Q1 2022 Viemed Healthcare Inc Earnings Call
Okay.
Greetings and welcome to the Biomet first quarter 2022 earnings call.
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And answer session will follow the formal presentation.
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Now I'd like to turn the call over to Todd Zehnder, Chief operating officer. Thank you you may begin.
Thank you Daryl 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.
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 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 except as required by law.
First for the first quarter financial news release, including the related financial statements are available on the SEC's website I'll turn it over to Casey to get things started.
Thank you Todd.
And everyone. Thank you for joining our call today, we'd like to begin by acknowledging the dedicated team of respiratory therapist behavioral health specialist staffing professionals and administrative support staff, who work tirelessly to deliver the best in class care to our patients living within the communities we serve.
As of March 31st family of employees grew to 662.
At the same time last year, our total head count grew by over 25%.
We continue to believe that our investments in and dedication to our people drive a unique company culture that ultimately helps differentiate our home delivery model from the competition.
This is certainly contributed to our success in being able to acquire and develop good people amongst the battle for talent throughout the country.
As a result of this robust hiring growth we were able to organically enter four new territories in the first quarter of 2022.
Through our hands on training programs evolving middle management, and a new recruiting platform insider buying that health care staffing we are on our way to achieving the territory growth goals set at the beginning of the year.
In addition to the internal recruiting engine that by Med health care staffing has provided high contract demand and successful sourcing activities has resulted in an incredibly strong start to revenue generating external services.
And its first full quarter as an operating division experienced team that we built that V. H S generated over 1 million in revenues. We are very optimistic about the growth in synergies that I met health care staffing contributes to our organization.
The geographic and service offering growth during the quarter was combined with exceptionally strong growth in our historic business activities as the impact of the omicron Bury it began to weaken early in the quarter. We finally witnessed a return to normal course of business with our referral sources the.
The increase in face to face interactions with patients and providers is contributing to strong momentum coming out of the pandemic.
A key differentiator and our service model is the level of high touch personal care that we offer alongside of our products. We are well recognized in the respiratory care space as the benchmark for quality.
Underlying our physical presence in the home as our best in class High Tech engage technology platform now complemented by our behavioral health professionals.
As these differentiated services mature we are capturing robust historical data that not only proves out our investment thesis, but has also demonstrated to payers and providers that are care model contribute significant value in the evolving value based care arena.
Our traditional product lines benefit from the momentum exiting the pandemic constraints. We are incredibly excited to continue to innovate and expand our services to meet the evolving needs of patients providers and payers.
In recent periods, our strong relationships with suppliers has been a critical success factor in times when competitors are unable to meet the needs of the patients and providers.
As recalls and supply chain hurdles persist longer VI Mad is consistently obtain adequate resources to meet the demands of the market.
By preemptively investing in inventory and closely monitoring the supply chain, we were able to treat our existing population of patients and expand our market share by offering care when others were unable to do so.
Unlike others in the industry, we've never sat back and hope that supply change would eventually catch up to our commitments to deliver care.
We are establishing many new strong relationships with providers and referral sources, who.
Whose existing suppliers are unable to meet their patients' current and future needs.
As a result, our CPAP and ancillary revenues continue to grow at an impressive rate contributing to a meaningful diversification of our portfolio mix.
We also believe that in the long term our ability to meet these needs allows us to demonstrate the full suite of our capabilities to providers and referral sources. Additionally, as a result of the increasing growth in diversion and diverse offerings non vet revenues now make up 28% of our core business.
Within the regulatory environment, we continue to see positive signs the U S Department of health and human services. Once again has renewed the public health emergency determination.
Combined with the extension of moratorium relief for Medicare or Medicare sequestration, and five 4% increase for 2022 to the Medicare fee schedule based on inflation. These positive reimbursement trends are mitigating the effect of increase in cost.
We're often asked about our views and expectation around the next possible round of competitive bidding in 2024, we've always maintained that it would be irresponsible to include lifesaving devices, such as noninvasive ventilators in the program and we are also now seeing early indicators that the likelihood of a 'twenty 'twenty four round becomes less.
As each month passes.
While the decision will be left to CMS, the historical inability to achieve desired savings and current delays and then initiation of potential upcoming competitive bidding programs are strong indicators that we will have the support from CMS to further expand our products and services to the home.
Further we continue to invest in research that demonstrates the positive patient outcomes and cost savings associated with our products and services.
<unk> study demonstrating the benefits of Niv has recently been submitted for peer review and we are excited to formally share the detailed results upon publication.
We also continue to be methodical in our capital deployment strategies.
The end of the quarter, we were excited about the opportunity to repurchase shares and now have been executing on that buyback at what we see as an incredible value given the strength of our organization.
Our M&A pipeline also remains active with signs that valuations are coming down to levels that are more in line with our established thresholds for return on investment.
Ultimately our team views, our risk assessment and capital strategies will allow us to be well positioned as the market evolves.
With more on our operations financials, the buyback and regulatory landscape I'll now turn the call back over to Todd Zehnder, Chief operating officer.
Alright, Thank you Casey and reviewing the financial results offered years are in U S dollars and the full results have been made available on the SEC website as well as SEDAR.
Our core business generated net revenue of $30 2 million during the first quarter of 2022 as compared to net revenues of $25 5 million in the first quarter of 2021, which equates to an 18% increase our sequential growth for the core business was 4%.
We have once again seen solid growth in our major product lines being Vince taps and oxygen.
During the first quarter, we generated approximately $2 1 million of revenue from our other sources, primarily the vaccine tracing revenue generated during the quarter with our call Center, we still have an established unit in place at this time it can scale up or down in a very short period. Therefore, we will continue to pursue these opportunities in the future.
Our margin percentages, both gross and EBITDA once again very healthy and are primarily influenced by our core business.
As our product lines continue to diversify there might be some influence on these margin percentages for the notional growth as the main priority for the business.
Our gross and EBITDA margins during the quarter came in at 61.2 and 22, 5% Accordingly.
Our first quarter gross and EBITDA amounts came in at $19, seven and $7 3 million respectively.
We are once again encouraged by the rapid growth of our oxygen asleep businesses as they continue to benefit from our ongoing national rollout of these products are first quarter revenue from Vince was approximately 71% of our core revenue as compared to 80% in the first quarter of 2021.
Importantly, our vent revenue has grown during the same time, but the product diversification is beginning to show up more and more each quarter.
Our SG&A for the quarter totaled approximately $15 8 million as compared to $14 5 million in the first quarter of 'twenty one.
We have seen some inflationary effects on SG&A, but it manage the expenses and preserve margins we expect.
To continue hiring people to serve more patients around the country and expand our organic growth model to new areas.
As previously discussed the need for traveling clinicians continues to abate. Therefore, we have seen a decrease in the pressures on our people.
We continue to seek out superior clinicians and professional folks to help support our business, which has always been the key to our successful organic efforts.
For the quarter, we invested approximately $4 million on capital expenditures, the capex was spread out across our product suite as we've continued to grow all areas through a Dubai diversified supplier group.
We have managed to stay in front of supply chain issues through strategic purchasing and feel comfortable that we will continue to have product to serve our growing patient base.
Sometimes it means that we buy in larger quantities and in certain cases prepay for goods, but this is giving us the ability to increase market share.
We once again funded all of our Capex with discretionary cash flow and we also strengthened the balance sheet during the quarter.
At March 31, we had a cash balance of $29 3 million and an overall working capital of $30 1 million.
Our total long term debt remains at $4 3 million and we have begun executing on our stock buyback.
We once again have grown the company and stayed very under leveraged which gives us the tools needed to significantly grow the company through all of our organic and inorganic efforts.
As mentioned, we began our buyback efforts on the previously disclosed board approved stock buyback.
As of March 31st we had purchased 389878 shares out of the total available of approximately 2 million shares under the plan.
We were able to begin buying back on March 10, So we're off to a good start.
As previously discussed the buyback has risen in the ranks of our opportunities of capital deployment, but this does not mean that we are sacrificing business growth. We have continued to organically grow and are looking at inorganic opportunities and have been able to accomplish this while simultaneously reducing our share count.
Moving on to the O I G and CMS issue related to Orient IV claims we are continuing to work with CMS and its contractors through the appeal process to assess the medical necessity of the patient's audited by <unk>.
As discussed on our last call we filed with the quick in the fourth quarter and are awaiting their final review of these claims we anticipate receiving results back from this independent review during the next 30 days and are once again hopeful. This round of review will have a more individualized clinical review.
Moving on to the second quarter, we have provided net revenue guidance in the $32 one to $32 $8 million range related to our core business and have also guided approximately two to 300000 of revenue related to the COVID-19 pandemic.
Our organic core revenue is guided up 22% to 25% over the second quarter of 2021.
We continue to be encouraged by the core revenue growth as we have seen the COVID-19 effects diminish.
We have once again been visiting with current and prospective investors through the 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 will turn it back over to Casey to wrap things up.
Thanks Todd.
To sum up the overall theme of the first quarter I would say execution fueled by demand driven by return to normal course of business.
I'm very proud of our management team as it specifically relates to the performance metrics on recruiting acquiring and developing talent.
Watched our sequential improvement since the beginning of the pandemic on talent development and drive in processes that help rapidly increase our organic growth.
At <unk>, we never take our eye off the ball as it relates to the growth strategies that got us to this point.
We do however pay close attention to what the future holds as I think about the strategies ahead for growing our business in a different way I can categorize them into four buckets first getting acquisitive with expanding our payer geographical footprints, we know that our growth can be achieved in a faster way to finding companies that have.
Different payer contracts with possibly different patient populations in areas that were not physically in just yet while we don't have an acquisition report on yet we continue to analyze these businesses and hope to execute on this strategy soon.
Second hospital partnerships being in position to help drive the continuum of care from the facility to the home and the way that we are viewed as a valued partner initial.
Initiatives are well underway to provide further solutions type of referral sources, allowing them to be in position to treat a growing Medicare population of patients.
Third as that solutions provider, we must be willing are nimble enough to offer solutions that have the highest demand for our referral partners.
The staffing of behavioral health divisions are great examples of us providing this type of deliverable, while still complementing our core business.
And lastly business development through expansion of national payer contracts as payers evolve into a more value based world has a clinically focused organization, who can prove positive outcomes through the lens of data and through the lens of data technology Biomed becomes an essential piece of the puzzle in treating large.
<unk> of patients in a way that saves money.
These are the four areas of focus that will drive tremendous growth for biomed and ultimately drive shareholder value in the future.
This concludes our prepared remarks I want to thank everyone for taking time to join our call today and look forward to answering part of the questions. Thank you.
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Yeah.
Our first questions come from the line of Brooks O'neil with Lake Street Capital markets. Please proceed with your questions.
Thank you very much good morning, guys.
Alright.
I have a couple of questions.
I might have gotten distracted briefly in the middle of your prepared comments, which I thought were excellent by the way very comprehensive but I'm curious if you've commented at all about.
Sort of the month to month progression that you saw during Q1 in the core business and any comments you have relative to April would be extremely helpful.
Now you are we did not make any comments about that broke but I can give you a little bit of additional info I mean, obviously, the first quarter began with omicron affecting our.
Our country and while it didn't swell up the hospital system, we had a bunch of employees and referring physicians that just went down with it so.
I would say that January and February were very much lighter than March which is a good trend and March and April if you stack those on top of each other are the two best collective months that we've seen back to back since the pandemic began.
Yeah.
Great I was hoping you'd see something like that.
It sounds like business is it's pretty much returned to normal would you say at the end of April .
I'd say, yes, I mean, it's as close to normal as we are as we've seen and I think you know we can't sit here and say that we're having a bunch of restrictions out there around the country have.
Have things changed some yeah, I mean, the whole world changed some but are we back to where we think we can grow this company like we did pre pandemic absolutely.
I would just add to that and say that I've talked a lot about talent development and acquisition and training.
The training programs that we evolved throughout the pandemic when we were kind of sitting on the bench. If you will are really paying off right now.
Seeing a lot of our sales reps, whereas we would normally have five or six superstars.
Her month, we're now seeing that we have in 11 and 12.
Show up and it's.
A direct correlation in my mind too all of the development and training that we added along the way through project next level, which we were talking about a lot about last year. So we're seeing a lot of those efforts come to fruition.
Good morning Casey.
I mean I took from your comments that you had.
Not feeling constrained in your ability to hire the kind of a respiratory therapist or other professionals or other.
Team members that you need to aggressively grow the business going forward.
Not all not as it relates to the labor shortage or anything like that.
We still have the same constraints that we always have to just finding the right people to clinicians that were often try to convert into salespeople, but the good news is that biomass health care staffing as it's proven out to be a great internal recruiting platform, that's helping our sales managers be more efficient litigious monitoring day to day.
Things like the sales force and kind of taking recruiting out of their world and that's proven to be very efficient and effective and so these guys are still I would consider getting things going and haven't hit their complete stride, just yet, but everyday it gets better and better so I'm really excited about that infrastructure.
Change that we made.
Great Great. So you guys know I'm getting a little older. So I can I can sometimes not remember all the numbers that were in place pre pandemic, but I kind of have a recollection that organic growth in the 30% to 35%.
Range, what's kind of the target M.
Am I thinking about that right and I'm I think is it reasonable to think that you.
Our goals would be to kind of try to get back there recognizing that there have been changes in the business and as you scale that that kind of a number gets tougher.
I think it was or I'll say, our comments Brooks, we were targeting in that 30% to 35% range I'm not sure. If we got it every quarter or every year.
Yeah that was pretty the pandemic, but that is sort of what we wake up striving for and I think the comment that the I'm not sure about the change in the business as much as just the law of bigger numbers becomes a little bit more difficult, but that doesn't mean, that's not where we're striving for and look we always go back to I think the number as of.
Right now is 94% of what we define as the potential market is untapped. So there are plenty of patients who need our services. We've just got to continue to execute on guar to find them.
Yep, that's great. Let me just ask you one more I think I recall that you sort of quantified your exposure with this current view in the range of sort of a maximum of 5 million Buck again am I remembering that correctly.
It's still kind of the.
The sort of worst case scenario you see for what's going on out there with those guys.
Now I got to correct you on that one I can't call. It your old age you just probably had one slip up it was actually a $9 million total exposure and okay. Okay. Okay I continues to remain and.
Like I said, we're hoping to get their review here hopefully in the next 30 days that that's kind of what we're anticipating and we can we can update everybody at that point.
Okay, great. Thanks, again for taking my questions. Congratulations on the great job you're doing out there.
Thanks Brook, Thank you Brooks.
Thank you. Our next question is coming from the line of Nick Corcoran with acumen capital. Please proceed with your questions.
Good morning, I think Brooks asked most of the question that happened one one thing that I don't think huge asked earlier was the bad debt expense in the quarter was was higher than the typical run rate can you maybe give a little bit of color on what happened in the quarter and what your expectation for the year will be.
Yeah.
Thanks, Nick we are what we we did take a higher bad debt percentage in this quarter. We have traditionally always said the first quarter is the most difficult with deductibles resetting in this new new insurance plans and people change insurance and so forth. So it's kind of the toughest time for us from a billing and collection standpoint, and now that we have.
On a new workflow system for a period of time, we're getting better at looking at what our realizations in how much reserve we need so we took a higher percentage.
In the quarter I would anticipate that our total annual percentage should remain the same if not get better than last year. We have consistently over the last few years gotten probably 100 or 200 basis points better in our collection efforts. So I'm you know I'm hopeful.
That happens I'm pretty confident that the year over year bad debt will remain consistent it's just that we were.
We're gonna be a little bit I guess more accurate on a quarterly basis.
Great and then your Q2 guidance shows strong year over year growth and sequential growth how should we think about the remainder of the year like can you keep that growth up or do you think it will.
Come down a bit.
That's obviously it kind of ties into what Brookfield question was as well we are hopeful that this sequential growth continues and if you do you're starting to stack up I think our midpoint was something around 6% to 8% are you know our range was six 8% sequential if you do that then.
You're on your way back up to that 25% to 35% growth range.
That's not formal guidance, we don't have formal guidance out there, but we show up every day, hoping to get back to those those lofty ranges that we used to hit.
Great. That's good color. Thanks again.
Thanks, Nick.
Thank you. Our next question is come from the line of Doug Cooper with Beacon Securities. Please proceed with your questions.
Hi, good morning, guys or good quarter I was just getting back to the growth looks to my model. If you hit the sort of upper end of the range in Q2 would be the best year over year growth quarter in our core business in Q1, 2020, So you know pre pandemic.
The year over year growth in vent patients this quarter was about 10%.
Core revenue growth of 18%. So the diversification is working what is the outlook for the increase in the vent patients in particular, I mean, obviously youre doing a great job of CPAP oxygen and so forth.
It's it's no different than what we saw pre pandemic.
Todd mentioned were still after that underserved population that 94% of folks that that need us we got to continue to get our studies out there that prove the mortality rates decreasing and the reduction in hospitalizations and ER visits and which are ultimately leading to savings all of that.
Science and data that we've developed there's going to be key in and really moving the market penetration needle, but our game to get to the vet business is no different as it relates to finding people getting them in good areas getting them up and running and trained to walk and talk the biomed way.
I'd like to think that hospital partnerships and really getting inside of the hospital, becoming more of an extension of their continuum of care is the next way to really hit the core business in a different way and so where we're in the midst of those kinds of discussions and certainly.
The ability to use staffing as a lead in to help our hospital partners is key right now because they're just yearning for more clinical staffs were able to help and then the next conversation is okay, well, we're helping here in staffing, but how can we further help you into the home with treating these respiratory patients in a unique way and so that's going to be something that we really try to.
Hone in on and focus on in 2022, and we hope that it ends up being another another organic growth strategy.
Yeah, Casey you mentioned that you're going to for new territories in Q1, and you're on track to hit your goals just to remind us what is the goals for new territories. This year.
I believe we said 25 last quarter as the new goal.
'twenty or 'twenty or 'twenty five.
We're looking good on that as we sit here in April two we're increasing our rate from the first quarter and so we hope to stay on track for that but last year and the Internet incremental number was five Doug. So the fact that we added for the first quarter is a good sign that we're on track to hit that goal or pretty close to at least okay.
Okay.
Can you give us some idea of your.
You hit the goal in 2025, new territories, what what would be your geographical penetration of the U S at that point.
To give you some idea.
It's we're in 45 states with where our respiratory therapists have patience and we're and we're treating patients. So that's kind of how we highlight state, but again, you know where we're not in New York and I'll just use that as an example, it but.
But it's not on the top of mind to get into New York, We we can classify a new area in a state that we have really good coverage, but it's it's 60 miles down the road and it but it is an incremental new area with a new rep, a new set of respiratory therapist, New hospital system, It's basically like starting up a new business and.
We made that change at the beginning of the year to not talk about just where we're hiring reps because reps can come and go but that area that incremental new business area is the way that we want to start reporting it because just because it comes and goes doesn't mean that we can't sustain and maintain an a and a new area and so I think it's the.
Right way for you guys to think about how we're growing versus just tracking our new hires those sales reps do so many different things we have hunters, we have farmers, we have assistant sales reps and so on and so forth. So it was just it wasn't right just tracking it that way, it's better to just watch it for new areas and I'll add one other context is that.
Like in the case of states, we used to talk about states and a lot of detail and so forth and when we just to put it in context I think we have eight sales reps in the state of Louisiana I think it will have one in California, So calling those that were in both of those states. We know that there's a ton of runway in California, right just because of the pure size and population so case.
He is right where sovereign patients I think in 45, but the density that we have available to us in those states is just tremendous.
And does that correspond to stay with like do you get a national payer contract isn't going to easier entry into <unk> or <unk>.
Expansion or entry into some of those areas are not in yet.
Yes, it's always easier to go into a state when you've got good contracts already you know it just gives me it gives the salesforce so much more.
The ability to impact patients' lives and to take all patients from referral sources. So that's always a challenge so as we move into state. It does take us some time to get our model out there and to get new insurance contracts, but we've done pretty good at doing that overtime.
Okay. My last one for me Tom You said that you started buying stock back March 10th right Yeah.
Yeah.
Was the date that we were able to go live.
Okay, and what was the average price of the stock that you bought back do you have that.
I don't have it I know it's in the filing I think through March I mean through March 31st It was like 475 or 85 something like that.
Okay.
You've continued to buy stock back in in this quarter. We do it was actually 484 I just saw the number 484 for the average and we have we continue to buy.
I can't give numbers, yet, but I have to give them at the end of the quarter, but we've pretty much been buying every day.
Okay, great. That's it for me thanks.
Beautiful outlook for you guys. Thank you very much thanks, Doug Thank you Doug.
Thank you. Our next question does come from the line of percent Pondering. Please proceed with your questions.
Hi, Good morning, Thanks for taking my question I just have the one unanswered.
Could you talk about the margin structure and growth prospects for the staffing solutions business are related to the core business.
The staffing margins currently you know we're running.
I don't have an exact EBITDA margin, but I think it is accretive to the business currently and it really depends on the type of contracts. We have I think over time as we become more of a traditional.
Or a piece of the business because more traditional staffing.
It could be running at a lower EBITDA margin than the core business, but thus far because we've been more of what I guess would be defined as placement.
Revenue generation and more of just a a fee based business instead of just gross salaries and expenses. It has been accretive thus far so we don't have a complete a breakout just yet but I do know that it did a little bit over $1 billion of top line revenue for the quarter.
Okay. Thank you.
Thanks Christoph.
Thank you. Our next question is come from the line of Brooks O'neil with Lake Street Capital markets. Please proceed with your questions.
Hey, sorry, guys I was listening to Doug's question and it occurred to me I'm not sure I know that the number of total business theory as you're in an <unk>.
I can I can imagine and I'm not I'm not this kind of a modeling guy myself, but I can imagine that.
60 miles down the road from New York City. There is a lot of people 60 miles down the road from someplace in.
Rural Louisiana, there might not be that many people, but how do you. How do you think about the number of territories you have.
And.
Any way you think about.
What's left to go after out there.
Yes.
We're gonna have to get back to you on that Doug I think the numbers in the sixties right now and it's not like we're not disclosing it. We just we don't have it in front of us, but we've got probably about 80 total sales reps, if I had to gas and some of those are in exit like in one area. So it's probably mid Sixty's and will do.
Have to get what they are paying you later offline.
Cool thank you.
Got it.
Thank you there are no further questions at this time I would now like to turn the call back over to Casey Hogan for any closing comments.
Well thanks, everyone for joining the call. We appreciate all of your thoughtful questions and look forward to continuing to drive shareholder value.
Have a nice day.
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