Sectorwatch: Healthcare - Primary Care

Sectorwatch:Healthcare - Primary CareQ1 2020

2

Healthcare - Primary CareQ1 2020

Sector Dashboard [4]

Public Basket Performance [5]

Operational Metrics [7]

Valuation Comparison [10]

Recent Deals [13]

Appendix [14]

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only in conjunction with averbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. All data cited in this document wasbelieved to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations asto the accuracy or completeness of third-party data contained herein. This document should be treated as confidential and for the use of the intended recipient only. Pleasenotify 7 Mile Advisors if it was distributed in error.

3

Overview

7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close knit team with a long history together and a laser focus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluate new markets. We publish our sectorwatch, a review of M&A and operational trends in the industries we focus.

Dashboard• Summary metrics on the sector• Commentary on market momentum by

comparing the most recent 12-month performance against the last 3-year averages.

Public Basket Performance• Summary valuation and operating metrics

for a basket of comparable public companies

Valuation Comparison• Graphical, detailed comparison of

valuation multiples for the public basket

Recent Deals• The most recently announced deals in the

sector

4

Dashboard

Operating Metrics

Valuation

Revenue Growth Momentum

0.2% 1 - year revenue growth compared to revenue growth

average for last 3 years

Pricing / Gross Margin Momentum

0.3% 1 - year gross profit % compared to gross profit %

average for last 3 years

Profitability Momentum

1.3% 1 - year EBITDA % compared to EBITDA % average for

last 3 years

Current revenue growth rate exceeds the average of the last 3 years by this

amount, indicating that market momentum is increasing

Current gross profit margin exceeds the average of the last 3 years gross profit

margin by this amount, indicating supplier pricing power

Current EBITDA margin exceeds the average of the last 3 years EBITDA margin

by this amount, a condition that may attract new entrants

6.3%

13.1%

36.9%

0% 10% 20% 30% 40%

Median LTM Rev. Growth %

Median LTM EBITDA Margin %

Median LTM GP Margin %

1.1x

7.7x

10.4x

9.9x

0x 5x 10x 15x 20x

Median TEV / LTM Revenue

Median TEV / LTM EBITDA

Median TEV / LTM EBIT

Median Price / LTM Earnings

5

Public Basket

Company TEV $mLTM Rev

$m

Rev Growth

YoY GP %EBITDA

%TEV / Rev X

TEV / EBITDA

X # FTEsRev / FTE $k

Community Health Systems, Inc. 14,774 13,210 -7% 39% 11% 1.1 8.6 63,000 210

Universal Health Services, Inc. 12,922 11,378 6% 40% 16% 1.1 6.8 67,700 168

Tenet Healthcare Corporation 19,368 18,479 1% 36% 16% 1.0 5.7 88,608 209

HCA Healthcare, Inc. 67,464 51,336 10% 38% 19% 1.3 6.3 210,000 244

Anthem, Inc. 73,384 104,212 13% 22% 7% 0.7 9.8 70,600 1,476

UnitedHealth Group Incorporated 274,753 242,155 7% 24% 9% 1.1 12.1 325,000 745

Average 77,111 73,462 5% 33% 13% 1.1 8.2 137,485 509

Median 43,416 34,908 6% 37% 13% 1.1 7.7 79,604 227

share price as of 31Mar20

6

Public Basket Valuation Trends

Public EBITDA Multiples over Time

Public Revenue Multiples over Time

9.3x

1.1x

0x

3x

6x

9x

12x

15x

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Dec-1

8

Mar-

19

Jun-1

9

Sep-1

9

Dec-1

9

Mar-

20

TEV/EBITDA - Median TEV/Revenue - Median

TEV/EBITDA - Average TEV/Revenue - Average

0x2x4x6x8x

10x12x14x

Mar-

15

Jun-1

5

Sep-1

5

Dec-1

5

Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Mar-

18

Jun-1

8

Sep-1

8

Dec-1

8

Mar-

19

Jun-1

9

Sep-1

9

Dec-1

9

Mar-

20

TEV/EBITDA - Median TEV/EBITDA - Average

0.0x

0.5x

1.0x

1.5x

Mar-

15

Jun-15

Sep-1

5

Dec-1

5

Mar-

16

Jun-16

Sep-1

6

Dec-1

6

Mar-

17

Jun-17

Sep-1

7

Dec-1

7

Mar-

18

Jun-18

Sep-1

8

Dec-1

8

Mar-

19

Jun-19

Sep-1

9

Dec-1

9

Mar-

20

TEV/Revenue - Median TEV/Revenue - Average

7

Operational Metrics

LTM Gross Profit Margin % LTM EBITDA %

- 10% 20% 30% 40%

Median

Anthem, Inc.

UnitedHealth Group

Incorporated

Tenet Healthcare

Corporation

HCA Healthcare, Inc.

Community Health Systems,

Inc.

Universal Health Services,

Inc.

- 5% 10% 15% 20%

Median

Anthem, Inc.

UnitedHealth Group

Incorporated


Inc.

Tenet Healthcare

Corporation


Inc.


8

Operational Metrics

LTM Revenue Growth %LTM Revenue per

Full Time Employee x 000’s

(10%) (5%) - 5% 10% 15%

Median

Community Health

Systems, Inc.

Tenet Healthcare

Corporation


Inc.

UnitedHealth Group

Incorporated


Anthem, Inc.

$- $500 $1,000 $1,500

Median


Inc.

Tenet Healthcare

Corporation

Community Health

Systems, Inc.


UnitedHealth Group

Incorporated

Anthem, Inc.

9

Operational Metrics

Accounts Receivable TurnoverAverage Days

Sales Outstanding

0x 5x 10x 15x 20x 25x

Median


Inc.

Tenet Healthcare Corporation



Inc.

Anthem, Inc.

0 20 40 60 80

Median

Anthem, Inc.


Inc.




Inc.

10

Valuation

TEV / LTM Revenue TEV / LTM EBITDA

0.0x 0.5x 1.0x 1.5x

Median

Anthem, Inc.

Tenet Healthcare

Corporation


Inc.

UnitedHealth Group

Incorporated


Inc.


0x 5x 10x 15x

Median

Tenet Healthcare

Corporation



Inc.


Inc.

Anthem, Inc.

UnitedHealth Group

Incorporated

11

Valuation

TEV / LTM EBIT Price / LTM Earnings

0x 5x 10x 15x 20x

Median

Tenet Healthcare

Corporation



Inc.

Anthem, Inc.

UnitedHealth Group

Incorporated


Inc.

0x 5x 10x 15x 20x

Median



Inc.

Anthem, Inc.

UnitedHealth Group

Incorporated

12

Valuation

Historical Valuation Multiples versus Gross Profit

Historical Valuation Multiples versus Revenue Growth Rate

6x 6x 7x 9x 10x 12x

36.2% 37.6%

39.9%

38.7%

21.5%

23.8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0x

2x

4x

6x

8x

10x

12x

14x

LTM

GP%

EBIT

DA(x

)

EBITDA(x) LTM GP%

6x 6x 7x 9x 10x 12x

0.9%

8.2%

5.6%

(6.7%)

13.2%

6.4%

-10%

-5%

0%

5%

10%

15%

0x

2x

4x

6x

8x

10x

12x

14x

LTM

RG

R%

EBIT

DA(x

)

EBITDA(x) LTM RGR%

13

Recent Transactions

Date Target Buyer / Investor

Total Transaction

Value Target

Revenue TEV /

Revenue TEV /

EBITDA

9Mar20 20 Health Centers Healthstat, Inc. - - - -

2Mar20 Nine Maryland Urgent Care Sites from ChoiceOne University Of Maryland Medical System - - - -

2Mar20 ChoiceOne Urgent Care, LLC Northside Hospital, Inc. - - - -

2Mar20 Conroe Family Medicine Kelsey-Seybold Clinic - - - -

2Mar20 5 Independent Physician Practices Advocare, LLC - - - -

1Mar20 Seven Hills Ob-Gyn Associates, Inc. Axia Women's Health - - - -

14Feb20 Pembroke Family Medicine Oak Orchard Community Health Center, Inc. - - - -

13Feb20 Irvine Family Practice Medical Group, Inc.Memorial Health Services (nka:MemorialCare Medical Group)

- - - -

12Feb20 Hudson Valley Community Services Cornerstone Family Healthcare

10Feb20 18 clinics in the New England American Family Care, Inc. - - - -

3Feb20 Central Texas Medical Center Inc. CHRISTUS Santa Rosa Health Care Corporation - - - -

1Feb20 Micro Hospitals of Tandem Hospital Partners LLC St. Vincent - - - -

31Jan20 12 entry fee CCRCs with 5,641 units (nka:13 CCRCs) HCP, Inc. (nka:Healthpeak Properties, Inc.) 541.00 - - -

30Jan20 Summit Medical Group of Arizona VillageMD - - - -

28Jan20 New England Urgent Care, LLC PhysicianOne Urgent Care - - - -

28Jan20 Six Health Care Facilities in United States of Novant Health Holston Medical Group, PC - - - -

23Jan20 Primary Care Physicians, LLC Cano Health, LLC - - - -

15Jan20 Wellness for Life Proactive MD

13Jan20 Austin Complete Health Forum Health LLC

13Jan20 Uniontown Hospital Inc West Virginia United Health System, Inc. - - - -

11Jan20 UnityPoint Clinic Family Medicine - Clarke County Clarke County Hospital - - - -

7Jan20 The Healthcare Center at Patriot Heights in San Antonio, Texas The Ensign Group, Inc. - - - -

6Jan20 Apple Valley Medical Clinic, Ltd. Allina Health System, Inc. - - - -

11Dec19 Ormond Medical Arts, LLC Pharos Capital Group, LLC - - - -

4Dec19 Renville County Hospital and Clinics HealthPartners, Inc. - - - -

13Nov19 WVP Medical Group, LLC Salem Health - - - -

11Nov19 Birmingham Internal Medicine Associates, P.C. Complete Health, Inc. - - - -

5Nov19 Floyd Healthcare Management, Inc. Atrium Health - - - -

14

APPENDIX:

Public Basket

Constituents

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only in conjunction with averbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. All data cited in this document wasbelieved to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7M Securities make warranties or representations asto the accuracy or completeness of third-party data contained herein. This document should be treated as confidential and for the use of the intended recipient only. Pleasenotify 7 Mile Advisors if it was distributed in error.

Healthcare - Primary CareQ1 2020

15

Public Basket

Community Health Systems, Inc.

Community Health Systems, Inc., together with itssubsidiaries, owns, leases, and operates general acute carehospitals in the United States. The company offers generalacute care, emergency room, general and specialty surgery,critical care, internal medicine, obstetrics, diagnostic,psychiatric, and rehabilitation services, as well as skillednursing and home care services. It also provides outpatientservices at urgent care centers, occupational medicineclinics, imaging centers, cancer centers, and ambulatorysurgery centers. Community Health Systems, Inc. wasfounded in 1985 and is headquartered in Franklin,Tennessee.

Date Key Development Headline3/18/20 Allegiance Health Management, Inc. agreed to acquire

Ruston Louisiana Hospital Company, LLC from Community Health Systems, Inc. (NYSE:CYH).

12/30/19 Bon Secours Mercy Health completed the acquisition of Petersburg Hospital Company, LLC, Franklin Hospital Corporation and Emporia Hospital Corporation from Community Health Systems, Inc. (NYSE:CYH).

10/27/19 Bon Secours Mercy Health signed a definitive agreement to acquire Petersburg Hospital Company, LLC, Franklin Hospital Corporation and Emporia Hospital Corporation from Community Health Systems, Inc. (NYSE:CYH) for approximately $100 million.

9/29/19 Princeton Community Hospital, Inc. completed the acquisition of Bluefield Hospital Company, LLC from Community Health Systems, Inc. (NYSE:CYH).

0x

1x

1x

2x

2x

Revenue Multiples - Community Health

Systems, Inc.

TEV/Revenue Average

0x

5x

10x

15x

20x

EBITDA Multiples - Community Health

Systems, Inc.

TEV/EBITDA Average

16

Public Basket

Universal Health Services, Inc.

Universal Health Services, Inc., through its subsidiaries,owns and operates acute care hospitals, outpatient facilities,and behavioral health care facilities. The company operatesthrough Acute Care Hospital Services, Behavioral HealthCare Services, and Other segments. Its hospital offergeneral and specialty surgery, internal medicine, obstetrics,emergency room care, radiology, oncology, diagnostic care,coronary care, pediatric services, pharmacy services, and/orbehavioral health services. As of February 27, 2019, itowned and/or operated 350 inpatient facilities, and 37outpatient and other facilities located in 37 states,Washington, D.C., the United Kingdom, and Puerto Rico.Universal Health Services, Inc. founded in 1978 and isheadquartered in King Of Prussia, Pennsylvania.

Date Key Development Headline12/16/19 Beaumont Health, Universal Health Services Break Ground on

New Mental Health Hospital

12/18/18 Universal Health Services Inc. (NYSE:UHS) cancelled the acquisition of Memorial Behavioral Health from Gulfport Memorial Hospital.

11/5/18 Beaumont Health and Universal Health Services Form A Joint Venture

0x

1x

1x

2x

2x

3x

Revenue Multiples - Universal Health Services,

Inc.

TEV/Revenue Average

0x

2x

4x

6x

8x

10x

12xEBITDA Multiples - Universal Health Services,

Inc.

TEV/EBITDA Average

0x

10x

20x

30x

40xP/E Multiples - Universal Health Services, Inc.

P/E Average

17

Public Basket


Tenet Healthcare Corporation operates as a diversifiedhealthcare services company. The company operates inthree segments: Hospital Operations and Other, AmbulatoryCare, and Conifer. Its general hospitals offer acute careservices, operating and recovery rooms, radiology andrespiratory therapy services, clinical laboratories, andpharmacies. Tenet Healthcare Corporation was founded in1967 and is headquartered in Dallas, Texas.

Date Key Development Headline12/12/19 Methodist Le Bonheur Healthcare, Inc. entered into a

definitive agreement to acquire Saint Francis Hospital-Bartlett, Inc. and Saint Francis Hospital-Memphis, Inc. from Tenet Healthcare Corporation (NYSE:THC) for $350 million.

1/27/19 TWG Partners, LLC and Pipeline Health, LLC completed the acquisition of Louis A. Weiss Memorial Hospital, Westlake Hospital and West Suburban Medical Center from Tenet Healthcare Corporation (NYSE:THC) for $70 million.

12/3/18 Hakim Health Technology, Hakim International Development Co., Limited, Connected Care Health Services, Inc. and others completed the acquisition of Golden State Medicare Health Plan from Tenet Healthcare Corporation (NYSE:THC).

8/19/18 NMC Health Plc (LSE:NMC) acquired Aspen Healthcare Limited from Tenet Healthcare Corporation (NYSE:THC) for an enterprise value of £10 million.

0.0x

0.5x

1.0x

1.5xRevenue Multiples - Tenet Healthcare

Corporation

TEV/Revenue Average

0x

2x

4x

6x

8x

10x

12xEBITDA Multiples - Tenet Healthcare

Corporation

TEV/EBITDA Average

18

Public Basket


HCA Healthcare, Inc., through its subsidiaries, provideshealth care services. The company operates general, acutecare hospitals that offer medical and surgical services,including inpatient care, intensive care, cardiac care,diagnostic, and emergency services; and outpatientservices, such as outpatient surgery, laboratory, radiology,respiratory therapy, cardiology, and physical therapyservices. It also operates psychiatric hospitals, whichprovide therapeutic programs comprising child, adolescentand adult psychiatric care, and adolescent and adult alcoholand drug abuse treatment and counseling. HCA Healthcare,Inc. was founded in 1968 and is headquartered in Nashville,Tennessee.

Date Key Development Headline1/9/20 HCA Healthcare, Inc. (NYSE:HCA) acquired Valify, Inc.

1/6/20 HCA Healthcare, Inc. (NYSE:HCA) completed the acquisiton of a majority stake in Galen College of Nursing.

6/30/19 HCA Healthcare, Inc. (NYSE:HCA) acquired 24 MedSpringUrgent Care Centers in Texas from Fresenius Medical Care AG & Co. KGaA (XTRA:FME).

0x

1x

1x

2x

2xRevenue Multiples - HCA Healthcare, Inc.

TEV/Revenue Average

0x

2x

4x

6x

8x

10x

12xEBITDA Multiples - HCA Healthcare, Inc.

TEV/EBITDA Average

0x

5x

10x

15x

20x

25xP/E Multiples - HCA Healthcare, Inc.

P/E Average

19

Public Basket

Anthem, Inc.

Anthem, Inc., through its subsidiaries, operates as a healthbenefits company in the United States. It operates throughthree segments: Commercial & Specialty Business,Government Business, and Other. The company offers aspectrum of network-based managed care health benefitplans to large and small group, individual, Medicaid, andMedicare markets. Its managed care plans include preferredprovider organizations; health maintenance organizations;point-of-service plans; traditional indemnity plans and otherhybrid plans, such as consumer-driven health plans; andhospital only and limited benefit products. The company alsoprovides a range of managed care services to self-fundedcustomers, including claims processing, underwriting, stoploss insurance, actuarial services, provider network access,medical cost management, disease management, wellnessprograms, and other administrative services. Anthem, Inc.was founded in 1944 and is headquartered in Indianapolis,Indiana.

Date Key Development Headline3/1/20 Anthem, Inc. (NYSE:ANTM) completed the acquisition of

Beacon Health Options from Bain Capital Private Equity, LP and Diamond Castle Holdings, LLC.

1/22/20 Anthem, Inc. (NYSE:ANTM) completed the acquisition of Missouri and Nebraska Medicaid plans from WellCare Health Plans, Inc. (NYSE:WCG).

9/25/19 Anthem, Inc. (NYSE:ANTM) entered into an agreement to acquire Missouri and Nebraska Medicaid plans from WellCare Health Plans, Inc. (NYSE:WCG).

0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2xRevenue Multiples - Anthem, Inc.

TEV/Revenue Average

0x

5x

10x

15xEBITDA Multiples - Anthem, Inc.

TEV/EBITDA Average

0x

5x

10x

15x

20x

25xP/E Multiples - Anthem, Inc.

P/E Average

20

Public Basket

UnitedHealth Group Incorporated

UnitedHealth Group Incorporated operates as a diversifiedhealth care company in the United States. It operatesthrough four segments: UnitedHealthcare, OptumHealth,OptumInsight, and OptumRx. The UnitedHealthcare segmentoffers consumer-oriented health benefit plans and servicesfor national employers, public sector employers, mid-sizedemployers, small businesses, and individuals; health andwell-being services to individuals age 50 and older,addressing their needs for preventive and acute health careservices, as well as services dealing with chronic disease andother specialized issues for older individuals; and Medicaidplans, Children’s Health Insurance Program, and health careprograms; and health and dental benefits. The OptumHealthsegment provides access to networks of care providerspecialists, health management services, care delivery,consumer engagement, and financial services. This segmentserves individuals through programs offered by employers,payers, government entities, and directly with the caredelivery systems. UnitedHealth Group Incorporated wasfounded in 1974 and is based in Minnetonka, Minnesota.

Date Key Development Headline11/4/19 UnitedHealth Group Incorporated (NYSE:UNH) acquired

HealthSCOPE Benefits, Inc from ABRY Partners, LLC.

7/24/19 UnitedHealth To Seek Acquisitions

6/23/19 UnitedHealth Group Incorporated (NYSE:UNH) acquired PatientsLikeMe Inc. from iCarbonx and others.

0.0x

0.5x

1.0x

1.5xRevenue Multiples - UnitedHealth Group

Incorporated

TEV/Revenue Average

0x

5x

10x

15x

20xEBITDA Multiples - UnitedHealth Group

Incorporated

TEV/EBITDA Average

0x

5x

10x

15x

20x

25x

30xP/E Multiples - UnitedHealth Group

Incorporated

P/E Average

21

7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise onM&A and private capital transactions and provide market assessments and benchmarking. As a close-knit team with a long historytogether and a laser focus on our target markets, we help our clients sell their companies, raise capital, grow throughacquisitions, and evaluate new markets. Securities offered through 7M Securities LLC.

CONTACT INFO

Leroy Davis, Partner 704.899.5962 [email protected]

Tripp Davis, Partner 704.899.5762 [email protected]

Andy Johnston, Partner 704.899.5961 [email protected]

Mark Landry, Managing Director 561.972.0609 [email protected]

Ben Lunka, Managing Director 704.496.2995 [email protected]

John Cooper, Director 704.973.3996 [email protected]

Tim Frye, Director 704.973.3994 [email protected]

Kristina Sergueeva, Director 704.899.5149 [email protected]

Ben Garber, Vice President 412.626.7898 [email protected]

Nicholas Prendergast, Vice President 704.973.3995 [email protected]

Garth Martin, Vice President 704.973.3997 [email protected]

Ariail Barker, Director, Sales & Marketing 704.981.2908 [email protected]

Emily Halstenberg, Marketing & Sales Coordinator 704.409.9912 [email protected]

Marty Johnson, Senior Associate 704.973.3999 [email protected]

Sydney Scadden, Senior Associate 704.973.3998 [email protected]

Steve Buffington, Associate 704.960.1828 [email protected]

Dennis Fox, Associate 704.706.9168 [email protected]

Daniel Kim, Associate 704.912.4584 [email protected]

Olufunke Abass, Associate 704.285.8171 [email protected]

Robin Siegel, Analyst 704.490.4714 [email protected]

Sectorwatch: Healthcare - Primary Care

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