Nava Health MD Seeks $12 Million U.S. Micro-IPO (Pending:NAVA)

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A Quick Take On Nava Health MD

Nava Health MD (NAVA) has filed to raise $12 million in an IPO of its common stock, according to an S-1 registration statement.

The firm provides a range of holistic and alternative health and wellness services to consumers in the U.S.

Given the firm’s tiny size and industry dynamics, I’m on Hold for the NAVA IPO.

Nava Health Overview

Columbia, Maryland-based Nava Health MD was founded to provide health and wellness services to consumers via its three physical locations and telehealth services online.

Management is headed by founder, president and CEO Bernaldo Dancel, who has been with the firm since inception in 2014 and was previously founder of Ascend One and Amerix Corporation, a data services agency.

The company’s primary offerings include:

  • Physician appointments

  • IC Micronutrient therapies

  • Massage

  • Acupuncture

  • Aesthetic services

  • Other services

As of June 30, 2022, Nava Health has booked fair market value investment of $1.67 million in equity and convertible promissory notes as of June 30, 2022 from investors.

Nava Health – Customer Acquisition

The firm operates primarily through a membership subscription model and markets its services in the areas surrounding its physical locations.

Management says it plans to expand its marketing to online channels and to extend to demographics younger than 40 and older than 60 years of age.

Sales and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:

Sales and Marketing

Expenses vs. Revenue

Period

Percentage

Six Mos. Ended June 30, 2022

22.9%

2021

32.9%

2020

36.9%

(Source – SEC)

The Sales and Marketing efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, rose to 1.9x in the most recent reporting period, as shown in the table below:

Sales and Marketing

Efficiency Rate

Period

Multiple

Six Mos. Ended June 30, 2022

1.9

2021

0.8

(Source – SEC)

Nava Health’s Market & Competition

According to a 2022 market research report by Grand View Research, the corporate wellness market, as a proxy for the overall wellness market, is forecast to reach $75.3 billion by 2030.

This represents a forecast CAGR of 4.38% from 2016 to 2030.

The main drivers for this expected growth are an increasing desire by companies to provide proactive wellness health services to their employees to minimize health expenses and improve productivity.

Also, as workforces age, the need for wellness programs for employees of all ages is expected to increase in the areas of:

  • Health risk assessments

  • Fitness

  • Smoking cessation

  • Health screen

  • Nutrition and weight management

  • Stress Management

Major competitive or other industry participants include:

  • Wellness Corporate Solutions

  • Virgin Pulse

  • EXOS

  • Marino Wellness

  • Privia Health

  • Vitality

  • Wellsource, Inc.

  • Central Corporate Wellness

  • Truworth Wellness

  • SOL Wellness

Nava Health MD Financial Performance

The company’s recent financial results can be summarized as follows:

  • Growing topline revenue from a small base

  • Increasing gross profit and variable gross margin

  • Fluctuating operating losses

  • Lower cash used in operations in 1H 2022

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

Six Mos. Ended June 30, 2022

$ 5,979,000

77.8%

2021

$ 6,655,000

37.4%

2020

$ 4,842,000

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

Six Mos. Ended June 30, 2022

$ 3,318,000

77.9%

2021

$ 3,405,000

28.2%

2020

$ 2,657,000

Gross Margin

Period

Gross Margin

Six Mos. Ended June 30, 2022

55.49%

2021

51.16%

2020

54.87%

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

Six Mos. Ended June 30, 2022

$ (131,000)

-2.2%

2021

$ (1,310,000)

-19.7%

2020

$ (664,000)

-13.7%

Net Income (Loss)

Period

Net Income (Loss)

Net Margin

Six Mos. Ended June 30, 2022

$ (171,000)

-2.9%

2021

$ (307,000)

-5.1%

2020

$ 473,000

7.9%

Cash Flow From Operations

Period

Cash Flow From Operations

Six Mos. Ended June 30, 2022

$ (371,000)

2021

$ (1,500,000)

2020

$ (336,000)

(Glossary Of Terms)

(Source – SEC)

As of June 30, 2022, Nava Health had $893,000 in cash and $6.6 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2022, was negative ($1.8 million).

Nava Health MD IPO Details

Nava Health intends to raise $12 million in gross proceeds from an IPO of its common stock, offering 2 million shares at a proposed midpoint price of $6.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $76.1 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 13.8%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

$3,000,000 to open additional locations, $500,000 to increase staffing of new locations, $500,000 to purchase additional therapy equipment, $500,000 to increase our market communication, $500,000 to further brand development, $1,000,000 to invest in Nava Client, $500,000 to expand services and $500,000 to build talent infrastructure to support our growth, with the remaining proceeds for general corporate expenses and working capital.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says that the current legal actions it is a party to should not have a material adverse effect on its financial condition or operations.

The sole listed bookrunner of the IPO is WestPark Capital.

Valuation Metrics For Nava Health

Below is a table of relevant capitalization and valuation figures for the company:

Measure [TTM]

Amount

Market Capitalization at IPO

$87,000,000

Enterprise Value

$76,057,000

Price / Sales

9.38

EV / Revenue

8.20

EV / EBITDA

-49.36

Earnings Per Share

-$0.07

Operating Margin

-16.62%

Net Margin

-11.16%

Float To Outstanding Shares Ratio

13.79%

Proposed IPO Midpoint Price per Share

$6.00

Net Free Cash Flow

-$1,769,000

Free Cash Flow Yield Per Share

-2.03%

CapEx Ratio

-87.45

Revenue Growth Rate

77.79%

(Glossary Of Terms)

(Source – SEC)

Commentary About Nava Health’s IPO

NAVA is seeking U.S. public capital market funding to invest in its various corporate expansion initiatives.

The company’s financials have shown increasing topline revenue from a small base, growing gross profit and variable gross margin, variable operating losses and less cash used in operations in 1H 2022.

Free cash flow for the twelve months ended June 30, 2022, was negative ($1.8 million).

Sales and Marketing expenses as a percentage of total revenue have dropped as revenue has increased; its Sales and Marketing efficiency multiple doubled to 1.9x in the most recent reporting period.

The firm currently plans to pay no dividends and to retain any future earnings to reinvest back into the firm’s growth initiatives.

The market opportunity for personal concierge services in the United States is likely relatively robust and will grow in the years ahead.

WestPark Capital is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (72.8%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook as a public company is its small size and thin capitalization.

As for valuation, management is asking investors to pay an Enterprise Value/Revenue multiple of 8.2x.

It isn’t clear to me that the firm or industry has significant barriers to entry, which will likely push pricing power down and result in thin margins as competitors seek market share.

Given the firm’s tiny size and industry dynamics, I’m on Hold for the NAVA IPO.

Expected IPO Pricing Date: To be announced.

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