GMR Solutions GMRS: Hold on for the Ride – Unmatched Scale in Ground & Air EMS; Initiating at OW

Research evidence excerpt

GMR Solutions GMRS: Hold on for the Ride – Unmatched Scale in Ground & Air EMS; Initiating at OW

ith relatively de-risked forward pricing as a safety net provider,

we see line of sight toward ~HSD% organic earnings growth

While no provider is immune to rate pressure, we believe that GMRS’s role servicing

the U.S. healthcare safety net offers unique staying power vs other ambulance operators

and de-risks some of the company’s forward rate developments and policy outlook, with

the NSA/IDR serving as the largest potential area for downside along with broader

compression to commercial rates. GMRS is majority in-network with commercial

payers, with out-of-network (OON) exposure largely limited to air transports (~30% of

volumes) and subsequent NSA/IDR arbitration, as ground rates are set locally. That

said, emergency air volumes possess a lower rate of adverse selection from uninsured

populations, resulting in lower earnings volatility from changes in insurance coverage.

GMRS also has more limited exposure to Medicaid supplemental payment programs

that have created significant volatility for players like ARDT, HCA, THC, and UHS.

Within this context, GMRS describes a reasonable ~MSD%+ revenue algorithm

underpinned by ~LSD% volume increases and ~LSD%+ rate growth, which, when

combined with operating leverage, is expected to drive ~HSD% EBITDA growth over

time. We see potential opportunity for upside from M&A, contract wins in remaining

larger markets, accelerated integration of air/ground in existing markets, growth in

complementary services (notably event medical standby), and favorable rate

developments.

Deleveraging should provide greater flexibility on capital allocation and accelerate

both organic and inorganic growth efforts