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Summary

  • ADPT owns and operates First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States.
  • ADPT has been showing losses and the per share dilution on the IPO is almost as much as the IPO price.
  • By the end of 2014, ADPT expects to be operating 53 facilities in its target markets. ADPT currently plans to open a full-service general hospital in Arizona in 2015.

Based in Lewisville, TX, Adeptus Health (NYSE:ADPT) scheduled a $100 million IPO on the NYSE with a market capitalization of $424 million at a price range midpoint of $20.50 for Wednesday, June 25, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint Managers: Deutsche Bank Securities, Goldman Sachs, Evercore, Morgan Stanley

Co-Managers: Piper Jaffray, RBC Capital Markets, Dougherty & Company

End of lockup (180 days): Monday, December 22, 2014

End of 25-day quiet period: Monday, July 21, 2014

Summary

ADPT owns and operates First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States.

Valuation

Glossary

Pre-IPO grade-score summary
http://gaskinsco.com/scr-rate.htm

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

Adeptus Health

$424

2.7

-44.2

4.0

-5.2

24%

Conclusion

The rating is negative. ADPT has been showing losses and the per share dilution on the IPO is almost as much as the IPO price.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

ADPT owns and operates First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States.

Locations

ADPT's facilities are currently located in the Houston, Dallas/Fort Worth, San Antonio and Austin, Texas markets, as well as in Colorado Springs and Denver, Colorado.

Growth

ADPT has experienced rapid growth in recent periods, growing from 14 facilities at the end of 2012 to 26 facilities at the end of 2013, and to 32 facilities as of March 31, 2014.

By the end of 2014, ADPT expects to be operating 53 facilities in its target markets. ADPT currently plans to open a full-service general hospital in Arizona in 2015.

Emergency care experience

ADPT believes it is transforming the emergency care experience with a differentiated and convenient care delivery model which improves access, reduces wait times and provides high-quality clinical and diagnostic services on-site.

ADPT's facilities are fully licensed and provide comprehensive, emergency care with an acuity mix that ADPT believes is comparable to hospital-based emergency rooms.

Tax status

Following this offering, Adeptus Health LLC will continue to operate in the United States as a partnership for U.S. federal income tax purposes. In addition, however, Adeptus Health Inc. will be subject to additional entity-level taxes that will be reflected in its consolidated financial statements.

The emergency room remains a critical access point for millions of Americans who experience sudden serious illness or injury in the United States each year.

Shrinking emergency departments

According to AHA, from 1992 to 2012, the number of emergency room visits increased by 46.7%, while the number of emergency departments decreased by 11.4%.

The availability of that care is under pressure and threatened by a wide range of factors, including shrinking capacity and an increasing demand for services.

The number of emergency room visits exceeded 130 million in 2012, or approximately 247 visits per minute, and care previously provided in inpatient settings is now increasingly being provided in emergency departments.

Dividend Policy

No dividends are planned.

Intellectual Property

Some of ADPT's service marks and logos may be subject to intellectual property rights.

ADPT does not hold any patents.

To date, ADPT has not relied heavily on patents or other intellectual property in operating its business. Nevertheless, some of the information technology purchased or used by ADPT may be patented or subject to other intellectual property rights.

Competition

In each of its markets, ADPT faces competition from traditional and evolving medical providers, including other freestanding emergency rooms, both independent and hospital affiliated. Independent freestanding emergency room competitors include: Elite Care, ER Centers of America, Neighbors Emergency Center, PhysiciansER and Texas Emergency Care Center.

Given its 24/7 operating hours and ability to handle high-acuity needs, instead of competing with community medical practices and urgent care clinics, ADPT believes it complements them.

Many of ADPT's sites work closely with nearby urgent care facilities to ensure the most appropriate patient care for the community.

5% stockholders

Funds affiliated with Sterling Partners 67.1%

5-N Investments, LLC 11.2%

Thomas S. Hall 5.0%

Use of proceeds

ADPT expects to net $93 million from its IPO. Proceeds are allocated as follows:

intends to use $86.2 million of these proceeds to purchase newly-issued LLC Units from Adeptus Health LLC.

Disclaimer: This ADPT IPO report is based on a reading and analysis of ADPT's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Adeptus Health