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.