Viemed Healthcare, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also presents unaudited fourth-quarter results. Unless stated otherwise, amounts are U.S. dollars; financial figures below are in millions.
Business context
Viemed provides in-home durable medical equipment and post-acute respiratory care across 39 U.S. states. Its business is primarily ventilator rentals and related supplies, supported by respiratory therapists. Ventilator rentals represented 59.6% of FY2020 total revenue; COVID-19 response sales and services contributed a further 26.2%.
Key financial and operating metrics
| Metric | FY2020 | FY2019 | Q4 2020 | Q4 2019 |
|---|---|---|---|---|
| Revenue | $131.3 | $80.3 | $31.2 | $21.4 |
| Gross profit | $80.1 | $56.0 | $19.2 | $14.2 |
| Gross margin | 61.0% | 69.8% | 61.5% | 66.4% |
| Net income | $31.5 | $8.5 | $5.1 | $2.4 |
| Net margin | 24.0% | 10.6% | 16.3% | 11.1% |
| Diluted EPS | $0.78 | $0.21 | $0.12 | $0.06 |
| Adjusted EBITDA | Not stated annually in the cited table | Not stated annually in the cited table | $9.5 | $5.6 |
- FY2020 revenue grew 63.6%; excluding COVID-19 response sales and services, revenue increased 20.8% to approximately $96.9 million. COVID-related revenue was $34.4 million.
- FY2020 operating cash flow was $35.1 million, versus $19.1 million in 2019. Investing cash flow was negative $8.4 million and financing cash flow negative $9.1 million; cash increased $17.6 million.
- At year-end, cash was $31.0 million, total assets $112.6 million, and total liabilities $30.9 million. Notes payable were $7.6 million and lease liabilities $3.5 million. The $10.0 million bank line of credit was undrawn. The company reported compliance with debt covenants.
- Active ventilator patients numbered 7,892 at year-end, up from 7,759 a year earlier. Q4 revenue declined from $33.4 million in Q3; Q2 revenue was unusually high at $42.9 million.
Material changes and unusual items
- COVID-19 response revenue drove a substantial portion of the annual increase and diluted reported gross margin. Excluding COVID-19 response sales and services, FY2020 gross margin was 66.5%.
- The company recorded $3.5 million of HHS Provider Relief Fund income and a $5.2 million income tax benefit. The tax benefit primarily reflected release of an $11.1 million deferred-tax valuation allowance; management cited a 9.6% estimated tax rate excluding the discrete item.
- It recorded a $2.3 million net gain on disposal of property and equipment, including sales of equipment used in the COVID-19 response.
- The COVID-19 response customer accounted for 13% of FY2020 total revenue. Medicare and Medicaid represented 73% of traditional revenue, excluding COVID-19 response sales and services, compared with 64% in 2019.
Outlook, risks and contingencies
- No numerical revenue or earnings guidance was provided. Management expected organic growth to continue, but said near-term growth could be slower because of pandemic-related limits on hospital access and new-patient setup. It expected additional COVID-19 response revenue in 2021, with the amount uncertain.
- Management expected normal-operation gross margins to remain relatively consistent with non-COVID FY2020 levels; SG&A as a percentage of revenue was expected to trend higher toward historical levels in 2021. R&D spending was expected to increase.
- Key risks include reimbursement reductions, claim documentation and audit exposure, dependence on Medicare and Medicaid, supplier concentration, staffing and equipment availability, and uncertainty over future competitive bidding or prior authorization for ventilators. The next competitive bidding round was anticipated to begin in 2024.
- Viemed is pursuing a supplier over equipment it says was not delivered. A related counterclaim seeks $4.7 million; the company had not accrued a liability, stating that a loss was not considered probable and that the amount or range could not be determined. A $0.9 million supplier deposit remained recorded as a long-term asset.
- Relief-fund terms and reporting requirements could change and potentially require return of some or all of the $3.5 million. The company also noted uncertainty in receivables collectability and COVID-related supply-chain and operating effects.
Important facts for investors to verify
- How much of reported growth and profitability is repeatable after the $34.4 million of COVID-19 response revenue, $3.5 million relief-fund income, disposal gains, and tax benefit.
- Whether ventilator-patient growth and core margins recover or stabilize, given pandemic-related restrictions and the decline in Q4 revenue from Q3.
- Receivables quality and cash conversion: FY2020 operating cash flow included relief funds, while gross receivables rose and the doubtful-account allowance reached $9.0 million.
- Exposure to Medicare and Medicaid reimbursement, documentation audits, and any future competitive-bidding or prior-authorization changes.
- Progress and financial exposure in the Vyaire dispute, including recovery of the deposit and the $4.7 million counterclaim.
- Future dilution and compensation costs: shares outstanding increased to 39.2 million at year-end, with stock options, RSUs, and cash-settled phantom share liabilities outstanding.