Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the third quarter fiscal 2020 earnings and corporate update conference call for ProTech Home Medical. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. We remind you that the remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of the company's results news release, as well as the MD&A, which you can find on the website and on CDAR. The company's actual performance could differ materially from these statements. At this point, I'd like to turn the conference over to Chairman and Chief Executive Officer Greg Crawford.

Thank you, Operator, and thank you all for joining us today on the call. My name is Greg Crawford, and I'm the Chairman and Chief Executive Officer of ProTech Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. A brief introduction on ProTech Home Medical. ProTech is a national leader in the home medical equipment industry, specializing in end-to-end respiratory care, power mobility, sleep, and other home healthcare solutions from 42 locations in 10 states across the Midwest and East Coast regions, completing hundreds of thousands of deliveries each year to more than 85,000 longstanding patients. Before I begin discussing our record-breaking third quarter results, Let me first take a moment to thank and applaud our incredibly talented and dedicated team members, many of which continue their heroic efforts on the front lines every day serving our patients with the highest level of care during these most challenging times. Since the beginning of the COVID-19 pandemic, we have prioritized the safety and well-being of our team members and our patients. It is this incredible efforts of these individuals that have enabled Protech to assist in relieving the strain placed on the traditional healthcare system by helping to move non-COVID-19 related patients out of the hospital system and into the home. I can unequivocally say that Protech would not be in the strongest position in the history of the company without these hardworking individuals and most certainly, we would not be able to share with you these record-breaking results. On this call, I will outline our core business, which continues to be robust, review our continued organizational progress with a focus on our record-breaking quarter, and provide you with our updated outlook for the remainder of 2020. As our results show, we have made tremendous progress in the third quarter, including exceeding our previously stated objective, of annualized run rate revenue of $100 million, breaching a 21% adjusted EBITDA margin level for the first time, and bolstering our balance sheet dramatically with the closing of a $31.8 million bought deal capital raise in which myself and independent director Mark Greenberg added to our respective shareholdings. We are extremely pleased to join our fellow shareholders and believe this is a testament to how we feel about the future of ProTech. The successful capital raise paves the way for us to accelerate our growth trajectory with the strongest balance sheet in our history. And as such, we are aggressively ramping up our M&A efforts and expect to be busy on this front over the near and medium term as we look to further our long-term acquisition strategy. With the improving organic growth being derived from our first-rate infrastructure and extraordinary financial flexibility, we are confident the future is very bright for ProTech, and we will not be stagnant in capitalizing on the tailwinds propelling our industry. With that background, I'd like to hand the call over to Hardik to discuss our third quarter fiscal 2020 financial results.

Thanks, Greg. Yesterday evening, we announced our third quarter financial results for fiscal 2020 for the three months and nine months ended June 30, 2020. In reviewing the third quarter fiscal 2020 numbers, please note that all financial values are in Canadian dollars and the full results are available on CDAR. Please note that all the numbers for three months and nine months ended June 2019 have been adjusted for PHM Inc. Divestier 2020. and are reported for continuing operations only. Here are some key highlights. In the third quarter fiscal 2020, ProTec completed 57,551 setups or deliveries compared to 52,007 in the corresponding period last year, an increase of 11%. In the third quarter fiscal 2020, ProTec completed 14,436 respiratory resupply setups or deliveries compared to 11,034 in the corresponding period last year, an increase of 31%. The company generated revenue of $25.9 million in third quarter fiscal 2020, up 28% from third quarter fiscal 2019, and up 7.3% from second quarter fiscal 2020, majority of which was organic. During this quarter, we also reached $100 million annual revenue run rate. Gross profit for the third quarter of fiscal 2020 was approximately 18.4 million or 71% of revenue as compared to 14.1 million or 70% of revenue for the same period in 2019. The gross margin percentage improvement during the period was primarily due to better inventory management. SG&A for third quarter of fiscal 2020 was 49.8% compared to second quarter of fiscal 2020 of 52.9%, representing a 3.1% decrease quarter over quarter. This highlights our ability to deliver additional expanded margins on incremental revenue growth. Adjusted EBITDA for the third quarter of fiscal 2020 was 5.5 million compared to 3.8 million for the third quarter of fiscal 2019, representing a 47% increase year over year. Adjusted EBITDA margin for the third quarter of fiscal 2020 increased to 21.4% compared to 18.7% for the third quarter of 2019. At the end of third quarter fiscal 2020, cash balance was $44.7 million compared to $12.8 million at fiscal year end 2019. On June 29, 2020, the company closed a $31.8 million short-form prospectus offering and concurrent private placements. Cash flow from operations for the nine months ending June 2020 was $19.4 million compared to negative $1.7 million in the corresponding period ending June 2019. Current assets totaled more than $66.9 million compared to $30 million in net short-term liabilities. demonstrating continuing strength in our liquidity. On the heels of financing, our balance sheet is the strongest in the history of our company, and we are positioned to be aggressive with our organic and inorganic initiatives. Our focus remains on accelerating revenue growth, process improvement, and cost rationalization. To that point, on August 11th, we announced the execution of a non-binding LOI to acquire a leader in the respiratory home care services industry in the Midwestern region of United States. The target will enhance our presence in the Midwest, including adding a new market and will increase our active patient count by over 3,000. The diversification that the target provides, along with their regional dominance, will prove to be of significant value to our portfolio. The target focuses on all aspects of home respiratory equipment with a detailed focus on PAP, PAP resupply, and noninvasive therapy with a large ALS and COPD patient base. The target has great diversification amongst referral sources with no more than one referral source contributing 10%. It also has a very strong and diversified payer base with minimal Medicare exposure. Furthermore, the company has a long recurring revenue cycle which fits hand-in-hand with ProTech's business model. Additionally, we are now in a position to go after larger accretive transactions as compared to the size of our recent acquisitions that are designed to significantly add to our presence in a market we serve or potentially even open a new market entirely. In closing, we continue to see ample change widths at the company level from increased demand across the business, and we are picking up on a significant acceleration in the need for in-home care. This presents us with an incredible opportunity to seize market share, and we have all the tools needed to do so aggressively on a go-forward basis. Thank you, and with that update, I will turn the call back to Greg.

Thanks, Hardik. I am very proud of the accomplishments of our team during the third quarter, whom performed at an extremely high level, focused on superior patient care first and foremost. We are honored to be on the front lines helping to educate, assist, and passionately serve our current and future patients. The COVID-19 pandemic has magnified the point that in-home healthcare and telehealth are vital to our overall healthcare system, And we are capturing this dramatic acceleration, which is represented by yet another record-breaking quarter with strong operating performance and solid organic growth. To that end, our revenue growth came in ahead of our internal projections. We had forecasted reaching $100 million annualized run rate revenue by the end of calendar year 2020. I am pleased that we were able to achieve the revenue milestone a couple quarters earlier than forecasted. With our significantly enhanced balance sheet, we are exceptionally well equipped to continue scaling our business, both organically and through acquisitions. As we look at the next $15 to $20 million of organic revenue generation, there will be a much higher contribution of EBITDA than the current revenue profile as we saw in Q2 and now Q3. This is a true business of scale. And we are right at the inflection point where the next 15 to $20 million of organic revenue will require much less marginal increase in SG&A versus each dollar of revenue. Now, I want to take a moment to explain in a little more depth what we are doing differently and why we have been able to achieve the results we have and why we continue to be so excited about the future. We continue to successfully deploy a highly scalable growth model focused on organic sales generation, accretive acquisitions with efficient capital deployment, targeted margin expansion, and cash generation. ProTech uses unique efficient delivery cost models and technology to change the way in which home medical equipment is delivered to a growing aging U.S. population. This segment of the market known as the durable medical equipment or DME providers is estimated to approximately $60 billion. This is underlined by the fact that over 10,000 people in the U.S. will turn 65 every day for the next 15 years. This is our core market. Our core product offering is for chronic illnesses that are treatable at home using streamlined logistics and distribution. ProTech can offer home delivery and maintenance on this equipment, which is a first for many of these patients. Given COVID-19 as a respiratory illness, companies like ours with the equipment and expertise as it relates to the treatment of respiratory illnesses are crucial. We continue to experience increased patient demand for respiratory equipment, including ventilators and oxygen equipment, as well as our CPAP resupply and other supplies business which remained extremely healthy into the fourth quarter. Our resupply model is built on proactively interacting with our patients to ensure we are refreshing their supplies as needed. We cannot predict the duration of the COVID-19 crisis, but we have ensured our inventory levels are well aligned with the increased demand, and we are well prepared to seize on any future increase in demand, should it occur. There are very few companies like Protech that have the balance sheet, scale, and competitive advantages that we possess, including those from technology and logistics, to benefit from such structural changes that have come from previous reimbursement cuts and now the COVID-19 pandemic. I would now like to review with you the three components of our growth strategy. First, We are laser focused on capturing market share economically and profitably. Our industry growth rate is about 3% to 5% per year. However, we believe we can continue to achieve well more than double the industry growth rate by focusing on significantly increasing our market share in key target regions within the markets we serve. To execute on this, we are continuously hiring and training new sales representatives, and will continue to expand our product base. It is important to remember that this is an industry of scale and ProTech is still at the early stages of reaping the full benefits of being one of the only companies that can prosper from that given our relative size. These benefits will further magnify themselves as we continue to grow both organically and through acquisitions. Secondly, we continue to lead the industry in technology deployment and in our use of data mining tools to drive efficiencies and profitability. A patient's ability to order a piece of equipment, a service call, or other ancillary option via the touch of a button is where this industry is headed. We have made significant investments in developing these tools and will continue to invest in them to continue to maintain our technological advantages over our competitors. Providing exceptional service to our patients through technology will continue to separate us from our competitors who are simply unable to implement technology-based solutions due to their lack of scale and financial capabilities. The third component of our growth strategy is acquisitions. With our robust balance sheet, we now have the ability to pull the trigger when the right opportunity presents itself and expect to see a dramatic increase in our acquisition programs. with a focus on potentially larger acquisitions in both geographies where we currently operate as well as opening new markets. As Hardik noted, we executed a nonbinding LOI for a Midwest-based respiratory care company. This acquisition target will be immediately accreted to EBITDA and net income and is expected to increase annual revenues by approximately $5 million. Leveraging our existing infrastructure, We expect to achieve additional revenue generated from organic growth, cross-selling, and corporate synergies. Although we have a very robust pipeline of acquisition targets, we remain laser-focused on closing more material acquisitions on favorable deal terms and do not intend to waiver on our acquisition target criteria and will only execute when it makes the absolute sense to do so. I'm very optimistic we have the ability to close impactful deals in the near to medium term. Given the current landscape of the home health care industry, our well-defined three-pronged strategy and strongest financial position in our history, we will continue to propel our company towards sustained financial growth and continued profitability. On the capital markets front, I am thrilled to announce the addition of two new research analysts covering ProTech. including Colliers International, our first U.S.-based analyst, and Canaccord Genuity. This brings our total to seven analysts that will accelerate and assist us in engaging with new investors to share our continued success. We were very active during the third quarter, closing an oversubscribed bought deal offering for $31.8 million, as well as participating in multiple virtual investor roadshows, in both the United States and Canada, as well as virtually attending the Canaccord Genuity Growth Conference. We will also attend our first U.S.-based investor conference in the LD500 early September. We expect to remain very active with the investor community through virtual meetings and virtual conferences throughout the remainder of the year. Furthermore, we are excited to have received DTC eligibility for our listing on the OTCQX. This represents a significant step forward for our current and future shareholders as it comes to building liquidity and is crucial in building a strong presence for our company within the U.S. capital markets realm. Since our initial OTCQX listing, we have had good conversations with U.S.-based market participants And with the final completion of the DTC eligibility, this will allow current and prospective ProTech shareholders in the United States a more reliable, cost-efficient, and timely clearing and settlement for our common shares. Finally, as investors think about ProTech Home Medical today, I would highlight to them our robust balance sheet, our record-breaking adjusted EBITDA margins, and our improving cash flows all of which have put us in a position to quickly respond to organic growth initiatives and strategic acquisition opportunities. All of this, I believe, makes ProTech a truly dynamic home healthcare company operating in a compelling and growing industry, and therefore, a truly unique investment opportunity. I believe with continued execution of our stated growth strategy and consistent messaging to the investor community about the tremendous progress we are making, We will close the current valuation gap we have in the market relative to our peers. Once again, I would like to take a moment to thank the entire ProTech team for its tireless efforts and its shareholders for all their continued support. We look forward to continuing to demonstrate strong financial results and will continue to communicate with our retail and institutional shareholders the progress we're making toward our goals. This concludes our prepared remarks and we will now open for questions.

Thank you. We'll now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Once again, if you have a question, please press star then 1 at this time. Our first question is from Doug Cooper with Beacon Securities. Mr. Cooper, your line is open.

Hi, good morning, guys, and congratulations on a great quarter. Let's start off with organic growth. I think Gregor Hardicke said most of the growth in the quarter was organic. I think the Canadian dollar weakened during the quarter. Can you talk a little bit about what the organic growth was, excluding FX, and maybe break it down by segments, which segment performed better than others, and what do you maybe expect going forward?

Sure. Our overall growth for the quarter-over-quarter was 7.3%, of which about 4% was from organic growth, so the rest 3%, 3.5% was related to foreign exchange. And on the segment wise, I think our respiratory continues to be stronger. We kind of gained some tailwinds from the pandemic, continue to capitalize on those opportunities. Our sale as a percent as it relates to rental was up only 1.4% as compared to our rental, which was up 5.6% quarter over quarter without any foreign exchange. So those were the two segments that contributed to us.

Okay. Is there any comment you have on the sleep business? I'm assuming most of the referring clinics were closed in the quarter. Maybe just what the impact of that is and maybe what the demand could be coming out of that closures.

Yeah, sure, Doug. This is Craig. Yeah, definitely our sleep device referrals and that were down for the quarter and that they were probably down as far as the actual number of setups were down over 30%. But we've started to see those pick back up going into our Q4 here. And we're, you know, very optimistic in that that especially going into 2021 and that that, you know, we'll start to get the tailwinds of those labs opening back up and things like that. So we were still able to deliver the great revenue numbers even with the headwinds of the sleep business being down.

I want to focus on cash flow for the next question. Obviously, a very record EBITDA margin in the quarter. I did notice that your lease liabilities, in particular the monitoring equipment leases, were down $1.5 million or almost $1.5 million sequentially. The accounts payable is down, obviously, it generated enough cash flow to pay down some of these things. Can you just comment on how EBITDA translated to free cash flow in the quarter?

Sure. So if you look at our EBITDA, it's about $5.5 million. And then one way to look at it would be to look at EBITDA less, you know, spend on monitoring equipment, which is about $1.2 million, which takes us to... $4.3 million, and then to reconcile that with the changes on the balance sheet, if there has been a million-dollar increase in our operating cash and net of all the bought deal and PPP money, AP was paid down by $2.2 million. Add to that about a million to million and a half paid down in lease finances. So if you reconcile, they will kind of write into that $4.3 million.

Okay, perfect. My final one, Greg, the balance sheet is $45 million, obviously, of the LOI for the company you indicated. Can you give us an indication of how you expect to pay for the acquisitions? Obviously, you have a bunch of cash. Is there any potential for bank financings or debt from bank debt to fund even fuel that further? And maybe what do you think your can pay for the acquisitions. Thanks.

And I'll, I'll, yeah, everything does we have right now in that we're, uh, uh, really the. Is cash in that, uh, is our, our, our, the current terms in that of all the contracts that we're working on, uh, is as far as a bank facility in that, I mean, that's something that we're actively pursuing in that we were up pretty close on something in that prior to the pandemic and that that fell through when credit terms changed. And as far as multiples, we're seeing, you know, things in the five to seven range, five to seven times EBITDA. And those numbers would all kind of be based off of a pre-integration and synergies in that post-acquisition.

Okay, great. That's it for me. Thanks very much. Thanks, Doug.

The next question is from Justin Keywood with Stiefel.

Justin Keywood, your line is open.

Good morning, and thanks for taking my call. I was wondering if you could provide an update on the Medicare competitive round of bidding. I believe it was set to take place this summer for the sleep and oxygen therapy.

Hi, Justin. This is Greg. As of right now, we're expecting something to come through, say, in the next 30 to 60 days, if not sooner. We feel more confident now than ever that the program could be delayed, and that's recently, a few weeks ago, the public health emergency, and that was extended through the end of October. As industry leaders and along with some of the organizations and that within the U.S. have really been pushing in that for a delay in the program. So we expect something, you know, to come in the near term here in the next 30 to 60 days one way or another.

Okay, that's helpful. And then what would Protech's sales exposure be to that process?

Yeah, so our total sales in that right now, Medicare, are approximately 38%, and that is overall Medicare. As far as what's going to be affected by the bid, now that the noninvasive ventilators are out, is approximately about 20% to 22%.

Okay, that's helpful. I'll be monitoring that update. And then just going back to the cash generation in the quarter, quite strong and at a record. I was just hoping to get some greater clarity if there was any one-time-like items in the quarter. And do you anticipate a working capital investment in the fiscal Q4 coming up?

No. So, I mean, the... As it relates to the cash flow and what I just explained to Doug Cooper, no, there were not any extraordinary cash flow elements on those topics. However, we did receive PPP money and HHS money, which is sitting under deferred income on our balance sheet. And again, as I mentioned on my earlier point, those were not factored into the $4.3 million balance sheet. kind of free cash flow reconciliation we talked about previously. Okay, that's helpful. From an operating point of view, really not anything as such.

Okay, and just one last question. For the LOI for the respiratory business, any expected or be announced leading to the next step?

Could you repeat that, please?

The LOI to acquire the respiratory business, is there any expected timing on when that could close?

I mean, we think within the next two to three weeks when we made the announcement on August 11th, we kind of set a timeline for ourselves of about 30 days. So we're very optimistic that something will get closed on that. We'll make an announcement.

Okay, thank you. Appreciate it. Thank you. Thanks, Justin.

Once again, any analyst who has a question may press star then 1 to join the question queue. Our next question is from Dick Ryan with Colliers. Dick Ryan, your line is open.

Thank you. Greg, I'm not sure I caught your earlier comments, but what have you done with your sales force, the increase I think you referenced? Where are you at now, and where do you need to be?

Hi, Dick. Yes. Through the pandemic and that, there was a slight slowdown in that with the hiring and expanding of our sales force and that, but that has picked up going into our Q4 here. And actually, we're very pleased with the talent pool in that that, you know, has came with us. There's been a lot of layoffs around the industry and smaller size companies and things. So we're very pleased in that with the way we're going to end the calendar year and that likely with new hires for sales and expanding and

Okay, thank you.

So looking at your obviously impressive EBITDA margin progression over the last year or two, you've mentioned contribution from a variety of different sources, if you will, consolidations, back office, improvement efficiencies. And I'm trying to tie this how you get to a goal of maybe 25% margins. you know, with your scale to date, any purchasing volumes really contributing to EBITDA margins, or is that kind of a go-forward impact that we should see more of?

So there's definitely contribution on increasing margins when it comes to acquisitions. Usually we tend to have a better purchasing power than the acquisition, and that goes right into it. So that's always one contributing factor. But at the same, the other would be when we reach a certain scale with, you know, as we deploy the money from what deal, we should reach another tier with our suppliers. We should also allow us to get another slice of price cuts.

Are you at that scale level yet?

Not yet, in that we're really close. We're right at this inflection point of that $100 million Canadian revenue. And as a percentage of our purchases with some of our major vendors in that, we're really, really close in that to that next tier level of discounts or rebates and things like that. So we're, you know, very optimistic going into 2021 in that we could see an overall, you know, reduction from some of our larger vendors as we renegotiate our 2021 agreements.

Okay, thank you.

The next question is from Tanya Gonzalez with Canaccord Genuities.

Tanya Gonzalez, your line is open.

Good morning, gentlemen, and thanks for taking my questions today. Just a couple for me. So I noticed like payroll expenses, facility expenses, CAPEX, all of the percentage revenue came down quite meaningfully this quarter. Could you maybe touch on, does this have anything to do with the recognition of deferred income from that relief fund and PPP loan?

No, we have not allocated PPP loan towards any of the expenses. Everything under the PPP loan is sitting as a balance sheet item under deferred income. I mean, you can see those numbers are pretty flat. And the reason they're down is a percentage of revenues because our revenue is pretty nice for the quarter.

And then the CapEx being down a little bit, could you maybe explain that and give us an idea of budgeted CapEx for monitoring equipment for the rest of the year?

Sure. Going back into Q2, we had built up some inventory considering where COVID was. Some of that inventory was used in Q3, and overall we are getting better utilization on our assets, and that's kind of the reason why our fixed assets for the quarter was down. I would feel comfortable from a guidance point of view to use year-to-date percentages for going forward. Perfect.

Thank you. Now in terms of bad debt, That picked up a little bit as well. What have you been seeing subsequent to quarter-end, I suppose? Is this all just COVID-related?

No. I mean, our budget is pretty much aligned to what our estimates have been. We always said it should be somewhere in that 8% to 10% range. Anything less than 12% is considered a good industry standard. So I think where our better stands, we are comfortable. There is obviously rooms for improvement, but I think we fare on a scale of one to 10, probably seven, eight.

Okay, perfect. And the last one, you have this big war chest now to go out and be acquisitive. You talked a little bit about new markets that you could potentially enter. Could you maybe give us a little bit more color on new markets that you're not already in that you think are attractive and there are major players of scale that you could potentially acquire?

Sure. So we are looking at it from a couple of perspectives. One is, of course, going into a larger populous market. and adjacent to our existing territories. So those would be our favored targets. The thing we always keep in mind is going into a competitive bidding, we also want to be making sure that we are picking acquisitions with a pick that is making sure that there are some non-bid revenue heavy as well. So we manage our risk. So we are looking at it kind of from both perspectives, from going into a populous market, but then also going into the rural markets where we can enjoy higher reimbursements and not worry about competitive rates and its results. So we don't have to wait to deploy the capital until those results come up.

And could you provide any examples of those kind of markets?

Sure. Chicago would be a good market. We are already in Atlanta, so I wouldn't say that. Cleveland would be a good market. Michigan is a nice state, a neighboring state to us. Pittsburgh, Pennsylvania. Those are all kind of large, populous markets and which are also adjacent to one of our existing companies.

Excellent.

That's all for me. Thank you, gentlemen. The next question is from Ed Salobo with Spartan.

Ed Salobo, your line is open.

Yes, good morning. I'm glad that you're focusing. I think you did the cross-listing in the U.S. I'm just wondering, given you're all U.S. operations, why don't you do the financials in U.S. dollars?

Sure.

Going back to the history, we acquired this as part of the spin-off, and at the time, the company was... has been providing financials in Canadian. And given the opportunity on the operations and the process improvements and increasing margins, we decided to focus on that. And at this point, most of our investors are still Canadian. So despite the operations being U.S., our investor community is largely Canadian. So for those reasons, we have continued to keep it in Canadian dollars.

Hi, Ed. This is Greg. We've really just started touching the U.S. market from an investor relations standpoint and have started making some inroads, but really not much. Once we just got that DTC listing and that, we're very optimistic in that there's a lot of interest and we're going to be very, very active ending 2020 and going into 2021 on the U.S. side.

Yeah, I mean, my only comment is, you know, I know U.S. investors want to see U.S. dollars, and for Canadian investors, we're used to seeing U.S. dollars too, right, especially for U.S. operations. And it makes it easier to compare, obviously, quarter to quarter or year to year. Just on the financials, there's $600,000. There was a $600,000 expense called other. What does that refer to? are you referring to in the notes in the back of the financials there was under SG&A there was a $600,000 expense called other it is probably I mean everything that's of course not listed on the above but lots of

Yeah, sure.

I mean, I would have to get back to you on the details of what different accounts go into that. I don't know. I mean, probably more than 20 different types of expenses. Oh, it's not just one thing. Okay. No, no, no, no. If that's the question, absolutely not. It's basically everything that doesn't fall into the top. major buckets.

Okay. Okay. Yeah. Yeah. Some color there would be great. And last question is, again, on the SG&A, if you break it out, there's 2.4 million bad debt. It seems to me that's a big target in terms of increasing margins. What's the company doing to reduce bad debt expense?

Well, you know, as we've always kind of stated in that is that we wanted to keep our bad debt expense under 10%. And, you know, we've been able to maintain that. Obviously, there's always room for improvement. So we're, you know, continuously in that looking to improve processes and things like that and workflow processes primarily in billing. But we're actually pretty pleased with, you know, where those numbers are right now.

Okay, thanks a lot.

Nice progress. Just to follow up on the other expenses, I mean, those would be education, membership, licenses, office expenses, IT, computers, those kind of – I mean, the list can go on, but others is truly others. No one account contributes for more than 30%, 40% of that account.

Okay, so you're not putting – okay, that's great. You're not putting consulting in there or something kind of more –

Well, I mean, no. That's under professional expenses.

Okay. Okay, great. Thanks, and good luck with your progress.

Thank you.

The next question is from Doug Lowe with Echelon Partners. Doug Lowe, your line is open.

Yeah, thanks, operator, and congratulations on the quarter, gentlemen. Well done. I think most of the financial issues have been hit on here, so just kind of have a tangential question just related to the ventilator component of your business. And as you may know, there was some churn in the medical literature on the utility of mechanical ventilators in COVID-19 patients based on a jam of paper in April from New York hospitals that sort of questioned their utility. And I think there's just, you know, abundant confounding variables that weren't properly considered there. The data is improving as more studies have come out. It's just sort of wondering if there are any sort of trends on the receptivity of mechanical ventilation in the home care space, specifically with outpatient population. And if you might see any more data-driven trends that might increase the equipment distribution specifically in that part of the business. And I'll leave it there. Thanks.

Good question, Doug. So what we've seen on the home care side for ventilation is we've seen an uptick in our referrals and continue to see that into our Q4. And really what we're seeing is the same demographic of patient in that it's typically had multiple hospitalizations, has respiratory failure, and is what we refer to as a frequent flyer on the COPD. But we are seeing more trends of those ordered out of physicians' offices rather than the hospital setting. So we believe that we're getting these patients earlier in the onset of their disease state and that then we typically would if they were put into the hospital to maybe to be stabilized or something like that. So we're starting to see, you know, kind of those referrals to pivot even to some home health and that has gotten involved in, you know, some recommendations of ventilation of trying to treat patients at home rather than sending them to the hospital for an exacerbation. So we believe as long as COVID is here and that we'll continue to have those tailwinds of those referrals. So we've really kind of pivoted the way we market those particular services.

Great. That's helpful. And I actually just thought of one other thing while I'm on the phone here. As you may know, there are a number of inhalable therapies that are currently in development, including inhalable nitrous oxide that you and I have talked about before, and there's some inhalable interferon. formulations that are performing well in clinical testing. Is that an element of the business that you could perhaps explore once some definitive therapies are actually FDA approved and thus available for distribution? Or does that just sort of impose some distinct regulatory elements to your business that you wouldn't want to take on?

I mean, anything's a potential. We're always looking at the possibility of you know, adding new products to the portfolio. We definitely have the sales channel in that to be able to provide products like that. So we would definitely want to know, you know, more about that when it becomes available.

Thanks, Blake. All right. Thank you.

This concludes the question and answer session. I'd now like to turn the conference back over to Greg Crawford for any closing remarks.

Thank you, Operator, and thank you all for your participation today. As always, you can find us on the web at protechhomemedical.com, where we will be posting a transcript of this call and also our updated investor deck on the site. You can also view some of the exciting products and developments discussed on this call. Thank you, and goodbye.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.