'Grey Tsunami' Creates Surge in Physiotherapy Growth

Agility Health Consolidates a Profitable but Fragmented Industry

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| Source: Agility Health

VANCOUVER, British Columbia, Aug. 12, 2014 (GLOBE NEWSWIRE) -- David Cole (54), a Seattle businessman, still plays competitive soccer and that is taking a toll on his body. "In the last three year years I've torn a quad muscle, a calf muscle and a tendon in my shoulder," explains Cole, "This has required multiple trips to the physiotherapist".

Aging athletes are a key part of the "Grey Tsunami" that is flowing into Rehab and Physiotherapy Clinics across the U.S. The $31 billion market is growing at an annual rate of 6.1%.

Agility Health (TSX-V:AHI) has carved out a profitable niche in this space, and the company has just announced a "transformative" deal which is expected to increase annual revenues from about $65 million to pro forma revenues exceeding $100 million. The current market cap of Agility ($40 million) has not factored in the significant anticipated revenue bump ($39 million) from the new acquisition.

The total acquisition consideration of $20.8 million cash is less than 5x the anticipated pro forma EBITDA of the entity and would expand Agility Health operations to more than 200 sites across 26 states with more than 1,800 employees providing services for approximately 2 million patient visits per year. The acquisition of the target will be immediately accretive to Agility's earnings.

"The target company complements a key area of strategic growth," stated Davidson, "It's a line of business that we are looking to further grow in, and to specialize in. We believe we can advance their existing client relationships for both company's benefit."

Agility Health currently operates 74 outpatient or onsite rehabilitation locations in 17 states. The company also contracts rehabilitative services to 41 hospitals and inpatient rehabilitation units, 36 nursing homes, long-term care facilities and other service locations in 9 states. The company also provides embedded services at manufacturing facilities for a plethora of Fortune 500 companies. Further, Agility has an orthotics company with an elite athlete client list.

"Our service offerings are diverse by design," stated Davidson, "In the US, each region is unique, with different micro-healthcare economies. Our diversity allows us to cross-sell, and it creates a strong defensive position if market conditions change. Our skill set and services are customizable to any regulatory environment or geographic location. The key is that we have developed proprietary software that ties it all together."

"Another area of strategic growth is outpatient clinic acquisitions and development," stated Agility Health CEO Steven N. Davidson in an exclusive interview with Financial Press, "We target clinic owners who have developed 2-5 clinics. Agility run outpatient clinics are free-standing, and we partner with clinics where Agility become a majority owner. It's a good niche that is still meaningful for companies of our scale, but too small for larger competitors."

Davidson explains that a typical owner of a rehab clinic is very passionate about being a clinician, and building their practice. Agility provides "the back office functions that they don't like to do, and typically not skilled at". Namely, human resources, accounting, technology, data management and compliance.

When Agility acquires clinical practices, the seller typically retains 20-30% equity, so they are incentivized on the backend. Sellers also have access to funds to monetize and further scale their business. "The real synergy comes when a clinic operator can say, "I know doctors in an under-served area, let's investigate the economics of starting a clinic there to address the market need."

"We have developed a high tech infrastructure designed for outpatient clinics and hospital departments," stated Davidson, "We can take time consuming tasks off their plate which allows them to be better practitioners, better businesspeople."

Agility also manages the technology practice management for hospital rehabilitation departments. The company presently has about 25 hospital clients that are transitioning to Agility's next generation of software that also contains a clinical database with 290,000 cases. "We are currently validating data that will help us predict how long somebody should typically be receiving therapy, based on a standardized set of clinical data collection embedded in our software," stated Davidson, "This will allow us to manage cases internally and also externally for insurance companies."

"Our sweet spot is deploying our technology and entrepreneurial skill set to a hospital that doesn't regard rehab as a core competency," stated Davidson. "Joint-venturing with a hospital is the perfect scenario for us. We are in discussions with various hospital systems right now, demonstrating to them how we can save money, streamline business, and increase their quality of care."

"Data means everything to all stakeholders and is key," confirms Davidson, "It is vital for clinicians to have the ability to validate effectiveness and patient satisfaction. Data-driven decision-making is where we see the future. Creating software to manage a clinical database is central to our vision."

There is a big push in the U.S. to transition patients out of the hospital as quickly as possible – creating more post-operative care. 'Evidence-based medicine' is in vogue and prompts the question: "What's the research behind a given therapy?" If you're a spine patient, should you be receiving acupuncture, surgery, chiropractic treatment or physiotherapy? What treatment modality provides the best value and results?

Davidson further explains that "Obamacare" supported initiatives are putting the money into the hands of institutions to manage the entire length of a patient case, from the time the patient sees a doctor for their condition, through to surgery and post-operative care.

"The 'grey tsunami' is a meaningful factor for Agility. As you get older, injury rates go up. Physiotherapy utilization is 3-5% a year for the general population and over 10% for a 65-year-old. Also, there are changing attitudes to physiotherapy, as patients are increasingly self-referring to a physiotherapist."

Agility Health is currently trading at $0.51 with a market cap of $41 million.

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