Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the fiscal first quarter 2023 results conference call for equipped 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 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. The company's actual performance could differ materially from these statements. At this point, 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 Quipt Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. With the closure of our largest acquisition to date, Quipt is off to a historically strong start in calendar 2023. We believe solidifying ourselves as the fifth largest provider of home medical equipment focused on end-to-end respiratory care in the United States from a revenue standpoint. As of fiscal Q2, QIP currently has a $220 million run rate revenue and a $49 million run rate adjusted EBITDA, giving us a significant growth platform to continue driving economies of scale. The driving force behind our continued success is the more than 1,000 QIP team members who dedicate their daily work to providing superior patient care in order to improve the quality of life for each and every patient we serve. Our team is the real reason why the momentum continues to be robust throughout the business and we are able to successfully operate a patient-centric ecosystem. We are devoted to offering equipment solutions geared towards cardio and pulmonary disease states, all of which are minimizing the load that is being placed on a conventional healthcare system. In 2022, we improve the quality of life of over 200,000 patients, and in 2023, we will start with over 270,000 patient lives. Our primary goal is to make patient lives outside of the hospitals better by making it easier for them to breathe and sleep, which is ultimately important. result in higher life satisfaction. QIP stands apart in the market because of our high-touch service model we employ. As we carried out our strategic growth plan and future vision, fiscal Q1 2023 produced 38% year-over-year revenue growth and margin acceleration. For us, it goes without saying that offering a full range of end-to-end respiratory solutions is essential to maintaining our success and a significant growth factor in our key markets. Our team is concentrating on our primary sales touch points, which are healthcare institutions, including hospitals, physicians' offices, long-term care facilities, home health agencies, and rehab centers. We have been able to use the technology platforms we have deployed over the past few years, along with our specialized clinical programs, to effectively treat patients at home in a way that best meets their needs with the ability to monitor patients in greater numbers, reduce organizational redundancy, and lower overall health care costs. Returning to historical levels of organic growth is one of the primary focuses of our team, and we are confident that as the year 2023 develops, we will be able to meet and surpass historical levels of 8-10% given the substantial tailwinds that are in our favor. In the first fiscal quarter, we saw the beginning of these improved patterns in organic growth with 2% sequential organic growth returning. We have a fantastic opportunity to increase our organic growth performance as a result of our focused on growing our sales team, expanding the continuum of care, receiving the benefits of the major improvements to the supply chain, and operating in a regulatory environment that is extremely bullish. We continue to place a renewed emphasis on growing our sales team, and we are making progress, in particular because our sales professionals can now interact with our primary sales touchpoints in a more active manner in the post-pandemic environment. To achieve our organic growth goals, we are concentrating our efforts in areas with a high prevalence of cardio and pulmonary disease states and on hospitals with high admission rates. This is done with the intentions of acquiring patients at an earlier stage in the course of their illness, which is essential to our long-term expansion objectives. We will discuss our record-breaking fiscal first quarter 2023 performance as well as positive real-time business developments during this call. In addition, we will provide an update on the regulatory landscape, which remains the best in over a decade, as well as the significant improvement in the supply chain and our core business. We are operating in an extremely favorable regulatory and reimbursement environment, which was most recently evident by the Medicare fee schedule adjustments resulting in a significant CPI increase for DME providers that began January 1, 2023, of 6.4 to 9.1%. The percentage depends on whether products serviced are competitive bidding program items or in a former competitive bidding area. As we look at our product mix, we see a blended increase of about 8%. In calendar 2023, This CPI adjustment will be significant to us and start to positively affect our financial results during our second fiscal quarter. Additionally, in 2023, CMS relaxed coverage criteria for home oxygen therapy, now allowing patients who present to their physicians with an acute or chronic respiratory disorder to be covered for home oxygen therapy. and also removing the longstanding requirement for patients to obtain certificates of medical necessity, which eases the administrative burden on healthcare providers, further improving patient accessibility. Finally, the underlying positive regulatory environment is anchored by the decision CMS made to cancel the 2021 competitive bidding program for 13 product categories. In a time when the demand for the home medical equipment industry seems to be at an all-time high, we welcome these continuous positive regulatory changes. Turning to the supply chain environment, we have seen major improvement in 2023, with January being the first month since the June 2021 Philips recall we did not have allocation limits on a connected sleep device. The continued expectation is that exiting calendar Q1, we will be back to pre-pandemic setup levels. The team is actively driving setups across the organization to match the robust demand, which we feel will continue for the foreseeable future. This real-time development is a powerful tailwind and will significantly contribute to our organic growth over the coming year. When we look at the financial performance for fiscal Q1 2023, we can see that our team of operators has once again generated remarkable results, most notably the healthy and accelerating margin profile experienced throughout this time of higher-than-normal inflation. We saw a rise in revenue of 38% from fiscal Q1 2022 to fiscal Q1 2023, bringing the total to $40.8 million and a 50% increase in adjusted EBITDA, bringing the total to $9 million. We witnessed a decrease in bad debt expense and an acceleration of our adjusted EBITDA margin, which came in at 22%. This strong result is continued evidence that we are able to scale quickly through the strategic acquisitions without jeopardizing our billing capabilities or overall margin profile. We are pleased to close another record quarter in fiscal Q1 and begin calendar 23 with a recent milestone acquisition, which provides us with a significant presence from coast to coast in the United States. On a combined basis, we have grown to 115 locations in 26 states and surpassing 270,000 active patients. We are excited about what we have achieved to date, while at the same time continuing to have a deep acquisition pipeline, strong access to capital with a conservative balance sheet, and significant tailwinds within the business. We are looking forward to continuing to drive value for our shareholders. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal first quarter 2023 financial results. Thanks, Greg.

On Monday evening, we announced our fiscal first quarter 2023 financial results representing the three months ended December 31, 2022. In reviewing the fiscal first quarter 2023 numbers, please note that all financial values are in U.S. dollars and the full results are available on CDAR and ADGAR. Here are some key highlights. Through the company's continued use of technology and centralized intake processes, respiratory resupply setups and or deliveries increased to 69,482 for the quarter ended December 31, 2022, compared to 51,137 for the quarter ended December 31, 2021, an increase of 36%. The company's customer base increased 32% year-over-year to 99,420 unique patients served in fiscal Q1 2023 from 75,309 unique patients in fiscal Q1 2022. Compared to 118,100 unique setups and deliveries in fiscal Q1 2022, the company completed 146,350 unique setups and deliveries in fiscal Q1 2023, an increase of 24%. Revenue for fiscal Q1 2023 was $40.8 million compared to $29.5 million for fiscal Q1 2022, representing a 38% increase in revenue year-over-year. Organic growth increased by 2% sequentially compared to fiscal Q4 2022. We anticipate organic growth meeting and surpassing historical levels of 8% to 10% as calendar 2023 progresses. Recurring revenue as of fiscal Q1 2023 continues to be strong and exceeds 77% of total revenue. Adjusted EBITDA for fiscal Q1 2023 was $9 million at 22% margin compared to adjusted EBITDA for fiscal Q1 2022 of $6 million at 20.3% margin, representing a 50% increase year-over-year. We expect to continue seeing strong margin performance through the rest of the year. Net income for fiscal Q1 2023 was $325,000 or $0.01 per fully diluted share compared to net income for fiscal Q1 2022 of a loss of $2.1 million or $0.06 per fully diluted share. Additionally, we believe that the recent CPI adjustment announced will have a meaningful positive impact on our net income as we progress in calendar 2023. Cashflow from continuing operations was 4.8 million for the quarter ended December 31, 2022, compared to 5.1 million for the quarter ended December 31, 2021. CapEx as a percentage of total revenue was lower than fiscal year 2022, a trend that the company will like to maintain. For fiscal Q1, 2023, Bad debt expense was at 5.6% compared to 8.2% in fiscal Q1 2022. One of the primary reasons is improved billing and collection processes and exemplifies our ability to scale and add more revenue through add-on acquisitions without compromising our billing capabilities. For the three months ended December 31, 2022, operating expenses were $19,462,000 an increase of $6,048,000 from $13,414,000 for the three months ended December 31, 2021. Acquisitions contributed approximately $5 million of these increases. Remaining increases are related to payroll, professional fees, and inflation. The company reported $3.5 million of cash on hand and total credit availability of 101.9 million as of December 31, 2022, with 16.9 million available towards line of credit and 85 million available on DDTL. The company paid down 3.9 million of its revolving line of credit during the quarter ended December 31, 2022. The company has 37.1 million of liabilities that are due within one year, but has 38.9 million of current assets plus revolver line of credit availability of $16.9 million to meet those obligations. We are really proud of the continued operational excellence which is reflected in the robust performance throughout the first quarter of fiscal year. We are very pleased as we have near critical scale that our adjusted EBITDA margin has hit 22% and we anticipate that we will continue to have accelerating margins moving forward. We feel insulated despite the challenging economic environment. We believe we experienced peak inflation during the most recent fiscal year and anticipate the CPI adjustment that began January 1st will have a very favorable effect on our financial results in calendar year 2023, starting with our fiscal Q2 results. As we entered calendar 2023, we announced our largest acquisition to date, covering eight states, seven of which were new to Quibd. with over 1.5 million people suffering from COPD across those states. The closing of this recent acquisition is a major accomplishment, providing us with a turnkey acquisition at a prudent purchase price while simultaneously maintaining our conservative balance sheet at 1.96 times our net leverage and allowing for financial flexibility on a go-forward basis. We are confident that we will have the ability to increase the size of our senior credit facility whenever the appropriate window of opportunity presents itself. Including the acquisition, Quip has a combined annualized run rate revenue and annualized run rate adjusted EBITDA of 220 million and 49 million, respectively. Including the 2 million of cost savings and synergies based on Quip's reported audited financial results for the first quarter ended September 30, 2022. and Grey Downs unaudited results for 12 months ended August 31, 2022. Post-acquisition, QIP's recurring revenue will increase from 77% for the quarter ended December 31, 2022, to 82% on a pro forma basis. The purchase price was $80 million, which is comprised of approximately $73 million in cash, $5 million in assumed debt, and 431,000 QIP common shares. Cash was obtained from delayed draw term loan and revolving credit facility components of the facility. The purchase price was at the multiple of 5.2 times post synergies. We are well underway on our integration processes and we believe that the initial 2 million of synergies identified will be felt on the lighter side of six months. This acquisition provides us increased geographic reach, giving us additional opportunities to further expand on our tried and true acquisition and integration strategy with highly accretive tuck-in acquisitions for our full suite of respiratory care products and services. We believe there is more cost and revenue synergies to be captured over time, in particular through the various cross-selling opportunities, including ventilation and oxygen. Also, the significant opportunity to increase resupply revenue once sleep patients are onboarded to QIP's resupply program. Looking forward, our pipeline continues to be deep and we remain committed to our prudent acquisition approach, along with our tried and true integration processes, which has been the catalyst for a consistent revenue growth displayed on an annual basis. Moreover, given the nature of our industry and operations, As a respiratory-driven healthcare organization, we feel well-protected from any future economic difficulties. We are well-positioned to continue to implement our growth and acquisition strategy and increase shareholder value. Thank you, and with that update, I'll turn the call back to Greg.