SmallCapPower | March 20, 2018: Nova Leap announces a definitive agreement to make its second acquisition in 2018. On March 19, 2018, Nova Leap Health Corp. (TSXV:NLH) announced it has executed a definitive agreement to acquire a home care services company located in New England for US$1.2 million - US$1.0 million in cash and US$0.2 million in a 2-year promissory note. This transaction is in addition to its acquisition of Family Tree Home Care, another New England-based provider, in the previous month.
Target company has 2017 unaudited reported revenue of ~US$1.9M and adjusted EBITDA of US$0.3M. The deal is expected to be immediately accretive and projected to close in Q2/2018. With today's announcement, NLH is on pace to complete 2 transactions in the first half of 2018 as part of the Company's acquisitive growth plan by the end of the year.
After the deal closes, NLH's actual annual revenue run rate is expected to approach US$9 million. This amount is 90% of the forecasted US$10 million exit annualized recurring revenue run rate that the Company guided to in their March 9 news release. Home care services hours are expected to reach 352,000 hours annually, a 25% increase (72,000 hours) from the current reported levels of 280,000 annualized service hours. In addition, the Company is beginning to realize economies of scale through integration within its growth-by-acquisition model and expects to be profitable on a consolidated basis in Q4/2018.
Expect financing announcement shortly. The latest acquisition closing will be subject to financing and the Company expects to raise a combination of debt and equity to complete the transaction. The Family Tree Home Care $2.1 million purchase price was financed with $0.45 million in cash, a demand loan of $1.35 million from a Canadian Schedule 1 Bank, and a $0.30 million promissory note issued to the vendor; we assume a similar financing structure for this acquisition.
Nova Leap Health continues to execute on their corporate M&A strategy. The Company is focused on acquiring and organically growing Private Pay Non-Medical and Skilled Home Care Companies, and this recent announcement illustrates that the Company can continue to find investment opportunities. As the full impact of their latest acquisitions will be reflected after Q1/18 financials are reported, we continue to believe it is a good time to evaluate Nova Leap Health as an attractive investment opportunity.
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