Q3 2021 Viemed Healthcare Inc Earnings Call
Yes.
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Greetings and welcome to the <unk> third quarter 2021 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.
Now I'll turn the conference over to your host Todd Zehnder COO you may begin.
Thank you and 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 referred to as forward looking statements such statements reflect the company's current views and intentions with respect to <unk>.
The 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 securities regulatory authorities in certain provinces of Canada.
Because of these risks and uncertainties investors should not place undue reliance on forward looking statements are forward looking statements made in this conference call. Today are made as of the date hereof and the company undertakes no obligation to update or revise any forward looking statement, except as required by law.
The third quarter financial results news release, including the related financial statements are available on the SEC's website now I'll turn it over to Casey to get things started.
Thank you Todd good morning, everyone and thank you for joining our call today.
We are excited to announce another record breaking quarter, driven by the hard work and determination of our employees.
Our growing team of nearly 600 employees along with their extensive experience and strong relationships that enabled our organization to find opportunities to improve the lives of the patients we serve every day.
Our people are our most important asset and our ability to remain resilient. During these unprecedented times is directly tied to their unwavering commitment tire patients.
We once again, we'd like to take this opportunity to thank them for their dedication to excellence and for their devotion to our mission.
We are also thrilled to welcome tag team the 13 additional sales reps onboard during the third quarter.
These new hires bringing our total year to date sales hirings to 46 right on track with our plan goal of adding 60 by year end.
Despite the surge of Delta variant of COVID-19 during the quarter and many of our key markets, we were able to leverage our investments in people and technology to grow the core business by approximately 6% over the previous period and 12% over the third quarter of 2020.
During the time in which our access to referral sources and physical facilities was impacted we prepared for better days by completing project next level a nationwide training program.
So in the third quarter, our sales personnel returned it to field equipped to optimize their sales strategies and invigorate their communications to physicians and patients with a deeper understanding of the additional products and services by met offers.
As a result, we are seeing a strong increase in the sales associated with oxygen and sleep.
For example, in the third quarter oxygen revenues increased by 16% over the second quarter.
We are enthusiastic about these initial trends driving revenue growth and further diversifying our product mix.
In addition to the tailwind we experience from our training initiatives. The Philips recall is creating opportunities for <unk> to capture market share from competitors that lack access to vendors and equipment.
Early in the recall process or supply chain professionals were able to secure a strong pipeline of equipment by leveraging our scale and previous relationships with alternate manufacturers.
Based on our current projections, we do not anticipate our access to the supply of equipment to limit our constrain our expansion, but rather will contribute to our growth rate for the remainder of the year.
Our ability to rise to the occasion and meet customer needs. During this challenging environment demonstrates that both patients and providers that by Matt as a reliable partner.
As a result in the third quarter <unk> revenues increased 22% over the previous quarter Ulta.
Ultimately the recall is leading to an incredible opportunity for patient acquisition.
While we continue to actively identify potential strategic acquisitions, our observations of current valuations indicate that a patient acquisition strategy is an effective use of capital in the near term, allowing us to grow substantially while preserving capital for transformative acquisitions down the road.
Another core strength that emerged during the pandemic as our ability to source talent.
When resources became constrained at frontline facilities during the peak of the COVID-19 crisis.
I met was able to help source over 300 temporary health care staffing positions for our collaborative partners.
The trends are clear, we see that staffing competencies will become a critical success factor in the health care industry over the next five years.
Based on our historical success in this area. We are excited to announce the formation of the buy Med health care staffing division, which will be branded as V. H S.
The staffing division is expected to serve as a robust recruiting platform for internal and external clinical healthcare positions.
We believe that this recruiting engine will differentiate us from our competitors by allowing us to source industry, leading talent as well as provide a supplemental revenue stream by supply contingent in contract base resources health care facilities.
Another area, where biomet is emerging as an industry leader is through our facilitation and sponsorship of medical research as previously announced yet another peer reviewed study was published during the quarter, while the American journal of managed care.
This study supports the growing body of evidence that patients with COPD struggling with chronic respiratory failure, who utilize nibh therapy will live longer as well as go to the hospital in an emergency department rooms, less therefore, enjoying an improved quality of life.
As our investments in initiatives to support the scientific body of evidence mature. Our next step is to equip providers health systems and governmental organizations with the information to help patients are paying the care they need as well as hopefully reduce overall overall cost of care.
Finally, I'd like to provide an update on our technology initiatives, we believe that our long term value proposition is uniquely tied to our ability to combine that high touch service delivery with high Tech resources.
<unk> proprietary patient connectivity software have continued to demonstrate its value during the delta variant search.
In addition to our ongoing COVID-19 related contact and vaccine tracing activities. Our response to the pandemic. I've also included investments that allow health care professionals to leverage technology to treat their patients remotely.
We previously announced the rollout of our engage platform, which is our hub in the home, providing our Rts and positions a remote patient monitoring tool and telehealth solution to safely manage patients on a real time basis.
During the quarter, we saw further rapid adoption of the technology within the number of patients onboard it now exceeding 3000.
When combining engage with our proprietary <unk> view and connect platforms. We believe that we're well suited to become a leader in the evolving industry a technology enabled home health care.
With more on our operations financials and regulatory landscape I will now turn the call over to Chief operating Officer, Todd Zehnder, Todd Alright, Thanks, Casey and review of the financial results. All figures are in U S dollars and the full results have been made available on the SEC's website as well as SEDAR.
Our core business generated net revenue of $27 $8 million during the third quarter of 2021 as compared to net revenues of $24 9 million in the third quarter of 2020.
Which equates to a 12% increase our.
Our sequential growth for the core business was 6%.
We were very encouraged to see our growth be spread out amongst our event path and oxygen business lines.
During the third quarter, we generated approximately $1 5 million of revenue from the ongoing COVID-19 pandemic.
Primarily related to the vaccine and contact tracing revenue generated during the quarter with our established call Center.
As we have previously discussed by moving quickly during the pandemic, we've been able to be a resource to multiple groups through our call Center and we will continue to do so as long as there is an ongoing need.
Our margin percentages, both gross and EBITDA are once again very healthy.
And as we indicated last quarter, we have begun to normalize without significant COVID-19 revenue influencing our total numbers, our gross and EBITDA margins during the quarter came in at 63 and 25% Accordingly.
Our third quarter gross and EBITDA amounts came in at $18, four and $7 4 million respectively.
We have continued to diversify the business, while growing our revenue, which is a great sign that our complementary products are significantly growing.
The oxygen and Pat businesses are benefiting from our national rollout as well as unique circumstances related to the Covid pandemic and the ongoing Pap recall.
Our third quarter revenue from Vince was approximately 78% of our core revenue as compared to 82% in the third quarter of 2020.
Our SG&A for the quarter totaled approximately $13 3 million as compared to $13 6 million in the third quarter of 2020.
Once again, we're looking at prior year comparison, those amounts are impacted by all the activity going on with the COVID-19 supply revenues and our stock price volatility has had a positive impact during the current year.
We once again are staying committed to hiring people to help grow our company and serve more patients while the labor market has become more challenging specifically with the clinical clinical folks providing such great care.
Our culture and business model has kept us competitive and we have not seen any issue continuing to care for our patient base.
We took the opportunity during the current quarter to use some of our cash an opportunity opportunistic ways to grow the.
The most significant uses of cash were on equipment, where we used approximately $5 million on path and then purchases.
By getting ahead of supply chain issues, we have been able to capture business at our competitors, we're unable to serve.
We Additionally took the opportunity to buy an additional 5% of their staff as we continue to see the growing trend of remote patient monitoring around the country.
Moving on to the ongoing <unk> and CMS issue related to our Niv claims we are continuing to work with CMS and its contractors through the appeal process to assess the medical necessity of the patients already by <unk>.
The first round of appeals.
Upheld by CMS as contractor and the company will be filing appeals to the quick in the next couple of weeks.
We are hopeful that this round will have more of an individual clinical review rather than adopting <unk> position.
As a reminder, due to the four year look back window. It appears that 39 patients are being reviewed by CMS and the total exposure. If all failures were upheld would be $9 million.
Of these 39 patients 15 of them have been detailed reviewed by CMS and prior audits and all of them past complex Medical review.
And as confusingly two of the patients being reviewed appear to be outside of the four year look back window.
These amongst many other arguments are currently and will continue to be worked with the various levels of appeal.
The company is not accrued any liability related to this ongoing matter as it continues to believe these patients qualified for the CMS rules and it eventually will be overturned through the appeals process, which includes reconsideration and a L. Jay and will take some time to ultimately work through a final resolution.
We have taken this opportunity to begin a process of our first formal attempt to establish formulary rules related to an IV and we're working diligently to provide input to the coverage group at CMS.
We once again visit been visiting with current and prospective investors through industry conferences and non deal road shows with our existing analysts and banking relationships. We appreciate the ongoing support from both the buy and sell side during this year.
At this time I'm going to turn it over to Casey to wrap things up.
Thanks Todd.
Whether it be through access to care for patients our access to clinicians our health care system has certainly been tested by this pandemic.
With patient billing hospital beds throughout the country at a time, where clinicians are hard to come by we are seeing our physician and hospital referral sources being more engaged to develop deeper partnerships designed to treat more people in the home.
<unk> nimble track record of creatively being in position to respond to the nation needs at a moment's notice puts us in perfect position to capitalize on these opportunities.
Our value prop of placing experienced clinicians in the home utilizing proprietary clinical data analytics to measure success is the perfect blend up high touch with high tech desired by our partners.
As we moved to bolting on Biomed health care staffing as part of these programs, we view the staffing division being impactful in two ways.
First our dedicated staffing recruiters will fulfill a growing demand for the placement of clinicians throughout the referral sources we serve.
And second we will be developing a more sophisticated and dedicated strategy to constantly fueling <unk> proven organic growth engine with the clinicians are company requires to treat the underserved COPD population.
These are the growth levers that we will be pulling on throughout the end of the year of which will have the largest impact on our future growth rate.
Our outlook for our business is as bright as ever.
We were in an environment, where we have an increasing demand for service, our clinicians and our expertise make no mistake about it have I met our management team considers the perceived headwinds at the health care industry as a unique opportunity to capture market share at exponential rates.
We will continue to be resilient and relentless in our pursuit to help as many people as we possibly can and ultimately drive financial success for our shareholders that we are privileged to serve.
This concludes our prepared remarks, we will now open up the floor for Q&A.
Thank you 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.
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You May press star two for 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.
One when we please while we poll for questions.
And our first question is from Frank Morgan with RBC capital markets. Please proceed with your question.
Good morning.
Yeah, I guess my first question when you think about this most recent delta surge comparing it to some of the past surges.
Did you see anything really different here or is there anything that might.
You know the four she hadn't been withheld if we'd do that another surge at some point in the future how your business is adapting and adjusting to that.
And I guess on that point.
Any additional color you can provide for us on what youre seeing so far.
The fourth quarter as it relates to the.
You know the Niv and Oh, two men to independent so that's my first question.
I'll start and I'll, let Todd chime in as he wants the I would say the only difference with the delta surge compared to the I guess the original surge is that it was in different pockets throughout the country at different times and that was very evident to us and just kind of hard to to really track in place.
Naturally that just limits access points at different points in time as well. So it was just a.
A little bit harder for management to track of where what to expect in certain areas because of that.
But when I look at it. It's there was July was one of our better months and then then we got slowed down a little bit by the Delta surge and as we we split out of these things. We know just from the track record of once Youre on the back side of that business comes back up and turns backbone. If you will so we.
We are optimistic about getting through this in and certainly have the tools in place to operate in this environment.
Indeed, it doesn't go away so we're not sitting there.
And counting our chickens that the pandemic is over by any means but but you know once it does happen it'll be good for the business, Yeah, and just to add one piece on to the final part of your question October was a good reversal of while it wasn't as strong as July it was better than September so we look at <unk>.
A lot of times and we look at you know cities and how many of our reps are having struggles versus not having access struggles. If you will and the fact that October had a positive trend from new patients is a good sign although still hoping to get back to that full access that we saw in July that like Casey said was probably our best.
And the last a year and a half since the pandemic started.
Got you and then I guess.
Nice margin expansion here and obviously all our providers are talking about labor issues and I know your labor mix is different here, but are there any pockets that you would call out that you've that you are more mindful of are watching more closely and having to tap.
Having to address.
Well I think clearly we all see that respiratory therapists are in very high demand and we employ.
280, or probably somewhere between 275 and 300 of which.
60, or so are in our sales force. So the key drivers to growing our business are finding more sales people and finding therapists to take care of the patient. So that's that's the biggest need for us we've always done a very good way a very good job of recruiting and retaining our teas, but.
And it's in high demand as anybody out there. So it's a it's it has not become an issue for us servicing our patients we have not had that problem at all but it is just a little bit more difficult to keep the keep the the the rate of new hires coming in it probably.
Just exacerbated our need to have the staffing division we've had so many partners around the country States.
Hospital systems other partners looking for.
<unk> employees during this crisis and we just needed all of our teams to service our own patient. So the fact is that we just heard it so much in where our recruiting engine that it was time to bring some more muscle into that group, which is why we did it so while theres other needs throughout the business for sure. The Rts are definitely the.
One's that are.
You know front and center for Us and the only thing I'll add is that if you look at our business compared to a home health, we don't need our clinicians to bill for for our service in other words, we might lose an RT in a certain area, but it's up to us to just kind of backfill some support and pull from another area, but we can.
To bill for our patient demographics, so that would be kind of like the difference between our home medical equipment business, which has a billable equipment code versus billing for a person if you will at a home health.
Got you last one and I'll hop just you mentioned.
We're coming much more proactive in trying to.
Address I guess like a clinical criteria.
Any color on kind of you know.
Perfect World, how you'd like to see that laid out in Ohio.
Yeah, what we're doing right now is we are we've had some discussions with the coverage group at CMS regarded to trying to file for what for a full NCD reconsideration and we are waiting on at this point is doctor Frasier as finishing a full data study that is not using medical or a limited data set through Medicare.
Sure.
And we are we're making a few additional tweaks to that study to make sure our reconsideration for the NCD is supported through data and the study that we.
We will ultimately get published that should be forthcoming during this quarter and so our hope is that we could potentially file for a reconsideration, which is just giving our opinions to the coverage group at CMS.
It would put our recommendations or what event NCD should look like.
And for the first time would have real data to support it I mean, CMS has gone through three or four different processes on vent N C DS and it's not an easy topic.
To tackle, but whereas incentivize as anybody to make sure we get it in there and get it right. So hopefully once this data is finalized we are going to get it all hinged up and follow them with CMS. So fourth quarter is our goal.
Thank you.
Thanks, Brian.
And again as a quick reminder, if you have any questions. You May press star one on your telephone keypad doing so and I'll show you a spot in the Q&A queue.
Our next question is from Brooks O'neil with Lake Street Capital markets. Please proceed with your question.
Good morning, guys I apologize I got on a few minutes late so if I ask you about something you've already talked about.
You could either skip it and we can circle back around later or you could give me the short answer.
So first thing I was just curious about did you talk at all about any progress with the VA.
We didn't mention anything about the VA or I guess it should be talked about at our success with the VA. This past year Brooks has been in staffing. So we did talk about placing 300 nurses across the country and facilities that were in need of staffing.
A lot of those guys were VA facilities. So we're still seeing that demand and we're going to be fulfilling it with the.
The beginnings of the launch of our new staffing division by Med health care staffing.
The pilot study, which we were talking about a lot Brooks what you probably want to hear an update on that has been changing there moving from pilot mode into direct to fixing the contract.
That's somewhat good news because it's Jim, saying, Hey look why are we why do we need to do a pilot study whenever you have all this published data already that we're seeing it in IV does work. Unlike Ding Ding Ding Ding I've been talking about this for years.
Years now so.
That's a good thing that they are making a shift but I'm hesitant to just.
Included in the script, because it changes on a dime and but that's the update for you.
Perfect. That's helpful and then I guess.
Secondly, I'm curious.
Oh Gee investigations always puzzled me Im sure Theres some rationale for why <unk> should look over what CMS has already reviewed and come to a different conclusion about what what CMS does but a.
Can you understand or explain the rationale that you sense from the <unk> guys for why they're doing this and then secondly could you comment do you think it has any direct impact on a the way you run the business or be customer perception of <unk> right now.
<unk>.
So on the first part I understand Oh, Gee as an independent organization within the umbrella of HHS and has a job to do so we're fully understand that but there is no part of any of us that understands the rulings that they have made on our patients and the position that they've taken because it is 100% unsupportable, which is why we.
As an organization are so determined to get this fixed because it's just an unfair report and an unfair set of processes. They came into audit one thing we had 100% pass rate and they pick something else that has no justification. So I understand where their role is in the in the HHS.
Brett Le I don't understand their position on the second piece.
No we've been dealing with this audit since 2018 and not at one time have we done anything different than our internal processes. We screen for these patients we pick the right patients we know the patients that need ventilators and our data that is being published supports it if they're hyper cat, Nick and if they meet other conditions they need to be on a ventilator because it saves our lives and it saves.
The money for the health care system. So no we have not changed our position one bit and does there have a negative perception.
I can't answer that I'm sure people read this nasty report and think we're doing the wrong thing, which once again is why we're so determined to get to the right answer and it may take some a few rounds of appeals, but we're going to continue to fight for our patients and our employees and our company and shareholders.
Great. It makes total sense to me guys.
Keep up all the good work.
Thanks Brooks.
And our next question is from Doug Cooper with Beacon Securities. Please proceed with your question.
Hi, Good morning, guys, just one follow up on the <unk> stuff when when do you expect final resolution on this one way or the other.
Well, we're gonna find a reconsideration request within the next couple of weeks and that's probably a three month decision process and depending on how it goes if it goes we may have to bring it to ALJ, which is a court system. It's basically the court system for medical claims if.
We have to go to that route which right now it you know I can't say that it won't be because it's been going down the route of appeals that could be it.
It could be a 12 to 24 month resolution just depending on how long it takes us to get in front of a judge and ALJ situations. So I.
I guess the landscape, we could get some good results at reconsideration.
Which would be done soon.
Worse cases, we have to go to ALJ and that's where we're we're testifying in talking about chart by chart and it could be a couple of years.
Okay.
Okay, just moving on to the staffing initiative.
Can you just sort of walk through what the margin profile might be so you hire these people and then.
The bill amount by the hour through other companies or maybe just walk through what.
And it looks like.
Yes indeed.
With these contingency contracts there your typical staffing contracts, where a hospital system uses them and then and then you Bill are.
Are they you know they bill you build a hospital system per hour.
That's one piece of the strategy for sure that's what we've been doing with these.
I used the number 300 nurses that we've displaced that we placed in the last year.
The more important piece to us Doug and you're in one that Youll understand is that we are beefing up our own internal recruiting platform to help find the people that we need here at biomed to grow the organic growth engine.
So it'll.
There'll be two ways that we bring value what we're seeing the need for us that folks are without people number one but also we want to get our people into the hospital facilities as well to where they can help direct traffic for the referral source in and really help educate folks on how to do business with by bad more efficient.
Yeah.
Okay, and what is the process for recruiting. These people are you going to sort of schools or what what is the actual processing.
That's that's definitely one tactic, but we can't give all of our secrets away on this call here does that yeah look there is these guys. Our next level recruiters that are proven they've been doing this for many years and we're bringing another folks and training them how to efficiently do this.
Okay, and just because of the labor shortage are seemingly all all around are you seeing any upward pressure on wages.
Wages.
Yeah.
Oh, Yeah, I mean, we were.
We're getting creative with a lot of our packages but.
You know nothing that we're not gone chasing are competing with these travel contracts that clinicians are getting with right now and so were we.
We've lost a handful of people, but nothing material enough to really talk about the folks just traveling across country and gone gone make double the rate that's not a reason for us to go out and increase our rate to retain those folks we've already actually recruited some clinicians that have come back off of those contracts got it ready for a normal.
Job again, so we don't predict that we're gonna have to money with the problem. So that's going on right now.
And my final one just a 12% growth year over year I want to be very good.
Your expectations that he can maintain double digit organic growth into next year.
Absolutely.
We are hopeful while we can't say when it's going to happen. We are hopeful that we get back to more in months like July and it sets us up for more traditional growth rate.
This was a great quarter, having 6% sequential growth was great. It. It really started with we got off to a bang and always getting out early in the quarter is going to set us up for good growth. So we're hopeful that we can start getting to that 567 sequential growth rate and start stacking those up on top of each other which will yield more biomed traditional organic growth.
<unk>.
Okay, great. Thanks, Joan.
Thank God.
And we have reached the end of the question and answer session and this also concludes today's conference call.
You also may disconnect your lines at this time.
You for participation and have a good day.
Okay.
Okay.
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Yeah.
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