Viemed Healthcare, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; comparisons are to the corresponding 2018 periods unless otherwise noted. Amounts are in U.S. dollars. Viemed provides home respiratory durable medical equipment and related services across 31 states; ventilator rentals are its principal revenue source.
Financial performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $23.5 million | $17.2 million | $66.5 million | $46.8 million |
| Gross profit / margin | $17.2 million / 73.1% | $13.1 million / 76.1% | $49.5 million / 74.4% | $34.9 million / 74.7% |
| Income from operations | $2.3 million | $2.7 million | $6.9 million | $7.7 million |
| Net income | $3.0 million | $2.4 million | $6.9 million | $7.1 million |
| Diluted EPS | $0.07 | $0.06 | $0.17 | $0.18 |
| Adjusted EBITDA (non-GAAP) | $5.0 million | $4.4 million | Not clearly stated for the nine-month period | Not clearly stated for the nine-month period |
- Q3 revenue rose 37.1%; ventilator rental revenue increased 30.2%, and active ventilator patients grew 36% year over year to 7,421. Ventilator rentals supplied 84.3% of Q3 revenue.
- Nine-month revenue increased 42.2%, but net income fell 2.8% and operating income fell 10.9%. Higher SG&A, research and development, and stock compensation weighed on profitability.
- Q3 gross margin contracted as new-territory expansion increased costs. Management expected gross margin and SG&A as a percentage of revenue to remain broadly consistent with recent levels through year-end 2019.
- Nine-month operating cash flow was $11.7 million, down from $14.2 million. Investing cash outflow was $10.2 million; cash purchases of property and equipment were $10.6 million. Management reported total capital expenditures, including financed assets, of $25.3 million.
Financial position and liquidity
- At September 30, cash was $12.6 million; current assets were $27.7 million and current liabilities were $23.2 million.
- Accounts receivable, net, was $11.7 million, with a $7.7 million doubtful-account allowance, up from $4.3 million at year-end 2018. Nine-month bad-debt expense was $6.9 million. Medicare and Medicaid represented 52% of receivables combined and 66% of nine-month revenue.
- Term-note debt totaled $9.8 million; lease liabilities totaled $11.6 million. The $10 million revolving credit facility was undrawn and fully available, subject to covenants. The company reported covenant compliance.
- Management said available cash, operating cash flow, and the credit line were expected to fund operating needs, capital expenditures, debt service, and the growth strategy for at least 12 months.
Outlook, risks and notable items
- Management emphasized organic expansion in existing and new markets, growth in the ventilator patient base, and continued hiring of respiratory therapists. It provided no formal revenue or earnings guidance.
- Key risks include reimbursement-rate changes, dependence on government and other payors, collections and bad-debt estimates, substantial equipment investment, and the ability to obtain additional funding if needed.
- A $4.8 million building term note financed the new Lafayette headquarters; an interest-rate swap fixed its rate at 4.68%. A separate $5.0 million term note for general corporate purposes bears 4.60% interest. Both are secured by substantially all borrower assets.
- Q3 included an $0.8 million noncash unrealized gain on warrant conversion liability, which increased pretax income; all remaining warrants expired or were exercised by September 30. Nine-month SG&A also reflected higher phantom-share expense as the company’s share price rose 75%.
- After quarter-end, $1.2 million of accounts payable was converted into a two-year capital lease. Management said routine litigation was not expected to materially affect results or financial condition; it reported no material change in risk factors.
Important facts for investors to verify
- Whether receivable aging, bad-debt provisions, and collection trends support the reported allowance and cash conversion.
- Whether patient growth and new-market expansion can sustain revenue while stabilizing gross margin and operating expenses.
- How equipment investment, lease commitments, and term-note repayments affect liquidity and covenant headroom.
- The ongoing cash and income-statement effects of phantom-share awards, stock compensation, and other noncash adjustments; assess Adjusted EBITDA alongside GAAP results.