Viemed Healthcare, Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; comparisons are to FY2021. Amounts are U.S. dollars. Viemed provides home medical equipment and post-acute respiratory care across all 50 states, with ventilator rentals its largest business line.
Financial and operating performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $138.8 million | $117.1 million |
| Gross profit / margin | $84.7 million / 61.0% | $73.4 million / 62.7% |
| Operating income / margin | $8.3 million / 5.9% | $11.6 million / 9.9% |
| Net income / margin | $6.2 million / 4.5% | $9.1 million / 7.8% |
| Diluted EPS | $0.16 | $0.22 |
| Cash from operating activities | $27.7 million | $22.5 million |
| Cash and cash equivalents at year-end | $16.9 million | $28.4 million |
- Revenue grew 18.6%; excluding COVID-19 response sales and services, revenue increased $28.1 million, or 25.9%. Ventilator rentals rose 10.6% to $92.7 million; other HME rentals rose 54.9% to $21.4 million; equipment and supply sales rose 58.9% to $13.9 million. Staffing and other service revenue increased to $8.5 million.
- COVID-19 response revenue fell 73.4%, to $2.3 million from $8.6 million. Ventilator rentals represented 66.8% of total revenue and approximately 67.9% of traditional revenue excluding COVID-19 response activity.
- Gross margin declined 1.7 percentage points. Management attributed the decrease to revenue mix diversification and inflationary cost pressures. SG&A rose 24.2% to $68.2 million, primarily reflecting compensation, headcount growth and travel costs. Net income declined 31.8%.
- FY2022 fourth-quarter revenue was $37.5 million, gross profit was $22.9 million (61% margin), net income was $2.4 million and Adjusted EBITDA was $9.3 million. In Q4 2021, revenue was $32.0 million, gross profit was $19.7 million (62% margin), net income was $4.1 million and Adjusted EBITDA was $9.5 million.
- Operating cash flow increased to $27.7 million; investing cash outflow was $24.0 million, including $22.9 million of property and equipment purchases, primarily patient rental equipment. Financing cash outflow was $15.3 million, including $9.6 million of share repurchases and debt principal payments.
- Year-end total assets were $117.0 million and total liabilities $19.9 million. No borrowings were outstanding under the new credit facilities at year-end; lease liabilities were $0.7 million. The facilities provide up to $30 million revolving and $30 million delayed-draw term capacity, with a conditional accordion of up to an additional $30 million. Management said cash, operating cash flow and available facilities were expected to cover needs for at least 12 months from filing.
Changes, outlook and notable matters
- Management expects gross margin to improve as inflationary pressures ease and inflation-adjusted reimbursements rise, partly offset by product and service mix. It expects SG&A as a percentage of revenue to decline in 2023 as costs stabilize relative to growth, and R&D costs to remain broadly consistent with 2022. These are expectations, not quantified financial guidance.
- Active ventilator patients increased to 9,306 at year-end 2022 from 8,405 a year earlier. The company employed 743 people, including 292 licensed respiratory therapists.
- Medicare and Medicaid represented 56% of traditional revenue excluding COVID-19 response activity, down from 64% in 2021. CMS reimbursement, documentation requirements, audits and potential changes in coverage remain key business risks. The 75/25 blended Medicare DME reimbursement rates in non-competitive-bidding, non-rural areas were extended through the later of the COVID-19 public health emergency or year-end 2023. The next competitive-bidding round had not been announced; current Round 2021 contracts expire December 31, 2023.
- The company repurchased and canceled 1.79 million shares for $9.6 million during 2022. It reported no cash dividends and said it did not anticipate paying dividends in the foreseeable future.
- In a Medicare audit dispute involving 100 non-invasive ventilation claims, the QIC found approximately 77% of reviewed claims properly payable; in December 2022, an Administrative Law Judge overturned all remaining appealed claims. Viemed reported that the resulting refund was received after year-end.
- A supplier dispute with Vyaire remains in litigation. Vyaire seeks $4.7 million; Viemed considers a loss not probable and has not accrued a liability. The company reports $0.9 million of outstanding prepayment for undelivered equipment as a long-term asset. Viemed also disclosed potential litigation relating to the Philips device recall.
- Management identified the allowance for doubtful accounts as a critical estimate: it was $8.5 million at year-end, compared with $7.0 million in 2021. The auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls and internal control over financial reporting were effective. The auditor did not provide an internal-control attestation.
Key investor verification points
- Track organic ventilator-patient growth and whether diversification in PAP, oxygen, supplies and staffing can offset declining COVID-related revenue without further margin erosion.
- Review reimbursement policy, Medicare documentation and audit developments, including any new competitive-bidding or prior-authorization requirements.
- Assess receivables quality, the elevated doubtful-account allowance and cash conversion as the business scales.
- Monitor Philips recall-related claims and the Vyaire litigation, including recovery of the equipment prepayment.
- Confirm capital spending, share repurchases and use of the undrawn credit facilities against liquidity, covenant limits and growth plans.