Q2 2022 Viemed Healthcare Inc Earnings Call
Greetings and welcome to <unk> second quarter 2022 earnings conference 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 as a reminder, this conference is being recorded.
I would now like to turn this conference over to your host Mr. Todd Zehnder C. O O. Thank you Sir you may begin.
Alright, Thank you and good morning, everyone. Please note that our remarks in this conference call May include forward looking statements under 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 future.
The results or events and are subject to certain risks and uncertainties.
It 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.
These risks and uncertainties investors should not place undue reliance on forward looking statements 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 second quarter financial news release, including the related financial statements.
Available on the SEC's website, now I will turn it over to Casey to get things started.
Okay. Thank you Todd.
Good morning, everyone and thank you for joining our call today.
As always we'd like to begin by acknowledging and thanking the dedicated team a respiratory therapist behavioral health specialist staffing professionals and administrative support staff, who worked tirelessly to deliver the best in class care to our patients living within the communities we serve.
As of June our.
<unk> family grew to 715 employees, a 25% increase over the number of employees a year before.
We expect to continue to grow our labor force through strong retention of our existing employees and by identifying and recruiting top talent throughout the country.
In addition to investments in our workforce, we were investing heavily in inventory and supplies in response to the pent up demand coming out of the COVID-19 pandemic.
I renewed unrestricted access to referral sources and partners resulted in robust growth during the second quarter a trend that we expect to continue based on feedback from the field.
It's clear that health systems continued to struggle to address the demand for all services across the care spectrum.
Overcrowding in physical facilities labor shortages and supply chain constraints are reinforcing the critical need for the home based care solutions that we provide to patients.
Our strong relationships with manufacturers are well trained labor force and our innovative approach to care and data capture is demonstrated the partners that by Mad is a premier solution to larger scale population health programs.
Previously published confirmed previous published studies confirmed to our partners that our services are real drivers of improving health outcomes and preventing hospital readmissions.
The latest research published by respiratory Medicine Journal also shows that noninvasive ventilation in the home significantly reduces overall health care costs.
According to the recently released peer reviewed medical study when patients are placed on noninvasive ventilation within the first week of diagnosis.
Total annual annual Medicare spending was reduced by 12% while risk of death with simultaneously reduced by 43%.
We were anxiously awaiting the publication of the results and we are now incredibly excited to share the benefits with providers and referral sources.
During the second quarter, our sales force was provided with robust training on the pre published results of the study and preparation for the official June 29th release.
Our team is currently in the field executing on our national rollout of the new study.
Communication with referral sources, the need to get patients immediately on therapy. After diagnosis. This is a very powerful message to physicians and payers one that demonstrates we cannot afford to wait to try and fail other farms lesser therapy upon determining a chronic respiratory failure diagnosis.
We also continue to see positive momentum in the regulatory environment.
During the second quarter, we announced the successful appeal of the findings from the <unk> report.
While we have always maintained that the findings in the report looks completely unsubstantiated. The success of the appeal sends a clear message to our external stakeholders.
<unk> has consistently provided a true industry best standard of care.
In the first half of the year, we identified a tremendous opportunity and successfully executed on our capital strategy to buy back common shares at an incredible value.
As the value of our equity shares approach pre O I G report levels.
Our capital allocation strategies were able to shift towards acquisitive and transformative initiatives.
Therefore, I am extremely excited about the recently announced addition of two key executives to lead our acquisition and strategic partnership activities.
We're currently developing our acquisition infrastructure and working closely with a number of potential acquisition targets to execute on these transactions when the capital environment stabilizes.
As each month passes without action and administrative window to institute a competitive bidding process for the 'twenty 'twenty four round the likelihood of implementation becomes less probable.
CMS is annual inflation adjustments to the reimbursement rates also create regulatory relief in the current operating environment of rising cost across the industry and economy.
Inflationary cost increases are nearly impossible to avoid and are having an impact on short short term profitability and.
Inflation based annual statutory reimbursement rate resets are expected to counteract the long term impact.
We further believe that most of the repricing effect on our costs have already peaked.
We believe that top line revenue growth will quickly offset the inflationary cost increases in recent periods.
During the first half of the year most of the increases in our costs were associated with the hiring and retention of our labor force to support our significant organizational growth.
Our organic expansion has helped us to create an internal promotional opportunity many of the internal promotional opportunities for our existing employees to grow their careers within the organization, while simultaneously developing our people with minimizing the turnover.
Our sales base performance compensation arrangements with existing employees has also helped us to retain top talent, while keeping up with the good pace of growth.
We continue to seek innovative ways to invest in our people. So that we create an organization where all employees want to belong.
Our external recruiting efforts continue to benefit from the impressive growth of our health care staffing division.
We were able to enter nine new territories during the first half of 2022 as a result.
Health care staffing has sourced approximately a third of the new sales hires in 2022, and we are extremely proud of the growth of the incremental revenue producing staffing activities as well.
We were significantly diversifying our portfolio mix through this drove strong growth of non vet products and services.
While margin percentages have also been impacted by the evolution of our product mix. We are seeing the positive long term benefits of revenue synergies based on the diversification of our portfolio.
For example, the growth of opposite the oxygen business serves as a wellspring for ventilator patients have disease States progress.
Our behavioral health Division is having a considerable impact on the compliance rates and length of stay on existing ventilator patients.
We're also seeing similar results from our proprietary remote patient engagement technologies currently connected to 45% of our ventilator patients following the ongoing national rollout.
Our high touch high Tech model create strong relationships with patients that can evolve over the course of their care journey.
While many other corporations and sectors are preparing for a possible recession by slowing investments. We believe there is significant and growing demand for cost effective lifesaving services that we provide we will continue to invest in our ability to meet this demand and serve the patients in need.
With more on our operations financials, the buyback and the regulatory landscape I will now turn the call over to our Chief operating Officer, Todd Zehnder Alright.
Alright, Thank you 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 website as well as SEDAR.
Our core business generated net revenue of $33 1 million during the second quarter of 2022 as compared to net revenues of $26 3 million in the second quarter of 'twenty, one, which equates to a 26% increase our sequential growth for the core business was 10%. We've once again seen solid growth.
And our major product lines being Vince paths and oxygen.
Our COVID-19 related revenue was only 200000 for the quarter as we have seen the needs for these services go down as the country gets back to normal post the pandemic.
Our margin percentages, both gross and EBITDA are once again very healthy and are now back to being just from the core business lines. We continue to see our margin profile will be influenced by our ever changing product mix and have staffed up for this significant growth that we're currently seeing.
Our gross and EBITDA margins during the quarter came in at 61 and 19% respectively.
Our second quarter gross and EBITDA milk came in at $20 4 million and $6 5 million respectively.
We are once again encouraged by the rapid growth of our oxygen and sleep businesses as they continue to benefit from our ongoing national rollout of these products are.
Our second quarter revenue from Vince was approximately 69% of our core revenue as compared to 79% in the second quarter of 2021.
Importantly, our revenue has grown during the same time, but the product diversification is beginning to show up more and more each quarter.
To put this in further context, our second quarter with active patient growth was the highest quarterly growth since the second quarter of 2019.
The impressive stat is that we have now doubled our total rental patients which includes Vince that's O two impacts since the beginning of the pandemic, we see our organic growth ramping back up to even greater levels now that access is not an issue and are extremely pleased with the recent vent patient growth.
Our SG&A for the quarter totaled approximately $17 5 million as compared to $12 9 million in the second quarter of 2021.
We have ramped up hiring to serve our growing patient count around the country and expand our organic growth model of the new areas.
As we continue to grow our ancillary product lines, we should see cost efficiencies through scale as well as the positive effects of offering a wide berth array of respiratory products around the country.
We like most companies are seeing inflationary effects across the board, but have managed those as much as possible, while continuing to offer superior clinical care to our growing patient count.
For the quarter, we invested approximately 7 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.
As we have managed through the length of the pandemic as well as the Philips recall, we're 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 the capex through discretionary cash flow during the quarter, where organic patient growth is as high as we've seen in a couple of years. We continue to have a pristine balance sheet, where at June 30th we had a cash balance of $22 million on over in an overall working capital of $24 million.
Our total long term debt remains at $4 3 million and we have continued executing on the stock buyback as.
As mentioned last quarter, we began our buyback efforts on the previously disclosed board approved buyback.
During the second quarter, we bought back 960689 shares for total expenditures of approximately $5 1 million.
As of June 30, we had purchased 135 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 leverage company.
Moving on to the ongoing O I G and CMS issue related to our <unk> and IV claims we are continuing to work through the process of finalizing the results on these claims.
Importantly, during the second quarter, we received the results from the qualified independent contractor whereby they ruled that the patients in question actually were deemed medically necessary.
There are eight patients that had been deemed ineligible for several factors and the company has filed the next level of appeal on these patients which is go into the a L. J.
While we continue to seek a resolution to this issue the company has reduced the total exposure, but this review to approximately $1 1 million.
Moving on to the third quarter, we have provided net revenue guidance in the $34 five to $35 $5 million range all related to our core business. Our core revenue is guided up 24% to 28% over the third quarter of 2021.
With that I'm going to turn it back over to Casey to wrap things up.
Okay. Thank you Pat.
Looking back to the second quarter, we really began to see some interesting trends with our hospital and physician referral source partners.
Hospital bed capacity seem to be at an all time high despite the relief around the country from the COVID-19 patients filling beds.
Yes, there were certainly pent up demand from patients just getting back in to see their doctors, but our hospital partners are giving us no indication that they will be receiving any kind of relief anytime soon.
Health systems are all expressing that the growing Medicare population is driving the majority of the hospital bed demand and.
Unfortunately, the health systems struggle with this demand as Medicare patients tend to be more needy, making them less profitable.
This trend has ignited many hospital at home and strategic partnership conversations with home care providers across the country.
At <unk>, we have been developing these programs for our hospital partners and will continue to pursue a new way of treating more patients in the home and greater volumes.
The other strategy of treating patients at higher volumes is to partner with our payers through value based population health contracts.
We've begun to see many technology related platforms and great positions to collect and collaborate with leading disease management companies across the country.
Rather than trying to be a company, who treats every disease states for all people. These technology platform companies are looking to partner with leading disease management companies, who could perform care with the human touch.
Again at <unk>, we are uniquely positioned as a respiratory thought leader who has the data that reflects cost savings and superior clinical care.
In closing.
Our organic growth strategy is as strong as it's ever been and growing at a fast rate. We have proven that we can recruit and retain our best in class employee base to support our growth.
While we are experiencing inflationary cost pressure our management team is laser focused on creating operational efficiencies that maximize our capacity to help reduce this exposure as we look to grow through this challenge.
With the help of our diversification products, we have doubled our patient count since the pandemic began.
So we have a huge opportunity to expand patient satisfaction and our clinically oriented biomet brands throughout the communities that we serve.
Perhaps the most exciting piece of all of this is that we have yet to grow through acquisitions, and we see a major opportunity to do so in teaching our organic model to others as we bring them into the fold.
With regulatory headwinds at an all time low the future seems extremely bright providing that we thank all of you on the call who have placed their trust in our company and we look forward to continue to add shareholder value throughout 2022 and beyond.
This concludes our prepared remarks I want to thank everyone for taking time to join our call today and look forward to answer any further questions. Thank you.
At this time it will be conducting a question and answer session. If you would 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 to remove your question from the queue for participants using speaker equipment. It may be necessary for you to pick up your handset before pressing the star keys one.
While we poll for questions. Our first question comes from the line of Brooks O'neil with Lake Street Capital markets. You May proceed with your question.
Good afternoon. Good morning, guys, sorry, I was sleeping on the job there.
Good quarter, good progress I'm excited for all you're doing.
Thank you. Thank you Brooks.
So, let's just talk about a couple of things I'm guessing maybe one reason the stock is down today is the jump in the SG&A line.
And.
You guys talked about it what's going on what you're doing to drive organic growth, but how do you think about that line in terms of you know.
The future or are you thinking about absolute dollar levels are you thinking about SG&A as a percentage of the revenue you expect to get and do you expect to continue to grow SG&A spending in absolute dollars aggressively.
For the rest of the year.
Yeah, I'll take that Brexit. The answer is we think about it in both ways. We're always monitoring we always monitor G&A as a percentage of our revenue and that's just historically the way we've analyzed it and have not been as concerned about the gross amount because revenue was always growing faster.
I think we're in a period, where we turned the organic engine on again and it's always more expensive on the front end of our growth is what we've historically seen along with inflationary.
Inflationary items, you know I mean everything from <unk>.
Hiring new people is costing more money retaining people is costing more money commissions are at an all time high because growth is at an all time high and then the things like travel and fuel and all of those things that are hitting us.
Just combined two.
I guess, what I'd call a somewhat of a perfect storm.
We are we are managing that we're looking at what we can stabilize from a head count standpoint on the back half of the year and be very strategic to make sure that we're getting the revenue contribution out of our G&A dollars as much as possible. So we're not putting our head in the sand about it.
We want to reverse the trend, but we're also not going to quit growing G&A because it is the fuel for our future revenue growth. We're just we're going to have to be a little bit more diligent.
In the back half of the year to make sure we can get those margins back at a level, where we want them to be.
Sure.
Perfect I understand that but it sounds like you're doing all the right things.
Let's talk just a little bit about availability of labor it doesn't sound like you're having difficulty finding good people out there, but comment on that if you will and availability of equipment, obviously, the Philips recall, but it doesn't sound like you're having great difficulty getting the equipment you need to service the patients but talk about that if you will.
Yeah, we're executing on both of those the people really points back to the good work that Biomet health care staffing is doing our new division. They have gotten really good at understanding what makes a successful biomed sales rep respiratory therapists.
Clinically so on and so forth.
And we're very pleased with them being able to hire a third of the workforce basically in the second quarter. We expect that number to increase we expect it to take less pressure off of our current internal recruiting.
Efforts, which really fall on our regional sales managers and it frees them up to manage more people to hold more folks accountable and and and really get these new people up and running at a faster rate. So.
Bye.
Our goal is by 2023, we'd like buy them at health care staffing to take over all recruiting out but right now it's kind of a combined effort. So.
Very fortunate to have that resource to not be in a pinch to find good people as you know broke she's been with us for a while that is the driver to our organic growth strategy. The faster, we find salespeople and the faster we get incremental new areas up and running and that's that's why we've been able to add nine new areas here this year.
As it relates to equipment. We is it still the same story as it was last quarter, we have equipment for our patients we have not.
Being able to not.
Not put out equipment for a patient in need.
At this point, we've got inventory on the shelves ready to go for future growth.
Strategy whenever the Philips recall began was to do a patient acquisition movement throughout the country rather than going out.
And spending the money on buying distressed companies. We wanted to go out and really capture those patients who were sitting on waiting list and needs. We were able to do that and we doubled our patient count a lot of it came from sleep.
From since the pandemic began and so we're pleased with where we're at on that we're not having any restraints as it is right now the only thing that we struggle with is we've got a little bit of an internal.
Process gone to where we have to get machines back to fill ups, they've got to to fix them and get them back up and running get the phone out of the back of the machine and then we've got to get it out back into the field, but our referral sources are not affected by that not all of our patients.
Perfect. Let me just ask you one more I appreciate the color. So it sounds like you've got the Oh I G investigation pretty much under control if I was listening properly.
One 1 million kind of estimated future exposure can you just talk about how you think about that in terms of you know at what point do you kind of you.
Blow the whistle and call the game up and say, okay, let's meet in the middle and settle this and move our separate ways or is that a point of important principle.
The future that you feel you have to fight to the bitter it.
It's really the latter.
It's about our name at this point Brooks, we and its truthfully. It's the lift at this point is pretty minimal we're down to just talking about eight patients and we've already filed that with the ALJ. So basically it's just us and a judge and anybody from the government talking about eight specific patients, which we feel very.
Comfortable that we will have a positive outcome. So the the time that we've spent on this the time that we have outside help spending on it is definitely at a minimal pace now and truthfully, we kind of feel like this this whole issue is relatively in the in the rearview mirror now.
But we want to we want to finish the race and clear our name.
I think at the end of the day, the most positive thing for us and our industry is we now have learned from another audit that we're doing the right thing in treating the right patients and we've always been confident and have always said that it's unfortunate we had to go through the situation that we've gone through but it does quote unquote vindicated.
Does that we had been doing the right thing and we continue to do the right thing and it's just it's not a whole lot of work to finish it but we are going to finish this.
Okay makes sense, let me just ask one more sorry. So you hired these two guys probe your neighbor at LHC group.
Talk a little bit more about the opportunity for acquisitions and whether you think you know, it's the right time to be pulling the trigger on.
Something here this year or into 2023.
Yeah, we're very excited about Jeremy Chahar, Michael frame and we've made an official announcement for those on the call that would like to brush up on their backgrounds, but the short story is that these guys together, where we're at the lead of over $1 9 billion worth of acquisitions for LHC and.
And handled 100 acquisitions in house.
So they bring a lot of experience on just internal processes that we need to get ready in order to start flipping. These fish in the boat for lack of a better term.
I E.
We've got a target list for them to get going on they are they are developing a plan to really get to those folks they're using a lot of their old contacts to start finding new targets for us as well and so this is really the beginning of a dedicated team at <unk> to the M&A strategy.
Before we were all somewhat moonlighting on that growth strategy now, it's it's a dedicated team with direct responsibilities of acquiring folks in developing strategic partnerships with hospital partners and and health systems throughout the country that we.
Can be just more relevant to their continuum of care to the home. This is also something that they had experience with with LHC.
And so we're just we're blessed to have that here in our small town in Lafayette shake up wherever they are across the street with United purchasing them and so so the timing was right for them to come in and really start there what they did over there at biomed all over from ground zero, if you will.
Great. Thank you very much for taking my questions.
Thanks Brooks.
Our next question comes from the line of Doug Cooper with Beacon Securities. You May proceed with your question.
Hi, good morning, guys.
Excuse me just following on longterm, we'll start off with just following on from the SG&A topic.
I guess according to your MD&A at 715 full time employees at the end of Q2 versus 662 in Q1, So that's up 8%, where G&A was up 10%. So you can see it's the majority is head count I guess in my opinion, So where do you see staffing fulltime staff and going over the next couple of quarters.
Well, it's going to continue to grow as we continue to expand but I think youre going to see the absolute head count slow down. Some we've really added quite a few positions that are related to these growing.
Product lines, we've hired quite a few more oxygen or delivery drivers around the country as that business has expanded we.
We're stressing the Rts.
From a patient count standpoint, so we've had to hire some drivers we have.
Had to hire some more back office people because like I said, we've doubled the rental patients.
So it's just taking more people to do the tasks and the home office as well billing intake working with insurance companies all those type things. So I think that we have.
<unk> hired a big wave of people to help with that growing.
Patient base, so I don't see the absolute growth in the back half of the year that you've seen over the last quarter or two okay.
Maybe I'll come out of it another way too so.
The revenue in the quarters, just over $33 million growth is back up to that sort of 25% plus if I look out four quarters and assuming the top line revenue growth continues.
What kind of EBITDA flow through would you expect from that incremental revenue in other words. What are you can you get to EBITDA margins for.
Four quarters amount.
Back up to 22, 23%.
I would definitely say I would definitely say, that's what we're shooting for I can't say that that guidance, but the other factor to this is as you guys know we will get our I mean, the thing that will go straight to the bottom line is when we get our CPI adjustment from the first quarter of 'twenty three we're not waiting on that to work on our margins, but you know.
The inflation base was nine 1% at the end of June So, we'll wait and see what the actual adjustment is but we're due to have a pretty good rate increase from CMS, which translates into most of our commercial payers as well.
But just without that I would tell you that we are going to grow revenue and we're going to we will start to normalize G&A as a percentage. So I think youre going to see us work towards the you know getting back into the low twenty's here over the next couple or three quarters.
Okay, maybe just on that CPI adjustment this quarter revenue per active vent patients.
Basis was by my calculation $14625, which is a record.
And that's up from 13270 last year and I guess part of that is due to maybe some product mixture.
Hi, Matt.
Average patient by patient.
Yeah.
You hardly quota we went from 79% in the second quarter of 2021 contribution event and grew 69%. So when that the perhaps oxygen and this primarily get 10 extra percentage points, that's obviously going to drive that.
So yeah.
The revenue per patient well being driven by a how much we're getting reimbursed for Vince and then b how much of these ancillary products make up of the contribution so it could go way higher if we went to 50 50, let's say, but our goal at this point is to get Vince growing again at the <unk>.
Same rate as in other product lines, that's obviously going to help with margin it's going to be.
It will show that these other products are doing what they're supposed to do which is entering.
Entering patients into the VI Mad cycle earlier in their disease state.
And speaking of vent patients you finished the quarter with.
8837.
Is that a number you think by the end of the year can you sort of be.
North of 9090, 290 300 does that.
Possible number apps.
Absolutely I mean look we grew at 400 sequentially.
Where we're not taking our foot off the gas on that.
I would like to think that we can do that again this quarter and hopefully next but we'll just have to wait and see.
Okay.
And my follow up maybe the final question on <unk>.
M&A.
You talked in the past about not looking to acquire company right into your core competencies or another company what sectors. In particular are you focused on.
Well I mean, that's not entirely true we would we would consider a another big company as well and are in a region that we're not in with insurance contracts that we don't add up so we don't turn our nose up to just strictly vet company, but.
You know we.
We're still looking for respiratory tight durable medical equipment businesses that are inclusive of the majority of the products that we sell we know that we might pick up a product line or two that we don't really manage over here at biomed, but we certainly have the legacy domain knowledge in the team.
It's here in house to kind of work through all of those processes, but.
We're really we're really looking at all D. It needs throughout the country at this point just to see if we can we can find a good fit.
Okay, maybe my last my last one you mentioned the case here in nine new territories can you just remind us how many states you're in right now and what states you would like to enter in the next call. It 12 months.
Oh, Doug I mean, I know the last time I looked at it. It was it was still at like 45, but it could be higher right now I don't want.
Yeah, I'm getting the signal it might be 48 states right now so don't quote me on that but yeah, we're pretty close to having total lower 48 coverage right now.
Okay. So in particular or is it for me.
And M&A perspective for example, if youre looking tus.
A company who was in a region that you weren't particularly in are not as strong in what would that region are my wishes.
I'll just give you. An example, like New York State as a state that we would have to have a brick and mortar facility with a working storefront and so on and so forth. We have patients in that state and we have therapists in that state treating folks. So technically we we would call that a state that we're in however were not.
Really do in the business that we know we need to be doing in New York State.
Well, we made a strong push in Florida, I think we got some really good coverage now in Florida that used to be a state that we werent in but I'm sure we might have four or five maybe six reps something like that in Florida right. Now that are really doing well and then California still weak for us.
Got a couple of people over there and a handful of patients but by no means are we making any any movements in California. So these are good good areas that are examples of where we might see an M&A opportunity.
Okay, I'm, sorry, one more if I can just a philips came out the other day I guess it was a week or so ago and gave us some sort of positive outlook.
On friction.
The recall issue resume stock has certainly picked up over the past couple of weeks maybe on the back of that can you just talk a little bit of a supply issue do you see it easing at all.
On the Vince I, we've never had an issue as you know there is like case, you mentioned on the call. We're repairing sum up we are repairing the phone which is a process that we just had the transferred back to fill ups and that's ongoing on the patch side.
We haven't seen new Pap shipments, yet, but we're still anticipating I think the formal guidance theyre, giving us isn't later in the quarter.
We should get we should have the ability to get Philips paths again, we've been very progressive on the patch side to where we were a very acquisitive and got our got on a pretty good distribution early through the cycle. So we luckily or I guess proactively not had that issue.
But it will be nice to get Phillips back in the game from a Pap standpoint and.
Have everybody contributing to the supply issues that are out there.
Okay, great. Thanks, Scott Thanks, guys.
Doug.
Our next question comes from the line of Christoph handle a gun with Bloomberg and you May proceed with your question.
Hi, good morning, Thanks for taking my questions.
Are you talking about the <unk>.
Involving product mix could.
Could you expand a little bit dark spreads at least particularly in terms of the NIM guidance about the mix of Bentley Dragon.
Medical equipment rentals going forward and the impact of this on margins.
Yeah, I would expect to continue to see a little bit of increased contribution from the oxygen and sleep businesses as we are.
Are seeing the benefits of R.
Our sales force around the country distributing that but the patient growth that we saw in this quarter and what were kind of seeing coming in the third quarter to me is showing a stabilization of that percentage some I don't.
<unk> know quarter to quarter, where it's going to go but I could see it trickling down a little but I don't see it going down 10% like it has over the last 12 months. That's that's just rapid growth from the other products.
So if we if we stay close to where we are or down a little bit that will put a little bit of continued margin pressure on our on our percentages. Obviously, the notional amounts are going to keep going up but.
But I think that kind of like what I was telling either Brooks or Doug earlier, I think the offsets is that the G&A is going to stabilize as we've ramped up head counts for those divisions I think we've got a pretty good.
Pretty good crew of people at this point to.
To adequately take on more growth and so I would expect over time, our margins to start creeping back up.
Yeah, Yeah, yeah that sounds back and could you talk about potential Covid response, saying from a future of the business.
Comes more endemic.
With periodic spikes due to new radiance.
As we head into the fall.
Yeah, we're hopeful that that the mass need for our Covid services is behind us.
<unk> always said that it was good while it lasted but we werent D. We want patient access and physician access could be there.
If it comes from an inventory standpoint, we're clearly ready to serve and to help our different facilities and then the other thing is our call Center I mean, we've clearly.
We've laid that down if you will but we can stand it right back up we've got experience.
And so those were the majority of the revenue drivers and we don't see a growing need for that right now I would say the other piece that we're ready for is if there are hotspots and they are a need for people now that we have behind that health care staffing up and running and effectively doing what they do.
If there are.
Covid hotspot that need help we could serve as a resource there.
Oh, great. Thank you.
Thanks.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Casey for closing remarks.
Okay. Thanks to everyone for joining the call. We appreciate your participation and certainly appreciate the thoughtful questions coming from everyone as well.
But let us know if we can be of help feel free to reach out.
Thank you.
Concludes today's conference you may disconnect your lines at this time. Thank you for your participation during the rest of your day.
Yeah.
Okay.
[music].
Yeah.
Yeah.
[music].
Okay.
[music].
Yeah.
Yes.
[music].
Okay.
[music].