Q2 2025 Quipt Home Medical Corp Earnings Call
Chris Operator, welcome to the second quarter 2025 earnings results conference call for equipped home Medical Corp.
As a reminder.
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After the presentation, there will be an opportunity for analysts to ask questions.
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Let me remind you that the remarks today will include forward looking statements that are subject to important risks and uncertainties for more information on these risks and uncertainties. Please see the reader advisory at the bottom of the Companys results news release.
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The company's actual performance could differ materially from these statements.
Speaker Change: At this point I'd like to turn the conference over to Chairman and Chief Executive Officer, Greg Carlsberg. Please begin.
Greg Crawford: Thank you operator, and thank you to everyone joining us today I'm, Greg Crawford Chairman and CEO of quick Tom Medical I'm pleased to have Arctic Nader, our Chief Financial Officer, and Tom <unk>, Our Chief Accounting Officer are also joining me today.
Gregory Crawford: Oh, I see. That didn't come in like you expected. Okay, correct.
Gregory Crawford: And then the disposable supply contract issue. When did you learn about the non-renewal? Uh, that, that was in like September-October timeframe.
Greg Crawford: Four we begin I'd like to thank the entire quick team for their continued focus and execution and to extend our appreciation to our stakeholders for your ongoing support and partnership.
Gregory Crawford: So thank you all for joining us. What surprised you then, this far from them? It was more of a contract that we had for multiple decades in that, frankly, and there was a change of guard in that with staffing, in that with where this contract was done, and it was just not renewed in that with Quipt any longer. but that happened at your end of your fiscal 24. Yes, I think in the fiscal 24, we had one month. Fiscal 25, we had one month. Yeah, one month. Okay.
Greg Crawford: Let me start by reiterating who we are and what we do but <unk> medical as a diversified healthcare services company delivering a comprehensive range of home medical equipment and services to patients across the United States. We are driven by our commitment to clinical excellence powered by a patient centric model and advanced.
Greg Crawford: <unk> enabled solutions.
These strengths combined with our specialized respiratory programs position us effectively support patients in the comfort of their homes.
Greg Crawford: Today quick operates over 130 locations across 26 states serving over 223000 active patients our scalable infrastructure and growing national presence enable us to deliver consistent high quality service, while expanding our reach across both established and emerging.
Bill Sutherland: I didn't remember you mentioning this on the December quarter call. I think we did. Oh, you did? Okay. My apologies.
Gregory Crawford: What I guess last one for me and I'll hop off is do you think your growth engine can become effective this quarter in terms of looking at a quarter on quarter trend? Yeah, I mean, we are sitting here on, you know, May 13th here, so we have visibility on our April numbers. We had some trends going into March, so the trends do suggest stabilization and some uptake in our rental revenue and some recovery on our supplies business as well. But obviously, there's just one month here into it, but two more to go. But the trends are in the right direction.
Greg Crawford: <unk>.
Greg Crawford: Respiratory care continues to be our core focus compromising approximately 75% of our product mix. This strategic emphasis aligns with critical macro trends such as aging populations rising prevalence of chronic respiratory conditions like COPD and ongoing demand within the sleep apnea.
Greg Crawford: Market.
Greg Crawford: These durable <unk> paired with our operational expertise and expanding referral network strengthening our position for long term growth.
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.
Bill Sutherland: Great, good to hear. Thanks a lot.
Operator: Thank you. Once again, if you have a question, please press star then one.
Greg Crawford: As a trusted partner for patients and health care providers, we have developed a scalable model that addresses the complexities and evolving demands of the durable medical equipment ecosystem.
John Tiny: The next question is from John Tiny with Canaccord Genuity. Please go ahead.
Greg Crawford: As it relates to our key priorities for the remainder of calendar 'twenty five and beyond we remain committed to three key areas first returning to our historical levels of organic growth.
John Pinney: Hi, John Pinney, I'm from Richard Close. Thanks for the questions. So I guess I have a question about cash flow. So it's like if you take cash flow from operations less the purchase of P&E, less lease repayments, less equipment loan repayments, it's like slightly positive on the quarter. You pulled a little bit on the revolver this quarter. Can you just give some commentary of what you're doing in order to generate greater cash going forward? Yeah, so that's that's a little bit of timing and then some better controls on the on the CapEx spend. You know, we always encourage our investors to look at more of the year to date number or a trailing three quarters number than just look at the quarter.
Greg Crawford: Second optimizing capital allocation to drive long term shareholder value to this end we have been active with our normal course issuer bid and expect to continue to do so in the months ahead.
Greg Crawford: And third building, a scalable future ready healthcare ecosystem through strategic health care system focused expansion.
Greg Crawford: On today's call.
Greg Crawford: I will walk you through the details of our fiscal Q2 results highlight our strategy to return to growth, including progress across our key growth initiatives and industry insights.
Hardik Mehta: They tend to, you know, depending on how we lease and depending on how much we have purchased, there could be some working capital in those. So all I would say is. If you look at maybe over two quarters and three quarters, that will kind of look a more stabilized. Patton, then just a quarter. But but to kind of when we're talking about it, you know, we spoke about this last quarter. We are in the middle of a Philips recall. So there is some cash constraints that comes as a result of it. There's some timing in terms of, you know, with Philips, we had a different financing program with the newer vendors.
Greg Crawford: In terms of performance fiscal Q2 came in softer than expected as we continue to feel the downstream effects of the significant patient attrition.
Stemming from the Capitation agreement that went to other providers in the industry in 2024 in.
Greg Crawford: In addition, a disposable supply contract in which the company was a participant was not renewed and a seasonal low in our resupply segment contributing to the overall revenue impact.
Greg Crawford: Adjusted EBITDA margin came in at 23, 3%, which is we view as a standout performance given the revenue softness. This is the result of the hard work. We began in late 'twenty four to make the organization more efficient and more responsive to market dynamics.
Hardik Mehta: We have a different financing program. So there was some some some timing related to that as well, which pushed out our leasing further than what our typical funds would have been. You know, Philips recall creates a drag for us because we took a lot of those machines out of the out of servicing patients. They are sitting in our warehouse or to be shipped. But we haven't received some of the shipping details from Philips. They have been. There is some struggle on their end to take those equipments back. So we are kind of in a little bit of a working capital slash capex overspend.
We are seeing the benefits today, and we expect even greater leverage on this margin base as growth Reaccelerate.
Greg Crawford: Importantly, we are not standing still across the business. We are actively pulling multiple operation leavers to reignite organic growth in the back half of the calendar 'twenty five and into fiscal 'twenty six.
Greg Crawford: Strategically we are evolving beyond traditional <unk> acquisitions.
Greg Crawford: Central pillar of our forward strategy is to pursue healthcare system boned opportunities leveraging our scalable repeatable integration strategy.
Greg Crawford: Our goal is to embed quick directly within the hospital discharge ecosystem through preferred provider agreements that deliver coordinated value based care.
Hardik Mehta: category, for lack of a better word, because of mistiming between when we are taking equipments off the patient and when we will ultimately get credit from Philips, which we haven't received yet.
Greg Crawford: We are actively engaged in multiple conversations with leading regional health systems, and we expect to have meaningful updates over the near term. These.
Hardik Mehta: So do you have any visibility as to when that would clear up? I'm sorry? Do you have any visibility as to when this CAPEX overspend with Philips and when that will clear up? I would say definitely over the next couple of quarters, the spend should stabilize. I mean, there are still a few more ventilators that are out there. We ultimately paused this quarter because we were building a backlog in our warehouse where we were taking it off our patients, but on the other side, Philips wasn't able to process intake of those. So at some point, we had to take that operational decision where we were going to pause until things cleared up with Philips.
Greg Crawford: These relationships are compelling not only because of their strategic fit but also because they offer access to embedded patient volume enhances our care continuity and can be scaled across markets. Our team is highly focused on executing this strategy and aligning resources. Accordingly, we believe this approach will significantly.
Greg Crawford: Enhance our competitive positioning while creating long term shareholder value.
Greg Crawford: Shifting focus to our sleep business. We are pleased to report that <unk> medications continue to have no impact on demand.
Greg Crawford: Total activity for new device set ups is steady and consistent in recent months.
Hardik Mehta: Our goal with Philips was to recycle everything by end of June, but I don't think at this point, given the pace at which they're able to take those equipment, we are pretty confident they'll end up extending that timeline ultimately. So that's why earlier our goal was to get everything done by June, but I think at this don't know. But I would say we are kind of more than halfway through it, but there's still more to go in terms of recycling those equipments out of patients.
Greg Crawford: Recent real world data shared by the leading device manufacturer involving nearly one 4 million patients underscores the positive effects of <unk> on treatment adherence. The study found that individuals with an obstructive sleep apnea OSA diagnosis, who were prescribed the <unk> were 10 eight.
Greg Crawford: <unk> more likely to start positive airway pressure pap therapy compared to those not on <unk>.
Greg Crawford: Additionally, these patients exhibited higher resupply order rates over both 12 and 24 months periods.
Hardik Mehta: Thanks for that. So I guess like with the sequential and year-over-year drop, do you have any like, I guess, color you can give or commentary as far as how much is attributable to the humana capitated contract versus the just like seasonal, like first sequential just like seasonal deductible reset versus the disposable contract going away? Sure. I mean, while we don't break it up impact to impact from a public disclosure perspective, you can certainly deduce that by looking at similar patterns last quarter. You know, if you look at our Q1 to Q2 last quarter, it might show some similar trends as well.
Greg Crawford: This data has now been steady with the same trend plus or minus a couple tenths of a basis point as the leading manufacturer has grown their analysis from a year ago with approximately 300000 patients to now tracking nearly one 4 million patients.
Greg Crawford: During the quarter the lancet respiratory medicine published a landmark meda analysis, highlighting the significant clinical impact of CPAP therapy. This extensive study, which evaluated data from over 1 million individuals demonstrated that CPAP therapy reduces all cause mortality by 37%.
Greg Crawford: And cuts cardiovascular related mortality by even more compelling 55%.
Greg Crawford: These findings reinforced the critical role of CPAP and improving patient outcomes and further supports its value as a frontline treatment in sleep and cardiopulmonary health.
Hardik Mehta: And the rest is kind of between Humana and the supplies contract.
Hardik Mehta: Okay, then I guess one more. So I guess. My cost of inventory sold like there's a percentage of revenue drop pretty substantially sequentially and a little bit year-over-year as well Do you expect that to kind of stay at that level or were there some other like kind of one-off items this quarter? That would make it lower or any commentary you could provide there Yeah, so the quote, again, cost of goods is another category where we tend to look at over at least a six months to nine months time frame. If you look at our year to date number, it was at twenty seven point nine percent compared to twenty eight percent for fiscal twenty twenty four.
Greg Crawford: We believe <unk> medications will serve as a long term tailwind for our sleep business introducing more motivated patients into the health care system as they focus on improving their overall health.
Greg Crawford: Additionally, we continued to see a stable regulatory environment and we are not currently seeing any material headwinds in the near term. This consistency allows us to protect margins and focus on executing our strategic plan to return to growth without disruption. Moreover, we don't expect tariffs to affect our Medicare slash in.
Greg Crawford: <unk> contract products with this clarity, we are well positioned to expand our geographic footprint strengthen our referral relationships and pursue long term partnerships across the healthcare ecosystem.
Hardik Mehta: So it kind of has stabilized this, you know, Q1 was slightly higher and Q2 had some some normalizing adjustments to that coming from some some credits that were due that weren't received in the previous quarter and stuff like that. But if you look at our six months quarter, six months run rate or fiscal twenty twenty four, they kind of line up pretty consistent. We do we do hope to see some. Positive trends on the cost of goods with some of the things that we are working on going into Q3 and Q4.
Hardy: With that commentary I'd like to hand, the call over to Hardy to discuss our fiscal second quarter 2025 financial results.
Hardy: Thanks, Gregg on Monday evening, we announced our fiscal second quarter 2025 financial results for the three months ended March 31 2025.
Hardy: Please note that all financial values in U S dollars and are now reported under GAAP accounting principles. The competitive videos also reported under GAAP for consistency.
Hardy: Some key highlights from the quarter.
Hardy: The company's customer base declined 2% year over year, serving 146000 unique patients as of March 31, 2025, compared to 149000 unique patients as of March 31 2024.
Operator: All right, great, thank you. This concludes the question and answer session.
Hardy: The company completed two 103000 unique setups deliveries in Q2 2025, 3% decrease from 110000 setups deliveries in Q2 2024.
Gregory Crawford: I'd like to turn the conference back over to Mr. Crawford for any closing remarks. Thank you, and thank you all for your participation today. As always, you can find us on the web at www.quiptomedical.com, where we will be posting a transcript of this call and also our updated investor deck.
Hardy: Respiratory the supply set ups deliveries decreased 4% year over year totaling 111000 in Q2 2025.
Operator: Thank you, and have a great day.
Hardy: Revenue for fiscal Q2, 2025 came in at $57 4 million down 6% year over year. This softer than expected performance reflects several key factors.
Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Please note that all financial values in U S dollars and are now reported under GAAP accounting principles with comparisons <unk> also reported under GAAP our consistency.
Hardy: Going headwinds from the withdrawal of Medicare advantage members falling a cabinet at agreement that went to other providers in the industry and.
Some key highlights from the quarter.
The company's customer base declined 2% year over year. So 146000 unique patients as of March 31, 2025, compared to 149000 unique patients as of March 31 2024.
Hardy: In addition in November 'twenty, 'twenty, four a disposable supply contract in which the company was a participant was not renewed contributing to the overall revenue impact.
The company completed 203000 unique setups deliveries in Q2, 'twenty 'twenty, 5% to 3% decrease from one of those 10000 setups deliveries in Q2 2024.
Hardy: Seasonal weakness tied to patient deductible resets resulted in modestly lower supply volumes during the first half of the quarter. However, the company has seen improved momentum in volume exiting March and April.
Respiratory resupply setups deliveries decreased 4% year over year totaling 111000 in Q2 25.
Hardy: Revenue for the six months ended March 31, 2025 decreased to $118 8 million compared to one and then going to $3 8 million for the six months ended March 31, 2024, representing a decrease of 4%.
Revenue for fiscal Q2, 'twenty 'twenty five came in at $57 4 million down 6% year over year, the softer than expected performance reflects several key factors.
Hardy: Recurring revenue for Q2, 'twenty 'twenty five continues to be strong at 81% of total revenue.
Ongoing headwinds from the withdrawal of Medicare advantage members falling a cabinet in agreement that went to other providers in the industry.
Hardy: Adjusted EBITDA for Q2, <unk> was $13 4 million at 23, 2% of revenue compared to $14 9 million or 24, 3% of revenue for Q2 2024.
In addition in November 'twenty, 'twenty, four a disposable supply contract in which the company was a participant was not renewed contributing to the overall revenue impact.
Seasonal weakness tied to patient deductible resets resulted in modestly lower supply volumes during the first half of the quarter.
Hardy: Presenting a nine 5% decrease.
Hardy: Adjusted EBITDA of $27 4 million for the six months ended March 31, 2025, compared to $30 2 million for the six months ended March 31, 2024, a decrease of 10, 4%.
The company has seen improved momentum in volume exiting both March and April.
Revenue for the six months ended March 31, 20th Ninety-five decreased two one and then an 18 8 million compared to one and then going to $3 8 million for the six months ended March 31, 'twenty 'twenty four.
Hardy: Net loss for Q2, 2025 was $3 million or <unk> <unk> per diluted share compared to 739000 or 0.02 per diluted share for Q2 2024.
Presenting a decrease of 4%.
Recurring revenue for Q2, 'twenty 'twenty five continues to be strong at 81% of total revenue.
Hardy: Cash flow from operations was $18 3 million for the six months ended March 31, 2025, compared to $14 9 million for the six months ended March 31 2024.
Adjusted EBITDA for Q2, and five was $13 4 million at 23, 2% of revenue compared to $14 9 million a 24, 3% of revenue for Q2 'twenty 'twenty four.
Hardy: Operating expenses as a percentage of revenue came in at 58% in fiscal Q2 2025.
Sending a nine and a half per cent decrease.
Hardy: Compared to 48, 9% in the corresponding period in 2024.
Adjusted EBITDA of $27 4 million for the six months ended March 31, <unk> 25, compared to <unk> 2 million for the six months ended March 31, 'twenty 'twenty four a decrease of 10.4%.
Hardy: Capex also known as rental equipment transferred from inventory.
Hardy: For the six months ended March 31, 25 was $17 9 million compared to $14 4 million for the corresponding period.
Net loss for Q2, 'twenty 25 was $3 million.
Hardy: Turning to the balance sheet, we exited the quarter in a strong financial position with $17 1 million in cash $9 $7 million of ability under our revolving credit facility and $21 million available.
Our 0.07 per diluted share compared to 739000 or 0.02 per diluted share for Q2, 'twenty 'twenty four.
Cash flow from operations was $18 3 million for the six months ended March 31 25.
Hardy: Pursuant to the delayed draw term loan facility total liquidity of $30 7 million.
<unk> to $14 9 million for the six months ended March 31, 'twenty 'twenty four.
Hardy: Our net debt to adjusted EBITDA leverage stood at one five times EBITDA.
Operating expenses as a percentage of revenue came in at 58% in fiscal Q2 2025.
Hardy: Well within our target range. This gives us meaningful financial flexibility to fund organic growth initiatives and pursue healthcare system opportunities.
Compared to 48, 9% in the corresponding period in 2024.
Hardy: We are also maintaining an active share repurchase program under our NCI.
Capex also known as rental equipment transferred from inventory.
Hardy: Which we will continue to utilize given the current low valuation we have.
For the six months ended March 31, 25 was $17 9 million compared to $14 4 million for the corresponding period.
Hardy: One of the most important takeaway from this quarter is the strength and stability of our margin profile. Despite a decrease in revenue we delivered an adjusted EBITDA margin of 23, 3% a direct result of the structural efficiencies initiatives, we began rolling out in late 2024.
Turning to the balance sheet, we exited the quarter in a strong financial position with $17 1 million in cash $9 $7 million, probably be under revolving credit facility and 21 million of April.
Hardy: These efforts included streamlining back office functions, optimizing logistics, and <unk> operations and driving greater cost discipline across the organization.
As you enter the delayed draw term loan facility due to liquidity of $37 million.
Our net debt to adjusted EBITDA leverage stood at one and a half times EBITDA.
Hardy: As a result, our platform is now more scalable and resilient, allowing us to protect and sustain margin performance even in periods of lower top line contribution.
Well within our target range. This gives us meaningful financial flexibility to fund organic growth initiatives and pursue health care system opportunities.
Hardy: To expand on Greg's comment, while Q2 was a soft quarter for us from revenue standpoint, or underlying operating engine remains solid we are executing across multiple fronts to restore growth expand margins and deliver shareholder value or.
We are also maintaining an active share repurchase program under our N G. I B, which we will continue to utilize given the current low valuation we have.
One of the most important takeaway from this quarter is the strength and stability of our margin profile. Despite a decrease in revenue we delivered an adjusted EBITDA margin of 23, 3% direct result of the structural efficiencies initiatives, we began rolling out in late 2024.
Hardy: Our balance sheet is strong our recurring revenue business solid and we have a clearly defined strategy to grow.
Hardy: Moreover, our focus has evolved beyond traditional acquisitions, we are actively engaging with health care systems to create deeper more strategic partnerships.
These efforts included streamlining back office functions, optimizing logistics, and <unk> operations and driving greater cost discipline across the organization.
Hardy: Transactions that can come with preferred provider agreements and support integrated.
Hardy: Great.
Hardy: As we progress through calendar 2025, we are energized by the opportunities before us to reignite growth.
As a result, our platform is now more scalable and resilient, allowing us to protect and sustain margin performance even in periods of lower top line contribution.
Hardy: Our commitment to operational excellence disciplined growth and patient focused care remains the cornerstone of our approach.
To expand on Greg's comment, while Cuba was a softer quarter for us from revenue standpoint, or underlying operating engine remains solid we are executing across multiple funds to restore growth expand margins and deliver shareholder value or.
Hardy: Positioning us for long term success.
Greg: Ill now turn the call back over to Greg.
Speaker Change: Thank you <unk>, let me take a moment to expand on a few of the key points and share. How we are strategically positioning quip to not only recover from the recent headwinds but to emerge stronger and more agile first I want to be clear that while the second quarter came in below our expectations. We are not discouraged on the contrary we have.
Our balance sheet is strong our recurring revenue base is solid and we have a clearly defined strategy to grow.
Moreover, our focus has evolved beyond traditional mi acquisitions, we are actively engaging with health care systems to create deeper more strategic partnerships.
Speaker Change: Conviction in the fundamentals of our business and we are executing with urgency and precision across all opportunities we.
Transactions that can come with preferred provider agreements and support integrated delivery.
Speaker Change: We have seen our renal business continued to be very stable and our teams are focused on rebuilding patient volume and we're seeing early indicators of momentum and referral patterns setup activity in sales productivity. Our focus remains on restoring consistent organic growth and we're doing that by leaning into our core competencies click.
As we progress through calendar 'twenty 'twenty five.
Energized by the opportunities before us to reignite growth.
Our commitment to operational excellence disciplined growth and patient focused care remains the cornerstone of our approach.
Positioning us for long term success.
Greg: I'll now turn the call back over to Greg.
Speaker Change: Respiratory care integrated referral networks and efficient technology enabled service delivery.
Greg: Thank you <unk>, let me take a moment to expand on a few of the key points and share. How we are strategically positioning quit to not only recover from the recent headwinds but to emerge stronger and more agile first I want to be clear that while the second quarter came in below our expectations. We are not discouraged on the contrary we have.
Speaker Change: We've taken meaningful steps to strengthen our market presence, including sales presence in underpenetrated areas launching new therapy offerings and reinvesting in our commercial capabilities that expand our funnel and improve conversion.
Speaker Change: These are tangible actions that will yield long term value.
Greg: Wrong conviction in the fundamentals of our business and we are executing with urgency and precision across all opportunities we.
Speaker Change: Moreover, we are evolving our strategic playbook prioritizing larger scale healthcare system focused partnerships that align more directly with health care is delivered today to that end. We are actively engaged in conversations with multiple integrated health systems around opportunities that would integrate quipped into the discharge.
Greg: We have seen our rental business continued to be very stable and our teams are focused on rebuilding patient volume and we're seeing early indicators of momentum and referral patterns set up activity and sales productivity. Our focus remains on restoring consistent organic growth and we're doing that by leaning into our core competencies click.
Speaker Change: <unk> planning process. These relationships create embedded volume improved care continuity and offer a compelling pathway to scale.
Greg: Nickel respiratory care integrated referral networks and efficient technology enabled service delivery.
Speaker Change: From a broader industry standpoint, we continue to benefit from the durable macro tailwind the demand for home based care solutions, particularly for chronic respiratory conditions is rising steadily patients want to receive care at home and providers want to reduce hospital utilization and quipped issue uniquely positioned at this intersection.
Greg: We've taken meaningful steps to strengthen our market presence, including sales presence in underpenetrated areas launching new therapy offerings and reinvesting in our commercial capabilities that extend our funnel and improve conversion.
Greg: These are tangible actions that will yield long term value.
Speaker Change: <unk>.
Greg: Moreover, we are evolving our strategic playbook prioritizing larger scale healthcare system focused partnerships that align more directly with health care is delivered today to that end. We are actively engaged in conversations with multiple integrated health systems around opportunities that would integrate quipped into the discharge.
Speaker Change: At the same time, we are continuing to improve how we operate we've made measurable progress in simplifying our structure standardizing and taken delivery processes and eliminating operational inefficiencies. These initiatives are positioning us to drive margin expansion, even as revenue scales, a key priority for us moving forward.
Greg: <unk> planning process. These relationships create embedded volume improve care continuity and offer a compelling pathway to scale.
We are also committed to being responsible stewards of our capital our balance sheet is in excellent shape and we will continue to pursue value enhancing uses of our capital whether that's funding growth supporting targeted M&A or returning capital to shareholders through our in CIB.
Greg: From a broader industry standpoint, we continue to benefit from the durable macro tailwind the demand for home based care solutions, particularly for chronic respiratory conditions is rising steadily patients want to receive care at home and providers want to reduce hospital utilization and quit tissue uniquely positioned at this intersection.
Speaker Change: As we move through the remainder of 2025 and enter 2026, our top priorities remain clear.
Speaker Change: Accelerate organic growth by expanding patient access improving referral conversion and deepening partnerships.
Greg: <unk>.
Greg: At the same time, we are continuing to improve how we operate we've made measurable progress in simplifying our structure standardizing and taken delivery processes and eliminating operational inefficiencies. These initiatives are positioning us to drive margin expansion, even as revenue scales, a key priority for us moving forward.
Speaker Change: Maintaining and further enhance our margin performance through continued operational streamlining and centralized support functions and third building scale intelligently with a focus towards health care system integration, and finally drive shareholder value by aligning strategic execution with disciplined capital.
Greg: We are also committed to being responsible stewards of our capital our balance sheet is in excellent shape and we will continue to pursue value enhancing uses of our capital whether that's funding growth supporting targeted M&A or returning capital to shareholders through our in CIB.
Speaker Change: Allocation and a clear growth.
Speaker Change: I want to close by recognizing our team for their ongoing dedication and execution and thank our shareholders and partners for their continued confidence in our vision.
Speaker Change: While the environment has presented challenges our long term opportunity remains significant and we are focused aligned and well positioned to deliver on it.
Greg: As we move through the remainder of 2025 and enter 2026, our top priorities remain clear.
Greg: Accelerate organic growth by expanding patient access improving referral conversion and deepening partnerships second maintaining and further enhance our margin performance through continued operational streamlining and centralized support functions and third building scale intelligently with a focus.
With that we will now turn it over to the operator for questions.
Speaker Change: Thank you.
Speaker Change: We will now begin the analyst question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
Speaker Change: Your tone acknowledging your request.
Speaker Change: Using a speakerphone please pick up your handset before pressing any clue to withdraw your question. Please press Star then two.
Greg: Towards health care system integration, and finally drive shareholder value by aligning strategic execution with disciplined capital allocation and our clear growth fishing.
Bill Sutherland: Our first question is from Bill Sutherland with Benchmark Company. Please go ahead.
Greg: I want to close by recognizing our team for their ongoing dedication and execution and thank our shareholders and partners for their continued confidence in our vision, while the environment has presented challenges our long term opportunity remains significant and we are focused aligned and well positioned to deliver on it.
Speaker Change: Thanks, operator.
Bill Sutherland: Good morning, Greg and harder.
Speaker Change: I wondered if.
To get a little more color on the two discrete items you guys called out in terms of.
Speaker Change: The revenue impact this quarter.
Speaker Change: The Humana loss of MMA members are not loss, but.
Speaker Change: The downtick in your.
Greg: With that we will now turn it over to the operator for questions.
Speaker Change: Contract size with them is this just the loss.
Greg: Thank you.
Speaker Change: We will now begin the analyst question and answer session to join the question queue. You May Press Star then one on your telephone keypad now.
Speaker Change: The loss of their membership is more significant than they thought or does this have to do with where you came out in the contracting.
Greg: Your tone acknowledging your request.
Speaker Change: I think it has to do more with referral patterns in that.
Greg: Speakerphone, please pick up your handset before pressing any cool to withdraw your question. Please press Star then two.
Speaker Change: We understood and that early in the onset of what the revenue impact was going to be but we clearly underestimated.
Bill Sutherland: Our first question is from Bill Sutherland with Benchmark Company. Please go ahead.
Speaker Change: The referral impact as far as their behavior of referring.
Bill Sutherland: Thanks, operator.
Speaker Change: Good morning, Greg and Arctic wondered if.
Speaker Change: The other humana patients that are on PPO plans.
Greg: Get a little more color on the two discrete items you guys called out in terms of the revenue impact this quarter.
Speaker Change: Oh I see that didn't come in like you expected.
Speaker Change: Correct.
Greg: In the Humana loss of MMA members were not loss, but the.
Speaker Change: And then.
Speaker Change: The disposable supply contract issue.
Speaker Change: The downtick in here.
Speaker Change: When did you learned about the Nonrenewals.
Greg: Contract size with them is this just the lawsuit.
Speaker Change: That was in like September October timeframe.
Greg: The loss of their membership is more significant than they thought or has this had to do with where you came out in the contracting.
Speaker Change: So.
Speaker Change: What surprised you than this.
Far from there.
Speaker Change: It was more of a contract that we had for multiple decades and that frankly, and there was a change of guard and that to with the staffing and that with where this contract was done and it was just not renewed and that with quipped any longer.
Greg: I think it has to do more with referral patterns and that we.
Greg: We understood and that early in the onset of what the revenue impact was going to be but we clearly underestimated.
Greg: The referral impact as far as their behavior of referring.
Speaker Change: But that happened at your end of your fiscal 'twenty four.
Speaker Change: Yes, I think in the.
Greg: The other humana patients that are on P. P O plans.
Speaker Change: Fiscal 'twenty four we had one month.
Speaker Change: Oh I see that didn't come in like you expected.
Speaker Change: About 25, we had only one month, yet one month.
Greg: Correct.
Greg: And then the.
Speaker Change: Okay.
Greg: Disposable supply contract issue.
Speaker Change: Just.
Speaker Change: I didn't remember you had mentioned that some of the December.
Greg: When did you learned about the non renewal.
Speaker Change: Quarter call I think we did.
Uh-huh that that was in like September October time frame.
Speaker Change: Okay My apologies.
Greg: So.
Speaker Change: What.
Speaker Change: What surprised you then this bar from them.
Speaker Change: I guess last one for me and I'll hop off.
Speaker Change: Do you think your growth engine.
Speaker Change: It it was more of a contracted we had for multiple decades and that frankly, and there was a change of guard and that to with the staffing and that with where this contract was done and it was just not renewed and that with quipped any longer.
Speaker Change: <unk> become effective this quarter in terms of looking at our quarter on quarter.
Speaker Change: Trimmed.
Speaker Change: Yeah.
Speaker Change: I mean, we are sitting here on.
Speaker Change: May 13, two or so we have visibility on our April numbers, we had some trends going into March so.
Speaker Change: But that happened at your end of your fiscal 'twenty four.
Speaker Change: Trends do suggest stabilization and.
Speaker Change: Yes, I think in the.
Speaker Change: Some uptake in our rental revenue and some recovery on our on our supplies business as well, but obviously thats just one month into it but two more developed.
Speaker Change: Fiscal 'twenty four we had one month.
Speaker Change: So 25, we had only one.
Speaker Change: One month, yet one month.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: But the trends are.
Speaker Change: Yeah I didn't remember you had mentioned that some of the December.
Speaker Change: In the right directions.
Speaker Change: Great good to hear thanks, a lot. Thank.
Speaker Change: <unk> call I think we did.
Speaker Change: Thank you.
Speaker Change: Okay when my apologies.
Speaker Change: Once again, if you have a question. Please press Star then one the next question is from John <unk> with Canaccord Genuity. Please go ahead.
Speaker Change: What are I.
Speaker Change: I guess last one for me and I'll hop off is.
Speaker Change: Do you think your growth engine can become effective this quarter in terms of looking at our quarter on quarter.
John Penny: Hi, John Penny on for Richard close Thanks for the questions.
Speaker Change: Trimmed.
John Penny: So I guess I have a question about cash flow like if you take cash flow from operations less the FERC the purchase of <unk> lease repayments less equipment loan repayments, so you'll file.
Yeah.
Speaker Change: We are sitting here on may.
It made toward being pure out so we have visibility in our April numbers, we had some trends going into March so that the <unk>.
John Penny: Positive on the quarter, you pulled a little bit on the revolver. This quarter can you just give some commentary of what youre doing in order to generate greater cash going forward.
Speaker Change: <unk> do suggest stabilization and.
Speaker Change: Some uptake in our rental revenue and some recovery on our an.
Speaker Change: On our supplies business as well, but obviously thats just one month into it but more to go but the trends are.
John Penny: Yes, so that's a little bit of timing.
John Penny: Timing and then.
John Penny: Some better controls on the on the Capex spend.
Speaker Change: In the right directions.
Speaker Change: Great good to hear thanks, a lot. Thank.
John Penny: We always.
John Penny: College or investors to look at more of the year to date number or a trailing three quarters number than just look at the quarter.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Once again, if he has a question. Please press Star then one the next question is from John <unk> with Canaccord Genuity. Please go ahead.
John Penny: They tend to.
John Penny: Depending on how we lease and depending on how much.
Speaker Change: Hi, John pending on for Richard close Thanks for the questions.
John Penny: We have purchased there could be some working capital.
John Penny: In those.
John: So I guess I have a question about cash flow like if you take cash flow from operations less preferred the purchase of <unk> lease repayments plus equipment loan repayments.
John Penny: No.
John Penny: All I would say is.
John Penny: <unk>.
John Penny: If you look at maybe about two quarters and three quarters that will kind of look a more stabilized.
John Penny:
John: Positive on the quarter. So you put a little bit on the revolver. This quarter can you just give some commentary of what youre doing to generate greater cash going forward.
John Penny: Patterns than just a quarter.
John Penny: But but kind of when we were talking about it.
John Penny: We spoke about this last quarter we are.
John: Yeah, So that's a little bit of a timing.
John Penny: In the middle of Philips recalls so there is some cash constraints.
John: Timing and then.
John Penny: That comes as a result of it there is some timing in terms of.
John: Some better controls on the on the Capex spend.
John: We always encourage our investors to look at more of the year to date tomorrow or a trailing three quarters number than just look at the quarter there.
John Penny: With Phillips, we had a different financing program with the newer vendors, we have a different financing programs. So there was some some some timing related to that as well, which.
John: Tend to.
John Penny: Push out our leasing.
John: You know depending on how we lease and depending on how much we have purchased there could be some working capital.
John Penny: Other than what our typical phones would have been.
John Penny: Phillips, we call creates a drag for us because we took a lot of those machines out of the auto servicing patients they are.
John: It goes so it so.
John: All I would say yes.
John: <unk>.
John: If you look at maybe about two quarters and three quarters that will kind of look at more stabilized.
John Penny: Sitting in our warehouse or to be shipped but we havent received some of the the shipping details from Philips they have been.
John:
John: Pattern than just a quarter.
John Penny: That is with some struggle on that and to take those equipments back. So we are kind of in a little bit of a working capital of a slash cap.
John: But but due to kind of like when we were talking about it you know a week. We've spoke about this last quarter we are.
John Penny: Capex or spend.
John: In the middle of Philips recalls so there is some cash constraints.
John Penny: Category for lack of a better word because of mis timing between when we are taking equipment off the patients and when we will ultimately get credit from the from Philips, which we haven't received yet.
John: That comes as a result of it there was some timing in terms of.
John: You know with Phillips, we had a different financing program with the newer vendors, we have a different financing programs. So there was some some some timing related to that as well, which.
John Penny: So do you have any visibility as the one that would clear up.
John Penny: I am sorry, do you have any visibility as to when the slide Capex overspend with Philips someone I would clear up.
John: <unk> pushed out our leasing.
John: Other than whatever it could be called pumps would have been.
John Penny: I would say definitely over the next couple of quarters the spend should.
John: Philips recall creates a drag for us because we took a lot of those machines out of the out of servicing patients. They are.
John Penny: Stabilize I mean, there are still a few more.
John Penny: We're the leaders that are out there we ultimately paused this quarter because we were building our backlog in our warehouse, where we were taking it off or patients, but on the other side Philips wasn't able to process. It can take off those so at some point, we have to take that operational decision where do we.
John: Sitting in a warehouse or to be shipped but we havent received some of the the shipping details from Philips they have been.
John: That is with some struggle on that and do take those equipments back. So we are kind of in a little bit of a working capital of a slash capex.
John: Capex or spend.
John Penny: You are going to pause until things clear up with Philips or goal with Philips wants to recycle everything by end of June but I don't think at this point given the pace at which they are able to take those equipment.
John: Category for lack of a better word because of mis timing between when we are taking equipment off the patients and when we will ultimately get credit from the from Philips, which we haven't received yet.
John Penny: We are pretty confident they will end up extending that timeline ultimately so that's why early on our goal was to get everything done by June but I think at this point it will be definitely going into the quarter ending September maybe into December don't know.
John: So do you have any visibility as the one that would clear up.
Speaker Change: I'm sorry, do you have any visibility as to when this light capex overspend with Philips and whatnot would clear up.
I would say definitely over the next couple of quarters the spend should stabilize.
John Penny: I would say, we are kind of more than half way through it but there is still is still more to go in terms of recycling goes equipment out of patients.
Speaker Change: Stabilize I mean, there are still a few more.
Speaker Change: Regulators that are out there we ultimately paused this quarter, because we were building our backlog in our warehouse, where we were taking it off or patients, but on the other side Philips wasn't able to process. It can take off those so at some point, we had a pig that operational decision where we are.
John Penny: Alright.
John Penny: Thanks for that.
John Penny: So I guess.
John Penny: Sequential and year over year drop do you have any like I guess color you can give her commentary as far as how much is attributable to the humana cockpit capitation contract versus the just like seasonal like versus sequential does like seasonal deductible reset versus the disposable contract going away.
Speaker Change: You were going to pause until things clear up with Philips CT gold with Philips wants to recycle everything by end of June, but I don't think at this point given the pace that village.
Speaker Change: They are able to take those equipment.
John Penny: Sure I mean, we.
Speaker Change: We are pretty confident they'll end up extending that timeline ultimately so that's why early on our goal was to get everything done by June but I think at this point it will be.
John Penny: While we don't break it out.
John Penny: Impact to impact.
John Penny: From a public.
John Penny: Rosa perspective, you can suddenly.
Speaker Change: Currently going into the quarter ending September maybe into December don't know right.
John Penny: Deduce that by looking at similar patents last quarter.
Speaker Change: I would say, we are kind of more than half way through it but they chose to.
John Penny: If you look at our Q1 to Q2 last quarter might show some similar trends as well.
Speaker Change: Still more to go in terms of recycling goes because all those patients.
John Penny: Uh huh.
John Penny: And the rest is kind of between Humana.
Speaker Change: Alright.
Speaker Change: Thanks for that.
John Penny: The supplies contract.
Speaker Change: So I guess like with the <unk>.
John Penny: Okay.
Speaker Change: Sequential and year over year drop do you have any like I guess color you can give her commentary as far as how much is attributable to the humana cockpit calculated contract versus the just like seasonal sequential.
John Penny: And then I guess, one more so I guess.
John Penny: My cost of inventory sold as a percentage of revenue dropped pretty substantially.
John Penny: Sequentially in little.
John Penny: A little bit year over year as well.
Speaker Change: Sequential just like seasonal deductible reset versus the disposable contract going away.
John Penny: Do you expect that to kind of stay at that level or are there. Some other kind of one off items this quarter that would make it lower or any commentary you can provide there.
Speaker Change: Sure I mean, we while we don't break it out.
Speaker Change: The impact to impact.
John Penny: Yes, so the court.
Speaker Change: From a public disclosure perspective, you can suddenly.
John Penny: Cost of Bush's another category, where we tend to look at.
You'd use that by looking at similar patents last quarter.
John Penny: Or at least six months to nine months timeframe. If you look at our year to date and where it was at 27, 9% compared with 28% for fiscal 2024.
Speaker Change: If you look at our Q1 to Q2 last quarter it might show some similar trends as well.
John Penny: It is.
Speaker Change: No.
John Penny: Has stabilized.
Speaker Change: And then the rest is kind of between human and.
John Penny: Q1 was slightly higher and.
Speaker Change: Supplies contract.
John Penny: Q2 had somewhat some normalizing adjustments to that coming from.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And then I guess, one more so I guess.
John Penny: Some.
Speaker Change: My cost of inventory sold as a percentage of revenue dropped pretty substantially sequentially and a.
John Penny: Some credits that with you.
John Penny: <unk> received in the previous quarter.
John Penny: And stuff like that but if you look at our six months quarter.
Speaker Change: A little bit year over year as well do you expect that to kind of stay at that level or is there. Some other kind of one off items this quarter that would make it lower or any commentary you can provide there.
John Penny: Six months.
John Penny: Run rate, our fiscal 'twenty to 'twenty four do they kind of lineup pretty consistent.
We do we do hope to see some.
Speaker Change: Yeah, so the quote.
John Penny: Positive trends on the cost of goods with some of the things that we are working on.
Speaker Change: Cost of goods.
Speaker Change: Other category, where we tend to look at Oh, what at least six months to nine months timeframe. If you look at our year to date than what it was at 27, 9% compared with 28% for fiscal 2024.
John Penny: Going into Q3 and Q4.
John Penny: Alright, great. Thank you.
John Penny: Okay.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Mr. Crawford for any closing remarks.
Speaker Change: It has.
Speaker Change: It has stabilized this.
Speaker Change: Q1 was slightly higher and Q.
Greg Crawford: Thank you and thank you all for your participation today as always you can find us on the web at Www quick Tom Medical Dot Com, where we will be posting a transcript of this call and also our updated investor deck.
Speaker Change: Q2 had somewhat some normalizing adjustments to that coming from.
Speaker Change: Some.
Speaker Change: Some credits that with you.
Speaker Change: Thank you and have a great day.
Speaker Change: That we're in good shape in the previous quarter.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: And stuff like that but if you look at our six month quarter.
Speaker Change: Six months run rate, our fiscal 'twenty to 'twenty four do they kind of lineup pretty consistent.
Speaker Change: We do we do hope to see some.
Speaker Change: Positive trends on the cost of goods with some of the things that we're working on.
Speaker Change: Going into Q3 and Q4.
Speaker Change: Alright, great. Thank you.
Speaker Change: This concludes the question and answer session I'd like to turn the conference back over to Mr. Crawford for any closing remarks.
Speaker Change: Thank you and thank you all for your participation today as always you can find us on the web at Www quipped home medical Dot Com, where we will be posting a transcript of this call and also our updated investor deck.
Speaker Change: And have a great day.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating in hepatitis.
Speaker Change: Mhm.
Speaker Change: Yeah.
Speaker Change: Mhm.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].