Quipt Home Medical Corp.

Thank you for standing by. This is the conference operator. Welcome to the fiscal third quarter 2024 results conference call for equipped ComMedical 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. 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 Quick-Tone Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. Quipt Home Medical is a diversified healthcare services company providing a full spectrum of home medical equipment and services to patients in the home setting across the United States. At Quipt, our unwavering commitment is to provide clinical excellence through our patient-centric ecosystem, leveraging technology-enabled equipment solutions in conjunction with our specialized clinical respiratory programs to effectively treat patients at home in a way that best suits their needs. Our core go-to-market strategy drives market penetration through providing an end-to-end respiratory care solution with complementary durable medical equipment products to our key sales touchpoints, serving as a one-stop shop in the marketplace. At this time, respiratory care accounts for approximately 80% of our product mix, showcasing our ongoing commitment to serving the needs of patients with pulmonary and cardiovascular diseases. With our ongoing dedication to patient care and the scale we are achieving, we are poised to capitalize on the expanding need for respiratory care delivered in the home setting. This need for respiratory care is driven by an aging population, significant COPD target patient group of over 16 million Americans, and a significantly under-penetrated sleep apnea market with OSA impacting 80 million adults across the United States. On this call, we will provide updates on our fiscal third quarter 2024 performance, provide strategic insights into our core business and our strategic growth roadmap. In fiscal Q3 2024, we reported revenue of $64 million, marking a 6.1% year-over-year increase and adjusted even margin of 22.3%. This resulted in adjusted EBITDA of $14.2 million, representing growth of 2.7%. We increased revenues to $193.3 million for the nine months ended June 30, 2024, an increase of 21.4% compared to the prior period and generated adjusted EBITDA of $44.5 million, representing 23% of revenue compared to 22.6% for the corresponding period. Our strategy focusing on generating economies of scale and effective cost management enabled the consistency in our margin profile. We are very pleased with the progress made in the fiscal third quarter in the face of the challenges faced year to date. We saw year-over-year organic growth of 3% and flat sequential organic revenue growth in the quarter. This represented a solid sequential improvement from the 2% sequential decline seen in fiscal Q2. We are proud of the improvement given the absorbed impact of the end of the Medicare 7525 relief as of January 1st, which had been providing rate relief for certain geographies that changed healthcare cyber attack and the withdrawal of Medicare Advantage members due to a capitated agreement engaged on with other providers in the industry. We have observed strength in our referral patterns across our product offering in real time, which has helped to mitigate the impact, and we anticipate a return to historic levels of organic growth in time. Turning to our sleep business as it relates to the continued emphasis on GLP-1s, we have not seen any negative impact from GLP-1s whatsoever to date. We have seen referral patterns for new device setups remain consistent and replacement supplies very strong. In the quarter, we saw our resupply program perform very well with an increase of 2.2 million or 9%. Moreover, Additional positive data shared from the leading sleep device manufacturer recently involving 811,000 patients showed those with an OSA diagnosis and prescribed the GLP-1 are 10.7% more likely to start pap therapy compared to those not on GLP-1s, highlighting their impact on treatment adherence. Additionally, data showed more frequent resupply order rates for these patients over 12 and 24 months. The data shared demonstrates that GLP-1s are having a positive impact on patients both seeking and adhering to positive airway pressure therapy. We think that the availability of these medications for the treatment of obstructive sleep apnea will lead to a rise in the number of cases diagnosed with the illness and a rise in the market demand for pap therapy. It is important to remember that 80 million adults in the U.S. have OSA, of whom over 20 million have moderate to severe OSA. Furthermore, it's estimated that 85% of the cases of OSA remain undiagnosed and untreated. The total addressable market is extremely large for this segment of patients and allows for multiple treatment modalities. CPAP is also well tolerated with approximately 87% of patients meeting U.S. Medicare criteria for CPAP adherence using modern technology. We believe, based on early data, our real-time performance, and the positive developments of more motivated patients entering the healthcare system as they work towards their health goals, the introduction of GLP-1s will be complementary, serving as a tailwind for our sleep business over time. As it relates to the ongoing CID, known as the Civil Investigative Demand, we continue to make progress providing information and are working diligently to resolve this matter as quickly as possible. At this time, the government has not reached a conclusion that any wrongdoing has occurred. We have effective internal controls around billing and compliance procedures in place and remain confident in our practices. In fiscal Q3, we were laser focused on working through the short-term working capital impact of the change healthcare cyber attack, ensuring cash collections normalized and the processing of outstanding claims was prioritized. Now, as we begin to move on to the other side of this impact, we continue to look at ways to allocate our capital to promote growth and create value. To this effect, we have seen the M&A landscape evolve over recent months, with plenty of strategic opportunities in the marketplace that would fit our stringent mandate. Our pipeline is growing, and we are committed to economically building scale with the flexibility to deploy capital in a thoughtful manner as it relates to synergistic acquisitions at reasonable multiples. Moreover, as it relates to the M&A environment as a whole, we believe the recent sale of one of our larger peers, which is significantly higher than our current trading multiple, underscores how undervalued our company is at this time. Additionally, we anticipate that dislocation will occur in the marketplace from the M&A activity and will lead to organic growth opportunities for us to take advantage of, and we are ready to pick up market share. Finally, We will continue managing debt conservatively and leveraging our strong balance sheet, which stands at a conservative 1.5 net leverage, enabling us to pursue strategic initiatives that drive long-term value for our shareholders. As we continue to implement our strategic growth strategy, we are confident in our ability to deliver exceptional patient care, establish strong payer alliances, and achieve consistent and sustained long-term growth. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal third quarter 2024 financial results.

Thanks, Greg. On Wednesday evening, we announced our fiscal third quarter 2024 financial results, representing the three months ended June 30, 2024. Please note that all financial values are in U.S. dollars. Here are some key highlights. The company's customer base increased 9% year over year, to 153,223 unique patients served in Q3 2024, up from 140,515 unique patients in Q3 2023. Compared to 547,038 unique setups or deliveries in Q3 2023, the company completed 641,786 unique setups and deliveries in Q3 2024, an increase of 17.3%. This includes 120,118 respiratory resupply setups for the three months ended June 30, 2024, compared to 108,000 391 for the three months ended June 30, 2023, an increase of 10.8%, which the company credits to its continued use of technology and centralized intake processes. Revenue for fiscal Q3 2024 was $64 million compared to $60.3 million for fiscal Q3 2023, representing a 6.1% increase in revenue year over year. Organic growth contributed approximately 1.7 or 3% year-over-year. Revenues for the nine months ended June 30, 2024 increased to $193.3 million, representing an increase of 21.4% from the nine months ended June 30, 2023. Organic growth contributed approximately $8.1 million or 5%. Recurring revenues as of fiscal Q3 2024 continues to be strong and is approximately 82.1% of the total revenue. Adjusted EBITDA for fiscal Q3 2024 was $14.2 million or a 22.3% margin compared to $13.9 million or a 23% margin for Q3 2023. The EBITDA grew by 2.7% year over year. The company generated adjusted EBITDA of $44.5 million for the nine months ended June 30, 2024, a 23.7% increase from the nine months ended June 30, 2023. This represents 23% of revenue for the nine months ended June 30, 2024, an increase from 22.6% for the nine months ended June 30, 2023. Cash flow from continuing operations was $28.6 million for the nine months ended June 30, 2024, compared to 27.3 million for the nine months ended June 30, 2023, an increase of 4.9%. For fiscal Q3, 2024, bed debt expenses increased to 5% from 4% due to the direct and indirect effects of the change healthcare cybersecurity incident, resulting in a diversion from normal collection efforts. CapEx defined as transfers of rental equipment from serialized inventory to fixed assets when we deployed the equipment on patients was 12.7% for the nine months ended June 30, 2024, in line with historical levels. We experienced higher capex for the three-month period ending June 30, 2024, due to the purchase of new ventilators to replace the old triology model in our fleet. Operating expenses for the three months ended June 30, 2024 was 47.8% and increased from 45.4% in the three months ending June 30, 2023. Acquisitions accounted for approximately $900,000 of the increase and $723,000 of professional fees related to CID. Remaining increase was incurred to support organic revenue growth with payroll being the largest component. The company reported $14.4 million of cash on hand on June 30, 2024, compared to $14.6 million as of March 31, 2024. The company had total credit availability of $38.1 million as of June 30, 2024, with $17.1 million available on the revolving credit facility and $21 million available pursuant to the delayed draw term loan facility. The company maintains a conservative balance sheet with the net debt to adjust it with the leverage of 1.5x. We are pleased with the steady progress made throughout this quarter, and we are confident that our ongoing growth initiatives will translate into sustained long-term value for our shareholders. A key component of our strategy is our prudent approach to capital management, as this allows us to economically scale our business while maintaining efficiency. Our focus is on ensuring that every investment we make is geared towards sustainable growth. Our long-term strategy is built on maximizing the resources we already have in place, including leveraging our strong balance sheet, operational strength, sales capabilities, and the infrastructure we have developed so far. By doing so, we are able to build a more resilient and stable foundation for future growth, margin acceleration, and cash flow generation. We are proud of the efforts of our team in growing our overall revenue year-over-year and mitigating the temporary headwinds we faced with continued volume growth to produce flat growth sequentially, an improvement from sequential 2.1% decline seen from fiscal Q1 to fiscal Q2. Our priority remains on achieving organic growth target of 8% to 10% on an annualized basis. Our conservative balance sheet featuring $31.5 million in cash and revolver availability positions us exceptionally well to navigate an environment of higher interest rates and strategically pursue both organic and inorganic growth opportunities with a prudent leverage ratio of 1.5 times. We are strategically positioned to utilize the balance mix of debt and cash, demonstrating our commitment to disciplined growth. As it relates to working capital, we generally do not have any significant seasonal working capital fluctuations. However, during the nine months ended June 30, 2024, the change healthcare cybersecurity incident created a reduction in our cash flow and increased our working capital needs. We estimate the working capital impact from change health care has been approximately $4 million. As we continue collecting outstanding claims, it should mitigate this impact and reduce our higher working capital that we currently have. On a go-forward basis, we continue to anticipate 6% to 8% free cash flow following CapEx and or lease payments, but prior to any payments relating to debt service and acquisitions price payable. We see this as our baseline scenario going forward. with the long-term objective of improving on this as we continue to expand our business. We are confident in our ability to grow our net cash flow inclusive of our CapEx needs. Maintaining our capital allocation discipline is crucial to our continued financial success. We will continue to adhere to our strict approach, focusing our investments on creating value by building scale within the business to drive operating leverage. This disciplined strategy ensures we maximize financial flexibility and long-term shareholder value. Lastly, as a reminder, this is our last fiscal quarter reporting under International Financial Reporting Standards, also known as IFRS. Starting with our full-year fiscal 2024 results, we will transition to U.S. generally accepted accounting principles, also known as GAAP. This means starting from our fourth quarter of fiscal 2024 and our audited financials for year ending September 30, 2024, the financial statements will be prepared under U.S. GAAP. It also means that effective October 1, 2024, the company will be subject to the same reporting and disclosure requirements applicable to domestic U.S. companies, and the company will be required to file periodic reports and financial statements with the SEC on Form 10-K and Form 10-Q as applicable, as well as filing current reports on Form 8-K. We are looking forward to this transition as we believe it is important to align our accounting standards with the geography of our operations being all within the United States, as well as improving comparability to our peers in the industry. Thank you, and with that update, I'll turn the call back to Craig.