Viemed Healthcare, Inc. — FY 2019 Form 10-K
Reporting period: Year ended December 31, 2019. The filing also presents unaudited fourth-quarter results. Amounts are U.S. dollars unless noted.
Business context
Viemed provides home-based respiratory care and durable medical equipment, primarily ventilator rentals, through subsidiaries operating in 31 U.S. states. It reported 418 employees, including 228 respiratory therapists, at year-end. Ventilator rentals represented 86.0% of FY 2019 revenue; Medicare and Medicaid together accounted for 64%.
Financial performance
| Metric | FY 2019 | FY 2018, adjusted |
|---|---|---|
| Revenue | $80.3 million | $64.5 million |
| Gross profit / margin | $56.0 million / 69.8% | $47.8 million / 74.1% |
| Operating income | $8.7 million | $10.1 million |
| Net income / diluted EPS | $8.5 million / $0.21 | $9.5 million / $0.24 |
| Operating cash flow | $19.1 million | $22.4 million |
| Adjusted EBITDA | $19.0 million | Not clearly stated as an annual total in the presented summary |
Revenue increased 24.5%, led by ventilator rental growth of 19.2%. Active ventilator patients rose 31%, from 5,905 to 7,759. Net income declined 10.3%; management attributed pressure principally to higher SG&A, research and development, and stock-based compensation. The reported gross-margin comparison was affected by the 2019 adoption of ASC 842, which moved bad debt expense into revenue; management said this presentation change reduced 2019 revenue by $9.8 million and lowered reported gross margin.
For Q4 2019, revenue was $21.4 million, gross profit $14.2 million, net income $2.4 million, and Adjusted EBITDA $5.6 million. Q4 2018 adjusted revenue was $18.4 million and net income was $3.0 million.
Cash, liquidity and debt
Year-end cash was $13.4 million, versus $10.4 million a year earlier. Current assets were $27.8 million and current liabilities $25.9 million. Operating cash flow was positive, but lower year over year; investing outflow rose to $12.8 million as the company expanded its rental equipment fleet and acquired its headquarters. Total 2019 capital expenditures, including financed equipment, were $25.4 million.
At year-end, term debt was $9.4 million and lease liabilities were $10.1 million. The $10 million revolving credit facility was undrawn; the company reported compliance with its covenants. Management believed cash, expected operating cash flow, and available credit would fund operations, planned capital needs, and debt service for at least 12 months. No dividends were anticipated.
Restatement, outlook and key risks
- Restatement and controls: The company corrected rental revenue previously recognized in full in the billing month rather than pro rata over the lease term. Q2 and Q3 2019 statements were deemed materially misstated and restated; 2018 and other affected periods received corrections management characterized as immaterial. Previously issued information for the non-reliance periods should not be relied upon. Management identified a material weakness in revenue-recognition controls and concluded disclosure controls were ineffective at December 31, 2019. It planned monthly monitoring controls for 2020; remediation was not yet established as complete.
- Outlook: Management anticipated continued organic growth from expansion into existing and new markets and the shift toward home care. It expected SG&A as a percentage of revenue to remain broadly near 2019 levels and R&D costs to increase in 2020. The filing gives no specific revenue or earnings guidance.
- Reimbursement and compliance: Revenue depends substantially on government and commercial payors. Documentation audits, denials or recoupments, reimbursement cuts, Medicare competitive bidding, and possible prior authorization for non-invasive ventilators could affect revenue, cash flow, and margins.
- Other risks and unusual items: The business relies on a limited number of equipment manufacturers and faces competition and regulatory risk. The doubtful-account allowance was $7.8 million, up from $4.3 million. Phantom-share liability was $5.3 million, with related expense influenced by share-price movements. Management said routine litigation was not expected to materially affect results; no material undisclosed off-balance-sheet arrangements were reported.
Investor verification priorities
- Review the restated quarterly figures and Note 3/Note 13, including the revenue deferrals and associated cost adjustments.
- Track implementation and testing of the revenue-recognition control remediation plan and any subsequent control or reporting updates.
- Assess receivables quality, allowance adequacy, collection trends, and government-payor exposure.
- Monitor reimbursement rules, competitive bidding exposure, prior-authorization developments, and supplier equipment availability.
- Reconcile ongoing equipment investment and lease obligations with cash generation, debt covenants, and management’s liquidity expectations.