Q2 2024 Viemed Healthcare Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Viemed second quarter 2024 earnings call. Our host for today's call is Todd Zehnder, Chief Operating Officer.
Operator: 2024 Earnings Call. Our host for today's call is Todd Zehnder, Chief Operating Officer. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. I would like to now turn the call over to your host, Mr. Zehnder.
Speaker Change: At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would like to now turn the call over to your host, Mr. Zehnder. You may begin.
Todd Zehnder: All right, thank you, and good morning, everyone. We appreciate you joining us today.
Todd Zehnder: All right, thank you and good morning, everyone. We appreciate you joining us today. I'm excited to share that.
Todd Zehnder: I'm excited to share that Yes, and I'm prepared to marshal it. Please note that our remarks in this conference call may include forward-looking statements, under the U.S. Federal Security Act's laws, or forward-looking information, under applicable Canadian security legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to differ from those indicated in such forward-looking statements.
Speaker Change: Yeah, you got that unprepared with Marcella.
Speaker Change: Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements.
Speaker Change: Such statements reflect the company's current views and intentions with respect to future results or events, and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements.
Todd Zehnder: Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC for the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The second quarter financial news release, including the related financial statements, is available on the SEC's website. I'll now turn it over to Casey to get things started. Okay, thank you.
Speaker Change: Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC for the security regulatory authorities in certain provinces of Canada.
Speaker Change: Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements.
Speaker Change: The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements except as required by law.
The second quarter financial news release, including the related financial statements, are available on the SEC's website. I'll now turn it over to Casey to get things started.
Casey Hoyt: Okay, thank you, Todd. And good morning, everyone. We appreciate you joining us today. I'm excited to share that the second quarter of 2024 has been nothing short of exceptional for VidMed. Our organic growth in the company's core product categories remains impressive, consistent with our strategic vision. Our net revenue for the quarter reached a new company record of $55 million, exceeding the top end of our guidance and representing a 27% increase over the previous year.
Casey: Okay, thank you, Todd, and good morning, everyone. We appreciate you joining us today. I'm excited to share that the second quarter of 2024 has been nothing short of exceptional for VODMED.
Casey: Our organic growth in the company's core product categories remains impressive, consistent with our strategic vision. Our net revenue for the quarter reached a new company record of $55 million, exceeding the top end of our guidance and representing a 27% increase over the previous year.
Casey Hoyt: We are incredibly happy with our results and our opportunities for continued growth. This remarkable growth is a testament to our robust operational performance and the unwavering dedication of our team. Our Viemed family continues to expand, now numbering 1,121 employees as of June 30th, which includes our talented team at East Alabama Home Med following our acquisition on April 1st.
Casey: We are incredibly happy with our results and our opportunities for continued growth.
Casey: This remarkable growth is a testament to our robust operational performance and the unwavering dedication of our team.
Casey: Our Viemed family continues to expand, now numbering 1,121 employees as of June 30th, which includes our talented team at East Alabama Home Med following our acquisition on April 1st.
Casey Hoyt: Our HomeMed integration is on track, and we are close to the point where we are moving past process changes and can start to focus on growth for East Alabama Medical Center and BiMed. We expect to realize further growth throughout the back half of the year and are really more excited about the framework we've created for future JV opportunities through this transaction. New ventilator setups are incredibly strong, with active vent patients growing by 4.4% during the quarter compared to the March patient count.
Speaker Change: our homenett integration is on track and we are close to the point where we re moving past process changes and can start to focus on growth for east alabama medical center and byme
Speaker Change: We expect to realize further growth throughout the back half of the year and are really more excited about the framework we have created for future JV opportunities through this transaction.
Casey: New ventilator setups are incredibly strong with active vent patients growing by 4.4 percent during the quarter compared to the March patient count.
Casey Hoyt: A major component of our successful quarterly performance is the impressive results from our Salesforce restructuring initiatives. We have refined our approach, enhanced developmental conversations, and identified and strategically invested in the right talent earlier in the training lifecycle.
Speaker Change: A major component of our successful quarterly performance is the impressive results from our Salesforce restructuring initiatives. We have refined our approach, enhanced developmental conversations, identified and strategically invested in the right talent earlier in the training lifecycle.
Casey Hoyt: New Incentive Plans and Alignment of Performance Targets have also contributed to these results. The impact of our new sales structure is evident with a 15% increase in average monthly benefit setups per sales rep compared to the beginning of the year.
Casey: New incentive plans and alignment of performance targets have also contributed to these results.
Casey: The impact of our new sales structure is evident,
Casey: setups per sales rep compared to the beginning of the year.
Casey Hoyt: New reps are hitting their sales targets faster and at higher rates than ever before, giving us tremendous optimism about the next 18 to 24 months of ventilator growth. We are now in the phase of the sales restructuring where management is in place, existing sales reps are producing at higher levels, and we will be accelerating recruiting efforts throughout the back half of the year. Market penetration for non-invasive ventilation remains in the sub-10% range, and we are observing considerable demand widespread throughout the country. Our industry association, A.A. Home Care, recently engaged Dobson-DiVanzo for a comprehensive non-invasive ventilation study to quantify the differences in outcomes and treatment costs for patients receiving an IVF therapy versus those who don't.
Casey: New reps are hitting their sales target faster and at higher rates than ever before, giving us tremendous optimism about the next 18 to 24 months of ventilator growth.
Casey: We are now at the phase of the sales restructuring where management is in place, existing sales reps are producing at higher levels, and we will be accelerating recruiting efforts throughout the back half of the year.
Casey: Market penetration for non-invasive ventilation remains in the sub-10% range and we are observing considerable demand widespread throughout the country.
Speaker Change: Our industry association, AA Home Care, recently engaged Opsin-DiVanzo for a comprehensive non-invasive ventilation study to quantify the differences in outcomes and treatment costs for patients receiving an IV therapy versus those who don't.
Casey Hoyt: This research will also analyze the experiences of Medicare Advantage patients. We believe this new study will further educate payers on the substantial advantages of non-invasive ventilation, reinforcing the significant benefits already highlighted by existing research. As many of you know, Viemed was a pioneer in the non-invasive ventilation market, resulting in a fleet of aging ventilators. The recent Phillips recall of these older machines has presented a unique opportunity to replace these devices and alleviate the need for future servicing. We've entered into an agreement with Philips to buy back a large number of our affected vents.
Casey: This research will also analyze the experiences of Medicare Advantage patients. We believe this new study will further educate payers on the substantial advantages of noninvasive ventilation, reinforcing the significant benefits already highlighted by existing research.
Viemed: As many of you know, Viemed was a pioneer in the noninvasive ventilation market, resulting in a fleet with a number of aging ventilators.
Speaker Change: The recent Philips recall of these older machines has presented a unique opportunity to replace these devices and alleviate the need for future servicing.
Casey: We've entered into an agreement with Philips to buy back a large number of our affected vents.
Casey Hoyt: By leveraging substantial volume purchasing discounts with manufacturers of new ventilators, we can use the proceeds from the buyback to significantly reduce the average age of our VIT fleet without negative impacts on our overall cash flows and P&L. Our sleep business continues to experience strong organic growth, and it now represents 15% of our revenue mix. The GLP-1 craze may be contributing to this increase in sleep volume as more folks are addressing their health concerns at higher rates around the country. Sleep has grown at a double-digit quarterly rate over March.
Casey: By leveraging substantial volume purchase discounts with manufacturers of new ventilators, we can use the proceeds from the buyback to significantly reduce the average age of our VIT fleet without negative impacts on our overall cash flows and P&L.
Casey: Our sleep business continues to experience strong organic growth and it now represents 15% of our revenue mix. The GLP-1 craze may be contributing to this increase in sleep volume as more folks are addressing their health concerns at higher rates.
Casey: around the country. Sleep has grown at a double-digit quarterly rate over March. CPAP and sleep lines continue to thrive, reflecting the enduring demand and effectiveness of positive airway pressure solutions.
Casey Hoyt: CPAP and sleep lines continue to thrive, reflecting the enduring demand and effectiveness of positive airway pressure solutions. On the technology front, we have been beta testing machine learning tools that we believe will further improve our processes and provide opportunities to enhance our patient care capability. These technological and software developments are helping us to accelerate fulfillment times in the optimized claim process. Furthermore, the proprietary Engage platform continues to aggregate valuable patient data and create workflow efficiencies for our RTs in the field.
Casey: On the technology front, we have been beta-testing machine learning tools that we view will further improve our processes and provide opportunities to enhance our patient care capabilities.
Casey: These technological and software developments are helping us to accelerate fulfillment times and optimize claim processes.
Casey: Furthermore, the proprietary Engage platform continues to aggregate valuable patient data and create workflow efficiencies for our RTs in the field. We expect to realize real efficiencies and opportunities in the coming quarters as a result of the technology investments.
Casey Hoyt: We expect to realize real efficiencies and opportunities in the coming quarters as a result of the technology investment. On the payer and regulatory front, we have swiftly and successfully migrated all of our payers away from managed healthcare. We can now confidently say that we expect no material impact and timely filing denials as a result of the changed healthcare cyber attack. However, effective claims are being processed on the alternative clearinghouse. AA Home Care is also continuing the push for the reinstatement of 75-25 blended rates, which, if successful, has the potential to further improve margins.
Casey: On the payer and regulatory front, we have swiftly and successfully migrated all of our payers away from Change Healthcare.
Casey: We can now confidently say that we expect no material impact and timely filing denials as a result of the Change Healthcare cyber attack. Affected claims are being processed on the alternative clearinghouses.
Casey: AA Home Care is also continuing the push for the reinstatement of 75-25 blended rates, which, if successful, has the potential to further improve margins.
Casey Hoyt: We are also experiencing behavior shifts in payers adjusting to more favorable medical policies. As a result of regulatory enforcement and voluntary compliance, there are a number of payers modifying step therapy approaches to trying and failing buy-level devices before authorizing ventilation. These changes stand to reduce the burden patients experience when being placed on inferior treatments for chronic respiratory failure.
Casey: We are also experiencing behavior shifts in payers adjusting to more favorable medical policies. As a result of regulatory enforcement and voluntary compliance, there are a number of payers modifying step therapy approaches to trying and failing buy-level devices before authorizing ventilation.
Speaker Change: These changes stand to reduce the burden patients experience on being placed on inferior treatments for chronic respiratory failure. These positive medical policy trends also help our clinicians fast-track vet therapy and ultimately improve overall access to care in a timely manner.
Todd Zehnder: These positive medical policy trends also help our clinicians fast-track veterinary therapy and ultimately improve overall access to care in a timely manner. Recently announced mergers and acquisitions in the home healthcare sector underscore the robust appeal of the industry. For instance, Olinton Miners' $1.4 billion pending transaction to acquire Rotec, a large national HME provider, highlights the sector's significant attractiveness. We view this development as a testament to the industry's potential rather than a threat to BiMed's competitive stand.
Casey: Recently announced mergers and acquisitions in the home healthcare sector underscore the robust appeal for the industry. For instance, Olinton Miners' $1.4 billion pending transaction to acquire Rotec, a large national HME provider, highlights the sector's significant attractiveness.
Speaker Change: We view this development as a testament to the industry's potential rather than a threat to the BiMed's competitive stance.
Todd Zehnder: Our M&A pipeline remains active, reflecting our continued interest in acquisitions and promising growth opportunities. At Viemed, we are incredibly well positioned within our market as a leading provider of complex respiratory care. Ventilation services continue to be at our foundation and present an amazing opportunity for profitable growth in the sector. With more financial and operational updates on the quarter, I'll now hand the call over to Chief Operating Officer Todd Zehnder.
Speaker Change: Our M&A pipeline remains active, reflecting our continued interest in acquisitions and promising growth opportunities.
Viemed: At Viemed, we are incredibly well positioned within our market as a leading provider of complex respiratory care. Ventilation services continue to be at our foundation and present an amazing opportunity for profitable growth in the sector.
Todd Zehnder: With more financial and operational updates on the quarter, I'll now hand the call over to our Chief Operating Officer, Todd Zehnder. Todd? Hi, thanks, Casey. In reviewing the financial results, all figures are in U.S. dollars, and the full results have been made available on the SEC website.
Todd Zehnder: Alright, thanks Casey. In reviewing the financial results, all figures are in U.S. dollars, and the full results have been made available on the SEC website. Our core business generated net revenue of $55 million during the second quarter of 2024 as compared to net revenues of $43.3 million in the second quarter of 2023, which equates to a 27% increase. Our revenue increased approximately 9% sequentially, all of which was about $900,000 was organic, which is an extremely strong growth rate.
Todd Zehnder: Our core business generated net revenue of $55 million during the second quarter of 2024 as compared to net revenues of $43.3 million in the second quarter of 2023, which equates to a 27% increase.
Speaker Change: Our revenue increased approximately 9% sequentially, all of which about $900,000 was organic, which is an extremely strong growth rate. Operationally, the first half of the year has been strong, and we have worked through the majority of the first quarter and changed healthcare headwinds.
Todd Zehnder: Operationally, the first half of the year has been strong, and we have worked through the majority of the first quarter and changed healthcare headwinds. We continue to remain committed and optimistic that we will be able to continue our high organic growth rate.
Todd Zehnder: We continue to remain committed and optimistic that we will be able to continue our high organic growth rates.
Todd Zehnder: Our second quarter revenue from VINs was approximately 56% as compared to approximately 60% in the second quarter of 2023. Our gross and EBITDA margins are still strong, and we continue to be successful in managing our cost structure this year, and it is showing in both gross and EBITDA contributions. Our gross and EBITDA margins during the quarter came in at 60% and 23%, respectively.
Todd Zehnder: Our second quarter revenue from VINTS was approximately 56%, as compared to approximately 60% in the second quarter of 2023.
Todd Zehnder: Our gross and EBITDA margins are still strong, and we continue to be successful in managing our cost structure this year, and is showing in both gross and EBITDA contribution.
Todd Zehnder: Our gross and EBITDA margins during the quarter came in at 60% and 23% respectively. Our second quarter gross and EBITDA amounts came in at $32.9 and $12.8 million respectively.
Todd Zehnder: Our second quarter gross and EBITDA amounts came in at $32.9 and $12.8 million, respectively. Our SG&A for the quarter totaled approximately $26.5 million as compared to $20.6 million in the second quarter of 2023. SG&A as a percentage of revenue decreased sequentially from 49% during the first quarter of 24 to 48% during the second quarter of 24 and continues our theme of managing our SG&A well.
Todd Zehnder: Our SG&A for the quarter totaled approximately $26.5 million as compared to $20.6 million in the second quarter of 2023.
Todd Zehnder: G&A as a percentage of revenue decreased sequentially from 49% during the first quarter of 24 to 48% during the second quarter of 24 and continues our theme of managing our G&A well.
Todd Zehnder: We will continue to manage our GNA costs and also remain committed to investing in our patient and employee experience. And once again, we expect to grow revenues at a faster rate than expenses. For the quarter, we invested approximately $8.9 million in patient CapEx, primarily on various respiratory products. Gross capex is higher than normal this quarter because we have begun to sell back some of our fleet to Philips in conjunction with their recall, and hence are buying new vents from other manufacturers.
Todd Zehnder: We will continue to manage our G&A cost and also remain committed to invest in our patient and employee experiences. And once again, expect to grow revenues at a faster rate than expenses.
Todd Zehnder: For the quarter, we invested approximately $8.9 million on patient CapEx, primarily on various respiratory products.
Todd Zehnder: The gross capex is higher than normal this quarter because we have begun to sell back some of our fleet to Philips in conjunction with their recall, and hence are buying new vents from other manufacturers.
Todd Zehnder: We sold back approximately 2.6 million events during the second quarter, and this should be considered an offset to our CapEx. To add context to this, during the second quarter, Philips began offering a vent buyback program in relation to the Trilogy vents that have been on recall.
Todd Zehnder: We sold back approximately 2.6 million events during the second quarter that should be considered an offset to our CapEx number.
Todd Zehnder: To add context to this, during the second quarter, Philips began offering a vent buyback program in relation to the Trilogy vents that have been on recall.
Todd Zehnder: We're utilizing the buyback program for a portion of our fleet and plan to remediate a portion after the process is fully developed by Philips and the related governmental agencies. We are waiting to hear when the remediation can begin, and we'll continue to monetize a portion of our fleet over the next year or so. We have recorded some gains as a result of this project during the quarter and expect to continue to do so until it is completed.
Todd Zehnder: We're utilizing the buyback program for a portion of our fleet and plan to remediate a portion after the process is fully developed by Philips and the related governmental agencies.
Todd Zehnder: We are waiting to hear when the remediation can begin, and we'll continue to monetize a portion of our fleet over the next year or so.
Todd Zehnder: We have recorded some gains as a result of this project during the quarter and expect to do so until it is completed. Offsetting some of that gain are two unique items that impacted net income but not EBITDA for the quarter.
Todd Zehnder: All setting some of that gain are two unique items that impacted net income, but not EBITDA for the quarter. We took reserves related to a former vendor filing bankruptcy and an amount that we were owed from them, as well as an impairment on one of our investments down to fair market value. The total amount before tax benefits of these two items was approximately $2.2 million.
Todd Zehnder: We took reserve related to a former vendor filing bankruptcy and an amount that we were owed from them, as well as an impairment on one of our investments down to fair market value. The total amount before tax benefits of these two items was approximately 2.2 million dollars.
Todd Zehnder: We have once again funded our CapEx out of discretionary cash flow and continue to manage the business in order to drop free cash flow onto the balance sheet. Our percentage of net capex to EBITDA was healthy at 49%. We will continue to update our free cash flow disclosure on an annual basis, as we discussed last quarter. As an update on the cash collections being impacted by the changed health care cybersecurity issue, we have fully restored connectivity to all of our payers through alternative clearinghouses, and we made up a significant amount of the deferred collections during the second quarter.
Todd Zehnder: We have once again funded our CapEx out of discretionary cash flow and continue to manage the business in order to drop free cash flow onto the balance sheet.
Todd Zehnder: Our percentage of net capex to EBITDA was healthy at 49%. We will continue to update our free cash flow disclosure on an annual basis as we discussed last quarter.
Todd Zehnder: We are still working through finalizing the cash collections on the remaining claims and estimate that we still have approximately $4 million of increased AR on June 30th as a result of this issue. We are confident that this project will be completed during the third quarter with a substantial portion of the impacted amounts already collected in July. Our capital allocation opportunities remain consistent, and our organic growth is the highest priority. Our inorganic growth, debt paydown, and then equity buybacks continue to round out those priorities, as evidenced by our JV signed on April 1st and the $3 million paydown of our revolver on July 31st.
Todd Zehnder: As an update to the cash collections being impacted by the changed healthcare cybersecurity issue, we have fully restored connectivity to all of our payers through alternative clearinghouses, and we made up a significant amount of the deferred collections during the second quarter.
Todd Zehnder: We are still working through finalizing the cash collections on the remaining claims and estimate that we still have approximately $4 million of increased AR on June 30th as a result of this issue.
Todd Zehnder: we are confident to this project will be completed during the third quarter with a substantial portion of the impacted amounts already collected in july
Speaker Change: Our capital allocation opportunities remain consistent and that our organic growth is the highest priority.
Todd Zehnder: our inorganic growth debt pay down and then equity buybacks continue to round out those priorities as evidenced by our jv sign on april first and the three million dollar pay down of our revolver on july thirty first
Todd Zehnder: We ended the quarter in a net cash positive position once again and had total long-term debt of $8.7 million. Our working capital at the end of the quarter was $13.1 million. Moving on to the third quarter, we have provided net revenue guidance in the $56.5 to $57.7 million range related to our core business. The midpoint of our net revenue guidance is up 16% over core revenue in the third quarter of 2023 and is once again showing impressive sequential growth.
Todd Zehnder: We ended the quarter in a net cash positive position, once again, and have total long-term debt of $8.7 million.
Todd Zehnder: Our working capital at the end of the quarter was $13.1 million.
Todd Zehnder: Moving on to the third quarter, we have provided net revenue guidance in the 56.5 to 57.7 million dollar range related to our core business.
Todd Zehnder: the midpoint of our net revenue guidance is up sixteen percent over the core revenue in the third quarter of two thousand andtwenty threety and is once again showing impressive sequential growth
Todd Zehnder: We remain active in our discussions with investors and analysts and once again have seen our U.S. institutional ownership increase over the last couple of quarters. We remain excited about telling our story of growth and see the current market as an opportunity to attract new investors. At this time, I'll turn it over to Casey to wrap things up.
Todd Zehnder: We remain active in our discussions with investors and analysts and once again have seen our U.S. institutional ownership increase over the last couple of quarters. We remain excited about telling our story of growth and see the current market as an opportunity to attract new investors.
Casey Hoyt: Thank you, Todd. As we look back on the second quarter of 2024, we are proud of the robust growth we've achieved and the solid foundation we've built for future success. The opportunities presented by the Phillips Recall and the ongoing success of our Salesforce restructuring initiatives highlight our ability to adapt and thrive in a dynamic market environment. We're excited about the potential for future growth in our core product categories. Our advancements in technology and machine learning underscore our commitment to innovation and improved patient care.
Casey: at this time i'll turn it over to case y to wrap things up
Casey: Thank you, Todd.
Casey: As we look back on the second quarter of 2024, we are proud of the robust growth we've achieved and the solid foundation we've built for future success.
Casey: The opportunities presented by the Phillips Recall and the ongoing success of our Salesforce restructuring initiatives highlights our ability to adapt and thrive in a dynamic market environment.
Todd Zehnder: We're excited about the potential for future growth in our core product categories. Our advancements in technology and machine learning underscore our commitment to innovation and improved patient care.
Casey Hoyt: Our strong financial performance and the swift integration of East Alabama Home Med are testaments to our team's strategic vision and operational excellence. Our proactive approach to regulatory and payer challenges demonstrates our dedication to staying ahead of industry trends and ensuring the best outcomes for our patients and partners. We are deeply appreciative of the continued support and trust from our investors, analysts, employees, and partners. Your competence in biomedical fuels our drive to excel and pushes the boundaries of what's possible in respiratory care. Thank you for joining us today. This concludes our prepared remarks. We will now open the floor to further questions.
Todd Zehnder: Our strong financial performance and the swift integration of East Alabama Home Med are testaments to our team's strategic vision and operational excellence.
Todd Zehnder: Our proactive approach to regulatory and payer challenges demonstrates our dedication to staying ahead of industry trends and ensuring the best outcomes for our patients and partners.
Todd Zehnder: We are deeply appreciative of the continued support and trust from our investors, analysts, employees, and partners. Your confidence in BiMed fuels our drive to excel and pushes the boundaries of what's possible in respiratory care.
Speaker Change: Thank you for joining us today. This concludes our prepared remarks. We will now open the floor up for further questions.
Operator: If you would like to ask a question at this time, please press star then the number 1 on your telephone keypad now. You will be placed in the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question at this time, please press star, then the number one on your telephone keypad. Your first question comes from Brooks O'Neill with Lake Street Capital. Your line is open.
Speaker Change: if you would like to ask a question at this time please press star than the number one on your telephone key pad now you will be placed into the queue in the order received please be prepared to ask your question when prompted
Speaker Change: Once again, if you would like to ask a question at this time, please press star then the number one on your telephone keypad.
Todd Zehnder: Your first question comes from Brooks O'Neill with Lake Street Capital. Your line is open.
Brooks O'Neill: Thank you very much. Good morning, guys. Terrific quarter.
Brooks O'Neill: thank you very much good morning guys t or a quarter i have our questions
Operator: 2024 earnings call. Our host for today's call is Todd Zehnder, Chief Operating Officer. At this time, all participants are in a listen-only mode.
Brooks O'Neill: I have a few questions. I guess I'd like to start by saying that it feels to me like you're in a super target rich environment. I might make an analogy, it feels a little bit like you're looking at a flock of ducks coming over the duck blind. And I'm curious, do you think about that as taking your shotgun and hoping you hit something? Or would you say it's a little different than that, that you're really trying to prioritize the best opportunities and take careful shots at each?
Speaker Change: I guess I'd like to start. It feels to me like you're in a...
Operator: Later, we will conduct a question and answer session.
Brooks O'Neill: super target-rich environment. I might make an analogy, it feels a little bit like you're you're looking at a flock of ducks coming over the duck blind.
Todd Zehnder: I would like to now turn the call over to your host, Mr. Zehnder. You may begin. All right, thank you, and good morning, everyone. We appreciate you joining us today. I'm excited to share that I'm preparing for the boss.
Speaker Change: And I'm curious, do you think about that as taking your shotgun and hoping you hit something? Or would you say it's a little different than that, that you're really trying to prioritize the best opportunities?
Todd Zehnder: Please note that our remarks in this conference call may include forward-looking statements under the U.S, federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated and forward-looking statements. Examples of such risk and uncertainties are discussed in our disclosure documents, filed with the SEC, for the security regulatory authorities, and certain provinces of Canada.
Speaker Change: and take careful shots at each one.
Casey Hoyt: Well, to stay on your duck analogy, we're trying to get three shots per man out of each flock. So we're being really efficient with how we do things. And that kind of ties back to the sales restructuring, Brooks. Yes, I mean, we see vents as a target-rich, really complex breathing mechanism for all of our products right now, including vests and vents and even sleep. They're target-rich environments, and all of our sales folks are trained to cross-sell across all of those lines, where we're getting the most out of them thanks to increased training and improved management, and now we feel really confident about our management team out there, and so we're going to crank up and pour a lot more fuel on the fire on recruiting for not just the back half of the year but the back half and beyond.
Speaker Change: Well, to stay on your duck analogy, we're trying to get three shots per man out of each flock. So we're being really efficient with how we do things and that kind of ties back to the sales restructuring Brooks.
Speaker Change: Yes, I mean, we see Vents as a target-rich, really complex respiratory for all of our products right now, including Vest.
Speaker Change: and then get even sleep their target rich environments and all of our sales folks are trained to ccall sell across all of those lines
Todd Zehnder: Because of these risk and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements, except as required by law.
Speaker Change: We're getting the production out of them thanks to increased training and improved management.
Todd Zehnder: and now we feel really confident about our management team out there and so we're going to crank up and pour a lot more fuel in the fire on recruiting.
Todd Zehnder: The second quarter financial news release, including the related financial statements, are available on the SEC's website.
Casey Hoyt: And I'll just add one thing to the duck analogy. We don't miss very often, and we're going to stay consistent with that theme that we're very careful when we take our shots, and we're good at them generally. So we're patient, but we're prudent.
Casey Hoyt: I'll now turn it over to Casey to get things started. Okay, thank you, Todd, and good morning, everyone. We appreciate you joining us today.
Todd Zehnder: for not just the back half of the year, but back half and beyond.
Speaker Change: and i'll just add one thing to the duuck analogy we don't miss very often and they're going to they consistent with that theme that we're very careful where we take our shots and we're good atam generally so we're patient but we're prudent
Casey Hoyt: I'm excited to share that the second quarter of 2024 has been nothing short of exceptional for ViMed. Our organic growth in the company's core product categories remains impressive, consistent with our strategic vision. Our net revenue for the quarter reached a new company record of $55 million, exceeding the top end of our guidance, and representing a 27% increase over the previous year. We are incredibly happy with our results and our opportunities for continued growth.
Casey Hoyt: But for you, that doesn't make sense. Let me ask you about the most recent thing, the JV, that you've completed, and you mentioned a framework. Do you see a lot of opportunities for replicating that structure and that opportunity in other markets or with other partners?
Speaker Change: But for you, that all makes sense. Let me ask you about the most recent thing, the JV.
Speaker Change: you've completed and you mentioned a framework do you see a lot of opportunities for replicating that structure that opportunity in other markets or with other partners
Casey Hoyt: Yeah, I mean, we've gotten close to some, I think, really, where we're at with it, Brooks, is I'm, I'm hoping to have some real-world data to present at our next few opportunities, showing the success of HomeMed and, and how we've been able to improve their bottom line and, and their efficiencies and so on and so forth. So, we expect to probably have more meat on the bone for our value prop pitch to others, you know, by the end of the year.
Casey Hoyt: This remarkable growth is a testament to our robust operational performance and the unwavering dedication of our team. Our ViMed family continues to expand, now numbering 1,121 employees as of June 30, which includes our talented team at East Alabama home med following our acquisition on April 1. Our home med integration is on track and we are close to the point where we remove and pass process changes and can start to focus on growth for East Alabama Medical Center and ViMed.
Speaker Change: Yeah, I mean, we've gotten close with some. I think really where we're at with it, Brooks, is I'm hoping to have some real-world data to present to our next few opportunities, you know, showing the success of HomeMed and
Speaker Change: and how we've been able to improve their bottom line and and their efficiencies and so on and so forth so we expect to probably have more meet on the bone for our value prop pitch to others about it by years in
Casey Hoyt: And from there, we can, A, circle back with some of the ones that, you know, we've been close with, and then B, you know, bring it to the masses. But right now, I think we're in the proving the model out mode, if you will.
Speaker Change: And from there, we can, A, circle back with some of the ones that, you know, we've been close with, and then, B, you know, bring it to the masses. But right now, I think we're in the proving the model out mode, if you will.
Casey Hoyt: We expect to realize further growth throughout the back half of the year and are really more excited about the framework we have created for future JV opportunities through this transaction. New ventilator setups are incredibly strong with active vent patients growing by 4.4% during the quarter compared to the March patient count. A major component of our successful quarterly performance is the impressive results from our Salesforce Re-Structuring initiatives. We have refined our approach, enhanced developmental conversations, identified and strategically invested in the right talent earlier in the training Global.
Brooks O'Neill: Absolutely. Let me ask just one more question.
Speaker Change: absolutely may just one more sound like the philliipps recall and buybackatch in an absolute
Brooks O'Neill: It sounds like the Phillips recall and buyback is an absolute home run for you guys in that you can sell them back some used equipment, probably in a favorable way, and redeploy the capital into new equipment that is going to have a 10-year life. Am I thinking about that right, or is there any downside for you guys with what's going on there?
Casey Hoyt: New incentive plans and alignment of performance targets have also contributed to these results. The impact of our new sales structure is evident with a 15% increase and average monthly set-ups per sales rep compared to the beginning of the year. New reps are hitting their sales target faster and at higher rates than ever before, giving us tremendous optimism about the next 18 to 24 months of ventilator growth. We are now at the phase of the sales restructuring where management is in place, existing sales reps are producing at higher levels and we will be accelerating recruiting efforts throughout the back half of the year.
Speaker Change: home run for you guys in that you can sell them back some used equipment probably in a favorable way and redeploy the capital in new equipment that is going to have a 10-year life.
Speaker Change: am i thinking about that wr or is there any downside to you guys with what's going on there
Casey Hoyt: No, you're thinking about it correctly. It's a project that we've been working on. We've probably sold about 15% of our fleet back already. We're not exactly sure if we're going to sell the whole thing back. We're just working through that, but exactly correct in that we're able to replace the fleet at a cost-saving situation. And, you know, at this point, we've been able to record an accounting gain as a result of it.
Speaker Change: No, you're thinking about it correct. It's a...
Speaker Change: It's a project that we've been working on, we've probably sold about 15% of our fleet back already. We're not exactly sure if we're going to sell the whole thing back, we're just working through that.
Speaker Change: exactly correct in that we're able to replace the fleet at a cost advantage situation and you know at this point we've been able to record an accounting gain as a result of it.
Casey Hoyt: It's an operational project, but our team has folded in really well. Phillips has been a good partner to work with on it, and thus far, it has been extremely positive and nothing but good for the company and the patients at that point, for sure.
Speaker Change: It's an operational project, but our team has folded in really well. Philips has been a good partner to work with on it, and thus far it has been extremely positive and nothing but good for the company and the patients at that point.
Brooks O'Neill: For sure. Well, great. Thank you very much for taking the questions. Congratulations. Keep up all the good work. Thank you.
Casey Hoyt: Market penetration for non-invasive ventilation remains in the sub-10% range and we are observing considerable demand widespread throughout the country. Our Industry Association A Homecare recently engaged ops in Devonzo for a comprehensive non-invasive ventilation spray to quantify differences in outcomes and treatment costs for patients receiving an IV therapy versus those who go. This research will also analyze the experiences of Medicare-Advanced patients. We believe this new study will further educate payers on the substantial advantages of non-invasive ventilation, reinforcing the significant benefits already highlighted by existing research.
Speaker Change: For sure. Well, great. Thank you very much for taking the questions. Congratulations. Keep up all the good work.
Operator: Once again, to ask a question, press star, then the number one on your telephone keypad. Your next question comes from Ilya Zubkov with Freedom Broker. Your line is open.
Speaker Change: Thank you for joining us.
Speaker Change: once again to ask a question press star than the number one on your telephone ke ad
Speaker Change: Your next question comes from Ilya Zubkov with Freedom Broker. Your line is open.
Ilya Zubkov: Good morning and thank you for taking my question and congratulations on the strong quarter. I have a question on the equipment and supply sales dynamics. One of the mentioned growth drivers of this segment is the sleep resupply program, and I'm wondering how much this program contributes to the segment's revenue? And could you elaborate on the quarterly revenue dynamics in this segment as well? Because I see that revenue is rebounding significantly in Q2, compared to the previous two quarters.
Ilya Zubkov: Good morning and thank you for taking my question and congrats with the strong quarter.
Ilya Zubkov: I have a question on the equipment and supply-sales dynamics. One of the mentioned growth drivers of this segment
Casey Hoyt: As many of you know, ViMed was a pioneer in the non-invasive ventilation market resulting in a fleet with a number of aging ventilators. The recent Phillips recall of these older machines has presented a unique opportunity to replace these devices and alleviate the need for future servicing. We've entered into an agreement with Phillips to buy back a large number of our affected vents. By leveraging substantial volume purchase discounts with manufacturers of new ventilators, we can use the proceeds from the buyback to significantly reduce the average age of our vit fleet without negative impacts on our overall cash flows in P&L.
Speaker Change: is the sleeper supplyer program and i'm wondering how much does this program contribute to the segment' revenue
Speaker Change: And could you elaborate on the quarterly revenue dynamics in this segment as well, because I see that the revenue is rebounding significantly in Q2 compared to the previous two quarters.
Casey Hoyt: The specific line item that you're acting on is equipment and supply sales, is that correct? Yes, it is correct.
Speaker Change: the specific whyite m that you're actking about is equipment and supply sales is that correct
Casey Hoyt: It's mainly due to us increasing our sleep business over the last, call it two years, but then especially last year when we bought out, or we bought H&P, and then our own Viemed, with sleep growth being so strong the last, call it, one to two years. The primary amount of that is related to our sleep resupply program. And if you're familiar with the sleep business, that is really the driver of your long-term value creation in the sleep business.
Speaker Change: Yes, correct.
Speaker Change: Okay, it's mainly due to us increasing our sleep business over the last, call it two years, but then especially last year when we bought out or we bought H&P and then our own ViMed
Casey Hoyt: Our sleep business continues to experience strong organic growth and it now represents 15% of our revenue mix. The GLP-1 craze may be contributing to this increase in sleep volume as more folks are addressing their health concerns at higher rates around the country. Sleep has grown at a double-digit quarterly rate over March. Seapot and sleep lines continue to thrive reflecting the enduring demand and effectiveness of positive airway pressure solutions.
Speaker Change: sleep growth being so strong the last call it
Speaker Change: 1-2 years. The primary amount of that is related to our sleep resupply program.
Speaker Change: And if you're familiar with the sleep business, that is really the driver of your long-term value creation in the sleep business, is the patients who need new supplies every three or six months or whatever it is. So as we've stacked on thousands and thousands of new patients into the resupply program, that number is going to continue to grow. It has zero CapEx associated with it, which is another good piece of our business. It's all...
Casey Hoyt: It's the patients who need new supplies every three or six months or whatever it is. So as we've stacked on thousands and thousands of new patients into the resupply program, that number is going to continue to grow. It has zero CapEx associated with it, which is another good piece of our business. It's all cashflow. And so we fully expect that line item to continue to grow over the coming quarters.
Ilya Zubkov: Okay, thank you. That is very helpful.
Casey Hoyt: On the technology front, we have been beta testing machine learning tools that we view will further improve our processes and provide opportunities to enhance our patient care capabilities. These technological and software developments are helping us to accelerate fulfillment times and optimize claim processes. Furthermore, the proprietary engaged platform continues to aggregate valuable patient data and create workflow efficiencies for our teeth in the field. We expect to realize real efficiencies and opportunities in the coming quarters as a result of the technology investment. On the payer and regulatory front, we have swiftly and successfully migrated all of our payers away from change health care.
Speaker Change: cash flow, and so we fully expect that line item to continue to grow over the coming quarters.
Casey Hoyt: And I have one more on service revenue. There is a significant ramp-up in service revenue this year due to the staffing offerings. And I'm curious, is there any seasonality in this segment that could cause quarter-to-quarter fluctuations in revenue in the future?
Speaker Change: yeah
Speaker Change: Okay, thank you. That is helpful. And I have one more on service revenue.
Speaker Change: There is a significant ramp-up in service revenue this year due to the staffing offerings, and I'm curious if there is any seasonality in this segment that can cause quarter-to-quarter fluctuations of the revenue in the future.
Casey Hoyt: No, not really. Those could come and go in the future, but we don't see anything large falling off in the near term. That's really our healthcare staffing division. And as we've expanded that group over the last several years, I mean, we just set that up organically about three years ago. So as they continue to go out there and explain our value proposition and what we can do, we've gotten some new contracts with some states around the country. And that's just it. While it's not seasonal, it could have terms. But at this point, once again, we see some good growth coming from that division over the next couple of quarters.
Speaker Change: no
Speaker Change: No, not really. Those could come and go in the future, but we don't see anything large falling off in the near term. That's really our healthcare staffing division.
Eric Coldwell: Eric. We can now confidently say that we expect no material impact and timely filing the Niles as a result of the Change Health Care Cyber Attack. Effective claims are being processed on the alternative clearing houses.
Speaker Change: and as we've expanded that group over the last several years, I mean, we just stood that up organically about three years ago.
Casey Hoyt: A.A. Home Care is also continuing to push for the reinstatement of 75-25 blended rates, which is successful how did the potential to further improve margins. We are also experiencing behavior shifts and payers adjusting to more favorable medical policies. As a result of regulatory enforcement and voluntary compliance, there are a number of payers modifying step therapy approaches to trying and failing by-level devices before authorizing ventilation. These changes stand to reduce the burden patient's experience on being placed on inferior treatments for chronic respiratory failure. These positive medical policy trends also help our clinicians fast track vet therapy and ultimately improve overall access to care in a timely manner.
Speaker Change: So as they continue to go out there and...
Speaker Change: explain our value proposition and what we can do. We've gotten some new contracts with some states around the country.
Speaker Change: And that's just, while it's not seasonal, it could have terms, but at this point, once again, we see some good growth coming from that division over the next couple of quarters.
Ilya Zubkov: Okay, great. Thank you very much.
Operator: Yep, have a good day.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: yeah havea die
Doug Cooper: Your next question comes from Doug Cooper with Beacon. Your line is open.
Speaker Change: your next question comes from doug cooper with beacon your line is open
Doug Cooper: Hey, good morning guys, and congratulations on a terrific quarter. It's amazing to me in one sense that the sector has been hit so hard from a stock price perspective because people think the GOP ones presumably are going to have an impact, but nobody seems to be highlighting that impact when they release the results. I think Rotec, by our math, sort of got sold for six of the chain, keep it down multiple, based on where you guys were before your stock opened this morning. It was trading at five times last quarter annualized, which seems pretty much an all-time low multiple. What do you think has to break here from an investor perspective?
Doug Cooper: Hey, good morning, guys, and congratulations on a terrific quarter. It's amazing to me in one sense that the sector has been hit so hard from a stock price perspective because people think, you know, the GOP ones presumably are going to have an impact, but nobody seems to be...
Casey Hoyt: Recently announced mergers and acquisitions in the home health care sector underscored the robust appeal for the industry. For instance, all of the miners 1.4 billion pending transaction to acquire a ROTEC, a large national HME provider, highlights the sector's significant attractiveness. We view this development as a testament to the industry's potential rather than a threat to the by-meds competitors' bands. Our M&A pipeline remains active reflecting our continued interest in acquisitions and promising growth opportunities.
Speaker Change: highlighted impact when they released the results. And I think Rotech by our math sort of got sold for six of the chain EBITDA multiple based on where you guys were before your stock opened this morning. It was trading at five times last quarter annualized EBITDA, which seems pretty much an all-time low multiple.
Speaker Change: he been ked to breakthroughhere again ban investor perspective
Casey Hoyt: You know, it could have a lot to do with the GLP craze, which we've only been able to explain a couple of different ways. We listen to the larger people out there who are doing studies, and it seems nothing has been pulled away from their sleep business or their profitability, which is good. There are companies that are much more focused on it. Sleep makes up roughly 15% of our business right now, and as we did last quarter, probably the last few quarters, all we can tell you is, by no means is our sleep business feeling any pressure.
Casey Hoyt: At ByMed, we are incredibly well positioned within our market as a leading provider of complex respiratory care. The ventilation services continue to be at our foundation and present an amazing opportunity for profitable growth in the sector.
Speaker Change: You know, it could be a lot to do with the GLP craze, which we've only been able to, like, explain a couple different ways. We listen to the larger people out there who are doing studies, and...
Todd Zehnder: With more financial and operational updates on the quarter, I'll now hand the call over to the chief operating officer, Todd. All right, thanks, Casey. In reviewing the financial results, all figures are in US dollars and the full results have been made available on the SEC website. Our core business generated net revenue of $55 million during the second quarter of 2024, as compared to net revenues of $43.3 million in the second quarter of 2023, which equates to a 27% increase.
Speaker Change: um
Speaker Change: It seems nothing has been pulled away from their sleep business or their profitability, which is good. There's companies that are much more focused on it.
Speaker Change: Sleep makes up roughly 15% of our business right now, and...
Speaker Change: As we did last quarter, probably the last few quarters, all we can tell you is by no means is our sleep business feeling any pressure. We're not having patients fall off of service in any meaningful way, any higher attrition rates.
Casey Hoyt: We're not having patients fall off of service in any meaningful way, any higher attrition rates. The sleep business is doing great, and we continue to grow it, and we're happy to keep growing it. Outside of that, Doug, the stock market has its ebbs and flows, as we all know. We're very conscious of the stock price, but right now, we spend 99% of our time just continuing to try to grow the company, try to add to the bottom line, and we think as long as we keep doing that, the stock price is going to come around at some point.
Todd Zehnder: Our revenue increased approximately 9% sequentially, all of which about 900,000 was organic, which is an extremely strong growth rate. Operationally, the first half of the year has been strong, and we have worked through the majority of the first quarter and change healthcare headwinds. We continue to remain committed and optimistic that we will be able to continue our high organic growth rates. Our second quarter revenue from Vince was approximately 56% as compared to approximately 60% in the second quarter of 2023.
Speaker Change: The sleep business is doing great, and we continue to grow it, and we're happy to keep growing it.
Speaker Change: Outside of that, Doug, the stock market has its ebbs and flows, as we all know. We're very considerate of the stock price, but right now...
Speaker Change: We spend 99% of our time just continuing to try to grow the company, try to add to the bottom line, and we think as long as we keep doing that, the stock price is going to come back around at some point.
Doug Cooper: Do you guys know what percent of your patients are on GLP-1 drugs on the sleep side?
Speaker Change: Do you guys know what percent of your patients are on GLP-1 drugs on the sleep side?
Todd Zehnder: Our growth in EBITOP margins are still strong, and we continue to be successful in managing our cost structure this year, and is showing in both gross and EBITOP contribution. Our gross and EBITOP margins during the quarter came in at 60% and 23% respectively. Our second quarter gross in EBITOP mounts came in at 32.9 and 12.8 million respectively. Our SGNA for the quarter totaled approximately 26.5 million as compared to 20.6 million in the second quarter of 2023.
Casey Hoyt: No, we don't. We haven't dove in yet into that.
Speaker Change: No, we don't. We haven't dove in into that. I know some of our peers have gone out and I think the number that they said was maybe 12% of their patients. Once again, we focus our research and our kind of digging in on complex respiratory because that's what
Casey Hoyt: I know some of our peers have gone out, and I think the number that they said was maybe 12% of their patients. Once again, we focus our research and our kind of digging in on complex respiratory diseases because that's what drives us every day. But I'd have to think that if you hear from ResMed or some of our peers that that percentage is somewhere around it, then that's probably a pretty decent number for us as well.
Speaker Change: drives us every day, but I'd have to think that if you hear from ResMed or some of our peers that that percentage is somewhere around it, then that's probably a pretty decent number for us as well.
Doug Cooper: And again, maybe just the last one, just based on that, on the private side, the M&A pipeline, what are you seeing expectations for guys? prices that they want. And if those come down over the past 12, 18 months as well, to coordinate with the values for a publicly traded company.
Todd Zehnder: GNA as a percentage of revenue decreased sequentially from 49 percent during the first quarter of 24 to 48 percent during the second quarter of 24 and continues our theme of managing our GNA well. We will continue to manage our GNA cost and also remain committed to invest in our patient and employee experiences and once again expect to grow revenues at a faster rate than expenses. For the quarter we invested approximately 8.9 million on patient cat-backs, primarily on various respiratory products.
Speaker Change: And again, maybe just the last one, just based on that, on the private side, the M&A pipeline, what are you seeing expectations for guys?
Speaker Change: prices that they want. Have those come down over the past 12-18 months as well, coincident with the values for publicly traded companies?
Casey Hoyt: In our discussions, we're talking through that, that the public multiples can't be significantly depressed from private multiples, but we haven't really gotten to the point where we were with like an HMP and talked that much turkey out there. So I think that the market, seeing the Rotec transaction was good because that means that things are starting to maybe open up again. And I would think a public company multiple out there on that big of a transaction would set some sort of marker, but that's somewhat theoretical, and we're going to continue to look for the right opportunity. And if we get to the point where we're talking that level of detail, we're going to be prudent about the multiple that we pay.
Speaker Change: You know, we...
Speaker Change: In our discussions, we're talking through that, that the public multiples can't be...
Speaker Change: significantly depressed from private multiples, but we haven't...
Speaker Change: We haven't really gotten to the point where we were with an HMP and talked that much of Turkey out there.
Todd Zehnder: The gross cat-back is higher than normal this quarter because we have begun to sell back some of our fleet to Phillips in conjunction with their recall and hence are buying new vents from other manufacturers. We sold back approximately 2.6 million vents during the second quarter that should be considered an offset to our cat-backs number. To add context to this, during the second quarter Phillips began offering a vent buyback program in relation to the trilogy vents that have been on recall.
Speaker Change: I think that the market, you know, seeing the Rotech transaction was good because that means that things are starting to maybe open up again. And I would think a, you know, a public company, multiple out there on that big of a transaction set some sort of marker.
Speaker Change: But that's somewhat theoretical, and we're going to continue to look for the right opportunity and, you know, if we get to the point where we're talking that level of detail, we're going to be prudent about the multiple that we pay.
Doug Cooper: And maybe there's a final one for me. Casey, you referred to the non-invasive vent market, which is still less than 10% of what could be the applicable market. It's sort of been like that now for a couple of years despite a bunch of research showing better outcomes. What do you think? Is this sort of just a chug-along here, or is there a big moment by the referring physicians that said, yeah, I'm going to start referring all my guys to MIVs?
Todd Zehnder: We're utilizing the buyback program for a portion of our fleet and planned to remediate a portion after the process is fully developed by Phillips and the related governmental agencies. We are waiting to hear when the remediation can begin and will continue to monetize a portion of our fleet over the next year or so. We have recorded some gains as a result of this project during the quarter and expect to do so until it is completed.
Speaker Change: And maybe there's a final one for me. Casey, you referred to the non-invasive vent market still less than 10% of what could be the applicable market. It's sort of been like that now for a couple of years despite a bunch of research showing the better outcomes. What do you think?
Speaker Change: Did this sort of just chug along here, or is there a big...
Casey: Ah-ha moment by the referring physicians that said, yeah, I'm going to start referring all my guys to the MIBs.
Todd Zehnder: All setting some of that gain are two unique items that impacted net income but not even offer the quarter. We took reserve related to a former vendor filing bankruptcy and an amount that we were owed from them, as well as an impairment on one of our investments down to fair market value. The total amount before tax benefits of these two items was approximately 2.2 million dollars. We have once again funded our cat-backs out of discretionary cash flow and continue to manage the business in order to drop free cash flow onto the balance sheet.
Casey Hoyt: Yeah, I mean, Doug, in our investor presentation, we focus on, you know, the 6% is really the Medicare population, so when we say sub-10, we're kind of just assuming that the commercial or the private sector is going to make up the rest of that, but we're still in a drastically underserved population. Research is important in order to get the penetration number up a little bit higher.
Casey: Yeah, I mean, you know, and the way that we break it down, Doug, in our investor presentation, we focus on, you know, the 6% is really the Medicare population. So when we say sub 10, we're, we're kind of just...
Doug Cooper: Assuming that the commercial or the private sector is going to make up the rest of that, but we're still in a drastically underserved population
Casey Hoyt: If we continue to see more positive and positive studies, not just the ones that we've accomplished over the years but others and outside forces now proving out the benefits of non-invasive ventilation, it's exciting to take a look now at the Medicare Advantage population. This is the first time that we've had access to those patients, so we'll see how good those guys have been doing with non-invasive care. And it's really exciting to see that AA Home Care, our industry association, is the one that's leading the charge now.
Speaker Change: Research is important in order to get the penetration number up a little bit higher. If we continue to see more positive and positive studies, not just the ones that we've accomplished over the years, but others and outside forces now.
Todd Zehnder: Our percentage of net cat-backs to EBITDA was healthy at 49%. We will continue to update our free cash flow disclosure on an annual basis as we discussed last quarter. As an update to the cash collections being impacted by the change healthcare cybersecurity issue, we have fully restored connectivity to all of our payers through alternative clearing houses and we made up a significant amount of the deferred collections during the second quarter. We are still working through finalizing the cash collections on the remaining claims and estimate that we still have approximately 4 million dollars of increased AR on June 30 as a result of this issue.
Casey: proving out the benefits of non-invasive ventilation.
Speaker Change: It's exciting to take a look now at the Medicare Advantage population.
Speaker Change: This is the first time that we've had access to those patients, so we'll see.
Speaker Change: how good those guys have been doing on non-invasive care.
Speaker Change: and it's really exciting to see that a home care industry association is the ones that's leading the charge now it's not for years we've had to be the leader in the research market but that's changing and physicians are jumping in from across borders and doing studies now so
Casey Hoyt: For years, we've had to be the leader in the research market, but that's changing, and physicians are jumping in from across borders and doing studies now. It's all positive momentum, everything clinically that we're seeing. Ultimately, we hope that that research really will drive penetration up to where more folks are considering NIV, the gold standard of care, and really, step therapy and other forms of treatment to try and fail will become less of an alternative for medical policies and payers to lean on down the road.
Todd Zehnder: We are confident that this project will be completed during the third quarter with a substantial portion of the impacted amounts already collected in July. Our capital allocation opportunities remain consistent and that our organic growth is the highest priority. Our inorganic growth, debt paydown and then equity buybacks continue to round out those priorities as evidenced by our JV signed on April 1st and the $3 million paydown of our revolver on July 31st.
Speaker Change: It's all positive momentum, everything clinically that we're seeing. And so, ultimately, we hope that that research really will drive penetration up.
Speaker Change: to where more folks are considering NIV, the gold standard of care, and really step therapy and other forms of treatment to try and fail will become less of an alternative for medical policies and payers to lean on down the road.
Doug Cooper: All right. Thanks very much, guys. That's it for me.
Todd Zehnder: We ended the quarter in a net cash positive position once again and have total long-term debt of 8.7 million. Our working capital at the end of the quarter was $13.1 million. Moving along to the third quarter, we have provided net revenue guidance in the $56.5 to $57.7 million range related to our core business. The midpoint of our net revenue guidance is up 16% over the core revenue in the third quarter of 2023 and is once again showing impressive sequential growth.
Speaker Change: All right. Thanks very much, guys. That's it for me.
Operator: At this time, there are no further questions in queue. I'd like to turn the call back over to our presenters for any further remarks.
Doug Cooper: All right, Doug, thanks.
Speaker Change: At this time, there are no further questions in queue. I'd like to turn the call back over to our presenters for any further remarks.
Casey Hoyt: We want to thank everybody for listening in today. Follow up if there's any other questions, and we appreciate your support. Have a great day.
Speaker Change: We want to thank everybody for listening in today. Follow up if there's any other questions and appreciate your support. Have a great day.
Operator: This concludes the Viemed second quarter 2024 earnings call. Thank you for attending and have a wonderful rest of your day. It's hard to hear, I can't...
Speaker Change: This concludes the Viemed second quarter 2024 earnings call. Thank you for attending and have a wonderful rest of your day.
Operator: It's hardly, I can't.
Todd Zehnder: We remain active in our discussions with investors and analysts and once again have seen our US institutional ownership increase over the last couple of quarters. We remain excited about telling our story of growth and see the current market as an opportunity to attract new investors.
Casey Hoyt: At this time, I'll turn it over to Casey to wrap things up. Thank you, Todd. As we look back on the second quarter of 2024, we are proud of the robust growth we've achieved in the solid foundation we've built for future success. The opportunities presented by the Phillips Recall and the ongoing success of our Salesforce restructuring initiatives highlights our ability to adapt and thrive in a dynamic market environment. We're excited about the potential for future growth in our core product categories.
Casey Hoyt: Our advances in technology and machine learning underscore our commitments to innovation and improve patient care. Our strong financial performance and the swift integration of East Alabama home med are testaments to our team's strategic vision and operational excellence. Our proactive approach to regulatory and paired challenges demonstrates our dedication to staying ahead of industry trends and ensuring the best outcomes for our patients and partners. We are deeply appreciative of the continued support and trust from our investors, analysts, employees and partners. Your confidence environment fuels our drive to excel and pushes the boundaries of what's possible in respiratory care.
Casey Hoyt: Thank you for joining us today. This concludes our prepared remarks.
Operator: We will now open the floor up for further questions. If you would like to ask a question at this time, please press star than the number one on your telephone keypad now. You will be placed into the queue in the order received. Please again, if you would like to ask a question at this time, please press star than the number one on your telephone keypad.
Speaker Change: Jonathan Walker, Stuart Greensam, and Oliver King.
Brooks O'Neill: Your first question comes from Brooks O'Neill with Lake Street Capital. Your line is open. Thank you very much. Good morning, guys.
Casey Hoyt: Terrific quarter. I have a few questions. I guess I'd like to start. It feels to me like you're in a super target rich environment. I might make an analogy. It feels a little bit like you're looking at a flock of ducks coming over the duck blind. I'm curious. Do you think about that as taking your shotgun and hoping you hit something? Or would you say it's a little different than that that you're really trying to prioritize the best opportunities and take careful shots at each one?
Speaker Change: [music]
Casey Hoyt: Well, to stay on your duck analogy, we're trying to get three shots per man out of each flock. So we're being really efficient with how we do things. That kind of ties back to the sales restructuring, bro. Yes, I mean, we see Vince as a target rich, really complex respiratory for all of our products right now, including Vest and Vince and even Sweet, their target rich environments and all of our sales folks are trained to cross-sell across all of those lines, where we're getting the production out of them thanks to increased training and improved management.
Operator: John Amann, Sterling Steveisy, Ian McKenzie, Brian Cummings, Camilda McGean Brentigan [music]
Casey Hoyt: And now we feel really confident about our management team out there and so we're going to crank up a lot more fuel in the fire on recruiting for not just the back half of the year but back half and beyond. And I'll just add one thing to the duck analogy, we don't miss very often and we're going to be consistent with that theme that we're very careful where we take our shots and we're good at them generally, so we're patient but we're prudent.
Casey Hoyt: But for you that all makes sense, let me ask you about the most recent thing, the JV that you've completed and you mentioned a framework, do you see a lot of opportunities for replicating that structure and that opportunity in other markets or with other partners? Yeah, I mean, we've gotten close with some, I think, really where we're at with it, Brooks is I'm hoping to have some real world data to present to our next few opportunities, you know, showing the success of home men and how we've been able to improve their bottom line and their efficiencies and so on and so forth.
Speaker Change: and others.
Casey Hoyt: So we expect to probably have more meat on the bone for our value prop pitch to others by years in and from there, we can encircle back with some of the ones that we've been close with and then bring it to the masses, but right now I think we're improving the model out mode if you will. Absolutely.
Casey Hoyt: Let me ask just one more, it sounds like the Phillips recall and by the ash is an absolute home run for you guys in that you can sell them back, some used equipment probably in a favorable way and redeploy the cattle and in new equipment that was going to have a 10-year life. Am I thinking about that right or is there any downside to you guys with what's going on there? No, you're thinking about it correct, I'd say it's a project that we've been working on and we're probably, we've probably sold about 15% of our fleet back already.
Casey Hoyt: We're not exactly sure if we're going to sell the whole thing back, we're just working through that but exactly correct in that we're able to replace the fleet at a cost advantage situation and at this point we've been able to record an accounting gain as a result of it. It's an operational project, but our team has folded in really well, Phillips has been a good partner to work with on it and thus far it has been extremely positive and nothing but good for the company and the patience at that point.
Brooks O'Neill: For sure, well great, thank you very much for taking the questions, congratulations, keep up all the good work. Thanks for that.
Operator: Once again to ask a question, press star then the number one on your telephone keeps Ed.
Ilja Zubkov: Your next question comes from Ilja Zubkov with Freedom Broker. Your line is open. Good morning and thank you for taking my question and congrats with the strong quarter. I have a question on the equipment and supply cell dynamics. One of the mentioned growth drivers of this segment is the Sniper Supply Program. And I'm wondering how much does this program contribute to the segments revenue? And could you elaborate on the quarterly revenue dynamics in this segment as well?
Ilja Zubkov: Because I see that the revenue is rebounded and significantly into two, compared to the previous two quarters. The specific one item that you're talking about is equipment and supply sales, is that correct? Yes, correct. Okay, it's mainly due to us increasing our sleep business over the last, call it two years, but then especially last year when we bought HMP and then our own Viemed sleep growth being so strong, the last call it one to two years.
Ilja Zubkov: That, the primary amount of that is related to our sleep resupply program. And if you're familiar with the sleep business, that is really the driver of your long-term value creation in the sleep business. It's the patience you need, new supplies every three or six months or whatever it is. So as we've stacked on thousands and thousands of new patients into the resupply program, that number is going to continue to grow. It has zero cat backs associated with it, which is another good piece of our business. It's all cash flow. And so we fully expect that line item to continue to grow over the coming quarters.
Ilja Zubkov: Okay, thank you, that is helpful. And I have one more on service revenue. There is a significant ramp up in service revenue this year due to the stuff in us. And I'm curious, is there any seasonality in the segment that can cause quarter to quarter fluctuations in the revenue in the future? No, not really. Those could come and go in the future, but we don't see anything large falling off in the near term.
Ilja Zubkov: That's really our healthcare staffing division. And as we've expanded that group over the last several years, and we just stood that up organically about three years ago. So as they continue to go out there and explain our value proposition and what we can do, we've gotten some new contracts with some states around the country. And that's just, while it's not seasonal, it could have terms, but at this point, once again, we see some good growth coming from that division over the next couple of quarters. Okay, great. Thank you very much. Yep. Have a good day.
Doug Cooper: Your next question comes from Doug Cooper with Beacon. Your line is open. Thank you.
Doug Cooper: Good morning, guys. And congratulations on your quarter. It's amazing to me and again, since the subject has been hit, say, heard from a stock place perspective, because people think they're the GOP ones within where they are going to have an impact. But nobody seems to be highlighted in the impact when they release the results. I think road tech by our maps sort of got sold for six of the chain. We went down multiple.
Doug Cooper: Based on the, you guys read before you stock opened this morning, it was trading at five times, lost quarter annualized, which seemed pretty much an all-time low multiple, like what? What has been caused to break here, they're getting a bit, you know, they're in the best you can expect. You know, it could be a lot to do with the GLP craze, which we've only been able to explain a couple of different ways.
Doug Cooper: We listen to the larger people out there who are doing studies and it seems nothing has been pulled away from their sleep business or their profitability, which is good. There's companies that are much more focused on it. Sleep makes up roughly 15% of our business right now and as we did last quarter, probably the last few quarters, all we can tell you is by no means is our sleep business filling any pressure.
Doug Cooper: We're not having patients fall off of service in any meaningful way, any higher attrition rates. The sleep business is doing great and we continue to grow it and we're happy to keep growing it. Outside of that, you know, the stock market has it's ebbs and flows as we all know. We're very, we're very considerate of the stock price, but right now, we spend 99% of our time just continuing to try to grow the company, try to add to the bottom line.
Doug Cooper: And we think as long as we keep doing that, the stock price is going to come back around at some point. Do you guys know what percent of your patient around GLP 1 price on the sleep side? No, we haven't dove in into that. I know some of our peers have gone out and I think the number that they said was maybe 12% of their patients. Once again, we focus our research and our kind of digging in on complex respiratory because that's what drives us every day. But I'd have to think that if you hear from ResMed or some of our peers that that percentage is somewhere around it, then that's probably a pretty decent number for us as well. Okay.
Doug Cooper: And again, maybe just the last one, just based on that, on the private side, the M&A pipeline, what do you see in expectations for guys' choices that they want? If those come down over the past 12, 18 months as well, what do you think would be the values for publicly traded company? You know, in our discussions, we're talking through that that the public multiples can't be significantly depressed from private multiples, but we haven't really gotten to the point where we were with like an HMP and talked that much of Turkey out there.
Doug Cooper: So, I think that the market, seeing the ROTEC transaction was good because that means that things are starting to maybe open up again, and I would think a public company multiple out there on that big of a transaction set some sort of marker, but that's somewhat theoretical. And we're going to continue to look for the right opportunity and if we get to the point where we're talking that level of detail, we're going to be prudent about the multiple that we pay. Okay.
Casey Hoyt: And maybe there's a final one to me in case you referred to the non-invasive vent market. It's going to less than 10 percent of what could be the applicable market. It's sort of been like that now for a couple years despite a bunch of research showing the better outcomes. What do you think, is there this sort of just a chat along here, or is there a big Uh-huh moment by the referring positions that said, yeah, I'm going to start with her and all my guys to be able to.
Casey Hoyt: Yeah, I mean, you know, and the way that we break it down, Doug and our investor presentation, we focus on, you know, the, the, the 6% is really the Medicare population. So when we say sub 10, we're, we're kind of just assuming that the commercial or the private sector is going to make up the rest of that. But we're still in a drastically underserved population. Um, research is important in order to get the penetration number up a little bit higher.
Casey Hoyt: We continue to see more positive and positive studies, not just the ones that we've accomplished over the years, but others outside forces. Now proving out the benefits of motivation. It's exciting to take a look now at the Medicare Advantage population. This is the first time that we've had access to those patients. So we'll see. How good those, those guys have been doing on on a base of care. And it's, it's really exciting to see that a home care, our industry association is the ones that's leading the charge now.
Casey Hoyt: It's not, you know, for years, we've had to be the leader in the research market, but that's changing and positions are jumping in from across borders and doing studies now. So it's all positive momentum, everything clinically that we're seeing. And so ultimately, we hope that that research really will drive penetration up to where more folks are considering an IV, the gold standard of care and really step therapy and other forms of treatment to try and fail will become less of an alternative for medical policies and pairs to lean on down the road.
Operator: All right. Thanks very much guys. That's it for me. All right, dog. Thanks. At this time, there are no further questions in queue.
Casey Hoyt: I'd like to turn the call back over to our presenters for any further remarks. We want to thank everybody for listening in today. Follow up if there's any other questions and appreciate your support. Have a great day.
Operator: This concludes the ViMed second quarter, 2024 earnings call. Thank you for attending and have a wonderful rest of your day.
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