Q1 2025 Quipt Home Medical Corp Earnings Call
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Speaker Change: Thank you for standing by. This is the conference operator. Welcome to the first quarter 2025 earnings results conference call for Quipped Home Medical Corporation.
Speaker Change: As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions.
Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0.
Speaker Change: For more information on these risks and uncertainties, please see the reader advisory at the bottom of the company's results news release.
Speaker Change: The company's actual performance could differ materially from these statements. At this point, I'd like to turn the call over to Chairman and Chief Executive Officer, Greg Crawford.
Greg Crawford: Thank you, Operator, and thank you to everyone joining us today. I'm Greg Crawford, Chairman and CEO of QliptoMedical. I'm pleased to have Hardik Mehta, our Chief Financial Officer, and Tom Ehrich, our Chief Accounting Officer, joining me today.
Greg Crawford: These, combined with our specialized respiratory programs, allow us to effectively meet patient needs in the comfort of their own homes.
Greg Crawford: At present, WHIP has expanded to 135 locations across 26 states with over 314,000 active patients, which has enabled us to strengthen our coast-to-coast reach.
Greg Crawford: Our go-to-market strategy is rooted in providing an integrated end-to-end respiratory care solution.
complemented by a diverse portfolio of durable medical equipment.
Greg Crawford: As a trusted partner for patients and healthcare providers alike, we have developed a scalable model that addresses the complexities and evolving demands of the durable medical equipment ecosystem.
Greg Crawford: Respiratory care comprises approximately 77% of our product mix, demonstrating our unwavering commitment to patients with pulmonary and cardiovascular conditions.
Greg Crawford: This strategic focus aligns with critical macro trends such as the aging population, the rising prevalence of chronic respiratory disease like COPD, and the significant untapped opportunities in the sleep apnea market.
Greg Crawford: These drivers, combined with our operational expertise and expanding scale, position QWIP to meet the growing demand for high-quality in-home respiratory care solutions.
Greg Crawford: On today's call, we will review our fiscal first quarter 2025 performance, as well as provide insights into emerging demand trends, operational highlights, and strategic initiatives shaping our growth trajectory for the remainder of fiscal 25.
Greg Crawford: For the first quarter of fiscal 25, we experienced consistent demand across all major product categories and steady referral patterns.
Greg Crawford: We achieved stable revenue generation of $61.4 million, alongside a strong sequential improvement in adjusted EBITDA margin, which reached 22.8%, leading to adjusted EBITDA of $14 million.
Greg Crawford: We are particularly encouraged by the meaningful improvement in our adjusted EBITDA margin sequentially during Fiscal Q1 2025.
Greg Crawford: This progress reflects the proactive steps we've taken to streamline our operations and optimize our organizational structure. These enhancements are enabling us to operate more efficiently while maintaining our commitment to high-quality patient care.
Greg Crawford: As we continue to execute on our growth initiatives, we expect this operational discipline to support steady margin expansion throughout the year.
Greg Crawford: Shifting the focus to our sleep business, we are pleased to report that GLP-1 medications continue to have no impact on demand. Referral activity for new device setups remain solid, while replacement supply volumes continue to demonstrate strong and consistent performance.
Greg Crawford: Recent real-world data shared by the leading sleep device manufacturer involving nearly 1.2 million patients
underscores the positive effects of GLP-1s on treatment adherence.
Greg Crawford: The study found that individuals with an obstructive sleep apnea, OSA diagnosis, who were prescribed a GLP-1 were 10.7% more likely to start positive airway pressure therapy compared to those not on GLP-1s.
Greg Crawford: Additionally, these patients exhibited higher resupply order rates over both 12 and 24 month periods.
For more information visit www.fema.gov
Greg Crawford: These data points have now been steady with the same trend, plus or minus a couple of tens of a basis points, as the leading manufacturer has grown their analysis from a year ago with approximately 300,000 patients to now tracking nearly 1.2 million patients.
Greg Crawford: pharmotherapies in the treatment of OSA. The AASM continues to emphasize positive airway pressure therapy as the frontline treatment for OSA.
Greg Crawford: We believe GLP-1 medications will serve as a long-term tailwind for our sleep business, introducing more motivated patients into the healthcare system as they focus on improving their overall health.
Greg Crawford: Additionally, the regulatory environment remains stable and we are not seeing any significant headwinds over the near term. This stability allows us to operate with greater efficiency and confidence.
Greg Crawford: supporting both margin performance and continued strategic execution. With this regulatory clarity, we are well positioned to sustain long-term growth as we expand our footprint and deepen partnerships across the healthcare ecosystem.
Greg Crawford: We continue to manage our balance sheet prudently with net leverage at 1.5 times which gives us the flexibility to invest in strategic initiatives. As we move forward, we are confident in our ability to deliver exceptional patient care, strengthening relationships with payers, and execute on a disciplined scalable growth strategy.
Greg Crawford: Through these efforts, we are well positioned to drive consistent long-term value for our shareholders.
Speaker Change: Thanks, Greg. On Monday evening, we announced our fiscal first quarter 2025 financial results for the three months ended December 31, 2024. Please note that all financial values are in U.S. dollars and are now reported under GAAP accounting principles, with comparison periods also reported under GAAP for consistency.
Here are some key highlights from the quarter.
Speaker Change: We completed 221,000 unique setups and deliveries in the fiscal first quarter 2025, an increase of 3% from 215,000 unique setups and deliveries in fiscal Q1 2024.
Speaker Change: Respiratory resupply setups and deliveries increased to 124,000 for the quarter reflecting growth of 1% year-over-year driven by our centralized intake processes and technological innovations.
Speaker Change: The customer base grew by 1%, serving 157,000 unique patients as of December 31, 2024, compared to 155,000 unique patients as of December 31, 2023.
Speaker Change: Revenue for fiscal Q1 2025 was $61.4 million compared to $62.6 million in fiscal Q1 2024. This represents a 2% decrease year-over-year.
Revenue for Q1 2025 was flat compared to Q4 2024.
Speaker Change: The Medicare 75-25 blended rate, which had been providing rate relief for certain geographies, was discontinued as of January 1, 2024.
Speaker Change: Although this change is still under legislative review and could return, its immediate cessation had a negative impact on our revenue and operating results.
Speaker Change: Moreover, in certain regions, we also experienced the withdrawal of Medicaid Advantage members due to a capitated agreement engaged with other providers in the industry.
Speaker Change: In November 2024, a disposable supply contract was not renewed. The cumulative annual impact of these three events is estimated to be approximately $8 million.
Speaker Change: with a reduction of approximately $1.5 million for the three months ended December 31, 2024, as compared to the three months ended December 31, 2023. Recurring revenue for Q1 2025 was very strong and was approximately 77% of total revenue.
Speaker Change: Adjusted EBITDA for Q1 2025 was $14 million at 22.8% margin compared to $15.3 million at 24.5% margin for Q1 2024, representing an 8.7% decrease.
Speaker Change: Adjusted EBITDA sequentially increased by 4.5% from Q4 2024 in which the company reported adjusted EBITDA of $13.4 million at 21.8% margin.
Speaker Change: Net loss improved from Q1 2025 to 1.1 million or 0.03 per diluted shares compared to net loss of 1.5 million or 0.04 per diluted share for Q1 2024.
Speaker Change: Operating expenses as a percentage of revenue came in at 49.5% in fiscal Q1 2025 compared to 47.6% the corresponding period in 2024.
Speaker Change: CapEx, also known as Rental Equipment Transfer from Inventory for Fiscal Q1 2025 was $9.4 million compared to $7.3 million in Fiscal Q1 2024.
Speaker Change: Cash flow from continuing operations was $9.3 million for the three months ended December 31, 2024, compared to $10.6 million in the prior period.
Speaker Change: The company reported $15.5 million in cash on hand as of December 31, 2024, compared to $16.2 million in cash on hand as of September 30, 2024.
Speaker Change: The company has total credit availability of $32.4 million, including $11.4 million available on revolving credit facility and $21 million on delayed fraud on loan facility.
Speaker Change: We maintain a conservative balance sheet with a net debt to adjusted EBITDA leverage of 1.5 times.
Speaker Change: Our financial performance in fiscal Q1 2025 demonstrates the stability of our business model. We delivered an improvement in adjusted EBITDA margin compared to previous quarter, reflecting the initial benefits of the structural optimization efforts we began implementing at the start of the fiscal year.
Speaker Change: These initiatives are focused on enhancing operational efficiency across the organization, reducing inefficiencies, and unlocking margin expansion opportunities.
Speaker Change: We are pleased with the results so far and we plan to deliver steady margins throughout the year as we continue to refine our processes and optimize our cost structure.
Speaker Change: We continue to see steady referral activity demonstrating the durability of our operating model and our ability to meet evolving market needs.
Speaker Change: This consistent demand trend reinforced the strength of our business, which continues to benefit from macro tailwinds such as the aging population and the rising relevance of chronic respiratory conditions.
Speaker Change: While some headwinds persisted, we are pleased with our ability to build upon the foundation established in prior quarters and position ourselves for growth in the calendar year ahead.
Speaker Change: The strength and consistency of our revenue base was underpinned by our recurring model, which accounted for over 77% of total revenue in fiscal Q1 2025.
Speaker Change: A cornerstone of this model is our resupply program, which has grown to support more than 174,000 patients as of December 31, 2024.
Speaker Change: This program not only extends the duration of each patient's relationship, but also reinforces the value of our high-touch patient-centered care model.
Our financial position remains a critical driver of growth.
Speaker Change: With 47.9 million in liquidity and a net leverage ratio of 1.5, we are well equipped to advance our growth initiatives. As capital market dynamics evolve, we remain confident in our ability to seize strategic opportunities that align with our long-term goals.
Speaker Change: all while safeguarding our strong financial foundation. As we progress through calendar 2025, we are energized by the opportunities before us. Our commitment to the operational excellence, disciplined growth, and patient-focused care remains the cornerstone of our approach, positioning us for continued success.
Greg Crawford: With that, I will now turn the call back to Greg.
Greg Crawford: Thank you, Hardik, for that comprehensive overview of our financial performance and operational highlights.
Greg Crawford: Our top priorities for fiscal 2025 and beyond are driving organic revenue growth.
Greg Crawford: Achieving Operational Net Profit, Generating Positive Cash Flow, and Expanding both Adjusted EBITDA and Adjusted EBITDA Margin.
Greg Crawford: We are focused on expanding our presence in both existing and new markets, leveraging our scalable business platform to broaden our product offering and service reach. To support these objectives, we continue to optimize our organizational structure, enhancing operational efficiencies by reducing redundancies and centralizing back-office processes.
Greg Crawford: These measures are streamlining operations, improving scalability, and positioning the business for sustainable long-term growth.
Greg Crawford: At the heart of our strategy is our commitment to addressing chronic respiratory conditions, including sleep apnea, COPD, and other pulmonary diseases, while ensuring patients can access high-quality care in the comfort of their homes.
Greg Crawford: As demand for home-based healthcare solution grows, we are exploring new ways to expand our reach, including entering into untapped markets and fostering strategic partnerships with payers, referral sources, and healthcare providers.
Greg Crawford: Our competitive strengths lie in the unique combination of our expanding national footprint, growing market share, and deep clinical expertise.
Greg Crawford: These advantages enable us to operate at scale, creating efficiencies while delivering a seamless patient-centric experience that meets the rising demand for home-based care solutions.
Greg Crawford: We are also focused on enhancing our workflow processes, which creates efficiencies and removes friction points. We believe the keys to success are strong organizational efficiency and building economical scale to create long-term value.
Greg Crawford: U.S. and Canada as we focus on delivering value through an expected return to consistent organic growth in calendar 2025. Importantly, despite trading well below the valuation levels at which recent acquisitions have occurred within our space,
Our business fundamentals remain solid.
Greg Crawford: With steady demand across our product portfolio, we are optimistic about the balance of calendar 2025 and excited to share continued progress with you. We look forward to reporting our fiscal Q2 results in May.
Greg Crawford: In closing, we remain committed to exploring and pursuing all avenues to drive increased shareholder value, and I would like to take this chance to thank the entire Quip team for their tireless work and our stakeholders for their continued support.
Speaker Change: We will now begin the analyst question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing any keys.
Speaker Change: To withdraw from the question queue, please press star then 2.
Speaker Change: The first question comes from Richard Close with Canaccord Genuity. Please go ahead.
Richard Close: Yeah, thanks for the questions and I apologize if there's any background. I'm traveling
Richard Close: You know, I appreciate the providing the calendar 2024 revenue headwind impact of $8 million on those moving parts.
Speaker Change: I was wondering if you could provide us some background on the contract termination, the disposable supply, and how much of a headwind do you think that's going to be in the remainder of this fiscal 25? That's my first question.
Speaker Change: Yeah, sure. So that was an incontinence supply contract and that that we had had with a state that we operate in through a home health agency and it ended up getting terminated there on November 1st.
Speaker Change: So we expect that to be about a $2.5 million headwind in that kind of look at it, say, in calendar 25.
Speaker Change: okay and that includes the first quarter impact that two two and a half million
Speaker Change: Well, that's the total in that for the entire calendar year, so it's probably a little more heavily weighted in that in the first quarter than it would be going out into, say, our fiscal Q126.
Speaker Change: Okay, that's helpful. And then also on the capitated contract that, you know, shifted, I guess, at the end of 2023.
Speaker Change: You know, that was MA mostly, but you also, I think, have PPO patients.
Speaker Change: as well with them. And, you know, how should we be thinking about like that headwind?
Speaker Change: and how much of the headwinds are sort of continuing this year and obviously the two and a half that you just mentioned is part of that.
Speaker Change: Hey Richard, this is Hardik. Yeah, great question. So you're right, you know, as we kind of go into fiscal 2025, sorry, calendar 2025, so fiscal Q2, Q3, and Q4,
Speaker Change: you know, you would see the larger impact year over year in the first...
Speaker Change: Year-over-year, you will probably see about somewhere in the neighborhood of a million dollars in Q2, maybe $750 to $800 in Q3. Q4, similar, and then Q125 might be much lesser.
Speaker Change: So, again, if you take that 2.6, it's probably weighted towards the front couple quarters and the second quarter, the two quarters in calendar 2025.
Speaker Change: and that as far as in that what we've seen fall off and we're starting to make some progress in the referral community with the sales team and that of some some initiatives in that to let them know that hey, we still can take the PPO plans.
Speaker Change: Okay, so it sounds like not much from Humana PPO rolling off in calendar 25 and you just have this, you know, very small disposable contract termination. So most of the headwinds are behind you.
Speaker Change: That's what we believe, yes. Yeah, that would be a good fair characterization.
Speaker Change: A little bit of Humana would be in the first half of that cycle. It is certainly stabilized.
Speaker Change: Okay, perfect. And then the final question is, good job on the margins.
Speaker Change: and interested in some of the cost efficiencies or optimization that you're talking about and how much of that's...
Speaker Change: Still to come, just curious, Hardik, in terms of how you're thinking about the progression of margins as we go through the years. Should we think about steady, stair-step?
Speaker Change: As we progress through the year, and then how do you guys think about, you know, 25% adjusted EBITDA margins? Is that attainable this year or a timeline to get in there?
Speaker Change: So, with that said, for 2025, of course, our goal this year is to get more organic growth. That's our primary focus here.
Speaker Change: but in the event that's not going to happen then we will have to certainly readjust our cost structure but for now we are certainly planning for revenue growth and stabilization of EBITDA is kind of where we see things are.
Speaker Change: Of course, with growth, we would be probably, we certainly would be seeing that step increases in EBITDA margins as well.
Speaker Change: I think we are certainly stabilized from a dollar perspective with some opportunities should we have to take some.
And is 25% still a long-term target?
Speaker Change: Yes, certainly a long-term and achievable target, maybe not in the near future.
Speaker Change: But yeah, it's certainly an achievable target, but just not in the next near future.
Okay, thank you.
Speaker Change: The next question comes from Doug Cooper with Beacon Securities. Please go ahead.
Hey, good morning, everybody.
Speaker Change: I just want to look at the EBITDA minus patient CapEx, Hardik, you said patient CapEx was 9.4 million in the quarter or total CapEx.
Speaker Change: That gets me in a margin adjusted margin of 7.5% versus 12.8% last year I just I don't have a number for q4 for patient capex. Do you have that number and Yeah, and what would yes I do
Speaker Change: Okay. Yeah, so patient CAPEX in Q4 of 2020 for fiscal year Q4 mean.
This shows year-over-year to be at a much larger scale.
Speaker Change: percentage points, so last year, this quarter, our medical equipment capex was around 7.3 million versus 9.3, 9.2, 9.3 that we reported this year. But if you look at our...
Speaker Change: Q2, Q3, and Q4 of 2024, those respective quarters were 7.1, 10, and 9.1.
Speaker Change: What we have is kind of more along the lines. We are also...
Speaker Change: in the middle of, you know, swapping out some recall for Philips on ventilators. So we do expect that will impact us for another couple of quarters as we kind of turn over the Philips Raspironic ventilators.
Speaker Change: I see. So it would seem to me, you know, a target of 10% plus should be a target there to generate some real free cash flow. Is that fair?
Thank you.
Sorry, can you ask that one more time, please?
Speaker Change: Yeah, the adjusted EBITDA margin or EBITDA minus patient capex margin to generate some material free cash flow, that's got to be over 10%, correct?
that, yes.
Speaker Change: and when would we expect to have that over 10% I mean obviously helps if you get even that margin towards the 25
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Speaker Change: Sure. Sure. I mean, if you look at fiscal 2024, we were at 10%, right, for the whole year. Again, we might have to replace some ventilators here for the next couple of quarters, as I just mentioned earlier, but we should be kind of heading back to that margin rate sooner than later.
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
Speaker Change: We are not saying that we are deviating from what historically we have performed, at least like if you look at the whole fiscal 2024, I think that is a good measurement of what to expect overall in 2025. Of course, quarters might move here and there, but to keep that as a goal for 2025, certainly
What we would consider steady state.
Okay, moving on.
the resupply business.
Haven't gained a lot of
Speaker Change: Yeah, this is Greg. Really good question in that I think one of the several things in that we've actually been working on is one we've been working to improve and we've started to see slight improvements in our catchment rates and that for new setups.
So
Speaker Change: We're trying to exceed 80%-plus on our catchment rate for new setups, so that's going to drive more patients in there. Also, our sleep compliance in that we're doing some transitions there. We've already seen a couple percentage points in that of increase in compliance, which ultimately in that also in that more patients into the resupply program.
Speaker Change: You know, so we do have several handles that we're kind of pulling there for that.
Speaker Change: would be getting. So we've got a really high catchment rate of patients in that ordering their first order after a new setup.
Speaker Change: and then these patients kind of fall off from that after the 90 days because we don't necessarily need compliance and that for the continuation of the rental. So now we have started to focus on patients and that to kind of follow them all the way out for a year because we're
Speaker Change: Yeah I mean as it stands right now and we don't know of anything that that would affect us I mean right now and that I mean we're still expecting there could be some positive news on the 7525
Speaker Change: the reinstatement. It seems like there is a lot of momentum in that within the industry on the 75-25 and then I think finally in that the discontinuation in that finally kind of putting the nail in the coffin on the competitive bid.
Speaker Change: But other than that, we haven't had anything from updates from a regulatory front.
Okay, great. Thanks very much.
Julian Hung: The next question comes from Julian Hung with CFO. Please go ahead.
Julian Hung: Hi, this is Julian, sitting in for Justin today. My first question is, with the switch from IFRS to US GAAP, bad debt expense is now embedded in revenue. Can you just give us a reminder of how, historically, how much bad debt expense made up and if you see that percentage going down over time?
Julian Hung: Yeah, historically, I mean, we did make that switch in last quarter of 2020, fiscal 2024, but prior to that, we were running around 4, 4.5%.
Thank you.
Thank you.
Speaker Change: Q2 of, which is calendar Q1, is always the roughest months of all from a cyclical perspective. We do expect those percentages to drop going into the second half of 2025 calendar year with some of the...
Speaker Change: improvements that we are making on our RCM team and some of the resources that we are allocating to our RCM team.
Thank you.
Speaker Change: So, I think for now, we would say that we were around the same percentages in Q1, we would probably be around similar percentages in Q2, and then maybe we will see some decline in Q3, Q4.
Speaker Change: Okay, and on the organic growth, and I think last quarter there was, you alluded to, maybe returning to 8 to 10% organic growth in 2025. Is that still a good expectation for now?
All right, thank you so much for taking my question.
Thank you.
Bill Sutherland: The next question comes from Bill Sutherland with the Benchmark Company. Please go ahead.
Bill Sutherland: Thanks, and good morning guys. Greg, back to that organic growth question for a second. When the, now that you've anniversaried 7525,
Bill Sutherland: Where does that kind of put you regardless of all your other initiatives in terms of organic growth and do you think it's just a steady progress?
Bill Sutherland: to the last quarter of the year to get to the 2% or so target that you've had.
Bill Sutherland: Yeah, it's it's it's certainly in that a steady progress to get there
Bill Sutherland: In that of utilization, we've also created an internal equipped accelerator academy in that for our sales team, in that for our current sales team, and then for any potential new hires, like I spoke in that we're expecting to see our catchment rate.
Bill Sutherland: and that on new orders and that increase and that through some technological and that things that we put put in place and that's we're seeing some good early results there.
Bill Sutherland: You know, also in that we're looking to reduce the attrition rate and that also on our resupply and that's we have a lot of different levers in that that we're starting to see some good early signs.
Bill Sutherland: So just internally and that those things there and that we anticipate and that that you know We could get back to that historical or organic growth That we'd previously seen
Bill Sutherland: Okay, and then just the removal of the 75-25 you know anniversary and I should say what does that do for your
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We'll keep you up to date. Thank you. Thank you.
Speaker Change: Yeah, I mean year over year and that the quarters and that I mean that is certainly and that going to help and that as we especially as we're kind of in our fiscal Q2 right now.
Speaker Change: I think that part of the impact you've had was in the ballpark of, on an annual basis, three million, was that? I'm looking back at my notes.
Speaker Change: Last year, that's about right. Yeah, just about $3 million for the 75-25. Okay, that's good. Health expense you called out last quarter, is that – I assume that is still something that's weighing on the margin a bit?
Running a little high, right? Expense-wise.
I'll let Hardik take that.
Speaker Change: I'm just making sure, are you talking about our Internet of Health insurance costs?
Yeah, you're on.
But...
but we are, we expect at this point.
You know, the first two are...
I guess ramp-up is kind of stabilized.
Okay.
The balance sheet is in good shape. Any commentary on...
Speaker Change: how we should think about capital deployment in the coming three or four quarters.
Speaker Change: We have some good opportunities in front of us that we are actively engaged in looking at.
Speaker Change: We will definitely look at deploying capital towards inorganic growth opportunities as well as trying to fund our organic growth.
Okay. Thanks, Hardik. Thanks, Greg. Appreciate it. Thank you.
This concludes the question and answer session. Excuse me.
Speaker Change: I would like to turn the conference back over to Mr. Crawford for any closing remarks.
Greg Crawford: Thank you, Operator, and thanks everyone for your participation today. As always, you can find us on the web at where we will be posting the transcript of this call and also our updated Investor Deck. On the site, you can also view some of the exciting products and developments discussed on this call. Thank you, and have a great day.
Greg Crawford: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.