Viemed Healthcare, Inc. — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. Unaudited, U.S. GAAP financial statements; amounts below are U.S. dollars. Viemed provides home medical equipment and post-acute respiratory care across all 50 states and reports as one operating segment.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $50.6 million | $39.6 million | +27.9% |
| Gross profit / margin | $29.8 million / 58.9% | $24.0 million / 60.7% | Profit +24.2%; margin down 1.8 percentage points |
| Income from operations | $2.2 million | $1.9 million | +14.0% |
| Net income / margin | $1.6 million / 3.2% | $1.5 million / 3.8% | Net income +5.7% |
| Diluted EPS | $0.04 | $0.04 | Unchanged |
| Adjusted EBITDA (non-GAAP) | $10.1 million | $8.3 million | +21.3% |
| Cash from operations | $1.2 million | $10.5 million | Down $9.3 million |
| Capital expenditures | $6.0 million | $4.7 million | Up $1.3 million |
Revenue by source: ventilator rentals $29.2 million (+16.1%); other HME rentals $10.9 million (+58.3%); equipment and supply sales $6.1 million (+28.8%); and services $4.3 million (+58.2%). Active ventilator patients were 10,450, compared with 9,337 a year earlier. Medicare represented 43% of revenue, versus 45%.
Gross margin declined as revenue mix diversified toward other products and services. Management attributed higher SG&A primarily to workforce growth: employees increased 35% year over year to 1,030. SG&A rose 25.6% to $24.8 million, but declined as a share of revenue to 49.0% from 50.0%. Management expects that ratio to improve through year-end 2024 and gross margin to remain relatively stable in upcoming periods.
Balance sheet, liquidity and debt
- Cash was $7.3 million at March 31, down from $12.8 million at year-end. Accounts receivable rose to $24.5 million from $18.5 million; the allowance for uncollectible accounts was $14.4 million, versus $11.1 million.
- Working capital was approximately $8.5 million. Total assets were $154.9 million and shareholders’ equity was $116.3 million.
- Reported debt was approximately $6.8 million, including $4.8 million drawn under the term facility, $2.0 million under the revolver, and acquired equipment financing; the balance-sheet carrying amount is net of financing costs. Lease liabilities totaled $3.0 million.
- The senior facilities provide for up to $30 million revolving and up to $30 million delayed-draw term capacity, both maturing in November 2027. Interest is floating-rate. The company reported compliance with its financial covenants; actual undrawn availability is not specified in the filing text provided.
- Operating cash flow was $1.2 million; investing cash outflow was $5.4 million and financing cash outflow was $1.3 million. Cash declined by $5.5 million during the quarter. The company stated that cash, expected operating flows and available credit are expected to fund planned operations and obligations for at least 12 months from filing.
Material changes, outlook and risks
- Growth reflected expansion in ventilator and other respiratory offerings, PAP resupply and sleep services, staffing activities, and the June 2023 acquisition of Home Medical Products (HMP). The filing does not quantify the portion of Q1 growth attributable separately to HMP versus organic growth.
- The Change Healthcare cybersecurity incident delayed claim submissions to certain payors. Viemed said it resumed submissions to several affected payors and used alternative platforms for most claims by quarter-end. It attributed higher receivables and weaker operating cash flow to the delays; the filing does not quantify the incident’s total financial impact.
- Management cited continued opportunity from home-based care, demographic and chronic-disease trends, and expansion into new territories. It also identified reimbursement and payor pricing pressure, inflation and supply-chain costs, regulation, competition, acquisition integration, and cybersecurity as risks. CMS 2024 DMEPOS fee schedule adjustments ranged from 2.6% to 3.0%, depending on item category.
- There is no specific full-year revenue or earnings guidance in the filing. Management’s stated expectations include relatively stable gross margins and improving SG&A as a percentage of revenue during 2024.
- In the Vyaire/CareFusion dispute, a court found Vyaire had breached contract, but damages remain unresolved and Vyaire appealed. Viemed reports $0.9 million of outstanding prepayment as a long-term asset, has not accrued a liability for Vyaire’s $4.7 million counterclaim, and says the possible loss range cannot be determined from available information.
- Viemed reported no material changes to risk factors from its 2023 Form 10-K, no material undisclosed off-balance-sheet arrangements, and effective disclosure controls and procedures.
Important facts for investors to verify
- Whether delayed claims submissions are fully resolved, how quickly receivables convert to cash, and whether allowance estimates remain adequate.
- Whether revenue growth and patient additions continue, including the respective contribution of organic expansion and HMP.
- Whether product and service mix stabilizes gross margin and the expected SG&A leverage appears in subsequent quarters.
- Cash requirements for rental-equipment purchases, debt service and any acquisitions; covenant headroom and actual revolver availability.
- Developments in the Vyaire appeal and damages proceedings, and any governmental audits, investigations or reimbursement changes.
- Adjusted EBITDA is non-GAAP and should be assessed alongside GAAP earnings and cash flows; it was $10.1 million while operating cash flow was $1.2 million in Q1.