Viemed Healthcare, Inc. — Q2 2022 Form 10-Q
Business and period: Viemed provides in-home durable medical equipment and post-acute respiratory care in 48 U.S. states. This unaudited filing covers the quarter and six months ended June 30, 2022; financial amounts below are U.S. dollars.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $33.3 million | $27.4 million | $65.6 million | $55.8 million |
| Gross profit / margin | $20.4 million / 61.2% | $17.6 million / 64.3% | $40.1 million / 61.2% | $35.4 million / 63.4% |
| Operating income | $1.0 million | $2.7 million | $3.2 million | $4.0 million |
| Net income | $1.0 million | $1.6 million | $2.7 million | $3.3 million |
| Diluted earnings per share | $0.02 | $0.04 | $0.07 | $0.08 |
| Adjusted EBITDA | $6.5 million | $6.8 million | Not clearly stated as a six-month figure | Not clearly stated as a six-month figure |
Q2 revenue grew 21.6%; excluding COVID-19 response revenue, management reported growth of 26.1%. For the first half, revenue grew 17.5%, or 22.4% excluding COVID-19 response revenue. Ventilator rentals remained the largest revenue source. Growth in other DME rentals, equipment and supply sales, and staffing-related services broadened the revenue mix, while COVID-19 response revenue declined.
Profitability weakened despite revenue growth: Q2 net income fell 38.3% year over year and first-half net income fell 16.0%. Management attributed margin pressure to product and service mix changes and higher labor and supply costs. Q2 SG&A rose 36.1%, faster than revenue, reflecting headcount, compensation, commissions, travel and fuel costs.
Cash, debt and liquidity
- Cash and cash equivalents were $21.9 million at June 30, 2022, down from $28.4 million at December 31, 2021. Current assets were $41.9 million and current liabilities were $17.9 million.
- First-half operating cash flow was $12.1 million, versus $8.8 million a year earlier. Investing used $10.5 million, including $11.0 million of property and equipment purchases; financing used $8.1 million, including $7.0 million of share repurchases. Cash declined $6.5 million overall.
- Recorded notes payable totaled $4.8 million; lease liabilities totaled $0.5 million. The $10.0 million revolving credit line was undrawn. The company reported compliance with debt covenants. A $5.0 million term note was due September 19, 2022.
- Management said available cash, expected operating cash flow and the undrawn credit line should fund operations, capital expenditures and debt service for at least 12 months from the filing date.
Outlook, risks and unusual items
- Management expects growth for the rest of 2022 to exceed growth in pandemic-impacted periods, while acknowledging residual pandemic effects may affect the growth rate. It expects normal-operations gross margin to remain relatively consistent with Q2 and SG&A to decline as a percentage of revenue as costs stabilize. No quantified revenue or earnings guidance was provided.
- The company repurchased and canceled 1.35 million shares for $7.0 million in the first half; 633,447 shares remained authorized for repurchase at June 30. Management cautioned that repurchases may reduce cash reserves and do not guarantee long-term shareholder value.
- Accounts receivable included a $9.4 million allowance for doubtful accounts, up from $7.0 million at year-end; the first-half provision for uncollectible accounts was $6.3 million. Medicare and Medicaid represented 49% of outstanding receivables. Management identified collection estimates and reimbursement uncertainty as significant judgments and risks.
- In the OIG Medicare ventilator-claims matter, a reconsideration review found about 77% of claims reviewed medically necessary and payable. Recalculated overpayment requests totaled $1.1 million; appeals continue. The company recorded no accrual, assessing a loss as not probable but reasonably possible.
- A separate dispute with Vyaire concerns a $0.9 million prepayment for equipment not delivered and Vyaire’s $4.7 million counterclaim. The company recorded the outstanding prepayment in other long-term assets and recorded no counterclaim accrual, judging a loss not probable.
- COVID-19 response revenue was $0.2 million in Q2 and $2.3 million in the first half, both down year over year; management expected it to decline further through 2022. Other risks include reimbursement changes, regulatory audits, supply and staffing constraints, and potential COVID-19 disruption.
Investor verification priorities
- Track receivable collections, allowance adequacy and the concentration of Medicare/Medicaid balances, particularly given the $6.3 million first-half bad-debt provision.
- Monitor whether revenue growth translates into improved operating leverage and margins as staffing and other costs rise.
- Verify repayment or refinancing of the term note due September 2022 and the effect of ongoing equipment investment on cash and liquidity.
- Follow the OIG appeals and Vyaire litigation, including any change in potential exposure or recoverability of the $0.9 million prepayment.
- Reconcile the tax discussion: the financial statements report a $1.023 million tax provision for first-half 2021, while the MD&A text describes a roughly $1.0 million benefit for that comparison period.