Q1 2023 Quipt Home Medical Corp Earnings Call

Speaker 1: The that.

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Speaker 2: Thank you for standing by. This is the conference operator.

Speaker 2: Welcome to the fiscal first quarter 2023 results conference call for Quipped Home Medical Corp.

Speaker 2: As a reminder, all participants are in listen only mode and the conference is being recorded.

Speaker 2: After the presentation, there will be an opportunity to ask questions. To join the question, Q, you may press star then one on your telephone keypad.

Speaker 2: Should you need assistance during the conference call, you may signal an operator by pressing Star & Zero….

Speaker 2: We remind you that the remarks today will include four lean statements that are subject to important risks and uncertainties.

Speaker 2: For more information on these risks and uncertainties, please see the Reader Advisory at the bottom of the company's results news release.

Speaker 2: The company's actual performance could differ materially from these statements.

Speaker 2: At this point, I'd like to turn the call over to Chairman and Chief Executive Officer Greg Crawford.

Speaker 3: Thank you, operator, and thank you all for joining us today on the call. My name is Greg Crawford, and I'm the chairman and chief executive officer of Quiptome Medical. Joining me today is Hardick Mata, our chief financial officer.

Speaker 3: With the closure of our largest acquisition today, Quipt is off to a historically strong start in calendar 2023.

Speaker 3: We believe solidifying ourselves as the fifth largest provider of home medical equipment focused on end-to-end respiratory care in the United States from a revenue standpoint.

Speaker 3: As of fiscal Q2, Quip currently has a $220 million run rate revenue and a $49 million run rate adjusted EBITDA, giving us a significant growth platform to continue driving economies of scale.

Speaker 3: The driving force behind our continued success is the more than 1,000 Quip team members who dedicate their daily work to providing superior patient care in order to improve the quality of life for each and every patient we serve. Our team is the real reason why the momentum continues to be robust throughout the business.

Speaker 3: and we are able to successfully operate a patient-centric ecosystem. We are devoted to offering equipment solutions geared towards cardio and pulmonary disease states, all of which are minimizing the load that is being placed on the conventional healthcare system.

Speaker 3: In 2022, we improve the quality of life of over 200,000 patients, and in 2023, we will start with over 270,000 patient lives. Our primary goal is to make patient lives outside of the hospitals.

Speaker 3: Better by making it easier for them to breathe and sleep, which is ultimately result in higher life satisfaction.

Speaker 3: Quit stands apart in the market because of our high-touch service model we employ. As we carried out our strategic growth plan and future vision, fiscal Q-1 2023 produced 38% year-over-year revenue growth and margin acceleration.

Speaker 3: For us, it goes without saying that offering a full range of end-to-end respiratory solutions is essential to maintaining our success and a significant growth factor in our key markets.

Speaker 3: Our team is concentrating on our primary sales touch points, which are healthcare institutions, including hospitals, physicians, offices, long-term care facilities, home health agencies, and rehab centers.

Speaker 3: We have been able to use the technology platforms we have deployed over the past few years, along with our specialized clinical programs, to effectively treat patients at home in a way that best meets their needs with the ability to monitor patients in greater numbers.

Speaker 3: reduce organizational redundancy, and lower overall health care costs. Returning to historical levels of organic growth is one of the primary focuses of our team, and we are confident that as the year 2023 develops, we will be able to meet and surpass historical levels of 8 to 10 percent of the overall health care costs.

Speaker 3: as a result of our focus on growing our sales team, expanding the continuum of care, receiving the benefits of the major improvements to the supply chain, and operating in a regulatory environment that is extremely bullish.

Speaker 3: We continue to place a renewed emphasis on growing our sales team and we are making progress. In particular, because our sales professionals can now interact with our primary sales touchpoints in a more active manner in the post-pandemic environment.

Speaker 3: To achieve our organic growth goals, we are concentrating our efforts in areas with a high prevalence of cardio and pulmonary disease states and on hospitals with high admission rates.

Speaker 3: This is done with the intentions of acquiring patients at an earlier stage in the course of their illness, which is essential to our long-term expansion objective.

Speaker 3: We will discuss our record-breaking fiscal first quarter 2023 performance as well as positive real-time business development during this call. In addition, we will provide an update on the regulatory landscape which remains the best in over a decade as well as the significant improvement in the...

Speaker 3: supply chain and our core business.

Speaker 3: We are operating in an extremely favorable regulatory and reimbursement environment.

Speaker 3: which was most recently evident by the Medicare fee schedule adjustments resulting in a significant CPI increase for DME providers that began January 1, 2023 of 6.4 to 9.1%. The percentage depends on whether product service are competitive bidding programs.

Speaker 3: affect our financial results during our second fiscal quarter.

Speaker 3: Additionally, in 2023, CMS relaxed coverage criteria for home oxygen therapy, now allowing patients who present to their physicians with an acute or chronic respiratory disorder to be covered for home oxygen therapy, and also removing the longstanding requirement for patients to obtain.

Speaker 3: made to cancel the 2021 Competitive Fitting Program for 13 product categories. In a time when the demand for the home medical equipment industry seems to be at an all-time high, we welcome these continuous positive regulatory changes.

Speaker 3: Turning to the supply chain environment, we have seen major improvement in 2023, which January , being the first month since the June 2021 Phillips recall, we did not have allocation limits on a connected sleep device.

Speaker 3: The continued expectation is that X-Ting Calendar Q1, we will be back to pre-pandemic setup levels. The team is actively driving setups across the organization to match the robust demand which we feel will continue for the foreseeable future.

Speaker 3: This real-time development is a powerful tailwind and will significantly contribute to our organic growth over the coming year.

Speaker 3: When we look at the financial performance for Fiscal Q1 2023, we can see that our team of operators has once again generated remarkable results. Most notably, the healthy and accelerating margin profile experienced throughout this time of higher than normal inflation.

Speaker 3: We saw a rise in revenue of 38% from fiscal Q1-22 to fiscal Q1-23, bringing the total to $40.8 million and a 50% increase in adjusted EBITDA, bringing the total to $9 million.

Speaker 3: We witnessed a decrease in bad debt expense and an acceleration of our adjusted even a margin which came in at 22%. This strong result is continued evidence that we are able to scale quickly through the strategic acquisitions without jeopardizing our billing capabilities or overall margin profile.

Speaker 3: We are pleased to close another record quarter in fiscal Q1 and begin calendar 23 with a recent milestone acquisition, which provides us with a significant presence from coast to coast in the United States.

Speaker 3: On a combined basis, we have grown to 115 locations in 26 states and surpassing 270,000 active stations.

Speaker 3: We are excited about what we have achieved to date, while at the same time continuing to have a deep acquisition pipeline, strong access to capital with a conservative balance sheet, and significant tailwinds within the business. We are looking forward to continuing to drive value for our shareholders.

Speaker 3: With that commentary, I'd like to hand the call over to Hardy to discuss our fiscal first quarter 2023 financial results.

Speaker 4: Thanks, Craig. On Monday evening, we announced our fiscal first quarter 2023 financial results representing the three months ended December 31, 2022.

Speaker 4: In reviewing the fiscal first quarter 2023 numbers, please note that all financial values are in US dollars and the full results are available on CEDAR and EDGAR.

Speaker 4: Here are some key highlights.

Speaker 4: Through the companies continued use of technology and centralized intake processes, respiratory resupply setups and or deliveries increased to 69,482 for the quarter ended December 31, 2022 compared to 51,137 for the quarter ended December 31, 2021, an increase of 36%.

Speaker 4: The company's customer base increased 32% year-over-year to 99,420 unique patients served in fiscal Q-123 from 75,309 unique patients in fiscal Q-122.

Speaker 4: Compared to 118,100 unique setups and deliveries in fiscal Q1 2022, the company completed 146,350 unique setups and deliveries in fiscal Q1 2023, an increase of 24%.

Speaker 4: Revenue for Fiscal Q1 2023 was 40.8 million compared to 29.5 million for Fiscal Q1 2022, representing a 38% increase in revenue year over year.

Speaker 4: Organic growth increased by 2% sequentially compared to fiscal Q4 2022.

Speaker 4: We anticipate organic growth meeting and surpassing historical levels of 8 to 10% as calendar 2023 progresses.

Speaker 4: Recurring revenue as a fiscal Q1223 continues to be strong and exceeds 77% of total revenue.

Speaker 4: Adjusted EBITDA for fiscal Q1 2023 was 9 million at 22% margin compared to adjusted EBITDA for fiscal Q1 2022 of 6 million at 20.3% margin, representing a 50% increase year-over-year.

Speaker 4: We expect to continue seeing strong margin performance through rest of the year.

Speaker 4: Net income for fiscal Q1 2023 was 325,000 or 0.01 per fully diluted share compared to net income for fiscal Q1 2022 of a loss of 2.1 million or 0.06 per fully diluted share.

Speaker 4: Additionally, we believe that the recent CPI adjustment announced will have a meaningful positive impact on our net income as we progress in calendar 2023.

Speaker 4: Cash flow from continuing operations was 4.8 million for the quarter ended December 31, 2022, compared to 5.1 million for the quarter ended December 31, 2021.

Speaker 4: CAPEX as a percentage of total revenue was lower than fiscal year 2022, a trend that the company will like to maintain.

Speaker 4: For Fiscal Q1 2023, bad debt expense was at 5.6% compared to 8.2% in Fiscal Q1 2022.

Speaker 4: One of the primary reasons is improved billing and collection processes. An example is our ability to scale and add more revenue through add-on acquisitions without compromising our billing capabilities.

Speaker 4: For the three months ended December 31, 2022, operating expenses were $19,462,000, an increase of $6,048,000.

Speaker 4: from 13,414,000 for the three months ended December 31, 2021.

Speaker 4: Acquisitions contributed approximately 5 million of these increases. Remaining increases are related to payroll, professional fees and inflation.

Speaker 4: The company reported 3.5 million of cash on hand and total credit availability of 101.9 million as of December 31, 2022, with 16.9 million available to a line of credit and 85 million available on DDTL.

Speaker 4: The company paid down 3.9 million of its revolving line of credit during the quarter-ended December 31, 2022.

Speaker 4: The company has 37.1 million of liabilities that are due within one year at 38.9 million of current assets plus revolver line of credit availability of 16.9 million to meet those obligations.

Speaker 4: We are really proud of the continued operational excellence which is reflected in the robust performance throughout the first quarter of fiscal year.

Speaker 4: We are very pleased as we have near critical scale that are adjusted EBITDA margin has hit 22% and we anticipate that we will continue to have accelerating margins moving forward.

Speaker 4: We feel insulated despite the challenging economic environment.

Speaker 4: We believe we experienced peak inflation during the most recent fiscal year and anticipate the CPI adjustment that began January 4th. We will have a very favorable effect on our financial results in calendar year 2023, starting with our fiscal Q2 results.

Speaker 4: As we entered calendar 2023, we announced our largest acquisition to date, covering eight states, seven of which were new to quit, with over 1.5 million people suffering from COPD across those states.

Speaker 4: The closing of this recent acquisition is a major accomplishment, providing us with a ton key acquisition at a prudent purchase price while simultaneously maintaining our conservative balance sheet at 1.96 times our net leverage and allowing for financial flexibility on a go-forward basis.

Speaker 4: We are confident that we will have the ability to increase the size of our senior credit facility whenever the appropriate window of opportunity presents itself.

Speaker 4: including the acquisition, GRIPT has a combined annualized run rate revenue and annualized run rate adjusted EBDA of 220 million and 49 million respectively.

Speaker 4: including the 2 million of cost savings and synergies based on quick reported audited financial results for the first quarter and their September 30, 2022. And Great Ong's un audited results for 12 months and their August 31, 2022.

Speaker 4: Post-act position, RIPP's recurring revenue will increase from 77% for the quarter ended December 31, 2022 to 82% on a pro forma basis.

Speaker 4: The purchase price was 80 million, which is comprised of approximately 73 million in cash, 5 million in assumed debt and 431,000 quib common shares.

Speaker 4: Cash was obtained from delayed draw, term loan, and revolving credit facility components of the facility. The purchase price was at a multiple of 5.2 times for synergies.

Speaker 4: We are well underway on our integration processes and we believe that the initial 2 million of synergies identified will be felt on the lighter side of 6 months.

Speaker 4: This acquisition provides us increased geography reach giving us an additional opportunities to further expand on our tried and true acquisition and integration strategy with highly accretive tucking acquisitions for our full suite of respiratory care products and services.

Speaker 4: We believe that it's more cost and revenue synergies to be captured over time, in particular through the various cross-selling opportunities, including ventilation and oxygen. Also the significant opportunity to increase resupply revenue once sleep patients are onboarded to QUIPS resupply program.

Speaker 4: Looking forward, our pipeline continues to be deep and we remade committed to our prudent acquisition approach, along with our tried and true integration processes, which has been the catalyst for a consistent revenue growth displayed on an annual basis.

Speaker 4: Moreover, given the nature of our industry and operation, as a respiratory driven healthcare organization, we feel well protected from any future economic difficulties. We are well positioned to continue to implement our growth in acquisition strategy and increase sharedholder value.

Speaker 3: Thank you, and with that update, I'll turn the call back to great. Thanks, Arctic. Superior patient care is our top priority in every one of our markets. And we do everything in our power to assist those who require treatment for conditions like sleep apnea, COPD, and other chronic respiratory diseases. Thank you.

Speaker 3: Our aim is to make sure that patients get the treatment they need, when, where, and how they require it. When I think about how our company has evolved, I am immensely proud of the entire team for their ongoing dedication to going above and beyond. Quick now serves more than 270,000 active patients.

Speaker 3: has more than 32,000 referring physicians in 26 states. According to our estimates, Quipt is now the fifth largest.

Speaker 3: Home Medical Equipment Provider in the United States in terms of revenue.

Speaker 3: At this point, restatory products constitute about 79% of our overall product mix, and we continue to develop methods to increase our patient base and access lucrative markets by cultivating relationships with referral sources, patients, and payers.

Speaker 3: At the same time, we continued to simplify our operating platform.

Speaker 3: We anticipate that our strong momentum will continue throughout 2023 as a result of our successful execution of the critical components of our growth strategy on the heels of the largest acquisition today. As a reminder, these components include making a creative acquisition, investing in our future organic growth developments, and expanding our healthcare network.

Speaker 3: it into this year. We are actively working with additional significant commercial pairs to assist them in understanding the benefits of our strong patient-centric approach for both patients and pairs. We are confident that we will be able to get further national insurance contracts during the first half of 2023.

Speaker 3: As we can see from the current environment, a significant effort is being made to ensure that a patient is treated in a home care setting whenever feasible. As a result, we will continue to use our high-touch model centered around technology usage, such as remote patient monitoring to grow our referral sources, which will benefit our company.

Speaker 3: We constantly invest in technology to improve our operational efficiency, the automated ordering systems, revenue cycle management, and our automated resupply program. These activities assist us to increase productivity and produce long-term value. Investments in our scalable healthcare platform generates strong cash flow, margin expansion.

Speaker 3: accretive acquisitions and organic sales growth. I would now like to review with you the three components of our core growth strategy as we move into 2023.

Speaker 3: First is organic growth, which historically has ran 8 to 10 percent annually, and we are confident that 23 will meet and surpass this. Initiatives on this front includes growing our sales team, which is how we reach important touch points like hospital networks, doctors' offices, long-term care facilities.

Speaker 3: Moreover, extending patient accessibility by signing additional national health care insurance contracts with significant payers in the United States.

Speaker 3: Secondly, in order to always be improving our operational performance, we will endeavor to expand our use of technology throughout the organization. We are focused on the use of data mining and data analytics tools to drive efficiencies and long-term profitability.

Speaker 3: The third component of our expansion strategy is the execution of strategic acquisitions.

Speaker 3: We are on the lookout for respiratory companies that can be effectively integrated into our scalable infrastructure. Our primary focus right now is on expanding our business to a larger size economically with the overreaching strategic goal of broadening our payer base and expanding our geographic reach into more...

Speaker 3: population and overall geographic reach. We anticipate that we will be active throughout 2023.

Speaker 3: After completing our biggest purchase to date, we are off to a strong start in 2023 on the capital markets front. We are connecting with U.S. and Canadian investors to share our captivating narrative and have the exciting chance to talk to investors about our future growth ambitions.

Speaker 3: Through 2023, both our institutional shareholder base and our total US ownership has grown significantly, and we will continue attending investor conferences and take part in investor road shows throughout 23. Moreover, we have plans to uplist to the Toronto Stock Exchange.

Speaker 3: Big Board in the first half of calendar 23, which we believe will foster more liquidity and institutional ownership over time. It is important to note that investment dealers with global headquarters account for 40% of TSX trading.

Speaker 3: This forthcoming big milestone for us is undoubtedly a testament to our historical financial success, which has given us the chance to seize this wonderful opportunity.

Speaker 3: Given the bullish industry environment that rapidly improves supply chain for sleep devices in real time and all the organic tailwinds at our back, we are continuing to strategically position the company for ongoing strong growth and we must remain aggressive in taking advantage of the many opportunities that are open to us.

Speaker 3: With our operational excellence and sub-tutime leverage balance sheet, we have all the resources needed to execute our ambitious growth plan.

Speaker 3: We have high hopes for the future of equipped and the more than 270,000 patients we care for.

Speaker 3: As a healthcare organization with a concentration on respiratory treatments, we feel well insulated from any potential economic challenges given the nature of our business and sector.

Speaker 3: Currently, our run rate revenue is $220 million and our run rate adjusted if it is $49 million. It is important to note that these run rate figures are not inclusive of the positive impact of the CPI adjustment that took effect January 1, 2023.

Speaker 3: As we move through 2023, we have a great deal of confidence in our ambitious growth trajectory. And I would like to take a moment to once again thank the entire equipped team for its tireless efforts and its stakeholders for all their continued support.

Speaker 2: We will now begin the question answer session.

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Speaker 2: The first question comes from Doug Cooper with Beacon Securities.

Speaker 2: Please go ahead.

Speaker 5: Thank you, Morgan. I heard I'm going to congratulations on a nice corner and we look forward to the inclusion of Great Almond Q2. I just want to focus on the margins for a minute. Obviously, very strong here and Q1 Grand Improvement both sequentially and year-to-year. Can you give us any idea on a pro-FORRA basis what?

Speaker 5: The margin would have been if the CPI adjustment was made on October 1st, as opposed to the generous.

Speaker 6: Or I have small support

Speaker 4: I guess the CPI increase across our organization translates to around

Speaker 4: 6% for the Medicare piece, 6% to 7% for the Medicare piece.

Speaker 4: But I think to be frank, the question is a little more complex than that. Over the last.

Speaker 4: Six months, the company has been working with different vendors and has also worked on some pricing arrangements and stuff, which you are seeing some benefits into the margins. But I think if you want to annualize the CPA increase, it's around $6 million is how we calculate any time.

Speaker 4: If you look at our cost of goods as a percentage of ourselves

Speaker 4: And then increase the revenue by about 2%. Overall, because the 2% is kind of a blended rate to the whole revenue for CPI increase.

Speaker 5: So maybe from a broader perspective, you have 22% margin in this quarter prior to the CPI adjustment.

Speaker 5: that started six weeks ago. And you would feel comfortable that 22% margin is a baseline that you can expand from there. Is that for the trust?

Speaker 6: yes

Speaker 5: Okay, just on bad debt provision obviously pretty low 5.6% or 5.7% is not sustainable as we had to be in the balance of the year.

Speaker 4: Yes, I think that's definitely within half a point here and there, but I think that is definitely sustainable.

Speaker 5: And my friend, I just can't make the sales to be bad at a bunch of sales folks.

Speaker 5: How quickly does it take for them to ramp and what percentage of your sales force?

Speaker 5: would be new. Like have you added 10%, 15%, like what percentage is new and typically how long till a new salesman hits their stride? It was six months, eight months, kind of thing.

Speaker 3: I know this is Greg. It normally takes about six to nine months and probably since July , August , timeframe and that of 22 and that, we have probably increased our sales team about 20 to 22% or so.

Speaker 3: as far as the overall headcount. So, you know, some of those hires in that early on are just now starting to hit their stride in that of where they should be.

Speaker 5: And, sure, just one more for meeting, I'll pass it along. Just in terms of the organic growth that you referenced and targeted at 80%, 10%. Does that just, the Chris business or the anticipate great on being able to grow in that level as well? I'll leave it there. Thank you.

Speaker 3: Well, we anticipate the entire business in that, you know, is going to grow in that back at a minimum back to historical levels and that where we were prior to supply chain issues and fiscal 22. We had been right in that 8 to 10 percent range.

Speaker 3: So we think that now we kind of got the first quarter of seeing that 2% sequential organic growth and that we can consistently hit that stride if not exceed that.

Speaker 2: Okay, perfect. Thanks very much. The next question comes from Rahul Surigathar with Raymond James.

Speaker 7: Good morning, Greg Gartick. Thanks so much for taking our questions and grubbing the quarter. So just sort of a general question, you previously talked about your product offering specifically in diabetes. Could you give us a sense for the timing on that specifically also around the new acquisition?

Speaker 3: Yeah, so as far as adding new product lines, those are things that we've been working on in that since last year and that. We've been adding product lines in that such as theurological and incumbent supplies and that where we see fit.

Speaker 3: So we expect to continue to expand those product lines, and that is we continue to cross-sell and map the patient database.

Speaker 7: Terrific. And just a quick follow on, like, so in terms of timing, how should we be thinking about the timing for that? And then I'll throw in my second question, which is just sort of following on from Doug's previous questions around sort of margin. So we saw, you know,

Speaker 7: looking at COGS having increased a little bit, of course, as a CPI adjustment. So how should we be thinking as sort of a more normalized COGS margin going forward?

I guess what you see in Q1 is certainly that is a baseline that we could all work off. One thing I didn't address in Doug's question was cost of goods is definitely a function of our sales and rental revenue split as well. So, we are anticipating that we will continue to grow.

And as a result of that, it does have a direct impact on our margins as well. So all I'm saying is it's a little more complicated than just thinking as CPI increase and passing on that CPI increase into a gross margin number because the gross margin numbers would also be changing along with our product mix of rental and sales.

Okay, okay, that's helpful. And then just sort of one somewhat asking you guys a question. Now of course with the acquisition, your cash position is going to change. Your cash will currently then this quarter which is all being an artifact. And we're all going to run our numbers, but maybe just for the sake of clarity, could you give us a sense for, you know, perform a cash moving into the new quarter, it's a post acquisition.

you know, a lot of combinations of, you know, when you consummate a transaction, there are, obviously activities and services that you're used, that you're going to use, you have cash to work. We also assumed about $5 million of lease liability as part of that position, so those lease liability will start flowing through our...

lease payment on the cash flow. So for the first two or three quarters, we would we do see that would be more of a cash usage than what are historically it has been.

Okay, that's the way of. And then just a quick follow up and then I'll hand it all back in the queue. So in terms of liquidity available, that you talked about with sort of the pay down on the debt, maybe just give us a sense for your liquidity and the ability to sort of manage these integration, incremental integration costs and then I'll get back in the queue. Sure, yeah, I think we have.

We're very confident about our liquidity at this point. We still have availability on our line of credit. That should be plenty for us to go through the castle of fluctuations that we talked about. As far as apart from that, to support our acquisition, we still have our ability on our DTTL. So between the availability on DTTL and the line of credit,

We feel extremely comfortable with where we stand not just to maintain what we have, but if we want to continue on the acquisition path, again, we don't see a challenge.

of liquidity from that perspective. Terrific, that's helpful. Thanks again for taking our questions. We'll all get back in the queue now.

The next question comes from Tanya Armstrong-Witworth with Cannecord Genuity.

Please go ahead. Get more on guys just following up on the questioning around ZADDEC. We can see a pretty market decline quarter over quarter and I want to go with specific change in its unique to your billing and collections process you can highlight for us.

Hi, good morning. Primarily in that it's been our workflow processes in that that we've improved on in that throughout 22 and that we're just starting to kind of see some of the reflective in that of that work on the financials. So we would expect to see that to continue in that beyond this quarter.

Okay, and where do you think that line item will settle as a percent of revenue then once all those changes are fully in effect? Yes, we think consistently to stay in this, you know, 5 to 7% range. I know kind of prior to this we were always...

8% to 10% in that for bad debt. So we think, you know, now we can stay consistently 5% to 7% that will depend on acquisitions also as we acquire companies and perhaps they don't collect quite as good as we do and that it takes a while to implement that but besides a larger one could potentially affect that.

Okay, excellent. And when Great Almond brought on, are they running at 5 to 700 percent subducks? It's since as well, or is there a little bit higher? And we made to that to cut the meantrum.

Now, there are within a couple of points of where we are on the lower side. So we don't, again, that's why on the first question we said that, you know, what we currently have in Q1 can be considered as a good baseline. Hopefully we can improve from there.

Perfect. And then on Great Almond's well, and forgetting now what there are mixes between fields and rentals, should we expect the growth margins to temporarily dip as you integrate Great Almond, get their patients onto your recovery supply business? Or will the Medicare changes kind of offset that? And we can see growth margins stay about the same.

Yeah, so I guess, you know, great, great, and does have a different, slightly different revenue versus sorry, revenue distinction between rentals and sales. So you would see a mathematical shift on the gross margin side, but if you look. So.

This, a bit different than we see in other healthcare companies where you typically see that Q4 seasonality. It doesn't seem like your business has a ton of seasonality. Is that fair, isn't it?

Yeah, historically we haven't seen seasonality in that from a revenue standpoint. On the collection side in that we do see seasonality in that we're on the fiscal year 930 as a reminder. So typically maybe into our Q2 in that from a cash perspective and collections and that we could see a slight dip.

But historically, we've picked that up in the prior quarters.

historically we've picked that up in the prior quarters or in the following quarters.

Perfect. Thanks guys, that felt for me.

The next question comes from Justin Keywood with Steve Hull.

Please go ahead. Hi, good morning. Thanks for taking my call and nice to see the operating leverage in the quarter. Just on the organic growth outlook of 8% to 10%, is that a bit conservative given the already price increases implemented?

early last month which I believe is a blended rate of around 8% for quip.

Yes, that is correct and that it is about the CPI is about 8% overall. You know, we believe that 8% to 10% and that is probably on the lighter side in that, especially when we get into the back half of calendar 23, between the expansion of the sales force that we are starting to see some impact from and then the full end.

Medicare revenue, not on the photo revenue off-quip. Right, but it is the...

The private insurers aren't their rates somewhat comparable or is there a bit of a lag for that to catch up?

Well, most of the commercial, I mean commercial payers and that typically don't follow Medicare, there are some of the Medicare Advantage plans that do. It just depends on if our contract is related to the Medicare rate or not as a percentage or anything. Those will see an increase on. But what we've referred to as this 8% is the overall blend and then the $6 million at heartic men.

The 8% is only over the Medicare plus Medicare-Advendance Plan, which is, you know, you can refugalize investor debt, but be reforestation. About 25% of our 34% of our revenue would be impacted by that. Understood, and thanks for clarifying that. And then on M&A, obviously a bigger acquisition with a great album.

and a pretty favorable multiple of what you would see with some of the smaller deals. What's your ability to continue to acquire larger size companies at that multiple? Was gray down a bit of a unique situation or do you think there's other opportunities out there like it?

Yeah, as far as multiples and that, I mean, we've seen multiples kind of stay pretty consistent. You know, we'll say 20 million and under type revenue companies in that are still in that forward adjust over five times. We've historically seen larger companies 20 to say 80, $90 million in top line revenue and that come in in that seven to nine times.

All of those are kind of pre-entie synergies. I'll say that the market has slightly changed and that and came down on the larger size deals. There tends to be a fair amount of those still on the market that we're commanding that high end of the multiple and that I'll say going back a year and a half ago.

So we anticipate as long as we continue to remain disciplined in that and our approach and that we'll be able to continue to fill the pipeline here and close some deals in that in 23.

And would the focus still be in respiratory services or are you looking at any other areas?

Primarily would be respiratory focused. Great. Thank you for taking my questions.

Thank you. The next question comes from Stefan Kwenvil with Estonline Capital Markets.

The next question comes from Stefan Kwenville with Estonal and Capital Markets. Please go ahead.

Hi guys, thanks for taking my question and I could ask you a question on the Cardinal Distribution Deal. It's been about six months since you guys announced that. And I just wanted you to help me understand the kind of contribution that's been making to organic growth and maybe just your assessment of how an assistance bill, yes. is this difficult one to solve for even sticking out of that business and ????m is going further?

we've seen over this past quarter and we expect to see that to continue to build as we get into 23.

And how much of a sort of tailwind in terms of like other basis points of growth do you think that that could add?

Yeah, it would be tough for us to really kind of give a number on that of where we're at, how much those particular categories are actually going to contribute so we're still in the early stages.

Okay, great, that's it for me.

for me. Thanks guys. Thank you.

That concludes the question and their session. I will now hand the call back to Mr. Crawford for closing remarks. Thank you operator and thank you all for your participation today. As always you can find us on the web at www.quiptolemedical.com where we will be posting a transcript of this call.

and also our updated investor deck. Thank you and have a great day.