Viemed Healthcare, Inc.

Greetings. Welcome to the ViMed third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded, and I'll now turn the conference over to your host, Todd Zender. You may begin.

Thank you. Good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in the forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the securities regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements as required by law. The third quarter financial results news release, including the related financial statements, are available on the SEC's website. I'll now turn it over to Casey to get things started. Okay. Thank you, Todd. Good morning, everyone, and thank you for joining our third quarter earnings call. Today I'll be providing commentary on our positive operational results of the third quarter, as well as our current view and outlook of the industry. I'd like to begin, as always, by acknowledging and thanking Our dedicated team of respiratory therapists, behavioral health specialists, staffing professionals, and administrative support staff who work tirelessly to deliver the best-in-class care to our patients. We are privileged to have these employees within the communities that we serve as they pride themselves with their servant mentality. As of September, our bi-med family grew to 722 employees. Underlying these numbers is a substantial increase in sales hiring offset by natural turnover in administrative functions. Our rate of hiring for sales positions is at an all-time high thanks to the support of our VHS staffing division. Through September, we have hired 52 sales reps and converted four existing employees to sales reps. We're also seeing positive retention trends with our existing sales force, contributing to an overall 34% net growth in Salesforce compared to the beginning of the year. In the third quarter, we added eight new geographic areas, bringing our net new areas for the year up to 23, which puts us in position to supply our goal of adding on 25 new areas by the end of the year. Based on the historic productivity curve of new hires in our Salesforce, we are optimistic about the robust organic growth potential coming through the pipeline over the next six to 12 months, strengthening our 2023 growth optimism. In addition to investing in growth and with the help of our maturing digital process improvement investments, we were able to reverse margin compression associated with the increased labor and inflation costs. Our competitive advantage and organizational value comes from our ability to leverage the best available technology combined with the best people. Technology, like our proprietary digital health platform, Engage, has enabled us to monitor our patients in greater volumes, reduce overhead, and continue to treat patients in a way so that their needs can be met efficiently and effectively. With over half of our event patients now on the Engage connected health platform, we are able to leverage data and the division of labor that comes with our scale. E-prescribing and e-ordering platforms that we offer are also being rapidly adopted by providers, patients, and payers, further contributing to our efficiencies. These platforms reduce on paperwork and time, creating a more timely and frictionless patient and provider experience. We've also recently completed a refresh of our website with an emphasis on the digital patient experience. A new digital ordering page and educational resource center complete with patient tutorial videos, is now available on the web. In addition to the innovative business approach through the use of technology, we are also innovating our approach to clinical services. Through our behavioral health division, BiMed Clinical Services, we are able to provide targeted clinical responses to patients requiring specialized mental and environmental care for our referral sources. The combination of our engaged technology coupled with human touch supported by behavioral health is generating improved compliance, which is leading to improved levels of care driving patient longevity. Our high-touch, high-tech approach also continues to open doors and make ViMed an attractive partner to large institutional providers like the VA and regional hospital networks. We are in various stages of partnership development with a number of large healthcare institutions, including a recent engagement with the VA during the third quarter. We have been awarded a solicitation contract to place our people in the homes of veterans in need of pulmonary disease management, social services, and behavioral health. The VA has asked us to track the patient results using our engaged platform and share the results on clinical outcomes and patient satisfaction. I'm very excited about this opportunity to work with the VA on this project, which has the potential to dramatically improve the lives of veterans living with COPD on a widespread national level. Value-based and at-risk administrators are seeking specialty care solutions, and BiMed's health tech offerings are solving the problems that major networks are facing within large COPD populations. During the third quarter, a study authored by our chief medical officer was published in Respiratory Medicine, a peer-reviewed medical journal. The study is being regarded as groundbreaking in the industry for the first-of-its-kind findings related to the overall healthcare cost savings. Using the largest data set to date, this study also reaffirmed that the sooner CRF patients initiated non-invasive ventilation treatment, the greater the mortality and hospital readmission improvements. In addition to the academic presentations of findings by Dr. Frazier, our sales reps have been actively discussing the study with our referral network of prescribing physicians. Concurrently, our payer development team has been vigorously engaged with commercial payers amongst our network to ensure that the right patients are getting the right care in a timely, effective, and cost-efficient manner. Despite signs that the overall economy may weaken in upcoming periods, our operating environment is actually stabilizing and showing signs of significant improvement. As a respiratory-focused healthcare company, We faced unique and significant challenges during and after the pandemic. Labor and supply chain constraints led to increased costs and shortages across the industry. Today, labor markets are stabilizing, and a number of new manufacturers have entered the supply chain and are delivering equipment at lower cost than ever before. The OIG review is closer to complete resolution, with nearly all of the original findings overturned. Our access to physicians and referral sources are now restored with clinics seeking innovative ways to free up beds by sending patients home with our equipment and services. Reimbursement rates for Medicare and most commercial plans are expected to rise during 2023 as a result of established inflation adjustments. When considering the positive trends in patient growth, reimbursement rate increases, and supply chain improvement, we are very excited about the future potential for our organizational growth and the creation of shareholder value in the year ahead. During the quarter, we spent a significant amount of time working through our processes to onboard potential acquired companies with our executive leaders and departments. Our new M&A team is extremely active and supportive of our disciplined approach with our current pipeline of targets. With that said, we're excited and expect to supplement our growth with acquisitions in the coming quarters. We also continue to execute on our shared repurchase program while at attractive valuation levels. Our organic growth in non-vent product and service lines continues to add opportunity and diversification to our business. Our suite business is setting records for new patient setups, which has pushed our more profitable resupply revenue stream into greater numbers. Our oxygen business is also growing at a rapid pace, which allows us to fully support the patient's care journey across all stages of their progressive respiratory disease. In addition to supporting VADMED's internal staffing needs, our staffing division is exceeding revenue and profitability expectations for the external staffing services it provides to hospital and government agencies. Although we are growing ventilator patient count at the highest rate since before the pandemic, our nonventilator revenue growth continues to perform better than expected. The result is that we are successfully adding diversity to our portfolio mix, ending the quarter with 33% of our revenue derived from non-vent resources. In addition to the strong revenue growth of our existing service lines, we are continuously developing new services and programs to address the needs of an evolving healthcare market and the growth of BIMED. With more on our operations, financials, the buyback, and the regulatory landscape, I'll now turn the call over to our Chief Operating Officer, Todd Zender. All right, thank you, Casey. In reviewing the financial results, all figures are in U.S. dollars, and the full results have been made available on the SEC website as well as CDAR. Our core business generated net revenue of $35.8 million during the third quarter as compared to net revenues of $27.8 million in the third quarter of 2021, which equates to a 29% increase. Our sequential growth for the core business was 8%. As indicated last quarter, we are now back to seeing growth across all of our major product lines and have very little restrictions to our access around the country. Our growth in EBITDA margin percentages are once again very healthy and are now back to being just from our core business lines. As indicated last quarter, we anticipated our margins to begin to turn around towards the end of the year or next year. And we're pleased that we were able to show a slight increase in EBITDA margins sequentially. We continue to see our margin profile be influenced by our product mix and continue to be pleased by the notional growth. Our growth in EBITDA margins during the quarter came in at 61 and 20% respectively. Our third quarter growth in EBITDA amounts came in at 21.7 and $7 million respectively. Our third quarter revenue from Vince was approximately 67% of our core as compared to 78% in the third quarter of 2021. We saw our active patients grow across all product lines and now have four products that we are comfortable saying are rolled out across a significant portion of the country. We should continue to see economies of scale as we continue to grow these lines. Our SG&A for the quarter totaled approximately 17.7 million as compared to $13.3 million in the third quarter of 2021 and is flat with the prior quarter. As indicated last quarter, we have ramped up hiring to serve our growing patient count around the country and expand our organic growth model in new areas. We did front load many of our significant hiring initiatives as evidenced by a flat G&A quarter, but we continue to pursue talent to help with our ongoing growth initiatives. Following on our last quarter comments, we have managed the inflationary effect that we are seeing in our business, but doing so in the spirit of not sacrificing patient growth or bottom line growth. For the quarter, we invested approximately $6.3 million on capital expenditures. The capex continues to be spent across all of our major product lines as we have continued to grow all products and manage this through a diversified supplier network. As we have managed through the Phillips recall, we are happy that we have maintained adequate supplies to service our growing patient base. We will continue to diligently monitor supply chain issues in the future in order to maintain adequate inventory levels. We once again funded all of our CapEx with discretionary cash flow during a quarter where organic patient growth is as high as we have seen in a couple of years. We continue to have a pristine balance sheet where at September 30th, we had a cash balance of 21.5 million and an overall working capital of 22.3 million. Our total long-term debt stands at 4.2 million. We have continued to opportunistically capitalize on our previously announced stock buyback. During the third quarter, we bought back 323,053 shares for total expenditures of approximately $1.9 million. As of September 30th, we had purchased approximately 1.67 million shares out of the total available approximately 2 million shares under the plan. We are pleased that we've been able to execute on our organic growth strategy as well as our stock buyback, all while remaining an extremely low leveraged company. Historically, organic growth and the buyback took precedent from a capital allocation standpoint. Now that our M&A team is building out a pipeline of opportunities, we are confident that we have a third leg of the stool to add shareholder value. We believe there will be ample opportunities to capture inorganic growth in the coming years. Moving on to the ongoing OIG and CMS issue related to our NIV claims, we are down to eight patients that have been deemed ineligible for several factors, and the company is having a hearing at the ALJ this week. We are hopeful that this will be the last phase of the appeal, and we anticipate having a successful outcome during this process. The company paid the $1.1 million that is still being debated, and it was recorded as a prepaid asset. We are hopeful to have the outcome of the ALJ hearing before year-end. Moving on to the fourth quarter, we have provided net revenue guidance in the $37.1 to $38.1 million range related to our core business. our core revenue is guided up 30% to 31% over the fourth quarter of 2021. At this time, I'd like to turn the call back to Casey to wrap it up. Thank you, Todd. I'm extremely proud of how our team executed in the third quarter. We have successfully reversed an EBITDA margin compression trend through the efforts of creating operational efficiencies through our investment into good people and good technology. We are also well positioned in this current and forward-looking economic environment. While most are experiencing a labor shortage, our investment into staffing has allowed us to not only elude this challenge, but flip it into an opportunity that is generating growth for our company. The ability to provide staffing solutions to our referral sources is putting us into a wonderful position to execute on strategic hospital partnerships that go into the home. We continue to thrive in this fee-for-service world. But this has not changed our relentless pursuit nor our view of value-based arrangements being the future of reimbursement for our industry. Trends in the current regulatory landscape continue to reaffirm the value of home-based healthcare. The organic business model is back to growing at impressive rates, and we have the team and structure in place to expand the model further with an underserved population of patients in need. While we have not yet completed an acquisition, We see M&A as a major prong of our future growth model going forward. We recognize there are challenges in the country, but remain excited about the near-term and long-term of our business. History has shown where others perceive headwinds, BiMed sees tailwinds. We love to be opportunistic during challenging times, and this often leads us to being on the forefront of technology and clinical solutions for our payers, referral sources, and ultimately, our patients. We want to thank all of our investors for their continued trust in our company and look forward to driving further shareholder value. This concludes our prepared remarks. I want to thank everyone for taking time to join our call today and look forward to answering further questions.

And at this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And one moment, please, while we poll for questions. Our first question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Please proceed with your question.