founded in April 1998 as a growth corporation in a highly-fragmented hearing healthcare industry in North America. The company operates and manages a growing network of 16 hearing clinics in British Columbia, Alberta, and Idaho. Audiotech targets growth by establishing and opening new clinics in strategic locations as well as by identifying quality acquisition candidates that meet firm consolidation criteria and can achieve ongoing operating efficiencies. The company is becoming a regional industry leader by targeting primary hearing care providers in each major market. As North America's "baby-boomer" generation ages, the demand for hearing care services is expected to increase considerably. Audiotech’s goal is to establish a geographically diverse base of hearing clinics throughout North America upon completing the consolidation of profitable clinics in the Pacific Northwest.
The number of audiologists graduating from schools is lower than the number of audiologists retiring. This decreasing workforce combined with the increasing demand for hearing care as the population ages has placed unique pressures on hearing care companies to find qualified professional staff. Management believes that today's audiologists prefer autonomous working environments with the professional support and administrative infrastructure that Audiotech provides.
In August 2008, Audiotech opened a new clinic in Penticton, B.C. A lot of the equipment for this clinic opening was derived from a clinic that was closed in Victoria, B.C. after it failed to meet expectations. During the summer of 2009 some staffing changes were implemented at the company’s Kelowna clinic, which has begun to result in improved operating cash flow. In January 2010, Audiotech closed its Southwest Calgary clinic and merged its operations with the Northwest Calgary clinic due to lower than expected results. While estimated annual revenue loss of $100,000 to $130,000 will occur, the company is also expected to be able to save approximately $75,000 annually in operating costs. Ongoing initiatives to improve efficiencies and to capitalize upon growth opportunities within these clinics will also be emphasized in fiscal 2010. The company also intends to continue to open additional satellite clinics in B.C.
During the second fiscal quarter ended March 31, 2010 , Audiotech recorded sales of $1.23 million, which was almost identical to the amount generated in the same period last year. Canadian sales improved while U.S. sales declined during the quarter largely due to a weaker U.S. dollar. Audiotech recorded a strong gross margin of 68.1% during Q2, and management anticipates continued strength in its margins for the foreseeable future.
The company’s outlook for fiscal 2010 is very positive. Management is anticipating further improvements in profitability while generating strong operating cash flow. Audiotech is currently planning further initiatives to strengthen its position as a dominant regional hearing care provider particularly in the interior of B.C. Management remains confident that these investments to secure the company’s market position will result in a higher corporate valuation in the event that Audiotech is acquired by another entity in the current market consolidation cycle.
Due to the increasingly competitive and expensive nature of completing clinic acquisitions within the hearing industry, Audiotech has shifted its focus from actively seeking out accretive acquisitions to considering ways to grow organically through new clinic openings, existing clinic expansions and the opening of satellite clinics. Management may continue to review potential acquisition opportunities, but this will be a secondary growth strategy going forward.
Over the past several years, Audiotech has become an ideal acquisition candidate for a number of reasons. Firstly, there is a growing consolidation trend in the industry in which hearing aid manufacturers are buying up successful hearing clinics to gain the opportunity to sell their own line of products at company-owned locations. Especially attractive are those acquisition candidates that operate a chain of clinics and Audiotech falls into this category. It should be noted that, after incorporating the company’s debt, Audiotech is presently trading at approximately 0.7 times sales, which is a relatively low valuation based on the company’s potential takeover appeal.
FINANCIAL SUMMARY
(For the fiscal years ending September 30)
(all results expressed in 000's except per share values)
|
| |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Revenues |
$ 2,811 |
$ 2,989 |
$ 3,167 |
$ 3,630 |
$ 3,812 |
$ 3,552 |
$ 4,102 |
$ 4,427 |
$ 4,978 |
| Gross Profit |
1,654 |
1,926 |
1,851 |
2,321 |
2,493 |
2,447 |
2,838 |
2,927 |
3,449 |
| Net Income (loss) |
(575) |
(47) |
(105) |
154 |
79 |
102 |
88 |
*(1,272) |
3 |
| per share |
(0.044) |
(0.004) |
(0.008) |
0.012 |
0.006 |
0.008 |
0.007 |
*(0.095) |
0.000 |
| * includes goodwill impairment of $942,775
|
MANAGEMENT & DIRECTORS:
Osvaldo “Ozzie” Iadarola, President, CEO & Director
Grant Robertson, CFO & Director
Daniel Allen, Chief Operations Manager & Director
Dr. Gerald Mill, Director
James Gillis, Director
Glen Martin, Director
CONTACT INFORMATION:
Head Office: #760 - 175 Second Avenue, Kamloops, BC V2C 5W1
Telephone: (250) 372-5847 or 1-888-590-3555
Fax: (250) 372-3859
Email: ozzie@audiotech.org
Website: www.audiotech.org
Contact Person: Ozzie Iadarola
The corporate information provided in this report is for informational purposes only. While every effort has been taken to provide accurate information, the completeness or accuracy of such information is not guaranteed. Certain statements in this report may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The company profiled assumes no liability for the information presented. The information contained in this report should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. Trading accounts, including personal, family and corporate accounts, under the control of QIS Capital management and employees currently hold 600,000 shares in the company profiled. QIS Capital may have financial relationships with the companies discussed and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright ©2010, QIS Capital Corporation.
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