Live blogging from HME Business Summit: How do you stack up to FedEx?
Don Davis of Duckbridge Advisors is comparing the financial performance of companies in the HME industry to companies in different, yet related, industries.
Davis is starting off by giving background on national providers like Lincare and Apria, and manufacturers like Invacare. He says a point he'll be making throughout his presentation is that companies in the HME industry may not be happy with the margins they're making (Lincare's EBITDA margin was 24% in 2009, down from 31% in 2008; and Invacare's was 7% in both 2009 and 2008), but companies in other industries are operating under tighter margins.
The first company up for comparison: Rent-a-Center. Its EBITDA margin was 32% in 2009 and 2008. A big difference between Rent-a-Center and an HME company: Its DSO is eight days (compared to Lincare's 35).
UPS's EBITDA margin was 12% in 2009 and 14% in 2008.
FedEx's average driver makes between 100 and 130 deliveries per day (imagine an HME driver making that many deliveries?). Its EBITDA margin was 11% in 2009 and 8% in 2008. Both UPS and FedEx have significantly higher salary and benefits expenses.
Davis says Apria, Rotech and American HomePatient, with 13%, 13% and 14% EBITDA margins, respectively, will have difficulty absorbing a 32% reimbursement cut due to competitive bidding. Lincare, with an EBITDA margin of 24%, looks like it's more in "survival mode."
So what? Davis says benchmarking to ancillary industries provides a different perspective. Can an HME driver make one more delivery, considering that FedEx drives make 130 deliveries a day? Yes, he says.