Q2 2024 Quipt Home Medical Corp Earnings Call

Worded.

After the presentation, there will be an opportunity for analysts to ask questions.

Speaker Change: So join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator, because in Dar undo.

Speaker Change: We remind you that the remarks today will include forward looking statements that are subject to important risks and uncertainties.

Speaker Change: More information on these risks and uncertainties. Please see the reader advisory at the bottom of the Companys results New Sydney.

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

Speaker Change: At this point I would like to turn the call over to Chairman and Chief Executive Officer, Greg Crawford. Please go ahead.

Thank you operator, and thank you all for joining us on the call. My name is Greg Crawford and I'm, The chairman and Chief Executive Officer of quick <unk> Medical's. Joining me today is hard at <unk>, Our Chief Financial Officer quick <unk> medical as a diversified health care services company, providing a full spectrum of home medical equipment and services to <unk>.

Speaker Change: <unk> in the home setting across the United States at quipped, our model is centered around delivering clinical excellence and we drive this through our patient centric ecosystem.

Speaker Change: Leveraging technology enabled equipment solutions in conjunction with our specialized clinical respiratory programs to effectively treat patients at home in a way that best suits their needs currently respiratory care accounts for approximately 80% of our product mix demonstrating our commitment to serving the needs of people with pulmonary.

Speaker Change: In cardiovascular diseases, our core strength is our incredible team, which consists of over 1200 individuals.

Speaker Change: The ongoing dedication to patient care and scale. We are achieving we are poised to capitalize on the expanding need for respiratory care delivered in the home setting this need for respiratory care is driven by an aging population significant COPD target patient group of over 16 million Americans and a significantly up.

Speaker Change: You're penetrated sleep apnea market with OSA impacting 80 million adults across the United States.

Speaker Change: On this call we will provide updates on our fiscal second quarter 2024 performance and provide.

Speaker Change: Strategic insights into our core business and our new capital flexible allocation strategy as it relates to our flexible capital allocation strategy. We look at all ways to allocate our capital to promote growth and create value to this effect. We are pleased to have initiated a share repurchase program through a normal course.

Speaker Change: Issuer bid or in CIB after quarter end for up to 10% of our public float. The NCI program reflects our continued confidence in our business model operating cash flow generation and ongoing commitment to create shareholder value and shows our beliefs that our valuation in the marketplace does not reflect the ongoing.

Speaker Change: <unk> strong fundamentals of the business in.

Speaker Change: In fiscal Q2, 2024, we saw revenue of 64 million, marking a 10% year over year increase while maintaining a robust margin of 23, 3%. This resulted in an adjusted EBITDA of $14 9 million representing growth of 14%.

Speaker Change: Our strategy focusing on generating the kind of economies of scale and effective cost management enabled us to strengthen our margin profile.

Speaker Change: While we are pleased with the overall margin profile and strength of our underlying operation fiscal Q2 presented us with a range of challenges that we absorbed in the quarter, which negatively impacted our financial performance to the end of the Medicare $75 25 relief as of January one, which had been providing rate relief for certain.

Speaker Change: Geographies was discontinued although this change is still under Legislative review and could return its immediate cessation was a negative impact on the quarter.

Speaker Change: Also in certain regions, we experienced withdrawal of Medicare advantage members due to our capitation agreement engaged on with other providers in the industry.

Speaker Change: Additionally, the recent cyberattack on change healthcare, which significantly impacted the health care industry hindered the ability to process and deal claims in the back half of the quarter, creating a short term drag on our cash flow and real time, we continue to work diligently through this with thousands of claims being recently submitted and we.

Speaker Change: Expect cash collections can move to <unk>.

Speaker Change: <unk> in the coming months as the backlogs of claims are adjudicated and future claims are adjudicated in a timely manner.

Despite these setbacks, we have observed several positive trends, indicating a recovery path for the remainder of the year. We continued to see strong equipment setups in real time, and there has been no change in the favorable referral patterns and our relationships with health care providers and payers remains solid. Moreover, we are working diligently.

Speaker Change: To make up for the lost revenue with ongoing organic growth initiatives, which we hope will provide benefit in the quarters to come our primary objective remains to be at an 8% to 10% annualized organic growth rate, which we believe can be attained with the incorporation of our updated and enhanced capital allocation strategy.

Speaker Change: Our organic growth strategy remains focused on growing into continuum markets enhancing cross selling of our product offerings and expanding our insurance portfolio, which provides a barrier of entry in the marketplace. This strategy has been crucial in our positioning towards achieving our target of 8% to 10% annualized organic growth.

Speaker Change: Reflecting our confidence in our internal capabilities.

Speaker Change: Sources and strength of our core business model.

Speaker Change: Our emphasis on utilizing our current infrastructure and economies of scale to generate margin consistency have been bearing fruit as we continue demonstrating our ability to drive a strong margin profile in any operating environment. All thanks to our careful and flexible approach to capital management.

Speaker Change: Our strategy of providing a comprehensive range of end to end respiratory solutions with our diverse product mix is critical to sustaining our success and playing a major role in the expansion of our core markets as we carry out our long term strategic expansion plan.

Speaker Change: By concentrating on our main sales channels, such as hospital systems and physician offices, we can increase overall volume growth, which is the main driver of our organic growth now.

Speaker Change: Now I would like to provide you another real time update on our sleep business with reference to <unk> referral patterns for new device setups and replacement supplies remained strong and recent positive data shared from the leading sleep device manufacturer involving 660000 patients shows those.

Speaker Change: On <unk> ones are 10, 5% more likely to start sleep therapy path compared to those not on <unk> highlighting their impact on treatment adherence. Additionally data showed more frequent resupply orders for these patients over 12 and 24 months. Furthermore, we believe are significant.

Speaker Change: New consumer driven trends that will promote more diagnoses of sleep apnea are tracking wearables. We're very excited to see one of the largest phone manufacturers in the world received de Novo FDA clearance to screen for sleep apnea on their watch our hope is that similar capabilities become available from other major tech companies.

Speaker Change: We think that the availability of these medications for treatment of obstructive sleep apnea may lead to a rise in the number of cases diagnosed with the illness and a rise in the market demand for Pap therapy. It is significant to remember that 80 million adults in the U S have OSA.

Speaker Change: Of whom over 20 million have moderate to severe OSA.

Speaker Change: <unk>, it's estimated that 85% of cases of OSA remain undiagnosed and untreated.

Speaker Change: The total addressable market is extremely large for this segment of patients and allows for multiple treatment modalities. We believe based on early data and positive developments of more motivated patients entering the health care system as they work towards their health goals. The introduction of <unk> can be a tailwind for our sleep business over time.

Speaker Change: Jim.

Speaker Change: As it relates to the ongoing CIB known as civil investigative demand I want to note that while we have not received the CIB before companies in our industry are subject to Cid's from time to time in our CIB as a request for information, which is designed to gather facts that are necessary for regulatory authorities.

Speaker Change: To make an informed decision about whether a violation has occurred in real time, we continue working in a timely and transparent manner to provide information requested.

Speaker Change: And at this time the government has not reached a conclusion that any wrongdoing has occurred we believe we have effective internal controls around billing and compliance procedures in place and are confident in our practices. Our priority is to resolve this matter as quickly as possible and we are working diligently to do so.

Speaker Change: Turning back to the business our approach to managing that and leveraging our strong balance sheet enables us to pursue strategic initiatives that drive long term value for our shareholders. As we continue to implement our strategic growth strategy. We are confident in our ability to deliver exceptional patient care established your own payer alive.

Speaker Change: <unk> and achieve consistent and sustained growth.

Speaker Change: With that commentary I'd like to hand, the call over to <unk> to discuss our fiscal second quarter 2024 financial results.

Speaker Change: Thanks, Gregg on Wednesday evening, we announced our fiscal second quarter 2024 financial results representing the three months ended March 31 2024.

Speaker Change: Please note that all financial values are in U S dollars.

Speaker Change: Here are some key highlights.

<unk>: The company's customer base increased eight 1% either way you are the 148874 unique patients. So in Q2 2024 up from 137748 unique patients in Q2 2023.

<unk>: Compared to 198101 unique setup deliveries in Q2 2023, the company completed 210279 unique setups and deliveries in Q2 2024, an increase of six 1%.

<unk>: This includes 116023 respiratory resupply setups and deliveries for the three months ended March 31, 2024 compared to 106486 for the three months ended March 31, 2023, an increase of 9%, which the company credits the way it's going.

<unk>: The use of technology and centralized intake processes.

Speaker Change: Revenue for fiscal Q2, 2024 was $64 million compared to $58 1 million for fiscal Q2, 2023, representing a 10% increase in revenue year over year.

Speaker Change: Organic growth contributed approximately $6 4 million or six 5% year over year.

Speaker Change: Revenues for the six months ended March 31, 2024 increased to $129 3 million, representing an increase of 31% for the six months ended March 31 2023.

Speaker Change: Recurring revenue as our fiscal Q2 'twenty 'twenty four continues to be strong and is approximately 80% of total revenue.

Speaker Change: Adjusted EBITDA for fiscal Q2, 2024 was $14 9 million or 23, 3% margin compared to adjusted EBITDA for fiscal Q2, 2023 of $13 1 million or 22, 5% margin representing a 14% increase.

Speaker Change: Year over year.

Speaker Change: Adjusted EBITDA for six months ended March 31, 224 increased to $30 2 million, representing an increase of 37% from the six months ended March 31, 2023, and represents 23, 4% of the revenues.

Speaker Change: Cash flow from continuing operations was $17 1 million for the six months ended March 31, compared to $14 8 million for the six months ended March 31, 2023, an increase of 15, 6%.

Speaker Change: For fiscal Q2, 2020 for bad debt expense improved to four 2% compared to four 3% for fiscal Q2 2023.

Speaker Change: This exemplifies the company's ability to scale without compromising billing and collection capabilities.

Capex defined as transfers of rental equipment from serialized inventory fixed assets when we deploy the equipment on patients was 11, 2% for the six months ended March 31, 2024, we expect capex to stay consistent the remainder of the year.

Speaker Change: Operating expenses for the three months ending March 31, 2024 was 48%, which was flat compared to the corresponding period in 2023.

Speaker Change: The company reported $14 6 million of cash on hand on March 31, 2024, compared to $18 3 million as of December 31, 2023.

Speaker Change: The decline in cash was due to seasonality in collections and the recent cyber attack on change healthcare, which impacted the ability to process and bill claims in the back half of the quarter, creating a short term drag in cash flow.

Speaker Change: In real time, the company continues to work through this with thousands of claims being submitted and the company expects cash collection to normalize in the coming months as the backlog of claims are adjudicated and future claims are adjudicated in a timely manner like they have been historically.

We continue to use of technology and centralized intake processes.

Revenue for fiscal Q2, 2024 was $64 million compared to $58 1 million for fiscal Q2, 2023, representing a 10% increase in revenue year over year.

Speaker Change: The company had total credit availability of $39 3 million as of March 31, 2024, with $18 3 million available towards the revolving credit facility and $21 million available pursuant to the delayed draw loan facility.

Organic growth contributed approximately $6 4 million or six 5% year over year.

Revenues for the six months ended March 31, 2024 increased to $129 3 million, representing an increase of 31% for the six months ended March 31 2023.

Speaker Change: The company maintains a conservative balance sheet with net debt to adjusted EBITDA leverage of one Forex.

Speaker Change: Our commitment is to ensure long term value creation for our shareholders. We dive this through our prudent capital management approach that aims to economically scale of our business. Our long term strategy emphasizes maximizing our existing resources, including our strong balance sheet operating strengths.

Recurring revenue as of fiscal Q2, 'twenty 'twenty four continues to be strong and is approximately 80% of total revenue.

Adjusted EBITDA for fiscal Q2, 2024 was $14 9 million or 23, 3% margin compared to adjusted EBITDA for fiscal Q2, 2023 of $13 1 million or a 22, 5% margin representing a 14% increase.

Speaker Change: Sales capabilities and infrastructure, we have built out to date.

Speaker Change: This strategy is particularly centered around long term stability and resilience as it focuses on building alright.

Year over year.

Adjusted EBITDA for six months ended March 31, 2024 increased to $3 2 million, representing an increase of 37% from the six months ended March 31, 2023, and represents 23, 4% of the revenues.

Speaker Change: Already rock solid foundation from which we grow.

Speaker Change: Subsequent to quarter end, we initiated a share repurchase program with the initiation of an N CIB reconsider the NCI as a welcome addition to our capital allocation plan, given our ongoing confidence in our business model future growth prospects, our solid balance sheet and our bill.

Cash flow from continuing operations was $17 1 million for the six months ended March 31, compared to $14 8 million for the six months ended March 31, 2023, an increase of 15, 6%.

Speaker Change: Leave that our current valuation does not accurately reflect the company's fundamentals.

Speaker Change: As Greg mentioned earlier in the second quarter, we absorbed the impact of the end of the Medicare 70, 525 relief as of January one and southern geographies and experienced a withdrawal of Medicare advantage members in certain regions due to the Capex did agreements engaged on with other <unk>.

For fiscal Q2, 2020 for bad debt expense improved to four 2% compared to four 3% for fiscal Q2 2023.

This exemplifies the company's ability to scale without compromising billing and collection capability.

<unk> in the industry. Despite this we are proud of the efforts of our team and mitigating the overall revenue impact and leveraging our strong operating platform to post that consistent adjusted EBITDA margin profile of 23, 3%.

Capex defined as transfers of rental equipment from serialized inventory fixed assets when we deploy the equipment on patients was 11, 2% for the six months ended March 31, 2024, we expect capex to stay consistent the remainder of the year.

Speaker Change: We have full confidence in our margin profile throughout the remainder of the fiscal year.

Operating expenses for the three months ending March 31, 2024 was 48%, which was flat compared to the corresponding period in 2023.

Speaker Change: Moreover, our priority remains on driving long term organic growth, which continues to be achieving our target of 8% to 10% on an annualized basis.

The company reported $14 6 million of cash on hand on March 31, 2024, compared to $18 3 million as of December 31, 2023.

Speaker Change: The company also utilized just free cash flow a non <unk> measure as a method of measuring its cash available to pay interest and repay the company's senior credit facility or to make acquisitions and looking at free cash flow, we define free cash flow.

The decline in cash was due to seasonality in collections and the recent cyber attack on change healthcare, which impacted the ability to process and build claims in the back half of the quarter, creating a short term drag in cash flow.

<unk> EBITDA less capital expenditures, both in cash and dose finding us through equipment loans and repayments of leases.

In real time, the company continues to work through this with thousands of claims being submitted and the company expects cash collection to normalize in the coming months as the backlog of claims are adjudicated and future claims are adjudicated in a timely manner like they have been historically.

Speaker Change: In fiscal Q2, we had $5 9 million of free cash flow or 9% of revenue prior to interest expense and working capital.

Speaker Change: Adjustments outperforming expectations.

The company had total credit availability of $39 3 million as of March 31, 2024, with $18 $3 million available towards the revolving credit facility and $21 million available pursuant to the delayed draw loan facility.

Speaker Change: On a go forward basis, we continue to anticipate 6% to 8% free cash flow following capex and lease payments, but prior to any payments relating to debt service and acquisition price payable.

Speaker Change: We see this as our baseline scenario going ahead with the long term objective of growing on this as we continue to expand our business. We are confident in our ability to grow our net cash flow inclusive of our capex needs.

The company maintains a conservative balance sheet with net debt to adjusted EBITDA leverage of one Forex.

Our commitment is to ensure long term value creation for our shareholders. We dialed this true or prudent capital management approach that aims to economically scale our business.

Speaker Change: Our robust balance sheet with $32 9 million in cash and revolver availability.

Speaker Change: In an exceptionally well positioned to navigate through an environment of high interest rates and to strategically pursue both organic and strategic.

Our long term strategy emphasizes maximizing our existing resources, including our strong balance sheet operating strengths sales capabilities and infrastructure, we have built out to date.

Speaker Change: Organic growth of venues with a prudent leverage ratio of one four times, we are strategically positioned to utilize a balanced mix of debt and cash reflecting our commitment to a disciplined approach to grow maintaining our capital allocation discipline is crucial to our continued financial success and we will continue to add.

This strategy is particularly centered around long term stability and resilience as it focuses on building.

Already rock solid foundation from which we grow.

Subsequent to quarter end, we initiated a share repurchase program with the initiation of an and CIB, we consider the NCI as a welcome addition to our capital allocation plan, given our ongoing confidence in our business model future growth prospects, our solid balance sheet and our bill.

Speaker Change: While our strict approach.

Speaker Change: Lastly, I would like to highlight an upcoming change related to financial reporting brought investors.

Speaker Change: The company has determined that it no longer qualifies as a foreign private issuer and as a result effective October one 2024, the company will transition from international financial reporting standards <unk>.

Leave that our current valuation does not accurately reflect the company's fundamentals.

As Greg mentioned earlier in the second quarter, we absorbed the impact of the end of the Medicare 70 525 relief.

Speaker Change: <unk>.

Speaker Change: U S generally accepted accounting principles.

Speaker Change: GAAP this means starting with our fourth quarter of fiscal 2024, and our audited financials for the year ending September 32020 for the financial statements will be prepared under U S. GAAP.

As of January one in southern geographies and experienced a withdrawal of Medicare advantage members in certain regions due to their capital agreements engaged on with other providers in the industry. Despite this we are proud of the efforts of our team and mitigating the overall revenue impact and leveraging.

Speaker Change: It also means that effective October one 2024, the company be subject to the same reporting and disclosure requirements applicable to domestic U S companies and the company will be required to file periodic reports and financial statements with the SEC on Form 10-K, and Form 10-Q as applicable as well.

Our strong operating platform to post a consistent adjusted EBITDA margin profile of 23, 3%.

We have full confidence in our margin profile throughout the remainder of the fiscal year.

<unk> filing current reports on form 8-K.

Moreover, our priority remains on driving long term organic growth, which continues to be achieving our target of 8% to 10% on an annualized basis.

Speaker Change: We're looking forward to this transition as we believe it is important to align our accounting standards with the geography of our operations being all within the United States as well as growing compatibility to our peers in the industry.

The company also utilized as free cash flow a non <unk> measure as a method of measuring its cash available to pay interest and repay the company's senior credit facility or to make acquisitions and look.

Thank you and with that update I'll turn the call back to Greg.

Greg Crawford: Thanks, Hardy our investment in creating operational efficiencies is central to our overall strategy by automating key processes and enhancing our operational infrastructure, we aim to boost productivity reduce costs and improve patient outcomes. This focus on generating <unk>.

And loans and repayments of leases.

In fiscal Q2, we had $5 9 million of free cash flow or 9% of revenue prior to interest expense and working capital.

Speaker Change: <unk> not only supports our long term organic growth objectives, but also ensures we remain competitive and agile in our markets coast to coast by optimizing our workflow procedures to generate tangible benefits and eliminate friction points such as throughout our billing and collections Department and we have seen a notable.

Adjustments outperforming expectations.

On a go forward basis, we continue to anticipate 6% to 8% free cash flow following capex and or these payments, but prior to any payments relating to debt service and acquisition price payable.

See this as our baseline scenario going ahead with the long term objective of growing on this as we continued to expand our business.

And our bad debt expense.

Speaker Change: And an increase in our net cash flow.

Speaker Change: Our expanded market share and overall reach allows us to take advantage of economies of scale within the business to drive margin growth and free cash flow generation and looking at our core growth strategy. We are focused on driving long term organic growth enhancing our cash flow generation and margin profile as well as retaining.

We are confident in our ability to grow our net cash flow inclusive of our capex needs.

Our robust balance sheet with $32 9 million in cash and revolver availability.

In an exceptionally well positioned to navigate through an environment of high interest rates and to strategically pursue both organic and strategic inorganic growth avenues with a prudent leverage ratio of one four times, we are strategically positioned to utilize a balanced mix of debt and cash reflecting our.

Speaker Change: Our financial flexibility that allows us to seize opportunities as they arise.

Speaker Change: First we are driving long term organic growth by leveraging our unique market positioning and clinical respiratory care, our objective of 8% to 10% annualized organic growth will be supported by an expanding need for home delivered respiratory services driven by an aging population significant COPD prevalence and in.

Our commitment to a disciplined approach to grow maintaining our capital allocation discipline is crucial to our continued financial success and we will continue to adopt to our strict approach.

Speaker Change: Underpenetrated sleep apnea market. The core path is through market expansion and sales initiatives as we are continuously exploring opportunities to broaden our product portfolio cross selling of our end to end product solution and penetrating new markets, our targeted initiatives aimed to drive volume based growth through enhanced.

Lastly, I would like to highlight an upcoming change related to financial reporting brought investors.

The company has determined that it no longer qualifies as a foreign private issuer and as a result effective October one 2024, the company will transition from international financial reporting standards <unk>.

Speaker Change: Sales efforts deepened relationships with health care providers, and payers and gain access to desired geographic areas.

Yes.

Generally accepted accounting principles.

A GAAP this means starting with our fourth quarter of fiscal 2024, and our audited financials for the year ending September 32020 for the financial statements will be prepared under U S. GAAP.

Speaker Change: As it relates to cross selling opportunities, we are strategically expanding our product offering by entering the diabetes market segment, including <unk> and related supplies. This represents a significant opportunity to enhance our value to our existing patient base. This initiative allows us to address an unmet need within <unk>.

It also means that effective October one 2024, the company be subject to the same reporting and disclosure requirements applicable to domestic U S companies and the company will be required to file periodic reports and financial statements with the SEC on Form 10-K, and Form 10-Q as applicable as well.

Speaker Change: Our patient base without necessitating any increase in SG&A expenses.

Speaker Change: This addition to our portfolio presents a promising avenue for our sales team to cross sell new products leveraging their established relationships and familiarity with the needs of our patients. This move not only bolsters our product offering but also strengthens our position as a comprehensive care provider in the home medical equipment.

Filing current reports on form 8-K.

We are looking forward to this transition as we believe it is important to align our accounting standards with the geography of our operations being all within the United States as well as improving comparability to our peers in the industry.

Speaker Change: System.

Speaker Change: The diabetes patient population is very complementary to our existing patient population and looking at sleep apnea patients clinical research so that as many as 48% of people diagnosed with type two diabetes have also been diagnosed with sleep apnea.

Speaker Change: Thank you and with that update I'll turn the call back to Greg.

Greg: Thanks, Hardy our investment in creating operational efficiencies is central to our overall strategy by automating key processes and enhancing our operational infrastructure, we aim to boost productivity reduce costs and improve patient outcomes. This focus on generating.

Speaker Change: Second we are focused on generating economies of scale and continued margin improvement by streamlining operations as we reach critical scale and optimizing our cost structure, we aim to enhance our margins and overall cash flow. This will allow for reinvestment into growth initiatives and help achieve positive.

Greg: Pnc's not only supports our long term organic growth objectives, but also ensures we remain competitive and agile in our markets coast to coast by optimizing our workflow procedures to generate tangible benefits and eliminate friction points such as throughout our billing and collections Department.

Speaker Change: Cash flow generation. Furthermore, we are focused on promoting long term adoption of the <unk> prescribed in our industry and have positioned ourselves well with our investment in this area in fiscal 2023 electronic prescribing is essential to the industry and as the technology can serve to boost productivity cut down on errors boost compliance.

Greg: We have seen a notable decrease in our bad debt expense and an increase in our net cash flow.

Greg: Our expanded market share and overall reach allows us to take advantage of economies of scale within the business to drive margin growth and free cash flow generation.

Speaker Change: And improved patient outcomes as of now less than 5% of our orders come from a prescribed and we anticipate this will grow significantly over time.

Greg: And looking at our core growth strategy, we are focused on driving long term organic growth enhancing our cash flow generation and margin profile as well as retaining our financial flexibility that allows us to seize opportunities as they arise.

Giving us an opportunity to improve the patient prescriber.

Speaker Change: And provider experience by eliminating inefficiencies and reducing paperwork.

Speaker Change: Our automated resupply platform thats another excellent illustration of how we use technology not only helps us achieve higher margin recurring revenue and organic growth, but it also offers us significant revenue synergies when we make strategic acquisitions. The resupply program also plays a crucial role in extending.

Greg: First we are driving long term organic growth by leveraging our unique market positioning and clinical respiratory care, our objective of 8% to 10% annualized organic growth will be supported by an expanding need for home delivered respiratory services driven by an aging population significant COPD prevalent.

Speaker Change: The patient lifecycle with us as well as driving compliance rates and long term adherence to the therapy, which all benefits for patients.

Greg: In an underpenetrated sleep apnea market the core path is through market expansion and sales initiatives.

Speaker Change: Third our focus is on financial Prudence and flexibility, let us allows us to allocate capital towards synergistic acquisition candidates as they meet our stringent criteria. Since 2018, we have successfully integrated 19 acquisitions totaling more than $150 million in revenue our.

Greg: We are continuously exploring opportunities to broaden our product portfolio cross selling of our end to end product solution and penetrating new markets. Our targeted initiatives aimed to drive volume based growth through enhanced sales efforts deepen relationships with healthcare providers and payers and gain access to desired geographic.

Speaker Change: <unk> approach to debt managing strategic investments in our operating platform and market expansion will support our long term objective of positive <unk>.

Greg: Areas.

Greg: As it relates to cross selling opportunities, we are strategically expanding our product offering by entering the dire diabetes market segment, including <unk> and related supplies. This represents a significant opportunity to enhance our value to our existing patient base. This initiative allows us to address an unmet need within.

Speaker Change: Net cash generation and modest leverage enhancing our ability to invest in synergistic acquisition opportunities as they arise focused on enhancing our go to market strategy centered around our <unk> respiratory offering.

Speaker Change: Despite quadrupling the size of the business since 2019 in terms of revenue and adjusted EBITDA as well as the continuous growth of our key operating metrics. Our current public valuation represents one of the lowest multiples we have traded at in the last five years, given the overall strong fundamentals of our business.

Greg: Our patient base without necessitating any increase in SG&A expenses.

Greg: This addition to our portfolio presents a promising avenue for our sales team to cross sell.

Greg: New products leveraging their established relationships and familiarity with the needs of our patients. This move not only bolsters our product offering, but also strengthens our position as a comprehensive care provider and the home medical equipment ecosystem.

Speaker Change: In real time and that disconnect we announced the CIB as an additional avenue to consider deploying capital that will allow us to enhance shareholder value. Opportunistically. Moreover, we are actively engaging with investors from the United States and Canada to discuss our long term growth objectives and expect to be.

Greg: Diabetes patient population is very complementary to our existing patient population and looking at sleep apnea patients clinical research so that as many as 48% of people diagnosed with type two diabetes have also been diagnosed with sleep apnea.

Speaker Change: Very active meeting with investors throughout 2024, our strategic emphasis on organic growth supported by our disciplined approach to synergistic acquisitions positions us well for sustained success, our ability to leverage internal resources and operational efficiencies underscore.

Greg: Second we are focused on generating economies of scale and continued margin improvement by streamlining operations as we reach critical scale and optimizing our cost structure, we aim to enhance our margins and overall cash flow. This will allow for reinvestment into growth initiatives and help achieve positive cash.

Speaker Change: <unk>, our commitment to building, a resilient and scalable business model.

Greg: Flow generation. Furthermore, we are focused on promoting long term adoption of the <unk> prescribed in our industry and have positioned ourselves well with our investment in this area in fiscal 2023 electronic prescribing is essential to the industry and as the technology could serve to boost productivity cut down on airs boost compliance and.

Speaker Change: As we continue to navigate the operating environment. Our focus is on our flexible capital allocation strategy will remain central to our efforts to deliver value to our shareholders.

Speaker Change: In summary, while physical Q2 poses several challenges the underlying strength of our market positioning scaled operational platform and the resilience of our business model are clear.

Greg: Improved patient outcomes as of now less than 5% of our orders come from a prescribed and we anticipate this will grow significantly over time.

Speaker Change: <unk> medical is well positioned to overcome these temporary setbacks and achieved this sustained growth path. We have laid out. We appreciate the continued support of our investors as we navigate these challenges and are extremely well positioned to seize the opportunities for further expansions finally I want to take this chance to thank the entire quip team.

Greg: Giving us an opportunity to improve the patient prescriber.

Greg: And provider experience by eliminating inefficiencies and reducing paperwork.

Greg: Our automated resupply platform. That's another excellent illustration of how we use technology not only helps us achieve higher margin recurring revenue and organic growth, but it also offers us significant revenue synergies when we make strategic acquisitions. The resupply program also plays a crucial role in extending.

Speaker Change: Once again for their tireless work and our stakeholders for their continued support.

Speaker Change: Hum.

Speaker Change: We will now begin the analyst question and answer session and join the question queue. That's Star then one on your telephone keypad.

Greg: The patient lifecycle with us as well as driving compliance rates and long term adherence to the therapy, which all benefits for patients.

Speaker Change: Yeah, Don acknowledging your request.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing any key.

Speaker Change: Can you draw. Your question. Please press Star then two.

Greg: Okay.

Greg: Third our focus is on financial Prudence and flexibility, let us allows us to allocate capital towards synergistic acquisition candidates.

Speaker Change: The first question comes from Richard close with <unk>.

Richard Close: Then accord Genuity. Please go ahead.

Greg: They meet our stringent criteria since 2018, we have successfully integrated 19 acquisitions totaling more than $150 million in revenue our disciplined approach to debt managing strategic investments in our operating platform and market expansion will support our long term objective of positive net cash.

Speaker Change: Yes, thanks for the questions.

Speaker Change: Good job on the margins given some of the headwinds.

Speaker Change: With respect to a 70 525 and that going away I guess I was a little surprised in terms of based on.

Greg: <unk> and modest leverage enhancing our ability to invest in synergistic acquisition opportunities as they arise focused on enhancing our go to market strategy centered around our <unk> respiratory offering.

Some of the past commentary I believe it was going to be.

Speaker Change: Minimal to the business. So since it was called out is there anything you can quantify the impact.

Speaker Change:

Greg: Despite quadrupling the size of the business since 2019 in terms of revenue and adjusted EBITDA as well as the continuous growth of our key operating metrics. Our current public valuation represents one of the lowest multiples we have traded at in the last five years, given the overall strong fundamentals of our business.

$75 25 had in the second quarter and how we should be thinking about that factoring into I guess, the remaining months of calendar 'twenty four.

Speaker Change: Told that's lapped that would be helpful.

Speaker Change: Yeah sure. Thanks, Richard this is Jorge.

Greg: This in real time and that disconnect we announced the <unk> <unk>.

Speaker Change: Based on our estimates.

Speaker Change: Back into early 2024.

Greg: As an additional avenue to consider deploying capital that will allow us to enhance shareholder value Opportunistically. Moreover, we are actively engaging with investors from the United States and Canada to discuss our long term growth objectives and expect to be very active meeting with investors throughout 2024.

Speaker Change: When we were expecting this to occur in the Congress was not going to wait we estimated that the impact of 70 525 was going to be around 1% and a half of our total revenue.

Speaker Change: As far as what was the actual so that was our estimate that goes on internal working that'd be we're working off.

Speaker Change: As far as the actual impact in Q2 as it relates to that that's that's a little tough one for us to go because the data is very convoluted given what happened with change healthcare and everything because the claims are non bank lenders that <unk> are not coming in which will allow us to quantify it better. So so that is something we are also kind of evaluating us somewhat.

Greg: Our strategic emphasis on organic growth supported by our disciplined approach to synergistic acquisitions positions us well for sustained success, our ability to leverage internal resources and operational efficiencies underscores our commitment to building a resilient and scalable business model.

Those things resolve and we got good data coming out of.

Greg: As we continue to navigate the operating environment. Our focus is on our flexible capital allocation strategy will remain central to our efforts to deliver value to our shareholders.

The claims that we have submitted so but that's that was our estimate.

Speaker Change: Back in January February timeframe, when we were when we kind of thought that Congress is not going to act on it.

Greg: In summary, while fiscal Q2 posed several challenges the underlying strength of our market positioning scaled operational platform and the resilience of our business model, our clear quipped home medical is well positioned to overcome these temporary setbacks and achieved this sustained growth path. We have laid out we appreciate the continued support of our.

Speaker Change: Okay and was that 1.5%.

Speaker Change: You provided an 8% to 10% organic growth target I guess was the 1.5%.

Speaker Change: Headwind on $75 25 contemplated in that 8% to 10% number.

Greg: Investors as we navigate these challenges and are extremely well positioned to seize the opportunities for further expansion.

Speaker Change: Uh huh.

Speaker Change: Not fully no we weren't we were anticipating some of the Medicare advantage going away in that.

Greg: Finally, I want to take this chance to thank the entire quip team once again for their tireless work and our stakeholders for their continued support.

Speaker Change: That 8% to 10% number the 70 by 'twenty five we were hopeful that at the time from what our networking with the.

Greg: Hum.

Speaker Change: We will now begin the analyst question and answer session and join the question queue. That's Star then one on your telephone keypad.

Speaker Change: But the Congress was at the time was that it would most likely be included in one of those things.

Speaker Change: He had time acknowledging your request.

Speaker Change: Now I do want to say like.

Speaker Change: They are using a speakerphone please pick up your handset before pressing any key.

Speaker Change: Since we are talking about revenue I mean, we do believe that this seems to be a good baseline.

Speaker Change: Cause enjoying a question. Please press star then two.

Speaker Change: But I was just a good bottom at this point.

Speaker Change: The first question comes from Richard close with Canaccord Genuity. Please go ahead.

Speaker Change:

Speaker Change: For the rest of the year I don't think we see further declines from here I think that whatever.

Richard Collamer Close: Yes, thanks for the questions.

Speaker Change: Whatever the maximum related costs.

Speaker Change: Good job on the margins given some of the headwinds.

Speaker Change: So the 6% organic growth.

Speaker Change: With respect to a 70 525 and that going away I guess I was a little surprised in terms of based on you know.

Speaker Change: That's a good baseline.

Speaker Change: Is that what youre, saying.

Well I think what we're saying this is Greg and that is that this.

Speaker Change: This revenue and that that we reported this quarter here as a good baseline and that to start factoring what the additional organic growth's been which historically and that it's been around that 8% or so.

Some of the past commentary I believed it was gonna be minimal to the business. So since it was called out is there if you can quantify the impact.

Speaker Change: Okay.

Speaker Change: And then on the supply chain just really quick.

Speaker Change: 525 had in the second quarter and how we should be thinking about that factoring in I guess, the remaining months of calendar 'twenty four.

Speaker Change: <unk> talked about some red sea.

Speaker Change: <unk> headwinds.

Speaker Change: <unk>.

Speaker Change: Took a pretty conservative stance with respect to their second quarter, I guess sleep re supplies.

Speaker Change: Untold, that's lapped that would be helpful.

Speaker Change: Yeah sure. Thanks, Richard this is hardly a base.

Speaker Change: Based on our estimates.

Speaker Change: Based on some supply chain can you just talk about your thoughts on the current.

Speaker Change: Back into early 2024.

Speaker Change: When we were expecting this to occur in the Congress was not going to grow. It we estimated that the impact of 70 525 was going to be around 1% and a half of our total revenue.

Speaker Change: Supply chain environment, whether you're seeing any impacts or anything to be aware of.

As it as it relates to devices and that we haven't seen any supply.

Speaker Change: As far as what was the actual so that goes over the estimate that was our internal working that'd be we're working off.

Speaker Change: Supply chain issues or any back orders or anything on the.

Speaker Change: Disposable supplies and that we have seen us a.

Speaker Change: As far as the actual impact in Q2 as it relates to that that's that's a little tough one for us to go because the data is very convoluted given what happened with change healthcare and everything because the payments are not going through and that is that <unk> are not coming in which will allow us to quantify it better. So so that is something we are also kind of evaluating us somewhat.

Speaker Change: A slowdown in shipment in that.

Speaker Change: Maybe things going from.

Speaker Change: Three to four day delivery time and that up to a week 10 days or so but nothing that's really kind of delayed. So we've just had to kind of pre planned out.

A little better than we have historically and that kind of going back to when we had the pandemic. We were really kind of pre planning rather than historically and that in this industry and that we've brought we brought things that then kind of just in time.

Speaker Change: Those things resolve and we got good data coming out off from R. R.

Speaker Change: The claims that we have submitted so but that's that was our estimate.

Speaker Change: Back in January February timeframe, when we were when we kind of thought that Congress aren't going to act on it.

Speaker Change: Okay and my final question with.

Speaker Change: Okay and was that 1.5%.

Speaker Change: With respect that obviously, some balance sheet impact cash flow impact from change.

Speaker Change: You provided an eight to 10.

Speaker Change: Change and that's going to take a while to work out.

Speaker Change: And person organic growth target I guess was the 1.5%.

Speaker Change: Any more details in terms of how you think about the timing of.

Speaker Change: Headwind on 70, 525 contemplated in that 8% to 10% number.

Speaker Change: As you see that normalize or coming back to normalized levels.

Speaker Change: Uh huh.

Speaker Change: Yes, so we have been actively working on an alternative exchange and stuff like that so and we've made some some decent progress.

Speaker Change: Not fully no. We were we were anticipating some of the the Medicare advantage going away in that.

Speaker Change: During the month of May is pretty much starting second half of April and we expect to do at least resolved the claim the dropping the claim issues here over the next.

Speaker Change: 30% to 10% number the 70 by 'twenty five we were hopeful that at the time from what our networking with.

But the Congress was at the time was that it would most likely be included in one of those things.

15% to 35 days hopefully from that point onwards, it would it be kind of business as usual.

Speaker Change: Now I do want to say like.

Speaker Change: Since we are not talking about revenue I mean, we do believe that this seems to be a good baseline.

Speaker Change: It would be a backlog that we would have to kind of process and stuff like that but we are hoping that at least by by June.

Speaker Change: But I just have a good bottom at this point.

Speaker Change:

Speaker Change: The process is starting to work like attached and then there would be some kind of backlog to recover from in terms of collections and getting those post data claims secondary in inpatient English is going up.

Speaker Change: For the rest of the year I don't think we see further declines from here I think we've taken whatever the maximum hidden costs.

Speaker Change: So the 6% organic growth.

Speaker Change: Okay. Thank you very much I'll jump back in the queue.

Speaker Change: That's a good baseline.

Speaker Change: Youre, saying yeah.

Speaker Change: Thank you.

Greg: Well I think what we're saying this is Greg and that is that.

Speaker Change: The next question comes from Doug Cooper with Beacon Securities. Please go ahead.

Greg: This revenue and that that we reported this quarter here as a good baseline and then to start factoring what the additional organic growth's been which historically and that it's been around that 8% or so.

Hey, good morning, gentlemen.

Doug Cooper: A couple of things first of all I, just want to clarify something that hardly because you said.

Doug Cooper: For patient Capex.

Greg: Okay.

Speaker Change: Set of 11, 2% was at 11, 2% of revenue.

Reza: And then on the supply chain, just really quick Reza.

Speaker Change: $7 2 million.

Speaker Change: <unk> talked about some red sea.

Speaker Change: Rockwood.

Speaker Change: Yeah, I mean, if you look at the.

Speaker Change: Headwinds.

The patient Capex is actually went up on items on.

Speaker Change: <unk>.

Speaker Change: Took a pretty conservative stance with respect to their second quarter, I guess sleep a re supplies.

Speaker Change: Our balance sheet right.

Speaker Change: Yes.

Speaker Change: But yes, that's right that's about right.

Speaker Change: Okay. Okay.

Speaker Change: Neuro based on some supply chain can you just talk about your thoughts on the current.

So the resupply programs 11, one four.

Speaker Change: Supply chain environment, whether you're seeing any impacts or anything to be aware of.

Speaker Change: Just to be precise about $7 one for you as far as what notes.

One 4 million, Okay, and Thats versus I think versus last year my numbers are correct.

Speaker Change: As it as it relates to devices and that we haven't seen any.

Speaker Change: Where do I put it here.

Speaker Change: Supply chain issues or any back orders or anything on the.

Speaker Change: Okay.

Speaker Change: I just wanted to.

Speaker Change: Disposable supplies and that we have seen us slow.

Speaker Change: 707900, Mcf that's right that's right that's right okay. Okay. The resupply program.

Speaker Change: A slowdown in shipment in that.

Speaker Change: Just maybe things going from.

Speaker Change: Can you talk a little bit about how that.

Speaker Change: Three to four day delivery time and that up to a week 10 days or so but nothing that's really kind of delayed. So we've just had to kind of pre planned al.

Speaker Change: <unk> contributed in the quarter in terms of how many reasons why patients do you have what the resupply revenue was in the quarter.

Speaker Change: A little better than we have historically and that kind of going back to when we had the pandemic. We were really kind of pre planning rather than historically and that in this industry and that we've brought we brought things and kind of just in time.

Speaker Change: No.

Speaker Change: I mean, we don't really break down our revenue by segment, but I think resupply planned it very similar to the rest of our revenue we were coming off a really really strong quarter. In December we were anticipating that journey this quarter was going to be.

Speaker Change: Okay and my final question with respect that obviously, some balance sheet impact cash flow impact from change.

Speaker Change: Just looking at quarter over quarter.

Speaker Change: <unk> four for two reasons, one that was seasonality that decided the months of deductible typically this months or the first quarter first calendar quarter, we tend to see the supply dip a little bit.

Speaker Change: Change and that's going to take a while to work out.

Speaker Change: Any more details in terms of how you think about the timing of.

Speaker Change: So that that did occur.

As you see that normalize or coming back to normalized levels.

Speaker Change: Just looking at quarter over quarter.

Speaker Change: Assembly is usually a very strong quarter in this last December was extremely strong quarter for us and so we did see some quarter.

Speaker Change: Yeah. So we have been actively working on an alternative at change and stuff like that so and we've made some some decent progress.

Speaker Change: Quarter over quarter decline when it comes down to it.

Speaker Change: We supply for those two reasons and then the third reason we saw some decline was just whatever you're talking about the change out but overall I think there was some decline related to that we didn't see a lot more that we didn't get a ton of decline as it relates to humana.

Speaker Change: During the month of May is pretty much starting second half of April and we expect to do at least resolved the claim to dropping the claim issues here in the over the next you know.

Speaker Change: 15% to 35 days hopefully from that point onwards, it would it be kind of business as usual.

Speaker Change: <unk> advantage.

Speaker Change: But just just there's three factors.

Speaker Change: Yes year over year and that we actually had seen an increase year over year.

Speaker Change: There'd be a backlog that we would have to kind of process and stuff like that but we are hoping that at least by by June.

Speaker Change: Our fiscal Q1 was so strong and that the.

Speaker Change: Fiscal Q2.

Speaker Change: The process is starting to work like a pass and then there would be some kind of backlog or any color from in terms of collections and getting those posted in claims secondary in inpatient English is going up.

Did not wasn't going to beat that.

Speaker Change: Okay. Okay.

Speaker Change: Greg just on the.

Speaker Change: You talked about the diabetes.

Speaker Change: Opportunity or your initiative in the diabetes.

Speaker Change: Okay. Thank you very much I'll jump back in the queue.

Maybe just expand on that a little bit about.

Speaker Change: Thank you.

Speaker Change: This is an organic strategy or moving into their diabetes, what exactly are you going to be selling strips or what exactly youre going to be.

Speaker Change: The next question comes from Doug Cooper with Beacon Securities. Please go ahead.

Speaker Change: They are doing.

Speaker Change: Hey, good morning, gentlemen.

Speaker Change: Yes, we're going to.

Doug Cooper: A couple of things first of all I, just want to clarify something that hurt that he said.

Speaker Change: Start, providing and that CGM and supplies and that to patients. We have already started in some territories and have had some positive results and we're in the process. This quarter here of kind of rolling it out to the sales team across the entire organization.

Speaker Change: Or patient Capex.

Speaker Change: At 11, 2% was at 11, 2% of revenue so $7 2 million.

Speaker Change: Yeah.

Speaker Change: Yeah, I mean, if you look at the.

Speaker Change: Okay.

Speaker Change: The patient Capex is actually one of our items on.

Speaker Change: Okay, what do you think the impact.

Speaker Change: It would be this year from that initiative and what kind of margin profile diabetes, I'm, assuming a little bit lower margin go problem.

Speaker Change: Our balance sheet right.

Speaker Change: Yes.

Speaker Change: But yes, that's right that's about right.

Speaker Change: Okay. Okay.

Speaker Change: Yeah, absolutely and that it's it's hard it's hard to put a number on it right now because we just don't know how successful we're going to be on the sales side.

Speaker Change: So the resupply program 714.

Speaker Change: Just to be precise about $7, one four as part of our footnotes.

Speaker Change: I think that's something we'll be able to speak to probably in the coming quarters.

Speaker Change: 114 million, Okay, and Thats versus I think versus last year. If my numbers are correct.

Speaker Change: And we will talk about as far as the margin and that its probably in the 15% 16% range or so.

Speaker Change: Where does that put up here.

Speaker Change: But just remember theres, no capex or anything.

Speaker Change: Sorry.

Speaker Change: Got it.

Speaker Change: I just wanted to.

Speaker Change: With that and then it's a lot of drop ship.

Speaker Change: $790 Mcf that's right that's right that's right okay. Okay. The resupply program.

So on the 50% to 60% gross margin that would basically fall unencumbered to EBITDA, what I'm hearing from them.

Can you talk a little bit about how that.

Speaker Change: <unk> contributed in the quarter in terms of how many reasons why patients do you have and what the resupply revenue was in the quarter.

Speaker Change: Okay.

Speaker Change: Correct, yes.

Speaker Change: Okay.

Speaker Change: So you have relationships with suppliers now and so forth. So there's no real capex involved to get into this business and is there any acquisition opportunities.

Speaker Change: Yeah.

Speaker Change: I mean, we don't really break down our revenue by segment, but I think resupply planned it very similar to the rest of our revenue we were coming off a really really strong quarter. In December we were anticipating that journey this quarter was going to be.

Speaker Change: Is there any acquisition opportunities in this.

Speaker Change: Yes.

Speaker Change: Could be those are things historically that we've passed on in the past in that but just based off the early results that we're kind of seeing the demand just went within our own patient.

Speaker Change: Just looking at quarter over quarter.

Speaker Change: For for two reasons, one that was seasonality that decided the months of deductible typically this months or the first quarter first calendar quarter, we tend to see the supply dip a little bit.

Speaker Change: Patient ecosystem and that looks pretty positive trend in that going into the back half of the calendar year.

Speaker Change: Okay I was at a pretty competitive market I would think it would be well established market and the <unk>, one which is obviously designed specifically for diabetes in the first place what impact would that have been on the diabetes market.

Speaker Change: That that did occur.

Speaker Change: And just looking at quarter over quarter.

Speaker Change: Similar to what is usually a very strong quarter. In this last December was extremely strong quarter for us and so we did see some.

Yeah, Yeah, I mean right now we're just focused on our internal patients and then kind of selling into our current networks.

Speaker Change: Quarter over quarter decline when it comes down to it.

Speaker Change: We supply for those two reasons and then the third reason we saw some decline was just whatever we are.

Speaker Change: Yes.

Speaker Change: Don't have any information as it relates in that or any experience I should say as it relates to <unk> and what it's doing to the CGM market, we just know that.

Speaker Change: Talking about the change healthcare overall I think there was some decline related to that we didn't see a lot more that we didn't get a ton of decline as it relates to humana.

Speaker Change: We get a lot of request and that for the CGM supplies.

Speaker Change: The Medicare advantage.

Speaker Change: But just just there's three factors.

Speaker Change: Within our current system and then we also.

Speaker Change: Yes year over year and that we actually had seen an increase yet literally over here.

Speaker Change: Started receiving a lot of referrals.

Speaker Change: What kind of prompted us in that to kind of enter that market I think for us it's really a ground.

Speaker Change: Our fiscal Q1 was so strong in that.

Speaker Change: Ground zero right. So we don't really get yeah, it's not like we are.

Speaker Change: Fiscal Q2 didn't just did not wasn't going to beat that.

We have an existing base and then JP once taking away from it I think for US it's really growing into.

Speaker Change: Okay. Okay.

Speaker Change: Greg just on the.

Speaker Change: <unk>.

You talked about the diabetes.

Speaker Change: Cross selling opportunity with an existing patient comfort.

Speaker Change: Opportunity or your initiative in the diabetes can you maybe just expand on that a little bit about.

Speaker Change: But just to be clear I'm, assuming these patients are getting their supply somewhere else right now, but maybe if there's an ease of use to get them from a one stop provider.

Speaker Change: This is an organic strategy, you're moving into the diabetes or what exactly is gonna be selling strips or what exactly youre going to be.

That.

Speaker Change: That's part of it yes, yes, yes, yes, but we're also receiving new referrals.

Speaker Change: They are doing.

Speaker Change: Yes, we're gonna.

Speaker Change: Start providing in that the CGM and supplies and that to patients. We have already started in some territories and have had some positive results and we're in the process. This quarter here of kind of rolling it out to the sales team across the entire organization.

Speaker Change: From dress diagnosis for example.

Speaker Change: Yes, yes, yes.

John: Brand new place Okay, yeah, okay, okay, great. Thanks, very much John.

John: Thank you.

Speaker Change: The next question comes from Bill Sutherland with Benchmark Company. Please go ahead.

Speaker Change: Okay, what do you think the impact.

Speaker Change: Would be this year from that initiative and what kind of margin profile. These diabetes I'm, assuming a little bit lower margin go problem.

Bill Sutherland: Thank you.

Bill Sutherland: I'm just kind of interested in.

Greg Crawford: Your initiatives Greg too.

Speaker Change: Yeah, absolutely and that it's it's hard it's hard to put a number on it right now because we just don't know how successful we're going to be on the sales side.

Speaker Change: Pick up the organic growth a bit.

Speaker Change: Pointed out the cross sell with.

Speaker Change: It is.

Speaker Change: Standing markets I Wonder if you could provide color there and maybe plans with the sales force.

Speaker Change: I think that's something we'll be able to speak to probably in the coming quarters.

Speaker Change: And we will talk about as far as the margin and that its probably in the 15% 16% range or so.

Speaker Change #100: Yes, sure and that's on the diabetes side and that we started our kind of testing in that in <unk>.

Speaker Change: But just remember theres, no capex or anything.

Speaker Change #100: 23.

Certain markets in that to see how well we can do with the CGM, because that's where the demand was coming.

Speaker Change: With that and then it's a lot of drop ship.

Speaker Change: So on the 15% to 16% gross margin I would basically point unencumbered to EBITDA, what we're hearing from them.

Speaker Change #101: So the early signs and that have looked.

Pretty good for us.

Speaker Change #101: So now now we're in the process of expanding that around the rest of the company as far as the rest of the sales team in that I mean, we continue to add to our sales team.

Speaker Change: Okay.

Speaker Change: Correct, yes.

Speaker Change: Okay.

So you have relationships.

Speaker Change: Our relationships with suppliers now and so forth. So there's no real capex involved to get into this business right and is there any acquisition opportunities.

Speaker Change #102: And expect that to continue throughout the year and that's what's kind of driving a lot of the growth in that that we are seeing on the organic side has been in into either new continuum areas or also supplementing that in certain regions and that are.

Speaker Change: And any acquisition opportunities in this.

Speaker Change: Yes, there could be those are things historically that we've passed on and in the past in that but just based off the early results that we're kind of seeing the demand just went within our own.

Or are they potentially don't have clinical coverage in that so we might have somebody selling just basic home medical equipment, but not selling the clinical respiratory such as our events in our percussion vest and other related items.

Speaker Change: Patient ecosystem and that looks pretty positive trend in that going into the back half of the calendar year.

Speaker Change: Okay I was at a pretty competitive market I would think it would be well established market with the <unk> one.

Speaker Change #102: Okay.

Speaker Change: Obviously designed specifically for diabetes and the earthquake what impact did that have been on the diabetes market.

Speaker Change #102: <unk>.

Is there I am sure you have ongoing.

Speaker Change #103: Negotiations or discussions with national payers, all the time is there anything.

Speaker Change: Yeah, Yeah, I mean right now we're just focused on our internal patients and then kind of selling into our current networks.

Speaker Change #104: Kind of.

Speaker Change #104: You think <unk>.

Speaker Change #104: Some sort of.

Speaker Change #105: Conclusion for you.

Speaker Change: We don't have any information is as it relates in that or any experience I should say as it relates to G O P ones and what it's doing to the CGM market, we just know that.

Speaker Change #105: Nothing imminent at this point.

Speaker Change #105: Okay.

Speaker Change #106: And then last from me I guess.

Speaker Change #106: With the buyback.

Speaker Change: We get a lot of request and that for the CGM supplies.

Buyback in place is it fair to say that capital deployment.

Speaker Change: Within our current system and then we also.

Speaker Change #106: It would be leaning towards that and not so much in the M&A.

Speaker Change: Started receiving a lot of referrals.

Speaker Change #107: We wouldn't say leaning towards that I think we I mean at the end of the day goal is to create shareholder value whichever way the federal way that gets created right and.

Speaker Change: What kind of prompted us in that to kind of enter that market, but I think for us it's really stop a ground zero right. So we don't really get yeah, it's not like we have.

JP: Have an existing base and then JP once taking away from it I think for US, it's really growing into an untapped.

Speaker Change #107: We believe at the levels that we were trading.

Speaker Change #107: Having that opportunity and option to do so well make the most sense. So.

JP: Cross selling opportunity with an existing patient company right.

Speaker Change: Right, but just to be clear I'm, assuming these patients are getting their supply somewhere else right now, but maybe it's just an ease of use to get them from a one stop provider.

We still believe in the M&A strategy, but you still believe in the inorganic growth part of the <unk>.

Speaker Change #107: Strategy and.

Speaker Change #107: That hasnt.

Speaker Change #107: Has that opinion hasn't changed so that focus hasn't changed.

Speaker Change: That's that's that's part of it yes, yes, yes, yes, but we're also receiving new referrals.

Speaker Change #107: Just wanted to have more optionality, given where the shares were trading.

Speaker Change: Compressed diagnosis for example.

Speaker Change #107: Uh-huh.

Speaker Change #107: Okay.

Speaker Change: Yes, yes, yes.

Speaker Change #108: Thanks for the color guys.

Speaker Change: Got it brand new patient, Okay Yep, okay. Okay, great. Thanks, very much John.

Speaker Change #109: Thank you.

Speaker Change #109: Okay.

John: Thank you.

Speaker Change #110: The next question comes from a wholesale.

Speaker Change #110: Raymond James Please go ahead.

Speaker Change: The next question comes from Bill Sutherland with Benchmark Company. Please go ahead.

Speaker Change #110: Good morning, Greg Martin Thanks, so much for taking my questions.

William Sutherland: Thank you.

Speaker Change #111: So unless you Mr. Four we noticed that there isn't any.

Speaker Change: Greg if I heard him.

William Sutherland: I was just kind of interested in.

Speaker Change #112: Talking about free cash flow the.

Your initiatives Greg to.

Speaker Change #113: The shift from adjusted EBITDA to free cash flow.

Greg: Pick up the organic growth's, a bit have you pointed out the cross sell with diabetes.

Speaker Change #114: Given the steep does generally are a proxy for for free cash flow could you maybe give us a little more color as to the spread there between the $15 million of we've seen adjusted EBITDA.

Expanding markets I Wonder if you could provide color there and maybe plans with the sales force.

Speaker Change: Yes, sure and that's on on the diabetes side and that we started our kind of testing in that in our fiscal 'twenty three.

Speaker Change #115: Around 6 million you can see free cash flow and also maybe you could give us a little color relative to your peers.

Speaker Change #116: We're set if possible.

Speaker Change: Certain markets in that too.

Speaker Change: See how well we can do with the CGM, because that's where the demand was coming.

Speaker Change #117: I didn't get the last part what was the last sentence. Please.

Speaker Change: So the early signs and that have looked.

And also how the how your peers are.

Speaker Change: Pretty good for us.

Likely treat.

Speaker Change: So now now we're in the process of expanding that around the rest of the company as far as the rest of the sales team in that I mean, we continue to add to our sales team.

Speaker Change #118: I treat this disease treatment.

Speaker Change #119: Yeah sure. So I guess it was a kind of a recurring question Oh over the years in terms of.

Speaker Change: And expect that to continue throughout the year and that's what's kind of driving a lot of the growth in that that we are seeing on the organic side has been in into either new continuum areas or also supplementing and that in certain regions and that are.

Speaker Change #119: Where does capex and.

Speaker Change #119: How does that relate to EBITDA.

Speaker Change #119: It looks like our peers have modeled it this way so we let the client quite frankly trying to give a peer to peer comparison here.

Speaker Change: Are they potentially don't have clinical coverage in that so we might have somebody selling just basic home medical equipment, but not selling the clinical respiratory such as our events in our percussion vest and other related items.

Speaker Change #119: Presenting the information that will be presented at this time.

Speaker Change #119: This information has always been in our financial statement and there are lot of PP&E that every quarter, we publish what our PP&E additions have been in.

Speaker Change: Mhm Okay.

Speaker Change #119: Over the years or every single pretty much on every single conference call. At this topic comes up and we do say one of the best and most conservative way to look at our business would be to take EBITDA less capex.

Speaker Change: <unk>.

Speaker Change: Is there I'm sure you have ongoing.

Speaker Change: Negotiations or discussions with national payers over time is there anything.

Kind of.

Speaker Change #119: Capex.

Speaker Change: You know you think reached.

Speaker Change #119: That is the most conservative way of looking at this business. If somebody was trying to get to a cash flow number and that's kind of what we attempted to do since that was a recurring question.

Reaching some sort of conclusion.

Speaker Change: Conclusion for you.

Speaker Change: And nothing imminent at this point.

Speaker Change: Mhm Okay.

Speaker Change: And then last from me I guess.

Speaker Change #119: And I think that's what is how do our peers trend I would say that trend rate is similar we.

Speaker Change: With the buyback.

Speaker Change: Buy back in place so it's fair to say that capital deployment is going.

Speaker Change #119: <unk> always nuances around how others do.

Speaker Change: It would be leaning towards that and not so much in the M&A.

Speaker Change #119: Doing that accounting and reporting so we've kind of been going to comment on that but it seems to us that it would be comparable.

Speaker Change: We wouldn't say leaning towards that I think we I mean at the end of the day you know the goal is to create shareholder value whichever way the federal way that gets created right and.

Speaker Change #120: Perfect. Thanks, that's really helpful and that's all for me today.

Thank you.

Speaker Change: We believe at the levels that we were trading at.

Speaker Change #120: The next question comes from Jeff Snooki would at Stifel. Please go ahead.

Speaker Change: Having that opportunity and options to do so well make the most sense. So.

Jeff Snooki: Good morning, Thanks for taking my call I, just want to circle back on the commentary around the revenue and growth if I interpreted correctly should we expect this year to be more or less steady on the revenue given the.

Speaker Change: B B, we still believe in the M&A strategy, we still believe in the inorganic growth part of the strategy and.

Speaker Change: That hasnt.

Speaker Change: That has that opinion is unchanged so that focus hasn't changed.

Just wanted to have more optionality, given where the shares were trading.

Speaker Change #122: Offsetting headwinds until ones.

Speaker Change #123: Well, we would expect the revenue in that just to kind of be the baseline in that to go forward for the rest of fiscal 'twenty four that we would get back to our historic too.

Speaker Change: Mhm.

Speaker Change: Okay.

Speaker Change: For the color guys.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: The next question comes from that wholesale.

Speaker Change #123: 2% sequential quarter over quarter growth.

Speaker Change: Raymond James Please go ahead.

Yes, so I guess, what we were I think put differently. This is a I think there's it seems like from a dollar number of perspective. This seems like a baseline data.

Speaker Change: Good morning, Greg Martin Thanks, So much for taking my questions. So I must say Mr. Four we noticed that there isn't any sort of in your opening statements.

Speaker Change #123: For the quarter I think from Europe on what do we should hopefully see.

Speaker Change: Statements are talking about free cash flow.

Sure.

Speaker Change #123: Organic growth quarter over quarter.

Speaker Change: EBITDA to free cash flow.

Speaker Change #123: How we have done in the past.

Speaker Change: C. Given that just EBITDA generally are a proxy for for free cash flow could you maybe give us a little more color as to the spread there between the $15 million and we see an adjusted EBITDA in the.

Speaker Change #124: Okay, and then I assume some of these headwinds are impacting the smaller operators and the <unk> space and a more profound way.

Speaker Change: Around 6 million you can see free cash flow and also maybe you can give us some more color relative to.

Speaker Change #125: Is that an opportunity to win market share or potentially acquire some of these operators that are very favorable multiples.

Speaker Change: Your peer set if possible.

Speaker Change: I didn't get the last part what was the last sentence. Please.

Speaker Change #125: We are seeing some increased inquiries.

Speaker Change #125: Celebrating quite as inbound sales side inquiries over the last.

Speaker Change: And also how the how your peers are likely treat.

Speaker Change #125: A month or so.

Speaker Change: Treat this kind of treatment.

Speaker Change #126: Does that necessarily translate into better valuation.

Speaker Change: Yeah sure so I guess.

Speaker Change: It was a kind of a recurring question Oh over the years in terms of.

Speaker Change #128: Couldnt speak to that right now.

Speaker Change #127: Is it because of the headwinds, but didn't speak to that but we.

Speaker Change: Where does capex and.

We are seeing some more inbound inquiries.

Speaker Change: How does that relate to EBITDA Oh, it looks like our peers have.

And finally any initiatives as far as cutting our costs to improve margins or do you feel like you have a.

Speaker Change: Modelled it this way so we let the client.

Speaker Change: Quite frankly trying to gear up peer to peer comparison here by presenting the information that will be presented at this time.

Speaker Change #127: A good baseline here to.

Speaker Change: This information has always been in our financial statement and there are a lot of PP&E that every quarter, we kind of publish whatever guinea additions have been in.

Speaker Change #127: Leverage of growth going on going forward.

Speaker Change #129: Yes, we think were built in that to continue to grow I think that's why you.

Speaker Change #130: Even despite the decline in revenue you're still seeing very strong margin in that I mean, if we would have had the additional revenue.

Speaker Change: Over the years or every single pretty much on every single conference call. At this topic comes up and we do say one of the best and most conservative way to look at our business would be to take EBITDA less patient that batch.

Speaker Change #130: You, probably would've seen margin, maybe 24% plus or so I think one thing historically in that that we've got a history of delivering strong margin. So we would expect that to continue in that throughout the rest of fiscal 'twenty four.

Speaker Change: That is the most conservative way of looking at this business. If somebody was trying to get to a cash flow number and that's kind of what we attempted to do since that was a recurring question and.

Speaker Change #130: And I think I'll, just add to what Greg said.

Speaker Change #130: Put differently I think we are.

Speaker Change: And I think that's what is outdoor peers trend I would say the trend rate is similar.

Speaker Change #130: We are still staff to grow.

Speaker Change #130: And.

Speaker Change #130: As far as the growth keeps coming in I think we would.

Speaker Change: As always nuances around how others.

Speaker Change #130: Would be step that way.

Speaker Change: Doing that accounting and reporting so we've kind of been going not to comment on that but it seems to us that it would be competitive.

Speaker Change #130: And our margins would reflect the way it is right now.

Speaker Change #131: If you are asking the blend question do you have.

Speaker Change #131: It does not do you have the opportunity to maintain it and cut costs. Then yes, we would react to whatever is required and we will try to maintain the margins.

Speaker Change: Perfect. Thanks, that's really helpful and that's all for me today.

Speaker Change: Thank you.

Speaker Change: The next question comes from Jeff Snooki would with Stifel. Please go ahead.

Speaker Change #132: Thank you for taking my questions.

Speaker Change #133: Thank you.

Jeff Snooki: Good morning, Thanks for taking my call I, just want to circle back on the commentary around the revenue and growth if I interpreted correctly should we expect this year to be more or less a steady on the revenue given the <unk>.

Speaker Change #134: We have a follow up question from Richard close with Canaccord Genuity.

Speaker Change #135: Go ahead.

Richard Close: Yes, thanks for the follow up I have a couple here with respect to diabetes.

Speaker Change #136: Adapt within that business.

Speaker Change: Offsetting headwinds until ones.

Speaker Change #137: Little bit earlier.

Speaker Change: Well, we would expect the revenue in that just to kind of be the baseline in that to go forward for the rest of our fiscal 'twenty four that we would get back to our historic.

Speaker Change #138: <unk> been encountering some headwinds as like reimbursement on C. G.

Speaker Change #138: Shifted over to the pharmacy channel from the medical D Army channel.

Speaker Change: 2% sequential quarter over quarter growth.

Speaker Change #139: And I guess I'm <unk>.

Speaker Change: Yeah. So I guess, what we were I think put differently. This is a I think there's it seems like from a dollar number of perspective. This seems like a baseline daughter.

Speaker Change #140: Curious how youre thinking about that and then are you, adding sales force with diabetes.

Speaker Change: For the quarter I think from Europe.

Speaker Change #140: Yeah.

Speaker Change: We sure hope when you see our organic growth quarter over quarter.

Speaker Change #141: To answer the second part of that we are not adding any sales and that this is just going to be off sell right into our current referral sources and that with the current sales team.

Speaker Change: How we have done in the past.

Speaker Change: Okay, and then I assume some of these headwinds are impacting the smaller operators and the <unk> space and a more profound way.

Speaker Change #141: You know for US we just kind of look at this this is an opportunity in that to serve the patients that we currently have along with the referral sources. The customers are coming to us and so are the referrals and that asking us to provide this.

Is that an opportunity to win market share or potentially acquire some of these operators that are very favorable multiples.

Speaker Change #141: To the patient and that's what's kind of prompted us to bring this into the product line.

Speaker Change: We are seeing some increased inquiries.

Speaker Change: Cell starting quite as our inbound sales side inquiries over the last month.

Speaker Change #142: Okay. So I have to comment on our competitors, but they have a I mean this was a big part of what they did that obviously there was a lot of M&A activity.

Speaker Change: A month or so.

Speaker Change: Does that necessarily translate into better valuation.

Is that part and it might have got complex right and I think our approach.

Speaker Change: Couldnt speak to that right now is it because of the headwinds couldn't speak to that but we.

Speaker Change #142: Just to keep it very simple year, its one more product that we would have.

Speaker Change: We are seeing some.

Speaker Change #142: Process.

Speaker Change: More inbound sales aren't quite as.

Speaker Change #142: Not putting an enormous amount of.

Speaker Change #142: In Oceania all capital behind US I think it's just one more thing that you do when you are in this industry and it just more like cross selling for lack of a better word.

Speaker Change: And finally any initiatives.

Speaker Change: As far as cutting our costs to improve margins or do you feel like you have.

Speaker Change #143: Yeah, Okay I appreciate that.

Speaker Change: A good baseline here too leverage of growth going on going forward.

Speaker Change #144: And then with respect to Humana and the <unk>.

Speaker Change: Yeah, We think were built in that to continue to grow I think that's why you see even despite the decline in revenue you're still seeing very strong margin in that I mean, if we would have had the additional revenue.

Arrangements are all those members.

Speaker Change #145: You won't see any additional impact here in upcoming quarters as that pretty much.

Speaker Change: Probably would've seen margin, maybe 24% plus or so I think one thing historically in that that we've got a history of it is delivering strong margin. So we would expect that to continue in that throughout the rest of fiscal 'twenty four.

Speaker Change #145: All done at this point.

Speaker Change #146: I wouldn't say the conversion is done but from a revenue perspective and that.

Speaker Change #146: Everything is relatively rolled off and that we still got a handful of patients to roll off in a couple of states, but its nothing material.

Speaker Change: Yeah, and I think I'll, just add to what Greg said.

Speaker Change: Put differently I think we are.

Speaker Change #146: And then gamestop.

Speaker Change: We are still staff to grow.

Speaker Change #146: They stopped paying us anyway.

Speaker Change: And.

Speaker Change #147: Okay. Thank you.

Speaker Change: As far as the growth keeps coming in I think we would.

We would be stopped that way.

Speaker Change: And our margins would reflect the way it is right now.

Speaker Change #148: This concludes the question and answer session I would like to turn the conference back over to Mr. Kaufman for any closing remarks. Please go ahead.

Speaker Change: If you are asking the blend question do you have if it does not do you have the opportunity to maintain it and cut caused then yes, we would react to whatever is required and we would try to maintain the margins.

Thank you operator, and thanks, everyone for joining us today as always you can find us on the web that quipped home medical Dot com, where we will be posting a transcript of this call and also our updated investor deck. Thank you and have a great day.

Speaker Change: Thank you for taking my questions.

Speaker Change: Thank you.

Speaker Change: We have a follow up question from Richard close with Canaccord Genuity. Please go ahead.

Speaker Change #148: Yeah.

Speaker Change #149: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Richard Collamer Close: Yes, thanks for the follow up I have a couple here with respect to diabetes.

Speaker Change: Adapt was in that business I'm, a little bit earlier, and they've been encountering some headwinds as like reimbursement on C. G I'm.

Speaker Change: Shifted over to the pharmacy channel from the medical D.

Speaker Change: On the channel and I guess I'm.

Speaker Change #100: Curious how youre thinking about that and then are you, adding sales force with diabetes.

Speaker Change #100: Yeah.

Speaker Change #101: To answer the second part of that we are not adding any sales and that this is just going to be off sell right into our current referral sources and that with the current sales team.

Speaker Change #101: You know for US we just kind of look at this this is an opportunity in that to serve the patients that we currently have along with the referral sources are there.

Speaker Change #101: The customers are coming to us and so are the referrals and that asking us to provide this to.

Speaker Change #101: To the patient and that's what's kind of prompted us and that to bring this into the product line.

Sean: And Sean to comment on our competitors, but they have a I mean this was a big part of what they did that they obviously there was a lot of M&A activity that that part and it might have got complex right and I think our approach is to keep it very simple. It's one more product that we would have it would process we are not putting an enormous someone else.

Speaker Change #101:

Speaker Change #101: Inertia on all capital behind this I think it's just one more thing that you do when you are in this industry and it just more like cross selling it for lack of a better word.

Speaker Change #103: Yeah, Okay I appreciate that and then with respect to Humana and the catheter <unk>.

Speaker Change #103: Arrangements.

Speaker Change #104: Are all those members.

Speaker Change #105: You won't see any additional impact here in upcoming quarters as that pretty much all done at this point.

Speaker Change #105: I.

Speaker Change #105: I wouldn't say the conversion is done but from a revenue perspective and that.

Speaker Change #105: Everything is relatively rolled off and that we still got a handful of patients to roll off in a couple of states, but its nothing material.

Speaker Change #105: And I think they've stopped it.

They stopped paying us anyway.

Speaker Change #106: Okay. Thank you.

Speaker Change #107: This concludes the question and answer session I would like to turn the conference back over to Mr. Kaufman for any closing remarks. Please go ahead.

Mr. Kaufman: Thank you operator, and thanks, everyone for joining us today as always you can find us on the web that quipped home medical Dot com, where we will be posting a transcript of this call and also our updated investor deck. Thank you and have a great day.

Mr. Kaufman: Yeah.

Speaker Change #109: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Speaker Change #109: Okay.

Speaker Change #109: [music].

Speaker Change #109: