Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the fiscal second quarter 2023 earnings result conference call for Clift 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 telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 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 CDAR and EDGAR. 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. Please go ahead.

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 QuickToll Medical. Joining me today is Hardik Mehta, our Chief Financial Officer, Tom Rierich, our Executive Vice President of Finance, and Cole Stevens, our VP of Corporate Development. Quip Home Medical is a rapidly growing healthcare company providing a full suite of home medical equipment and services to predominantly respiratory patients across the United States. Our mission is to provide patients with accessible, efficient, and personalized care that empowers patients to take control of their health and ensures they receive the support they need to live their lives to the fullest. We believe we have established ourselves as the fifth largest revenue-producing provider of respiratory and home medical equipment in the United States. Thanks to our aggressive organic and inorganic growth strategy, continued focused on technology to streamline operations, the strong patient-centric ecosystem we have in place, and the end-to-end respiratory solutions we provide. The over 1,000 members of the QIP team who dedicate their efforts each day to providing exceptional patient care in order to enhance the quality of life for each and every patient who receives our services are the engine that keeps our business performing so strongly. Our staff is the reason why we are able to successfully operate in an ecosystem that is focused on the patient's needs. We are committed to providing equipment solutions that are focused towards cardio and pulmonary disease conditions. and these solutions reduce the burden that is being imposed on the traditional healthcare system, saving the healthcare system hard dollars. In the year 2022, we were able to improve the quality of life of over 200,000 patient lives, and in 2023, we have more than 270,000 active patient lives under our care. The significant momentum we are currently experiencing across the entire organization is a result of a number of factors, including the ongoing successful integration of our largest acquisition to date, the recently announced execution of our second national insurance contract with Aetna, and the robust performance of our core business. With that backdrop, we are thrilled to report we have surpassed our run rate revenue and adjusted EBITDA estimates of $220 million and $49 million, respectively. Our fiscal Q2 resulted in revenue of $58.1 million or 73.2% year-over-year revenue growth, including very strong sequential organic growth and margin acceleration as we carried out our strategic growth plan and future vision. For us, it goes without saying that providing a complete line of end-to-end respiratory solutions is crucial to upholding our success and a fundamental driver of growth in our key markets. Our team is focusing on healthcare institutions such as hospitals, doctors' offices, long-term care facilities, home health agencies, and rehab facilities as they are our main sales touchpoints. One of our team's main goals is to surpass historic levels of organic growth. Thus, we are excited to have experienced 2.5% sequential organic growth in the second fiscal quarter and have high hopes for continuing strong organic growth patterns throughout the year. As a refresher, our organic growth has typically ranged between 8% to 10%, but given the strong tailwinds that are in our favor, We have had an excellent opportunity to improve our organic growth performance as a result of our focus on expanding the continuum of care, growing our sales teams, and reaping the benefits of the normalized supply chain and operating in an extremely bullish regulatory environment. We are focusing our efforts on regions with a high COPD prevalence and on hospitals with high readmission rates in order to meet our organic growth goals. On this call, we will discuss our record-breaking fiscal second quarter 2023 performance, recent positive real-time business developments, and we will provide an update on the regulatory landscape, which remains the best in over a decade. We are operating in an extremely favorable regulatory environment. which was most recently evident by the Medicare fee schedule adjustments resulting in significant CPI increases for DME providers that began January 1, 2023, of 6.4% to 9.1%. The percentage depends on whether products serviced are competitive bidding items or in a former competitive bidding area. We recognize a combined increase of roughly 8% when we look at our product mix directly related to our Medicare business. Moreover, the longstanding necessity for oxygen patients to obtain certificates of medical necessity was eliminated by CMS in 2023, reducing administrative costs on healthcare providers and enhancing patient accessibility. It is now possible for patients with acute or chronic respiratory disorders who visit the emergency room to be covered for home oxygen therapy, which is very advantageous for service providers like QIPT. Finally, the decision reached by CMS to halt the 2021 competitive bidding program for 13 product categories serves as an anchor for overall favorable regulatory environment. We appreciate the ongoing regulatory reforms at a time when the demand for the home healthcare sector appears to be at an all-time high. Looking at the financial performance for the second quarter of fiscal 2023, we can see that our team of operators has once more produced outstanding results, most notably the strong and increasing margin profile experienced during this period of higher than usual inflation. We surpassed our expectations, seeing revenue increase by 73.2% from fiscal Q2 2022 to fiscal Q2 2023. totaling $58.1 million and an 85.9% increase in adjusted EBITDA amounting to $13.1 million. Our adjusted EBITDA margin, which reached 22.5%, continued to accelerate and our operational cash flow increased. Our margin profile is expected to remain very strong through the fiscal year as we continue to see the benefits of increased scale across the business. With the continued seamless integration of our recent milestone acquisition to start the year, we are thrilled to have finished fiscal Q2 with another record-breaking quarter. We have identified and executed on the low-hanging cost savings and synergies of $2 million ahead of schedule, and we are eager to expand our strong footprint across the U.S. Together, we have expanded to 115 locations throughout 26 states, with more than 270,000 active patients. It is important to note that we look at our new geographical footprint and we have plenty of runway to organically expand into continual markets and source additional acquisition targets. We are proud of what we have accomplished to date and are extremely excited for the future as we continue to benefit from significant business tailwinds, a deep acquisition pipeline, and a very strong balance sheet further bolstered by the recent equity financing we completed. We have all the tools needed to execute our strategy and look forward to continuing to build shareholder value. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal second quarter 2023 financial results.

Thanks, Greg. On Monday evening, we announced our fiscal second quarter 2023 financial results representing the three months ended March 31, 2023. In reviewing the fiscal second quarter 2023 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. Through the company's continued use of technology and centralized intake processes, respiratory resupply setups and or deliveries increased to 106,486 for the quarter ended March 31, 2023 compared to 50,713 for the quarter ended March 31, 2022, an increase of 110%. The company's customer base increased 76% year-over-year to 137,748 unique patients sold in fiscal year-to-date Q2, 2023 from 78,273 unique patients in fiscal Q2 2022. Compared to 118,878 unique setups deliveries in fiscal Q2 2022, the company completed 198,101 unique setups and deliveries in the fiscal Q2 2023, an increase of 67%. Revenue for fiscal Q2 2023 was 58.1 million compared to 33.6 million for fiscal Q2 2022, representing a 73.2% increase in revenue year over year. Organic growth increased by 2.5% sequentially compared to fiscal Q1 2023. Revenues for the six months ended March 31, 2023, increased to 98.9 million or 56.8% from the six months ended March 31, 2022. Recurring revenues as of fiscal Q2, 2023 continues to be strong and exceeds 78% of total revenue. Adjusted EBITDA for fiscal Q2, 2023 was 13.1 million or 22.5% margin compared to adjusted EBITDA for fiscal Q2 2022 of $7 million at 21% margin, representing an 85.9% increase year over year. We expect to continue seeing strong margin performance. Cash flow from continuing operations was $14.8 million for the six months ended March 31, 2023, compared to $11.8 million for the six months ended March 31, 2022. For fiscal Q2 2023, that debt expense was at 4.2% compared to 9.4% in fiscal Q2 2022. This decrease is primarily due to improved collections and exemplifies our ability to scale and add more revenue through add-on acquisitions without compromising our billing capabilities. For the three months ended March 31, 2023, operating expenses were at $27 million, $686,000 and increase of $11,430,000 from $16,256,000 for the three months ended March 31, 2022. Acquisitions contributed approximately $10,571,000 of the increase. The company reported $2.1 million of cash on hand and total credit availability of $28 million As of March 31, 2023, with $7 million available towards the line of credit and $21 million available on DDTL. Subsequent to quarter end, the company completed a bought deal offering and bunker and target placement for the net proceeds of $28.9 million USD. The company pro forma balance sheet contains $18 million of cash and $41 million available on its senior credit facilities. Pro forma, our net leverage ratio is 1.5x. The continuation of our successful start to the year has further accelerated, which is evident in robust performance for the second quarter of fiscal year, where all of our key metrics outperformed. Our adjusted EBITDA margin has reached 22.5% as a result of the ongoing scaling of our business, and we anticipate that this trend will continue into the foreseeable future. We are increasing our margins by placing a strong emphasis on our heavily weighted respiratory product mix and services as well as focusing on operational efficiencies and effective cost management. In addition, we are encouraged by the strengthening of organic growth trends which reached 2.5% sequential growth in fiscal second quarter. We anticipate that this better organic growth will persist. Notwithstanding the current economic situation, Our business continues to produce consistent financial results driven by our highly recurring revenue model at 78% of our revenue mix, which continues to indicate the stability of our business model. Subsequent to quarter end, we continue to strengthen our already solid balance sheets so that we would have plenty of room to implement our rapid strategic growth strategy in a higher rate environment. Our current leverage is an extremely modest 1.5x, and we have ample flexibility to use a mix of debt and cash as needed for the execution of our acquisition pipeline. As we enter the calendar 2023, we announced our largest acquisition to date, covering eight states of seven which are new to CRIT, with over $1.5 million separating from COPD across those states it operates. Integration has gone extremely well, and we are very pleased to have recognized the initial $2 million of cost savings and synergies nearly a full quarter ahead of schedule. We now have more opportunity to build on our successful acquisition and integration strategy with highly accredited tuck-in acquisitions for our full portfolio of respiratory products and services, thanks to the large geographic land breadth we have undertaken. Additionally, with the low-hanging fruit capture, our operational team is working towards capturing additional cost and revenue synergies over time in particular through the various processing opportunities including ventilation and oxygen. Also, the significant opportunity to increase resupply revenue once patients are on board to push resupply program. Moving forward, we have a robust acquisition pipeline and we will continue to be committed to the systemic acquisition approach and proven integration method that we have developed, which has been the driving force behind our dependable growth demonstrated on a manual basis. We are in a great position to carry out our expansion and acquisition plan going forward to drive shareholder value. Thank you, and with that update, I'll turn the call back to Greg.