Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the fiscal third quarter 2023 earnings 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 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, 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 conference over to Ms. 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 Quiptone Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. Quipt Home Medical is a rapidly expanding healthcare services company that offers a complete spectrum of home medical equipment and services to patients in the home with a focus on those suffering from respiratory conditions. Quipt has strengthened its coast-to-coast reach with 115 locations across 26 states with over 270,000 active patients. At Quipt, we work hard to deliver top-notch patient care and we succeed in this mission by giving patient access to healthcare services that are convenient, effective, and tailored to their unique needs. The more than 1,000 QIPP team members who dedicate their daily efforts to delivering our core mission of outstanding patient care in order to improve the quality of life for each and every patient who uses our services are the driving force behind our company's success. The strength of our team across all business functions allows us to successfully drive our differentiated clinical service models that is having equipped emerge as a growing force in the industry. In order to relieve the burden on the traditional healthcare system and generate financial savings for the system, we are committed to providing equipment solutions for patients with cardio and pulmonary conditions in the home environment. As we have continued to execute on our strategic growth strategy, we believe to have positioned ourselves as the fifth largest revenue producing provider of respiratory and home medical equipment in the United States. This is thanks to our ongoing focus on technology to streamline operations, the strong patient-centric ecosystem we have in place, and the end-to-end respiratory and equipment solutions we offer. We are certain that our strong operational foundation and infrastructure, along with our aggressive organic and inorganic growth strategy, have placed us in a very favorable position to take advantage of the numerous opportunities for further meaningful expansion. On this call, we will discuss the robust performance of our record-breaking fiscal third quarter 2023 performance, the positive real-time business trends we are seeing, an update on the regulatory landscape, which remains the best in over a decade, and also provide details on our investment into DME Scripts, an independent e-prescribed company. In real time, we continue to fire on all cylinders. Seeing significant momentum across the entire organization is a result of a number of factors, including the continued penetration of our key sales touchpoints, the successful integration, and outperformance of our largest acquisition to date. and the underlying performance of our core business. During Fiscal Q3 2023, we surpassed our expectations reporting record sequential organic growth of 4% compared to Fiscal Q2 2023, ahead of our baseline expectations of 2% sequential organic growth. We have had a great opportunity to improve our organic growth performance as a result of our focus on expanding the continuum of care gaining from the benefits of the normalized supply chain, and working in an incredibly strong regulatory environment. To achieve our objectives for organic growth, we have been concentrating our efforts on areas with the high prevalence of COPD and penetrating our key sales touchpoints into continual markets. We anticipate continued, consistent, strong organic growth throughout the rest of the year, exceeding the 8% to 10% average organic growth we've seen annually. When considering our new geographical footprint covering 26 states, it is crucial to keep in mind that we have plenty of room for organic growth into additional markets and the acquisition of new accretive targets to build out scale. Our fiscal Q3 2023 revenue came in at a record $60.3 million, or 64% year-over-year growth, with strong margin acceleration to 23%. equating to adjusted EBITDA of $13.9 million or growth of 80%. As we continue to implement our long-term strategic expansion plan, it goes without saying to us that offering a full range of end-to-end respiratory solutions is essential to maintaining our success and a significant factor in the expansion of our key markets. Through the focus on our main sales touchpoints, which are healthcare institutions like hospital systems, doctors' offices, long-term care facilities, home health agencies, and rehab facilities, we continue to increase overall volumes and drive the growth in our automated resupply program for sleep supplies. Looking at the incredibly favorable regulatory environment, we have witnessed many positive changes in the past year, such as the easing of restrictions through the elimination of the long-standing requirement for providers to obtain certificates of medical necessities for home oxygen, which reduces the administrative burden on health care providers. Moreover, we have witnessed the opening of access for patients who visit the emergency room care setting and are identified as having either acute or chronic respiratory diseases, and they can now order home oxygen equipment. Additionally, we are given a favorable change to the Medicare fee schedule, which resulted in a sizable CPI increase that took effect on January 1st, 2023. In the past, our products were not subject to CPI adjustments during the competitive bidding program. Historically, CMS has begun any competitive bidding processes roughly 18 months before contract and prices take effect. The likelihood of this happening is decreasing because CMS hasn't indicated how returning to the program would result in savings. As a result of the positive operating environment and the ongoing operational fortitude we have shown, QIPT is well protected from any long-term inflation pressures and economic downturns. Subsequent to the end of fiscal third quarter, we are thrilled to have made an investment of $1.5 million to purchase approximately 10% of DME Scripps, an independent e-prescribed company dedicated to improving the patient, prescriber, and provider experience by eliminating inefficiencies and reducing paperwork. The investment we have made is to align our participation in the future growth of e-prescribed usage within the DME industry. This investment aligns us with the major peers in our industry to further collaborate and innovate. Electronic prescribing is essential to the durable medical equipment industry as this technology can serve to boost productivity, cut down on errors, boost compliance, and improve patient outcomes. As we continue to enjoy significant business tailwinds, a robust pipeline of acquisitions, and a very solid financial position, we are pleased by what we have accomplished thus far in fiscal 2023 and are incredibly optimistic about the future. We are prepared to carry out our strategy and eagerly work towards maximizing shareholder value as we continue to drive growth. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal third quarter 2023 financial results.

Thanks, Greg. On Monday evening, we announced our fiscal third quarter 2023 financial results representing the three months ended June 30, 2023. In reviewing the fiscal third 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. The company's customer base increased 58% year-over-year to approximately 141,000 unique patients served in fiscal Q3 2023 compared to approximately 89,000 unique patients in fiscal Q3 2022. Compared to approximately 134,000 unique setups deliveries in fiscal Q3 2022, the company completed approximately 203,000 unique setups deliveries in fiscal Q3 2023, an increase of 52%. There were approximately 108,000 respiratory resupply setup deliveries during fiscal Q3 2023 compared to approximately 63,000 during fiscal Q3 2022, an increase of 73%. Revenue for fiscal Q3 2023 was $60.3 million compared to $36.7 million for fiscal Q3 2022, representing a 64% increase in revenue year-over-year. The company witnessed great organic growth this quarter at 4% compared to Q2 2023, the previous quarter. Revenues for the nine months ended June 30, 2023 increased to 159.2 million or 60% from the nine months ended June 30, 2022. Recurring revenue as of fiscal Q3 2023 continues to be strong and exceeds 80% of total revenue. Adjusted EBITDA for fiscal Q3 2023 was 13.9 million at 23% margin compared to adjusted EBITDA for fiscal Q3 2022 of 7.7 million at 21% margin, representing an 80% increase year-over-year. We expect to continue seeing strong margin performance in fiscal Q4 and beyond. Adjusted EBITDA for the nine months ended June 30, 2023 increased to 36 million representing an increase of 73% from the nine months ended June 30, 2022, and represented 22.6% of revenues. Cash flow from continuing operations was $27 million for the nine months ended June 30, 2023, compared to $19.4 million for the nine months ended June 30, 2022, a substantial increase of 42%. For fiscal Q3 2023, bed debt expense was at 4% compared to 9% in fiscal Q3 2022. This significant decrease is primarily due to improved 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 June 30, 2023, operating expense was $27 million, an increase of $10 million from the three months ended June 30, 2022. Acquisitions contributed approximately $8.5 million of the increase, remaining increases related primarily to payroll. The company reported $20 million of cash on hand and $41 million available on its senior credit facility as of June 30, 2023, with $20 million available on the revolving line of credit and $21 million available on the delayed draw term loan. The company continues to maintain a very healthy net leverage ratio at just 1.4 times. In the fiscal third quarter of 2023, all of our key metrics outperformed our baseline expectations. Momentum has continued to build throughout the year, and we are seeing the robust organic growth and margin expansions we have been working towards. Our adjusted EBITDA margin has reached 23%, driven by our heavily weighted respiratory product mix and services, as well as focusing on operational savings and effective cost management. In addition, we are thrilled by the acceleration of organic growth trends which reached 4% sequential growth in the fiscal third quarter compared to the fiscal second quarter. We anticipate the strong organic growth will persist as we continue to drive volume through the cross-selling of products and expand the continuum of care in adjacent markets. In the fiscal third quarter, the company also demonstrated robust net cash flow from operations. In some of the previous conference call Q&A sessions, the company had stated that its near-term target was to consistently achieve 3% to 5% net cash flow from operations after CapEx and or lease payments and before any debt service-related and purchase price-related payments. On the heels of strong performance for the nine months ending June 2023, the company has revised its near-term goals upwards and would aim to consistently achieve 6% to 8% cash flow from operations after CapEx and or lease payments and before any debt service related and purchase price related payments. The continued consistency of our revenue base is driven by our highly recurring revenue model, which accounts for 80% of our total revenue mix as of fiscal Q3, in line with fiscal Q2. During the quarter, we further improved our already robust balance sheet in order to ensure that we will have sufficient room to execute our plan for rapid strategic expansion in an environment with higher interest rates. Our present leverage is a very modest 1.4 times, giving us considerable flexibility to deploy a combination of debt and cash for the execution of our acquisition pipeline in accordance with our prudent acquisition approach. As we entered calendar 2023, we announced our largest acquisition to date, covering eight states, seven of which were new to Quip, with over 1.5 million suffering from COPD across those states. We are seeing exceptional performance with the acquisition. Integration is near complete. and we are focused on longer-term revenue synergies through cross-selling of products, expansion of markets, and opportunities to leverage our significant existing resupply program. We continue to drive economies of scale through centralization processes and reducing overlapping functions. As mentioned on our fiscal Q2 call, we recognize the initial $2 million of cost savings and synergies nearly a full quarter ahead of schedule and have continued to build off that. Because we have undertaken such a significant geographic land grab, we now have greater opportunities to build on our acquisition and integration strategy with the pre-tutting acquisitions, expanding our portfolio of respiratory products and services. We have a solid plan for continued robust organic growth, a deep acquisition pipeline, and will continue to be committed to the systemic acquisition approach and proven integration process that we have built over many years. These are the factors that have been the driving force behind our steady growth that has been shown on an annual basis and the strengthening the company's position in the industry. We have all the tools to carry out our expansion and acquisition plan moving forward in order to generate increased value for our shareholders. Thank you, and with that update, I'll turn the call back to Greg.

Thanks, Hardik. Our first priority in every single one of our markets is to provide great patient care with a focus on the treatment of disorders including sleep apnea, COPD and other chronic respiratory diseases. By penetrating new markets and foregoing alliances with payers, patients and referral sources, we are always devising strategies to increase the number of patients we serve and gain entry to attractive geographic areas. Our robust clinical services, expanding reach and growing market share provide us a competitive edge and allow us to take advantage of economies of scale. We anticipate that our strong momentum will continue into the foreseeable future as a result of our successful execution of the key elements of our growth strategy. These include expanding our healthcare network across the nation through the execution of national insurance contracts, completing accretive acquisitions, and making investments in our company's future organic growth. Moreover, we are confident that the successfully completed acquisitions help us to accelerate our organic growth model overall. At this point, I would like to review with you the three components of our core growth strategy as we move into 2023. First is organic growth, which came in at a robust 4% sequentially in fiscal Q3, surpassing the 2% to 2.5% sequential pace or 8% to 10% annually in we have strived for. As shown by our results, we anticipate fiscal 2023 will surpass this. Growing our sales team is one of the core initiatives on this front, which is continuing to go very well and is how we connect with key touchpoints like hospital networks, doctor's offices, long-term care facilities, and rehab centers. Furthermore, the aging population and significant increase in the number of people with multiple chronic diseases Across the United States are positive demographic trends for QIP when looking at the operating environment. Home medical equipment and services are becoming more necessary as the population ages, which gives us with a very sustainable long-term growth opportunity. Additionally, a lot is being done to make sure that the patients receive care at home whenever it is feasible. Second, in order to consistently improve our operational performance, we are always focused on the usage of technology across our business functions in order to boost production and profitability. We are primarily focusing on applying data analytics and data mining techniques. A key example of usage of technology is our automated resupply platform which not only helps us drive organic growth but also provides us with considerable revenue synergies when we make strategic acquisitions. The third element of our growth plan is expanding scale by making smart, accretive acquisitions in conjunction with our tried and true integration approach, which has effectively integrated 18 acquisitions since 2018. Our attention is on heavily weighted respiratory businesses, which can be successfully incorporated into our scalable infrastructure. Our strategy objective is to increase our payer base and geographic reach into advantageous states with a high COPD prevalence, including those that are already within our healthcare network. Thanks to our robust balance sheet, we will be able to take advantage of the opportunities presented by our acquisition pipeline to grow our revenue, EBITDA, patient base, and overall geographic reach. With the start of trading on the TSX Big Board, as well as our inclusion into the Russell 2000 and 3000 indexes, our momentum in capital markets has continued in 2023. Both occurrences, in our opinion, will lead to increased institutional ownership and liquidity over time. It is significant to note that 40% of the TSX trading is conducted by investment dealers with global headquarters. As always, we are aggressively reaching out to U.S. and Canadian investors to tell our compelling story and have the wonderful opportunity to discuss our long-term growth goals. The remainder of the year will be very busy as we plan to attend a record number of of in-person and online investment conferences, and anticipate informing a wide range of investors about our growing company. In addition, we are continuing to strategically position the company for continued sustained growth in light of the extremely bullish industry environment, the strong demand for respiratory products and services, and all the organic tailwinds we are experiencing at our back. We will remain prudent yet aggressive in our pursuit of the numerous opportunities available to us. Our operational excellence and 1.4 times leveraged balance sheet provide us with all the resources necessary to execute our expansion strategy. Finally, I would like to take a moment to thank the entire QIP team for their tireless work and our stakeholders for their continued support.

We will 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 from the question queue, please press star then two. Our first question is from Doug Cooper with Beacon Securities. Please go ahead.

Hey, good morning, guys, and congrats on a terrific quarter. Just first of all, on the organic growth,

uh roughly four percent sequentially that's terrific work um that's 16 annualized greg um obviously exceeding the eight to ten how long can you keep that pace going you think yeah thanks doug for joining this morning and that i mean we've seen uh robust organic growth and that kind of come back uh into the business on the back side of the pandemic and uh the supply chain and that kind of normalizing I mean, we think at a minimum in that that we can beat our historic levels of that 9%, 10% in that that we've seen. One of the big drivers behind that has been the markets that we've obtained through acquisitions over the past couple years or so in that that we've added to our sales force on that front. So, you know, we think we're going to see continued momentum on the organic growth side for the foreseeable future.

Okay, so I looked at the actual sales. So sales of equipment, I guess, was up 3% sequentially. Rentals was up 4.9% sequentially. I'm not sure if that is meaningful or that's something to go forward. But can you just talk about where you're seeing the organic growth? Is it geographical, more penetration within states? Maybe just expand it just a little bit.

Yes. It's primarily in the states, and that's the new states that we've entered, and that over the past 18 to 24 months or so, we've probably added about 11 to 13 states. So it's really just kind of penetrating in that new continuum markets within those states. Okay.

How many states are you in now?

We've got over 115 locations. Okay.

Just on the operating leverage, I would say the EBITDA margin expanded this quarter. Part of it was driven by payroll as the percentage of sales dropped to 30% from 32% in Q1. It has been as low as 28%, 29% in the past. How much leverage can we get on that payroll as a percentage of revenues?

Hey, Doug, this is Hardik. So, you know, on the use of what Greg just said, you know, we are investing in some sales force expansion, which obviously was reflected in our top line growth as well. And so, you know, we will continue to do so. So just to say that put differently, I think the dollar amount might stay there. The hope would be to reduce the percentage of revenue as we actually continue unleash the top-line revenue as a result of adding the sales force.

Okay. And Hardik, while I got you, just on the free cash flow, you talked about raising your expectations, call it 6% to 8% of revenue. My back of the envelope in the quarter was met. That dropped $32 million sequentially, and we raised $27.9 million, give or take. So that difference is $4.2 million of increased cash or lower debt, whichever way you want to look at it, which is roughly 7% of revenue. Is that sort of in the ballpark of what you generated for free cash flow in the quarter?

That's pretty close. I mean, my maybe sharpened pencil was 7.9%, so to speak. Yeah. So I think we're pretty close. Okay.

Okay. And my final one, Greg, this is just sort of, you know, It may be a weird one, but obviously lots of focus on weight loss drugs like Ozempic and so forth certainly be marketed as a wonder drug and everybody's going to be skinny from now on. And maybe that'll have an impact on sleep apnea. Can you just sort of talk to it from your perspective, what's happening with that and the impact it might have on the industry?

Yeah, I mean, from, you know, my perspective in that, I mean, you know, we've done a lot of investigating here in that, and CPAP devices and BiPAP devices are still the gold standard treatment in that as of today, and that for sleep apnea, I mean, continues to be very, very strong demand in that for those products, and I think even the manufacturers have even spoken to that about the global demand in that for sleep products.

Okay, perfect. That's it for me. Thank you. Thanks.

The next question is from Richard Close with County Corriginuity.

Please go ahead.

Yes, thanks. Congratulations on a strong quarter and continued performance this fiscal year. Just wanted to go back on the strong organic growth and obviously a lot of optimism here going forward. So ADAPT talked a little bit about normalizing growth in sleep beginning this third quarter, their third quarter. They had strong setups beginning last year in the third quarter, so they're just lapping some higher comps. And, you know, I guess you guys started to see the improved supply at the beginning of January. So just trying to understand if you're going to encounter the same situation maybe or how we should think about QUIP being different as compared to ADAPT on that front.

Yeah, we think on our front that our sleep device in that setup and that are going to remain relatively strong in that. I mean, I don't think there's any particular peak or anything that's, you know, coming for that because it's really came back for us. I think additionally, though, we did set up a lot of patients in the first part of the year that are ending up in the resupply program and will stay there in that. So we're going to really, you know, probably see a ramp up in our resupply. with the additional setups that were done prior.

Okay, that's helpful. And then just to go back, Hardik, maybe on your comment in terms of with respect to the free cash flow, but also talking about, or I guess it was on the payroll, but continuing to invest in the sales force. Could you guys just... You know, let us know the status of, you know, the current Salesforce expansion, and are you increasing that here? Is that what we should believe based on those comments?

Yes. We certainly, for example, you know, at 1231, about, you know, eight months ago, we had 50-ish sales. in our sales force that increased to 62 at the end of March, and it's not of 70 as of 630. So you can see directionally we are having more boots on the ground. I mean, there's a whole cyclical process to adding sales teams. Some will click, some won't. Then you try to rehire the ones that don't work, and you continue down the path. So we expect to do that in the near future, yes.

Okay, and is that only in the newer acquired markets, or are you doing any of that in the core existing quip markets?

It's definitely a combination, for sure. I mean, it is based on where the opportunity is. If we are already well penetrated, whether it's a new market or an old market, then you probably don't want to spend additional. There may not be that much of a marginal benefit, but if you are in a market where there is an opportunity to penetrate further, whether it's in the form of a new product line or existing product line but more doctors and hospital coverage, then kind of you make those decisions accordingly.

Okay, that's helpful. And just a couple modeling questions here really quick. You know, I guess with respect to inventory levels, I see it went down a little bit, second quarter to third quarter, and just curious, you know, is this a good level, you know, going forward, or should we assume some growth there?

I think it's a stable level for, you know, we did some adjustments to inventory in this quarter, which kind of did through Q3 numbers. But I think within a margin, that is a steady state for the current revenue base.

All right. And final one, also modeling. You know, on equipment loans, you paid some off, obviously, added some, I think, around $7.8 million. Is that a good level going forward as well, now that Great Elm's completed and

sort of operating um full force here yeah i mean in this particular quarter of we we uh you know there were some new swings in that category to the to the normal but uh again if you look at the nine months period and if you look at or even if you want to just look at the last six months uh i think that's a good average uh since that already reflects uh Whenever we do an acquisition, you know, we do acquire some liability that's part of our purchase price allocation. So, it does cue it a little bit. But again, if you look at averages, I think you'll get a good average of the last six months.

Okay, thanks.

The next question is from Raul Salregaster with Raymond James.

Please go ahead.

Hi, good morning, Greg. Good morning, Hardik. This is Mike on for Rahul. First question is going to be on the acquisition pipeline. I wonder if you could describe the general profile of that pipeline and describe what you're seeing in terms of market pricing.

Sure. You know, a pipeline includes, you know, companies that are somewhere in the, you know, $3 to $15 million in top line revenue, some on the higher end of it, some at the lower end of it. I think the three-pronged strategy that we have laid out, I think that continues to hold for us. We do see smaller tuck-in opportunities, which, you know, are an extension of our existing geography, but within the same state, which probably you can acquire those at lower multiples. And then you will see the higher and maybe 10 million plus minus and those might demand a little bit higher in terms of valuation, but overall, you know, the valuation seems to be slightly depressed than what we have seen in the past.

Okay, great. That's helpful. Now, I wonder if you could provide an update on the Great Elm integration, wondering if there is, you know, more headroom for optimization of that ASIC moving forward and if that might factor into future adjusted EBITDA growth. And then describing with a bit more precision the ambitions around growth around that asset. What are some areas that you would like to see expand specifically in Great Elm?

I'll take the the synergy part and then I'll let Greg respond to the growth opportunity part. Just to rephrase your question, you're saying are there more synergies to be unleashed and hence more margins to be unleashed? Did I get that correct? Yeah, I think what you are seeing is mostly maturity on the synergy side. You know, we kind of, whatever was previously identified, we were able to, we were hoping to unleash that in about nine months. We were able to do that so sooner. So I think what you are seeing is probably more of a steady state. If there are some more synergies to be squeezed out, I mean, they might be gradual, but they may not be meaningful in this scheme of things. So I would consider

to be as a very good baseline yeah and this is greg i'll just add in that it's primarily going to be the cross-selling of additional products in the future and that across those particular geographical areas and then kind of follow after that will be expansion into continuum areas uh okay great and then just uh one uh one modeling question to be part for the course um i noticed uh you know uh

D&A climbing over the last three quarters. I wonder if you could describe what we should be thinking about moving forward.

D&A, that, you know, given the fact that we do acquisition, I think that that's one thing it's very hard to model. We totally appreciate that from a modeling perspective. As far as steady state business goes, You know, one way to look at it is look at our PP&E as a percentage of revenue, and then maybe you use that to do the roll forward for depreciation at least, right? Amortization is on the books. You can take that on a straight line. Having said all that, as soon as we do another acquisition, you know, that baseline asset value changes and the depreciation numbers changes. So that's kind of the tough part. And, again, we appreciate the challenge from an analyst perspective, but that's my two cents on how I would model if I was to look at the steady state business. All right.

Thanks very much, and congratulations on all this growth. Thanks. Thank you.

The next question is from Ty Collin with A Capital.

Please go ahead.

Hey, good morning, guys. Thanks for the question. My first one, regarding the investment you guys made in DME Script, is that something you might look to upsize as you get more familiar with that business? Are you kind of comfortable keeping that as a minority position just to keep your toes in the water?

Yeah, I think that remains to be determined at this point in that, I mean, we definitely see e-prescribe as a big part of the future in that. It's going to allow us to scale our business. It's going to create efficiencies really on all fronts for the ordering physician, you know, the company here as we process orders, and ultimately in that improve the patient experience so they can get their products quicker and get under service and keep them in the home setting.

Okay, got it. Great. And then just for my follow up, you know, appreciate the confidence around the the cash flow conversion and the updated guidance there. I guess I'm just wondering if you could maybe articulate or provide a little more color around what kind of gives you the confidence at this moment to increase that guidance and kind of hold that into the future.

Yeah, I think, you know, a combination of things, you know, great acquisition plus working on the business, you know, some tailwinds that we previously discussed on the conference call. But I think more importantly, the fact that things are kind of stabilizing, we are seeing the top line growth that we expect to and with the presumption that, inflation has kind of stabled out, and we are not going to see any wild swings. And then, obviously, confidence in the execution of our strategy is what makes us believe in those numbers.

Okay, great. Thanks for the questions, guys. Congrats.

Thank you.

We have a follow-up from Richard Close with Canaccord Genuity. Please go ahead.

Yeah, thanks for the follow up. Greg, I was wondering if you could talk a little bit about your thoughts on resupply, maybe, you know, core equipped as compared to Great Elm and, you know, what's the opportunity there is for further penetration and just timelines possibly?

Yeah, sure, actually a really good question in that we've just converted in that those operations in that post in that this quarter here of 630 over to the current platform that we're utilizing in that. So we would expect to see some nice growth come out of that over the next couple quarters in that as those patients get transferred over and start ordering more frequently, which is what we've historically seen when we've transferred acquisitions over to this platform.

Are there any, like, percentage of patients that are, you know, due in resupply or any metrics that you can provide?

No, we really don't publish any of those metrics. Obviously, you can see the volume metrics that is included in our PR as well as the remarks today. Generally, an increase in new setups leads to an eventual increase in our resupply station base and then the revenue that falls into that. I think the other advantage of moving into the platform that we use for the rest of Quip when it comes to grey down is I think our platform has higher retention rates for patients that are getting converted into a resupply patient. And so over time, you are building value under the platform that we are. So that's all I can say in terms of why we would expect to have further growth in resupply revenue for Great Elm.

Okay, great. Thanks.

And we have a follow-up from Rahul Sargassar with Raymond James.

Please go ahead.

Hey, Jens. Mike here again. I'm wondering, just a quick question on national insurance contracts. You know, you've added two national insurance contracts. I wonder how you could describe the impact of these on your organic growth formula. And then, you know, a quick follow-up on the deal we saw struck in May between Adapt Health and Rotech on DME generally. with Humana. I wonder if, like, does that take Humana off the table for Quip, or is there, you know, in your specific areas of focus in respiratory, if there is some opportunity with that particular insurance provider?

Yeah, I mean, the national insurance contracts and that have a very long sales cycle. We do have others that we're working on, and not only national contracts, but also some regional and state contracts, and that that would add additional patient lives and that it could potentially need our services. So we would expect that that's going to continue. That is one of the levers in that that we continue to pull in that to see this strong organic growth and still believe in that that we've got plenty of runway on that front. As it relates to Humana and to the best of our knowledge in that contract and that is for HMO plans, which only affects about 40% in that of the enrolled member lives under that Humana plan. So we've still got a good, strong relationship with Humana.

Okay. Thank you very much.

This concludes the question and answer session.

I'd like to turn the conference back over to Greg Crawford for any closing remarks.

Thank you, Operator, and thank you all for joining today. As always, you can find us on the web at www.quiptomedical.com, where we will post a transcript of this call and our also updated investor deck. Thank you, and have a great day.

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