Viemed Healthcare, Inc. — Q1 2023 Form 10-Q
Business and period: The company provides home medical equipment and post-acute respiratory healthcare services across the United States. This unaudited filing covers the three months ended March 31, 2023, compared with Q1 2022; balance-sheet figures are compared with December 31, 2022. Amounts below are U.S. dollars.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $39.6 million | $32.3 million; up 22.6% |
| Gross profit / margin | $24.0 million / 60.7% | $19.7 million / 61.2% |
| Operating income / margin | $1.9 million / 4.9% | $2.2 million / 7.0% |
| Net income / margin | $1.5 million / 3.8%; diluted EPS $0.04 | $1.8 million / 5.5%; diluted EPS $0.04 |
| Adjusted EBITDA | $8.3 million | $7.3 million |
| Cash from operations | $10.5 million | $7.1 million |
| Cash and cash equivalents | $23.5 million at March 31 | $16.9 million at December 31, 2022 |
| Total assets / shareholders’ equity | $124.6 million / $100.0 million | $117.0 million / $97.1 million at December 31, 2022 |
Investing activities used $3.9 million, primarily for $4.7 million of property and equipment purchases, partly offset by $0.8 million in disposal proceeds. Financing activities provided $0.04 million, including $0.5 million of option-exercise proceeds and $0.5 million of share withholding repurchases. The company reported no borrowings under its credit facilities; lease liabilities totaled $0.6 million. It had up to $30 million available under a revolving facility and a separate delayed-draw term facility of up to $30 million, both maturing in November 2027. The company reported covenant compliance.
Changes and operating drivers
- Revenue growth reflected ventilator rentals (+16.9%), other durable medical equipment rentals (+58.4%), equipment and supply sales (+56.9%), and service revenue (+119.8%). Active ventilator patients rose to 9,337 from 8,434 a year earlier.
- COVID-19 response sales and services fell to zero from $2.1 million in Q1 2022. Revenue excluding those activities increased 31.2% year over year.
- Gross margin edged down to 60.7% from 61.2%, which management attributed mainly to a changing product and service mix. SG&A rose 25.3%, faster than revenue, primarily due to staffing growth, compensation and incentive costs, including increased phantom-share expense.
- Net income declined 13.9%. Management cited the prior-year benefit from COVID-related activity and Provider Relief Fund income. The allowance for doubtful accounts increased to $11.0 million from $8.5 million at year-end; the provision for uncollectible accounts was $4.1 million.
Outlook, risks and notable items
Management said cash, expected operating cash flow and available credit should fund planned operations, capital spending and debt service for at least 12 months from the filing date. It expects gross margin in normal operations to improve through year-end as inflationary cost pressures subside and collection seasonality helps, partly offset by diversification of products and services. It also expects SG&A as a share of revenue to improve as costs stabilize, while R&D costs are expected to remain consistent with 2022. The filing provides no specific full-year revenue or earnings guidance.
- Management highlighted uncertainty around the end of the COVID-19 public health emergency and related waivers, reimbursement rules and demand. Medicare reimbursement changes, competitive bidding, payor concentration, collections, staffing and supply availability are additional risks.
- A Vyaire dispute remains in litigation. Vyaire seeks $4.7 million; the company says a loss is not probable and has not accrued a liability. The company had $0.9 million recorded in other long-term assets related to its prepayment for undelivered equipment. Trial was scheduled for October 2023.
- Following an administrative appeal decision, the company received during Q1 a refund of approximately $1.1 million previously remitted in connection with disputed Medicare claims.
- On April 18, 2023, after quarter-end, the company agreed to acquire Home Medical Products, Inc., an HME provider operating in Tennessee, Alabama and Mississippi. The supplied filing text does not state the purchase price or completion status.
- The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether growth in ventilator patients and newer service lines can continue, and how the revenue mix affects gross margins.
- Receivable aging, collection trends and the adequacy of the $11.0 million doubtful-account allowance, particularly given Medicare and Medicaid exposure.
- Acquisition price, financing, closing conditions and integration plans for Home Medical Products.
- Developments in the Vyaire litigation and any subsequent reimbursement, regulatory or Medicare payment changes.
- Adjusted EBITDA reconciliation and exclusions: it is a non-GAAP measure and should be considered alongside GAAP results and cash flows.