Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the Fiscal Second Quarter Results Conference Call for Quick to Home Medical Corp. 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 1 on your 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 and news release, as well as the company's MD&A, which you can find on their website, CDAR, and as may be included on EDGAR. The company's actual performance could differ materially from these statements. At this time, I'd like to turn the call 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 Quiptome Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. I would like to begin today by extending my appreciation to the over 700 dedicated, equipped employees across now 18 states for their tireless efforts in helping us significantly advance in our strategic plan of expanding from a regional to national provider of at-home respiratory services in the United States. As we have progressed through fiscal 2022, we have continued to focus on expanding our organizational capabilities. continuing to grow our employee base with additional talented new team members at each facet of the company and have made significant strides on this front. Importantly, as we have begun to move into the post-pandemic environment, we have accelerated the hiring of additional sales professionals, which we anticipate will be a key driver of future organic growth. It is Quip's service-intensive model centered around improving the quality of life for all of our patients, which has driven our consistent growth. Our model is focused on constant patient education, device compliance through remote patient monitoring, and the use of our interconnected healthcare platform to drive early interventions. This clear service-driven model is helping us to grow our market share as healthcare providers, such as hospitals, physicians, and long-term care facilities look for partners that can offer a range of products and services that improve outcomes, reduce hospital admissions, and help control costs. QIP fills this need by delivering a full suite of products and services to achieve these goals. The continued focus on compassionate care, coupled with the numerous secular tailwinds, such as a growing trend of Americans with multiple chronic conditions, and aging U.S. population and the need for healthcare to be delivered and monitored in the home has fostered continued robust growth. With a best-in-class service model in place and all the operational tools needed to position our organization to capitalize on our increased scale, it is the execution of our robust team that will continue to drive growth forward and allow us to take advantage of the opportunities across our product categories and markets. At present, QIPT operates out of more than 80 locations in 18 states across the United States, completing hundreds of thousands of deliveries each year to more than 180,000 active patients with over 19,000 referring physicians. We have seen accelerating momentum year to date as we have executed on our core growth strategy. We strengthened our healthcare network throughout the country, including Arkansas, Georgia, Indiana, Massachusetts, North Carolina, Ohio, Texas, and California. We have added important insurance contracts, including a new national contract with a top five insurance payer in the United States, added significant infrastructure and personnel, all of which has enhanced our national coverage sphere over an area That includes over 5 million COPD sufferers in the United States. Our ongoing focus on technology utilization, improved workflow processes to improve our operating efficiency, and the build-out of our robust resupply program has contributed to the robust financial performance. With the financial flexibility we have, the operational resilience, and the strongest regulatory environment we have had in a decade behind us, there was plenty of opportunity to expand our geographical footprint into new and existing attractive markets throughout 2022. Turning to the current supply chain dynamics, we have begun to see early signs of improvement with timely allocations leading to our highest CPAP inventory level to start fiscal Q3 since the recall began. For those not aware, in June of 2021, Phillips Respironic, announced a voluntary recall of certain respiratory devices related to the polyurethane foam used in those devices. The inventory trend has remained positive in real time, and we continue driving patient setups to ease the backlog as we move through fiscal Q3. We believe there is reason to be cautiously optimistic about the supply chain pressure continuing to alleviate as we continue through the calendar year. We are pleased to have strengthened our relationships with our suppliers, which has allowed us to better navigate the supply chain challenges, while also fostering a foundation to support our future expansion plans as the supply chain normalizes. Moreover, we are constantly striving to drive new setups and other product categories to mitigate the impact of the recall, which is seen in our record financial results consisting of a return to 2% sequential organic growth quarter over quarter. On the regulatory front, we continue to operate in an extremely bullish environment. One of the major tailwinds driving the industry comes from the decision made by CMS to cancel the 2021 competitive bidding program for 13 product categories. The cancellation of this program has provided us a clear margin outlook across our product mix and ensured our patient stability for the foreseeable future. Moreover, in September, Medicare finalized a national coverage determination for oxygen that will expand coverage and potentially reduce some of the administrative load. Turning our attention to recent CMS actions announced a 5% plus CPI adjustment for DME in 2022. Typically, the consumer price index increases for DME have been one to 3%. Last year, the inflation adjustment was less than 1%. Moreover, legislation was passed to delay a 2% cut to Medicare payments that was created under sequestration, but has been put on hold over the past two years due to the pandemic. Congress has also delayed a 4% cut to Medicare reimbursements triggered by the pay as you go law until 2023. The importance of the home medical equipment industry has never been more prevalent, and we are pleased to see these continued positive regulatory developments. Turning to the underlying business, we are thrilled with the robust financial performance seen in fiscal Q2, which saw revenue of $33.6 million, improving organic growth over fiscal Q1 2022 strong operating cash flow, and adjusted EBITDA margin acceleration to 21%. Our team has been laser focused on the efficiency of our operation, leveraging our capabilities to move us up the chain of value-based care, and our results reflect this. The continued focus on superior patient outcomes and satisfaction was also a major factor in receiving the national insurance contract recently announced. There is no doubt we are seeing strong momentum as we move into a post-pandemic landscape and have actively resumed our hiring of sales professionals, a key to future organic growth generation. Moreover, our performance was driven by our heavily weighted respiratory product mix, highlighted by ventilation therapy and continued strength in our oxygen therapy. We are extremely encouraged about the growth path we are on, carving out a special segment of the home care industry and we are well positioned to seize the growth opportunity ahead of us. Looking at our current acquisition pipeline, it remains very exciting with a wide range of targets that meet our stringent criteria, and we expect to remain very active over the near term. With that commentary, I'd like to hand the call over to Hardik to discuss our second quarter financial results.

Thanks, Greg. We just announced our fiscal second quarter 2022 financial results representing the three months ended March 31, 2022. In reviewing the fiscal second quarter 2022 numbers, please note that all financial values are in U.S. dollars and the full results are available on CDAR and EDGAR. Here are some key highlights. The company generated revenue of $33.6 million in second quarter fiscal 2022 up 38.4% from second quarter fiscal 2021. Not factoring acquisitions, the organic growth year over year was approximately 8%, and sequentially quarter over quarter, organic growth was a very strong 2%. As of March 31, 2022, the company's backlog was approximately in the range of 6,000 to 7,000 patients in the queue to be set up on sleep devices, compared to a more typical housing backlog historically. As Greg mentioned, the company began fiscal Q3 2022 with the most tapped inventory since the recall began, and we are cautiously optimistic that sleep device allocations will increase through the second half of 2022, which will relieve the backlog, generating a lift in revenue from this impacted segment of their business. The sleep segment revenue impact was approximately 1%. to $1.5 million in fiscal Q2 2022. Adjusted EBITDA for the second quarter of fiscal 2022 was $7 million compared to $5.4 million for the second quarter of fiscal 2021, representing a 31% increase year over year. Adjusted EBITDA margin for the second quarter of fiscal 2022 was very strong at 21% for the quarter. Revenue for the six months ended March 31, 2022 increased to 63 million or 34% compared to the six months ended March 31, 2021. Adjusted EBITDA for the six months ended March 31, 2022 increased to 13.1 million or 23.5% compared to the six months ended March 31, 2021 and represented 20.7% of the revenue. In the fiscal quarter 2022, QIP completed 118,878 setups or deliveries compared to 83,606 in the corresponding period last year, an increase of 42%. In the fiscal second quarter 2022, QIP completed 50,713 respiratory resupply setups or deliveries compared to 35,702 in the corresponding period last year. an increase of 42%. The company's recurring revenue continues to grow, and it is about 77%. For the six months ending March 2022, bed debt expense was 8.8% compared to 9.1% for the same period in 2021. This exemplifies our ability to scale and add more revenue through add-on acquisitions without compromising our billing capabilities. For the six months ending March 2022, operating expense excluding bed debt expense was 47% of revenue compared to 43% for the same period in fiscal 2021. The increase was due to inflation, higher fuel costs, and some one-time and non-recurring corporate expenses, including expenses related to acquisitions. Cash flows from operations for the six months ending March 2022 2022 was $12.2 million compared to $6.6 million in the corresponding figure ending March 2021, an increase of 84%. Current assets totaled more than $44 million compared to $28.5 million in net short-term liabilities, demonstrating continuing strength in our liquidity. At the end of second quarter fiscal 2022, cash balance was $17.4 million. At the end of second quarter fiscal 2022, the company has an undrawn revolving credit facility of $20 million. In addition to this, the company is actively working to significantly increase its credit facility, which will further accelerate our acquisition strategy. We are seeing positive momentums across the organization, and I'm very pleased to see revenue reaching $43.6 million for our fiscal second quarter with a strong adjusted EBITDA margin at 21%. as we continue through the integration process of our recent acquisitions. The strong performance was driven through elevated demand for oxygen, ventilation therapy, and our other supply businesses, leading to larger volumes and continuing to support the business with lower operating costs. The infrastructure we have in place today allows us to position ourselves as a market leader in at-home respiratory care and gives us the flexibility to add locations organically to the platforms. as well as efficiently integrated acquired assets. We also continue to seek solid cash collections through second quarter resulting from a continuous effort to better our revenue cycle management process. Going forward, we will continue to find ways to grow our patient base and penetrate attractive markets while continuing to streamline our operational platform. Our revenue base during fiscal Q2 2022 remains strong with recurring revenue representing approximately 77% of our overall revenue. This recurring revenue base provides us further stability and consistency as we look at our growth outlook, business model, and financial reporting. We are also extremely pleased with the ongoing results of our acquisition strategy. Integration is the key to our ongoing financial and operating success as it allows us to continue the strong pace of raising strategic acquisitions, and we have been enthused with the integration efforts today. Looking at our two most recent transactions, on January 4, 2022, we announced the acquisition of At Home Health Equipment, a business with operations in Indiana, reporting trailing 12-month annual revenues of approximately $14 million, $1.6 million in net income, and anticipated adjusted EBITDA of $2.9 million, reflective of a 22% margin post-integration. The acquisition added 15,000 active patients and created CRIP's single largest market from a revenue standpoint, covering the entire power sphere of Indianapolis. We are nearing full integration of at-home. On April 19, 2022, we announced the acquisition of Good Night Medical, a business with operations across seven U.S. states, reporting trailing 12-month annual revenues of approximately $7 million and with anticipated adjusted EBITDA of $1.5 million, reflective of a 20% margin post-integration. The acquisition added locations across seven U.S. states, including Arkansas, Georgia, Massachusetts, North Carolina, Ohio, Texas, and California.