Viemed Healthcare, Inc.

Greetings and welcome to ViMed's fourth quarter 2022 year-end earnings call. At this time, all participants are on 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Zender, Chief Financial Officer. Thank you. You may begin.

Hi, thank you, Doug. 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 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 forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security 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 except as required by law. The year-end 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. Thank you, Todd. Good morning, everyone, and thank you for joining our fourth quarter and year-end earnings call. Today, I'll be providing commentary on our continued strong operational results, 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, staff and professionals, and administrative support staff who work tirelessly to deliver the best-in-class care to the patients we are privileged to serve. At year-end, our ViMed family grew to 743 employees. We are currently experiencing tremendous positive momentum as we enter 2023. Our recent successful appeal of OIG findings was a a significant win for not only Vymed, but for our industry, and more importantly, the patients who desperately need this access to care. The overall reversal of all audited charts in this audit really allows our company to set the record straight that Vymed has always been a company that provides the right therapy at the right time for patients. We have a renewed sense of urgency and confidence in communicating these positive results with our payer network, to help further validate value-based capabilities. Furthermore, our view of the regulatory environment continues to be as stable as we have seen it since our inception. Trends in reimbursement rates are positive, including the announcement in December of CMS's fee schedule reflecting CPI-related reimbursement rate increases between 6.4 and 9.1%. Also, we believe a competitive bidding round for January 1, 2024 is extremely unlikely due to the timing of the preliminary planning activities necessary to implement the program. These positive trends in reimbursement rates should contribute to margin expansion. We see our innovative industry maturing as data continues to support the complex respiratory business, which makes us incredibly optimistic about the future of our business. Our supply chain remains strong with many additional manufacturers and excellent products coming onto the scene in 2022. At BiMed, our service is primary with devices and equipment being secondary. We have always been device agnostic. So having more manufacturers creates a competitive and healthy environment, one that drives further equipment options and improved quality, technology, and pricing in our space. Perhaps most importantly in the fourth quarter, with many of our new sales reps maturing in their roles, we saw our revenue growth for our core business approaching robust pre-pandemic levels. Our current operating environment should continue to promote strong growth through 2023 and beyond as the headwinds from the pandemic continue to subside. We were again able to get our patients in a more customary ViMed fashion, which means sooner. As the most recent published study proves, we can be more impactful by reducing hospitalizations and mortality rates and improve overall cost savings by implementing earlier utilization of non-invasive ventilation therapy. Our chief medical officer, Dr. William Frazier, has been actively sharing the results of the most recently published study with large audiences of pulmonologists and industry experts across the country. Our sales force and our network development teams have also been active in distributing the fresh data to our referral sources and payers amongst the network. This is driving new awareness of our value. We are also incredibly well positioned to execute on opportunities to supplement our organic growth with strategic acquisitions. During the fourth quarter, we repaid all debt on the balance sheet, refinanced and significantly upsized the commitments on our credit facilities, and are now in position to access funds immediately for the execution of transactions. As our negotiations indicate that valuations of target companies continue to fall, we have reached an inflection point in our identification of strategic acquisitions that can provide our strict thresholds for return on investment. With the recent addition of two key experienced M&A executives, we have a strong pipeline of target companies which we fully expect to drive transactions during 2023. Our management team has been working diligently, planning and developing integration processes necessary to efficiently integrate new companies. In addition to cash on hand, we have up to $90 million of unused capacity from our new credit facilities available to fund accretive acquisitions. We are targeting and screening acquisitions which leverage Vymed's competitive advantage, expand our geographic footprint, and are strong fits for our Vymed culture. These targets are typically high-quality home medical equipment providers that have a strong reputation with payers and referral sources. We also target companies that can significantly benefit from the scale and efficiency of our maturing operations as well as our high-tech processes, including real-time patient connectivity, e-prescribing, and e-ordering platforms. Our technological progression and growth in 2022 certainly facilitated a more frictionless patient and provider experience, one that complemented our strategic fourth quarter investment into Modo Health, a care management platform that leverages high tech connected care to improve health outcomes and stands to lower overall health care costs. Through the development of Engage, our proprietary connected health software, our organization has adopted a connected health care model coupled with automated process flows. We are incredibly excited to partner with Modo Health, which aggregates tech-enabled and data-centric healthcare companies like ViMed, expediting our evolution towards large value-based arrangements. Along with our continued progression with the launch of the BA pilot, we are confident that we can reach new populations of patients through our data-enabled evidence supporting payer relationships. Our relationship with existing payers is strong, and we are working hard to further expand our network through active contract development. Included in our headcount growth was a 38% increase in sales representatives during the year. Our sales headcount growth was net of turnover, making it the highest in our company's history. The substantial expansion of our sales force continues to be supported by our specialized healthcare recruiting division by MedHealthcare Staffing. VHS is improving the quality and quantity of our internal hires through sophisticated recruiting tools and the use of proprietary labor and demand data analysis. As a result, our data-informed organic growth is strategically and tactfully targeting areas in which payers and patient needs are highest and labor is available. With increasing stability in the supply of specialized labor, we are excited about the recruiting engine and new business line that we've built. Wyman Healthcare staffing is also contributing to the strong growth and diversification of non-vent revenues, along with the growth in our sleep and oxygen product lines. Monthly rental revenues from ventilators represented 68% of overall revenues in 2022, compared to 77% in 2021. The growth of our complex respiratory products and services remains incredibly strong, And we were very pleased with the rapid expansion of our portfolio of other respiratory products and services, allowing us to serve patients across a broader disease state and become a trusted partner in the extension of care for referring pulmonologists and physicians. Our focus remains on technology-enabled home medical products with a high level of quality service. The diversification of our services within that space we were able to create strong relationships with our complex respiratory and sleep patients earlier in their disease states. In addition to cross-selling and synergies between products and services in the portfolio, the diversity of products contributes to longer-term recurring resupply revenues, which we see expanding at a faster rate throughout 2023. With more on our financial results, capital activities, and regulatory updates, I will now turn the call over to our Chief Operating Officer, Todd Zender. Thanks, 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 $37.5 million during the fourth quarter of 2022 as compared to net revenues of $29 million in the fourth quarter of 2021. which equates to a 29% increase. Our sequential growth for the core business was 5%. Annual revenues related to the core business increased approximately 25%, which is a great indicator that our growth rates are back to levels that we saw before the pandemic. We're optimistic that we will be able to continue our high organic growth rates into the future as we continue getting our therapies to more patients around the country. Our gross and EBITDA margin percentages remain very healthy and are once again just from our core business lines, not impacted by COVID business. During our mid-year update, we expressed our goal of turning the margins around later during 2022, and we made great progress on our margin profile. We continue to see our margin percentages be influenced by our product mix and continue to be pleased by the notional growth. Our gross and EBITDA margins during the quarter came in at 61 and 25% respectively. Our fourth quarter gross and EBITDA amounts came in at 22.9 and 9.3 million respectively. Our fourth quarter revenue from VINTS was approximately 66% of our core revenue as compared to 76% in the fourth quarter of 2021. Our annual EBITDA came in at 30 million, which was a 22% margin. As we continue to build scale across all of our product lines, we should continue to see economies of scale, even in the light of our extremely aggressive growth targets. Our SG&A for the quarter totaled approximately $17.2 million as compared to $14.2 million in the fourth quarter of 2021 and is down approximately $500,000 from the third quarter of 2022. We have been aggressively managing our variable expenses as we continue to navigate the inflationary period. We conveyed to the market during our mid-year call that we would focus on expenses and the current quarter decrease is a testament to that work. With all that said, we continue to invest in growth and in any measure that can help with the clinical outcomes of our patients. For the quarter, we invested approximately $4.6 million on capital expenditures. The CapEx continues to be spent across all of our major product lines as we continue to grow all products and manage this through a diversified supplier network. We continue to see ample opportunity to procure inventory and have not had to turn any business away as a result of supply chain issues. We have 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 December 31st, we had a cash balance of $17 million and an overall working capital of $18.2 million. We ended the year debt-free in conjunction with our closing of our new credit facility. Along those lines, we were happy to announce the new credit facility put in place that is led by Regions and also has Whitney and Fifth Third as participants. The $60 million facility is structured to give us tremendous flexibility to use the term loan feature for acquisitions and a general revolver for any needs that arise. Additionally, there's a $30 million accordion feature that is easily accessible in the event that our M&A efforts exceed the original facility. Throughout 2022, we opportunistically reduced our share count through our stock buybacks. During the fourth quarter, we bought back 120,543 shares, and for the year, we purchased approximately 1.8 million shares. We have not been actively buying during the last few months as we have decided to leave some cash on the balance sheet for opportunistic acquisition targets. So, recapping the year from a balance sheet perspective, we are completely debt-free, have a cash balance of $17 million, and bought back approximately 5% of our stock. We expect to continue to grow and generate additional free cash flow from our organic business. Moving on to the ongoing OIG and CMS issue related to our NIV claims, we were extremely pleased to successfully resolve the last eight claims that were opened through our process with the ALJ. The $1.1 million was received in January, and the amount was held as a current asset on our year-end balance sheet. We continue to advocate for more formulary guidelines for NIV, but the access to care for our patients is what is most rewarding. Moving on to the first quarter, we have provided net revenue guidance in the $38 to $39 million range related to our core business. The midpoint of our core revenue guidance is up 27% over the first quarter of 2022. Lastly, along the lines of our activity in the markets, We have once again visited with many new and existing shareholders over the last few months to describe our mission and our value prop. Our conference call being on a Friday is unusual, but we held the call today to accommodate a trip to New York next week. The pandemic set our timeline back, but next Monday we will be ringing the opening bell on NASDAQ and we'll spend some time visiting with investors. It's hard to believe that it's been three and a half years since our listing on NASDAQ. We once again appreciate our shareholders' support of our mission and look forward to continuing to build upon the great company that we have. At this time, I'll turn it back over to Casey to wrap things up. Okay. Thank you, Todd. The opening bell ringing ceremony comes at an incredibly exciting time for BiMed. As we take the national stage on Monday to be honored by NASDAQ, we are proud of all we have achieved and even more excited about the strength of the business and opportunities on the horizon. We've proven to be incredibly resilient in recent years in confronting the adversity related to the COVID pandemic, device recalls, and the OIG report. We didn't just weather the storms, but instead we turned each into incredible opportunities to solve big problems and doing so profitably. Looking forward, the strength and stability of our core business is well positioned in this encouraging regulatory and operating environment. We were early adopters with respect to investing in and implementing digital care models and efficient automated workflows. With a strong infrastructure in place, we can focus our efforts on further developing our relationship with payers, physicians, and patients. As of year end, we are now treating patients in all 50 states, but too many patients eligible for our services continue to go untreated every day. The data and published medical research underscore the critical need for the services we provide. We will remain at the forefront of care delivery and will continue to work closely with payers and prescribing physicians to ensure that the right patients have access to the right care. Here at ViMed, our team will continue to do what we do best, drive a culture of innovation, resolve big challenges, and help a ton of people along the way. We want to thank all of our investors for their continued trust in our company and look forward to driving further shareholder value as we ring the NASDAQ bell Monday morning, not only for Vymed, but for each of you. This concludes our prepared remarks. We will now take further questions. Thank you.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. The 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 key. Our first question comes from the line of Charlie Montang with Lake Street Capital Markets. Please proceed with your question.