Viemed Healthcare, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparative period is FY2020. The filing also provides fourth-quarter results. Amounts are U.S. dollars. Viemed provides in-home durable medical equipment and post-acute respiratory care in 47 states, with ventilator rentals as its core business.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $117.1 million | $131.3 million |
| Gross profit and margin | $73.4 million; 62.7% | $80.1 million; 61.0% |
| Operating income and margin | $11.6 million; 9.9% | $26.8 million; 20.4% |
| Net income and diluted EPS | $9.1 million; $0.22 | $31.5 million; $0.78 |
| Cash from operating activities | $22.5 million | $35.1 million |
| Cash and cash equivalents at year-end | $28.4 million | $31.0 million |
FY2021 revenue declined 10.8% as COVID-19 response revenue fell to $8.6 million from $34.4 million. Excluding that revenue, net revenue increased $11.6 million, or 11.9%. Ventilator rentals grew 7.1% to $83.8 million; other DME rentals grew 40.0% to $13.8 million. Ventilator rentals represented 77.3% of traditional revenue excluding COVID-19 response activity. The active ventilator patient count was 8,405 at year-end, up from 7,892.
Gross margin improved as lower-margin COVID-19 activity declined and the revenue mix changed. Net income fell sharply in part because FY2020 included a $11.1 million valuation-allowance release that benefited taxes; FY2021 recorded $3.4 million of income tax expense versus a $5.2 million tax benefit in FY2020.
Q4 2021: Revenue was $32.0 million versus $31.2 million in Q4 2020; gross profit was $19.7 million (62% margin), net income was $4.1 million, and Adjusted EBITDA was $9.5 million. Q4 2020 net income was $5.1 million and Adjusted EBITDA was $9.5 million.
Cash, debt and liquidity: FY2021 investing cash outflow was $19.7 million, including $19.7 million of property and equipment purchases; total capital expenditures, including finance-leased equipment, were $19.8 million. Financing cash outflow was $5.3 million. Year-end long-term debt was $5.8 million and lease liabilities were $0.7 million. A $10.0 million revolving line was undrawn. The company reported compliance with its debt covenants and stated that cash, expected operating cash flows and available credit should cover at least the next 12 months.
Material changes, outlook and key commentary
- Management expects continued growth in ventilator patients and other respiratory services, including expansion in existing and new territories. It anticipates growth at an increased rate compared with recent periods affected by COVID-19; no quantified revenue or earnings guidance is provided.
- Management expects gross margin on normal operations to remain broadly consistent with FY2021. It expects SG&A to grow with expansion and R&D costs to increase slightly in 2022.
- COVID-19 response revenue and related activity remain uncertain. The company received $1.5 million of Provider Relief Funds in 2021, recognized in income; changes to grant requirements could require repayment.
- The next Medicare competitive bidding round was anticipated to begin January 1, 2024. Non-invasive ventilators, oxygen and PAP devices were removed from the prior round, but future inclusion and reimbursement effects are uncertain.
- Medicare and Medicaid generated 64% of traditional revenue excluding COVID-19 response activity. Reimbursement cuts, claim audits, documentation requirements, payment delays and coverage changes could affect revenue, cash flow and margins.
Risks, contingencies and unusual items
- Medicare audit dispute: Following an OIG review of 100 non-invasive ventilation patients, Medicare contractors issued unfavorable redetermination decisions. Viemed appealed and reported a possible loss, but no accrual was recorded because management did not consider a loss probable. The company estimated potential exposure on 39 claims within the statutory reopening period at approximately $9 million.
- Supplier litigation: Viemed is pursuing recovery of a $0.9 million prepayment for equipment Vyaire did not deliver. Vyaire has counterclaimed for $4.7 million; no liability was accrued, and the case was in discovery.
- Philips device recall: A 2021 recall of certain Philips BiPAP, CPAP and ventilator devices may constrain equipment supply and expose the company to operational, reputational or legal risks.
- Other exposures: Supplier dependence, staffing and supply-chain constraints, cybersecurity and privacy obligations, competitive pressure, and extensive healthcare regulation are significant risks. The allowance for doubtful accounts was $7.0 million at year-end, down from $9.0 million.
- Related-party transaction: In October 2021, Viemed acquired office and warehouse properties previously leased from entities owned by its CEO and President for $2.8 million, funded with cash. Routine litigation was not expected by management to have a material adverse effect.
Most important facts for investors to verify
- Progress and final exposure in the Medicare audit appeals, including whether the estimated $9 million maximum changes.
- Recovery of the Vyaire prepayment and outcome of the $4.7 million counterclaim.
- Whether reported growth excluding COVID-19 activity continues, alongside ventilator patient growth and margins.
- Cash conversion, receivable collectability and the adequacy of the doubtful-account allowance as reimbursement audits and payment timing evolve.
- Availability and cost of Philips replacement devices and other respiratory equipment, and any effects of future competitive bidding or reimbursement changes.
- The filing reports effective management disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation because Viemed qualified for the emerging-growth-company exemption.