Q2 2025 Viemed Healthcare Inc Earnings Call

Please and welcome to the V men. Healthcare second quarter 2025 earnings call at this time. All participants are in a listen-only mode. A question and answer session will follow the former presentation.

Home keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Trey Fitzgerald. Thank you. You may begin

Thank you and good morning, everyone. We appreciate you joining us today. Please note, that our marks in this conference call may include forward-looking statements under the US 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 risk 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, or the security regulatory authorities in certain provinces of Canada.

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.

The second.

Water Financial supplement, and financial news release, as well, as a related financial statements are available on the sec's website. I'll now turn it over to our s, our CEO, Casey Howe to get things start.

Okay, thank you Trey. Good morning everyone. And thank you for joining us today.

First and foremost, I want to give a big shout out to our more than 1200 employees and publicly. Welcome our newest family members from Lee Hands, Medical Equipment,

Thank you for all that you do and care for our patients providers partners and each other as we continue to grow Finance, trusted place in the home. We have an incredible team and each of you are making a difference in the lives of our patients.

This quarter underscores a clear theme, our discipline execution of the long-term strategy is driving tangible. Measurable results.

We sustained impressive growth on our core in-home ventilation business where we've established ourselves as a national leader in innovator.

For the 17th consecutive quarter, we've increased our active ventilator, patient count at a strong and steady pace.

That kind of consistency and scale doesn't happen by chance it happens because we built the best-in-class clinical and operational model that addresses the deeply underserved population and we continue to expand our leadership in this critical area of care.

At the same time we're seeing even faster growth in our complimentary product offerings, especially sleep and resupply which have been long strategic priorities. These offerings were developed intentionally to meet the evolving needs of our patient. Base. Results are clear. Those Sleep Therapy and resupply have shown strong sequential and year-over-year growth. Accelerating the diversification of our Revenue mix and strengthening our margin profiles.

Building on this momentum, we are successfully advancing. Another layer of this strategy expanding our addressable at home Market.

The recent acquisition of Lehand Medical Equipment marks a critical step forward in this initiative.

With Lee hands, we're entering the maternal Health space further diversifying our patient base and leveraging by the international infrastructure and pay relationships to reach new patient, populations earlier, in their Healthcare Journey.

at the same time, we're using the hands footprint to expand our existing complex respiratory and sleep offerings in Illinois and Wisconsin, just as we've done organically and other markets,

We hands bring the scalable platform focused on maternal Health, introducing a new population for us, this fulfillment technology aligns with our resupply model. And with our payer relationship that extend nationally, we are well positioned to grow this service Beyond Illinois and Wisconsin.

This represents a natural and strategic extension reaching patients earlier in their care. Continuum. With the same operational, discipline and compassion. That Define our respiratory services.

Ultimately, our goal is to serve patients from the beginning of Life through to the end and every stage in between.

Our organization continues to become more efficient every quarter supported by the fact that we've been able to enhance our growth while leveraging, our core structure, we are proud of our progress today. This clearly becomes a story of the first application and execution.

Now let's focus on the performance within our business in more detail in the second quarter of 2025.

Events, accounted for 54% of our revenues and remained the strong performing product sector. Once again this quarter.

Right. Now we're seeing our fast growth at the Sleep tests during the quarter of Sleep Therapy. Patients were up, 15% sequentially, and 51% year-over-year.

And setups were up an incredible 72% year-over-year.

We're focused on aggressively. Maintaining this growth Trend with 8, new sleep areas launched since the beginning of the year.

We're seeing a similar growth trajectory with our patients and our resupply program, which was up, 10% sequentially, and 25% year-over-year.

With the rapid growth of new patients, starts and patients under therapy, were expected to see strong growth and resupply the back half this year. And Beyond as these patients, get forwarded, the entire program.

We are also pleased to see an influx of patients transferring. Their sleep resupply needs start programmed from our competitors. This is the signal that our care Continuum is working and solve the real problem for Sleep, patients and referral source.

While our staff and business were up year-over-year for the first time, we did experience a sequential slowdown during the second quarter, resulting from softened labor demand. This business has seen significant growth over the past 2 years, and we believe it will be on a more normalized path going forward as we close on contracts that will be fulfilled throughout the back half of the year.

Last quarter, we discussed some of the new regulatory announcements that have been recently introduced.

Now that the final rule or what we anticipate is close to final is in place on the NCD. I want to provide some color around what we're thinking.

Overall, we're pleased with the NCD final rule. It's a major opportunity in terms of what we've been fighting for as a collective industry and as an individual company,

the big win is that tried and failed approach on BiPAP and stepped therapy is over. That's a huge victory for patients because the ma plans have been leaning on the step therapy as a means to divert, and defer using non-invasive ventilation on patients.

Now, all the MMA plans will have to follow the NCD making, this less burdensome for the patient and reducing our operational lift of swapping out equipment.

The new NCD does require us to document and Report usage metrics on the patient. However, we've been preparing for this requirement for a while and are ready with our engaged care manager and Technology platform which has been designed to help us document usage and compliance.

The last point I'll make here on the NCD. Is that not everyone in the industry is ready for this? We believe the mom and pop operators who don't have the scale, May struggle with this MTV.

We expect this could lead to some asset opportunities, down the road or possibly industry consolidation.

This is where our business model, which emphasizes improving quality of life. Across the full patient Journey, not only benefits patients, but also positions us to operate effectively in an increasingly complex environment.

We're pleased that CMS has furthest advanced on the patient struggles and connected with just how effective non-invasive ventilation is for this high-touch COPD population.

The industry is still working through a handful of specifics and open questions with CMS, but their responses have been very encouraging, a home care notice. It's never seen such an Abrupt shift from what was originally proposed to where we ended up with, as they acknowledged the patient concerns

The other recent news that the potential return of competitive bidding for dmes is now being discussed by this Administration.

As before we remain, well, positioned to navigate any future iteration of the program.

Our view is that the more sophisticated providers tend to succeed in a competitive bidding environment.

Although CMS is not indicated when the program might resume, typical 12 to 18 months of implementation period, following rule finalization suggests that the earliest you could take effect this 2027 with the possibility of delays taking it into 2028 or 2029.

The good news is thanks to the recent NCD resolution. Our industry has never been more aligned and well positioned to educate regulators and present Solutions Nationwide.

Overall, we're proud to be so well positioned in the current environment.

This quarter's results, reaffirms the resilience of our model and the discipline of our execution.

We said we would need in complex, Respiratory Care. And we've delivered 17 quarters of consecutive growth in our poor ventilation systems.

We said we scale complimentary Services sleep. And resupply. Our now, our fastest growing segments

We said it's Staffing would enhance our ability to meet clinical demand of the organization while adding a new layer of diversification. And today that accounts for approximately 10% of our total revenue was 75% of the offering supporting supported by behavioral and Social Service needs.

And through discipline M&A, our successful integration of Nation P and HomeMed proves that we have the team to do so.

And now our transaction of lead and medical stands to prove, we are headed towards another Frontier of delivering on diversification, to a new batch of patients and maternal health.

This isn't just progress its execution at the highest level. It's proof that our long-term diversification was delivered and our vision is coming to fruition. We are more confident than ever in our ability to keep delivering further value for our Stables.

For more on our operational Financial results for the quarter. I'll now turn it over to Todd Zender, our chief operating officer. All right. Thank you. Casey in reviewing the financial results. All figures are in US Dollars and the full results have been made available in the SEC website. And my comments today, I'll reference disclosures, we have made available in our quarterly Financial supplement, this supplement can be found on our IR website.

Our year-over-year Revenue increased 14.7% and was entirely driven by organic growth. This quarter keeping us within the range. We had anticipated for organic growth during the year.

The core vent business accounted for 54% of the revenue. The Sleep business increased to 19% of revenues. The Staffing business was 8% and oxygen was 10% of Revenue.

Gross margin was 58.3% for the quarter compared with 59.8% for the second quarter of 2024 and 56.3 in the first quarter of 25.

The year-over-year decline was consistent with what we've been calling out. The last several quarters namely that while margins remain, quite strong and steady in our core vent business. Its percentage of overall Revenue has declined year-over-year on a much larger base.

The year-over-year comparisons for us on gross margin, the gross margin line are becoming less relevant. As we focus more on the capex, light businesses such as sleep, resupply and Staffing. That allow us to leverage sgna and drive, net income, adjusted Ava, and cash flow growth.

That being said, we did see a sequential improvement from Q1 due to the growth in the Sleep business outpacing the growth of all of our other businesses.

When we layer in Lee hands in the second half of the year, we'll continue to see even more evolution of the gross margin as a less relevant measure.

Adjusted e butt off for the quarter, grew 12% year-over-year to 14.3 million is driven by strong organic growth and contributions from each of our businesses.

Adjusted EBITDA margin for the quarter was 22.7%, in line with our full year projection, compared with 23.3% a year ago.

We continue to leverage our investments, in new sales, talent and Technology with sgna at 45.7% of Revenue. In the quarter, a 250 basis, point Improvement year-over-year.

Is ahead of our original full year projections but also sets the stage for continued sgna leverage as we benefit from a more favorable product mix and sustained. Operational efficiencies

Turn into capex recall. That last quarter, we introduced some incremental disclosure in our supplemental for net capex. Over the trailing 8 quarters to highlight the impact of our vent Exchange program with Phillips.

This was a once in a lifetime opportunity to upgrade our vent Fleet and significantly extend the life of the fleet as well.

We believe this program has set us up to support the continued growth we're experiencing from net vendor ads.

Now that we've completed the exchanges, we expect our capex to normalize going forward.

We also expect this completion and the lower cash tag is taxes from the final legislation packages to lead to improvement in our adjusted free cash flow sequentially through the balance of the year.

We continue to fund our capex out of discretionary, cash flow and manage the business in order to drop free cash flow onto the balance sheet.

Tariffs continue to be in the news but like others in our industry we have yet to see a material impact.

For 2025, our supplier contracts are already locked in, and we're in constant contact with our suppliers for any indications that tariffs could impact us.

I would also note that we believe the Nairobi protocol should continue to exempt. Most medical equipment from any tariffs.

Our balance sheet continues to create opportunity for us to grow. As of June 30th, we have 55 million available on our credit facilities and a 30 million according to 30 million dollar accordion if needed.

20 million of cash on hand at quarter, end and a working capital balance of 18 million with no net debt.

This liquidity enabled us to put in place our third share repurchase program since going public.

In early June, the board authorized us to repurchase up to 5% of our outstanding common stock.

No time in executing on the program during the quarter.

By June 30th. We had Acquired and subsequently canceled, approximately 270,000 shares under the program for a total cost of 1.8 million.

the share repurchases are in a creative use of capital and we have ample liquidity to fund the program and inorganic growth,

The strong balance sheet gave us the confidence to pursue the Leahanns acquisition as well.

The transaction closed on July 1st and we funded it with a combination of 9 million of cash and 18 million of borrowings on the credit facility.

With the strong cash flow we're anticipating from the trilogy exchanges completed, we expect to pay down this debt opportunistically in conjunction with executing on the share buyback.

Based on our results for the second quarter and the inclusion of we hands effective July 1st. We've raised our guidance for the full year 2025

Our net revenue range is now $271 million to $277 million, reflecting a 22% growth over 2024 at the midpoint.

we also raised the adjusted e, but our range to 59 to 62 million, which implies 18% growth over 2024 at the midpoint

Both increases in the ranges are primarily related to the inclusion of Lee hands for the second half of this year.

And our quarterly supplement, we provided some additional commentary and assumptions on our guidance, I'll cover these briefly. First we still expect organic growth year-over-year in each quarter to be consistent with increases, we experienced in 2024

With the inclusion of Lee hands, will obviously see a bit more of total revenue growth than we had originally forecast.

We expect organic sequential Revenue growth in Q3, through Q4, to be in a range of 5 to 9%.

The adjusted EB, but our ranges for the full year, assume an adjusted e, but on margin of approximately 22%.

With the completion of our ventilator, Exchange program in June capex, is expected to normalize for the remainder of the year.

With 2 quarters of record Revenue, so far built on solid execution and organic growth. We're entering into the second half of 2025 with even a stronger Outlook.

We've actively deployed Capital into a tremendous growth opportunity in Lee hands that sets us up nicely for this year and Beyond.

And we've used our available liquidity to repurchase over 1.8 million dollars worth of shares in second quarter with additional shares already. Bought during the third quarter.

Thank you for joining us today. This concludes our prepared remarks and we will now open up the floor for questions.

We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press start to, to remove yourself from the queue for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

1 moment, please while we pull for questions.

Our first question comes from the line of Ryan Langston with TD Cowen, please proceed with your question.

Thanks. Good morning on the bent program, upgrade and exchanges. Can you maybe go into a little bit more detail on sort of the benefits of that move? I guess, both from a financial and a clinical perspective,

Yeah, sure Ryan. I mean, the, the financial part is pretty clear they, the Philips ended up buying these back, um, it the price that they paid us, depending on the age of the event. So we got cash back for the event, which was generally higher than our Netbook value. As you can see, through the gains that came through the p&l and the clinical, uh, the true clinical value is that we got a event that had a born on date of this year versus events that could be anywhere from 5 to 10 years old. So we got a new asset that had you know, lower repairs. And maintenance didn't have to get pmed as much and a new what? We'd appreciate a 10-year life.

Um, the vents have obviously gotten more and more technologically, favorable Bluetooth connectivity, different features, um, so it's, it's just been a good program. It's unfortunate that Philips had to go through it. But uh, we took to uh, we took full advantage of it.

Got it. And I guess, you know Dr. Osno has been kind of in his seat for a few months. You know, I think CMS has been fairly aggressive to

Some places like ma Home, Health eops, Rule and particular. I guess, do you have a view or do we know, maybe what, you know, key. He sort of thinks about about DME in in general, thanks.

So, you know, you're the, the competitive bidding pressure is definitely coming from you know, from what we understand the White House level at all the way to the top. But uh, it's uh, you know, they kind of really, and they were the ones that initiated it the first go around and the first Trump Administration.

So, uh, you know, it's it took a page out of that plane but us and kind of does it offer refreshed, it and submitted it. So we'll, uh, we'll just have to wait and see, but, um, you know, we're going through the same process as an industry to just kind of give them the feedback that they need to roll out a successful competitive bidding program because, you know, competitive bidding doesn't have to be a bad thing if it is structured in the right way. And so that's the, that's the level that we're at. It's just providing a lot of Education, a lot of feedback to the to Dr. Oz and his team,

Got it. Thank you.

All right, thanks Ryan.

Thank you.

All right, next question comes from the line of EA zhukov with freedom broker. Please proceed with your question.

Good morning. Uh thank you for taking my questions. So I have a couple of questions on the revenue side. Uh I see that there's been a notable uptick in sleep therapy, patient count. I'm just curious. Was there any unusual factors that contributed to this growth?

Nothing that we can point out Ilya. I mean, obviously we have grown our sleep sales staff, some, but we've also just opened it up over the last few years of um,

Letting our entire sales, force, sell sleep. And as we become more operationally, sound and Savvy. Uh, maybe more of those referral sources are, uh, sending more orders into us. Um, we read everything, like most of the investors do, and it does not appear. That glp1 is doing anything negative, um, to us, it's maybe coincidental but maybe not that our sleep business has been growing rapidly since glp1 have come about so that might play into some of the manufacturer studies that show that people are taking sleep Health, a little bit more seriously as they lose some weight, so it could be a combination of all of that. Um, we're very happy with the growth and the, uh, scalability of sleep around the country. As you can see, it makes 19% of our revenues now. And um, we're just going to keep growing it as fast as we possibly can. Yeah. And I would I'd add to that Ilya that you just a reminder when we're thinking about the Sleep Therapy patients. Um you know we will see a

Lag between um our path therapy patients that then become 3, 6 months later, roll into our our sleep program and and Casey alluded to that in his prepared remarks. And so when we talk about New Path therapy setups, being up, 72% year-over-year, you're not going to see that type of growth in the resupply, you know, it's going to be delayed a little bit longer tail for another 3 to 6 months which is really why we're excited about the back half of the year. And then looking into next year. As you know we have a more maturing uh, sleep program.

Okay, got it. Thank you. And could you also elaborate on the quarterly revenue dynamics in this stuff in business? So what drove the decline in service revenue in Q2?

Oh, yeah. Well, 76% of the business is coming from Behavioral Health and Social Service needs, and we're fulfilling it throughout the country with, you know, with different state agencies and so on and so forth. So we're getting Appropriations to do business and then it's up to the state to to kind of let us know how many folks they need. But yeah, we're pleased with that shift in the business, you know. We kind of, you know, we started Staffing originally. It was in the middle of a critical Labour shortage to find our own respiratory therapist to find some nursing to, uh, nursing for our referral sources.

And that has shifted throughout over the years. And so, uh, they've been pretty Scrappy. They've been, you know, even though they had a sequential slowdown this quarter, we're optimistic for some of the Appropriations that they landed for the back half of the year. We'll just it's kind of up to the states that we want to work with to see how much they want to fulfill those needs soap. But uh but we're in a good spot with it for it to be on a more normalized level.

Great. Thank you. That's very helpful.

All right. Thank you, IA.

And as a reminder for anyone who has any questions, you may press star 1 on your telephone keypad to join the queue.

And it looks like we have reached the end of the question and answer session. I'll turn the call back over to management for closing remarks.

We want to thank everybody for uh participating. We're obviously very excited about the back half of the year and uh, if anybody has follow-up questions, just reach out to us. Have a great day.

Thank you. This concludes today's teleconference, and you may disconnect your line at this time. Thank you for your participation.