Viemed Healthcare, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial amounts are in U.S. dollars; amounts below are shown in millions unless stated otherwise. Viemed provides home medical equipment and post-acute respiratory care across the United States.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Change |
|---|---|---|---|
| Revenue | $49.4 | $35.8 | +38.2% |
| Gross profit / margin | $30.6 / 61.9% | $21.7 / 60.5% | Margin +1.4 percentage points |
| Operating income | $4.2 | $1.5 | +186.3% |
| Net income | $2.9 | $1.1 | +176.7% |
| Diluted EPS | $0.07 | $0.03 | Up $0.04 |
| Adjusted EBITDA (non-GAAP) | $12.1 | $7.0 | Up $5.1 |
Nine-month results: Revenue was $132.3 million, up 30.5%; gross profit was $80.7 million, with a 61.0% margin, essentially unchanged; operating income was $9.0 million versus $4.7 million; and net income was $6.8 million versus $3.8 million. Diluted EPS was $0.17 versus $0.09.
Q3 revenue growth reflected ventilator rentals (+18.7%), other durable medical equipment rentals (+89.0%), and equipment and supply sales (+112.2%). Ventilator rentals remained the largest revenue source, at 57.3% of Q3 revenue. The company reported 10,244 active ventilator patients at quarter-end, up from 9,127 a year earlier.
Cash flow, liquidity, and debt
- Nine-month operating cash flow was $31.9 million, compared with $20.1 million in 2022.
- Investing cash outflow was $44.6 million, including $28.6 million net cash paid for the HMP acquisition and $18.2 million of property and equipment purchases, partly offset by $2.1 million from asset sales.
- Financing provided $5.9 million. Cash declined by $6.8 million over the nine months, ending at $10.1 million, versus $16.9 million at December 31, 2022.
- Total borrowings were approximately $9.9 million at September 30, of which $1.8 million was due within 12 months. The company reported compliance with its credit-facility covenants.
- Management said cash, expected operating cash flow, and available credit were expected to fund operations, capital expenditures, and debt service for at least the next 12 months. The filing also notes potential need for additional financing beyond that period, particularly for acquisitions and investments.
Material changes, outlook, and risks
- Viemed completed its acquisition of Home Medical Products, Inc. (HMP) on June 1, 2023, for approximately $29.4 million in cash or cash payable. HMP operates in Tennessee, Alabama, and Mississippi. The purchase accounting remains provisional; reported goodwill was $29.7 million. Acquisition-related costs of $0.477 million were expensed during the first nine months.
- Management attributed growth to organic expansion, broader PAP, oxygen and other DME offerings, the HMP acquisition, and growth in equipment sales and sleep-related offerings. Full-time employees increased 36.8% year over year to 988, partly due to HMP. SG&A increased in dollars but declined as a share of revenue; management expected that ratio to improve through year-end 2023.
- Management expected gross margin to remain relatively stable through the end of 2023 and quarterly net interest expense to decline as acquisition-related debt was paid down. The filing does not provide numerical revenue or earnings guidance.
- Reimbursement policy is a key exposure: the temporary 75%/25% blended Medicare rate was extended through the end of the COVID-19 public health emergency or December 31, 2023, whichever is later, after which it reverts to 100% of the Medicare fee schedule. The company also cited uncertainty around future competitive bidding and reimbursement rates. Medicare and Medicaid represented 54% of traditional revenue in the first nine months; together they were 36% of net receivables at September 30.
- The allowance for doubtful accounts was $11.6 million, up from $8.5 million at year-end 2022; the nine-month provision for uncollectible accounts was $10.8 million. Management considered the reserve adequate, while warning that reimbursement and collection estimates may change.
- In a dispute with Vyaire Medical, a state court found Vyaire had breached its contract; damages remain unresolved and Vyaire is pursuing an interlocutory appeal. Viemed reports $0.9 million of related undelivered-equipment prepayment in other long-term assets. The company did not accrue a liability for Vyaire’s $4.7 million counterclaim, determining a loss was not probable; it could not estimate a reasonably possible loss range.
- Management identified acquisition integration and execution, reimbursement changes and audits, payer concentration, collection uncertainty, staffing and supply availability, and interest rates and financing availability as risks. 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
- How much of reported growth is organic versus attributable to HMP, and whether HMP integration delivers expected benefits.
- Receivables, the rising allowance for doubtful accounts, and collection trends—particularly for Medicare and Medicaid.
- Medicare reimbursement and competitive-bidding developments after the temporary rate provisions expire.
- Cash generation relative to rental-equipment investment, acquisition spending, and debt repayment; borrowing availability and covenant headroom.
- HMP purchase-accounting revisions and the final value and recoverability of acquired assets and goodwill.
- Outcome and potential financial exposure from the Vyaire litigation and appeal.