Viemed Healthcare Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 7 speakers on the call.

Operator

Greetings, and welcome to the Viemed Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Zender, Chief Operating Officer.

Operator

Thank you, Todd. You may begin.

Speaker 1

Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward looking statements under the U. S. Federal securities laws or forward looking information under applicable Canadian securities legislation, which we collectively refer to as forward looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward looking statements.

Speaker 1

Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, Investors should not place undue reliance on forward looking statements. The forward looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward looking statements except as required by law. The Q2 financial results news release, including the related financial Statements are available on the SEC's website. I'll now turn it over to Casey to get things started.

Speaker 2

All right. Thank you, Todd, Good morning, everyone. Welcome to our Q2 2023 earnings call. Today, we are excited to share a comprehensive overview of our robust business Performance along with a positive forward looking outlook for the industry. Our organization is positioned exceptionally well to expand our reach and strategically capitalize on prevailing tailwinds in our operating environment.

Speaker 2

During this period, we've achieved significant organic growth, a testament to our management team and their commitment to continuing to our proven growth model. And we simultaneously initiated our long awaited M and A strategy. We are pleased to announce the successful completion of the H and P acquisition on June 1, which further accelerates our growth engine and broadens our capabilities geographically. This acquisition reinforces our dedication to delivering exceptional patient care while building a larger biomed team with expanded resources. Before we delve further, I want to take a moment to acknowledge and express our gratitude To our dedicated team of respiratory therapists, behavioral health specialists, staffing professionals and administrative support staff, Their continuous commitment to delivering best in class care to the patients we serve is the driving force behind our outstanding quarter and continued growth for Viemed.

Speaker 2

As of the end of the Q2, our Viemed family grew to 974 employees, including 172 new onboarded employees from the H and P We are fortunate and excited to welcome the H and P team and entire families. The Q2 of 2023 exhibited the strength of our business model. Our revenue results again landed at the top end of our guided range confirming that even as a larger company, we continue to experience strong growth. Our success is built on a robust and resilient strategy, which has consistently demonstrated its ability to overcome challenges and drive sustainable growth. We are pushing our growth strategy to new heights by executing on strategic and accretive acquisitions that build upon our existing capabilities.

Speaker 2

These acquisitions serve as powerful catalysts, accelerating the expansion of our comprehensive respiratory offerings in geographic coverage gaps throughout the country. Our back office team is continuously refining our processes for training and culture, which helps drive both organic and synergize inorganic growth. Through the acquisition and integration of HMP, we are demonstrating the value of our well developed model with a strong team at HMP. In the 1st month of post close operations, the non invasive ventilation setups from HMP have experienced significant growth over historic levels. Additionally, we will be training H and P clinicians on the use of our proprietary care delivery technologies such as Engage.

Speaker 2

Due to high-tech, high touch delivery model, we will continue to improve patient outcomes while driving efficiencies for all stakeholders. Our commitment to data driven decision making allows us to continuously measure and improve our business performance and patient satisfaction. Our equipment supply chain remains stronger than ever with many new manufacturers competing for our business. We have diversified our sources and forged partnerships with multiple reputable manufacturers safeguarding us against potential disruptions. This enhanced stability in the supply chain allows us to meet the ever increasing demands of our patients regardless of fluctuations in the market.

Speaker 2

This increased competition is stabilizing equipment costs and ensuring that we have adequate supply to meet the needs of our patients. Moreover, the recent H and P acquisition has delivered significant volume pricing favorability amplifying the advantages we gained due to our scale in the competitive equipment landscape. Our commitment to diversification has yielded substantial success and the integration of H and P has played a Pivotal will contribute to these efforts. We are now reaching patients earlier in their disease state, expanding our patient base like never before. As of June 30, we are treating over 96,000 unique patients, a significant increase from the same time last year.

Speaker 2

Our growing portfolio provides a robust continuum of care solution for patients and pulmonologists and our early intervention capabilities allows us to treat underlying conditions at the right time. As coordinated care efforts gain prominence, our adoption of sophisticated care services Such as behavioral health addressing social determinants of care going beyond respiratory, this positions us as a leader in patient centric as a leading patient centric provider in the industry. The adoption of innovative technologies such as portable oxygen concentrators and remote setups of PAP devices This has enabled us to expand our portfolios rapidly and in a cost effective manner. These ventilator adjacent offerings not only increase the length of our patient relationships, Shift would also allow us to provide timely care for patients as their disease state progresses. Integral to our strategy is our focus on people.

Speaker 2

Viemed Healthcare Staffing is playing a pivotal role in our organization, acting as a driving force behind Our commitment to finding the best professionals continued to drive remarkable results as evidenced by the significant improvements in both the quality and volume of internal hires. This success not only enhances our workforce, but also reflects our dedication to always developing a thriving and talented team. As our staffing division continues to mature, It has earned the trust and respect of our valued partners and customers. Organizations such as the VA and large regional hospital networks have come to rely on our staffing solutions, recognizing the value we bring in meeting their workforce needs. Our reputation as a dependable and valuable staffing partner has continued to grow, further strengthening our position in the healthcare industry.

Speaker 2

By continually refining our recruitment strategies and investing in advanced data and analytical tools, We are better equipped to identify and engage with top candidates in the market, and we are consistently prepared to make informed decisions that keep us ahead of the competition. This data driven approach empowers us to match the right professionals with the right physicians, ultimately leading to improved patient care and organizational performance. We continue to see encouraging progress ongoing in ongoing collaboration between regulators, legislators in the home medical equipment industry. Together, we are working to find practical solutions that ensure providers can deliver care to patients effectively. Regarding competitive bidding, although CMS has not announced plans related to future rounds, we have observed that the timeline for a potential round in 2024 for Competitive bidding has effectively lapsed.

Speaker 2

The prevailing signals also strongly suggest that the prospect of the 2025 round is dwindling. We remain confident in the current indicators of a strong reimbursement environment for the coming years and our business is well positioned in the face of potential macroeconomic challenges such as a recession and long term inflation pressures. Additionally, the issuance of the final rule by CMS On April 5, 2023 marks a significant milestone in the healthcare landscape, particularly in the realms of the Medicare Advantage and Medicare Part D Prescription Drug Benefits. This rule ushers in a host of changes, impacting several key aspects of the programs and signaling a positive direction Included in the provisions are improvements impacting prior authorization, marketing and communications, Health equity, provider directories, coverage criteria, network adequacy and other areas. Importantly, The final rule emphasizes the need to ensure that individuals with Medicare Advantage receive access to the same medically necessary care available in traditional Medicare.

Speaker 2

This parity in care is a crucial step towards achieving healthcare equity and ensuring that beneficiaries have equitable access to essential medical services, irrespective of their chosen Medicare program. As the healthcare reimbursement environment evolves, driven by Medicare Advantage Trends and value based arrangements, we maintain an optimistic outlook for the demand of our high quality and cost effective service offerings. Our unwavering commitment to investing in advanced technology and in robust protocols allows us to streamline administrative processes, capture essential data, and demonstrate tangible benefits to patients, physicians and payers alike. At this juncture, I'll now hand the call over to Chief Operating Officer, Todd Zehnder, to provide additional insights regarding our financial results and capital activities. Todd, the floor is yours.

Speaker 1

All right. Thanks, Casey. In reviewing the financial results, all figures are in U. S. Dollars and the full results have been made available on the SEC website as well as SEDAR.

Speaker 1

Our core business generated net revenue of $43,300,000 during the Q2 of 2023 as compared to net revenues of 33 $1,000,000 during the Q2 of 2022, which equates to a 31% increase. This revenue amount includes approximately $2,500,000 of revenue related to our acquisition of HMP during June. Excluding that impact, our organic growth over the Q2 of 2022 Was an impressive 23%. Our sequential growth for the core business was 9%, and we see that continuing to increase as we will have H and P for the entire Q3 and our organic growth remains very strong. That we will be able to continue our high organic growth rates as well as continue our evaluation of inorganic opportunities.

Speaker 1

Our gross and EBITDA margin percentages are once again strong as we are focused on both margin and diversification. We remain committed to our dual pronged strategy of continuing to diversify our revenue stream, all while looking to expand our bottom line margins. We continue to see our margin percentages be influenced by our product mix and continue to be pleased by the notional growth. Our gross and EBITDA margins during the quarter came in at 60.3% and 22.6%, respectively. Our 2nd quarter gross and EBITDA amounts came in at $26,100,000 $9,800,000 respectively.

Speaker 1

Our Q2 2023 EBITDA is approximately 52% higher than Q2 2022 EBITDA, which is a testament to our overall focus for the last 12 months. Our 2nd quarter revenue from Vince was approximately 60% of our core revenue as compared to 69% in the Q2 of 2022. Our SG and A for the quarter totaled approximately $20,500,000 as compared to $17,500,000 in the Q2 of 2022. We are continuing the efforts of managing costs across the board and are pleased in a quarter that had revenues grow 31%, G and A grew 17%. We will continue to invest in our patient and employee experiences.

Speaker 1

We continue to expect to grow revenues at a faster rate than expenses even in light of the ongoing inflationary environment. For the quarter, we invested approximately $6,000,000 on capital expenditures. The CapEx has been spent through a diversified supplier network, which has given us an ability to leverage relationships whereby we have minimized inflationary impacts as much as possible. As was the case over the recent periods, our vent and oxygen products had the most CapEx spent during the period. We have once again funded all of our CapEx with discretionary cash flow during a quarter of extreme growth and we were able to use our balance sheet to fund the HMP acquisition.

Speaker 1

We are very proud of the pristine balance sheet where we ended the quarter with a cash balance of $10,000,000 Additionally, we ended the quarter with an overall working capital balance of $4,400,000 We drew on our credit facility in order to close the acquisition and had $12,100,000 of long term debt at June 30. We will opportunistically pay down or use the revolver We are extremely excited in the integration efforts related to our acquisition of HMP. As previously stated, we are being extremely diligent in assuring the company is Folded into Viemed to assure efficiencies are attained. The HMP culture is one that is being easily integrated and we are seeing revenue synergies Come through early, which was always the number one reason for us to acquire this great company. We are diligently working with retained management to make sure this is the proverbial win win.

Speaker 1

We have now begun executing on our capital allocation strategy that we defined at the end of 2022. Our first priority remains on CapEx to service new patients. Our organic growth through new patient service has and will likely always be our first priority. We continue to see major organic growth opportunities for both legacy Viemed as well as HMP. Now that we have completed our first deal, it is evident that M and A has moved in a number 2 priority on the capital allocation.

Speaker 1

We continue to patiently evaluate other deals as we are optimizing our first one. As we previously mentioned, We might consider paying down on the revolver until another deal comes up that needs capital. But the flexibility of our credit facility allows for those We also expect to renew our existing shelf registration statement, which is scheduled to expire next month. This renewal will maintain our ongoing capacity to rapidly fund an acquisition or seize opportunistic transactions. Moving on to the Q3, we have provided net revenue guidance in the $49,000,000 to $50,200,000 range related to our core business.

Speaker 1

The midpoint of our net revenue guidance is up 39% over the core revenue in the Q3 of 2022. We remain active in our discussions with existing and potentially new investors. We are planning to attend a couple of institutional conferences during the Q3, whereby we will hopefully expand our investor base.

Speaker 2

We are excited to tell our story, but we

Speaker 1

are even more excited to continue to build out our footprint to new patients through our organic and now inorganic growth strategies. At this time, I'll turn it back over to Keshi to wrap things up.

Speaker 2

All right. Thanks, Todd. In the midst of these exciting developments in the quarter, we are most pleased with the fact that our commitment to organic growth remains unwavering. Our team has done some incredible orchestration for this next chapter of our growth story and their careful work on the integration of the H and P acquisition has not slowed us down in any way. On the contrary, we're firing on all cylinders, continuously improving, growing and expanding our operations.

Speaker 2

We remain focused on maintaining our position as the leader in the industry, never taking our eye off the ball. As we move forward with the help of the stable regulatory environment, We remain aggressive on creating more preferred partnerships with our hospital partners. Driving innovation and ongoing improvements Our clinical model will continue to be a major part of our strategy. We are confident in our ability to navigate the evolving healthcare landscape and deliver Once again, thank you all for joining us today and we look forward to sharing the exciting developments ahead for Viemed Healthcare. This concludes our prepared remarks.

Speaker 2

We'll now open up the floor for further questions. Thank you.

Operator

Thank you. We'll now be conducting a question and answer session. One moment please while we poll for questions. Thank you. Our first question is from Brooks O'Neil with Lake Street Capital Markets.

Operator

Please proceed with your question.

Speaker 3

Thank you and good morning, guys. Congratulations on the terrific results.

Speaker 2

Good morning, Brooks. Thank you.

Speaker 3

Yes. So I have a couple of questions here. The first I guess is, if I remember correctly, the business mix From HMP was modestly I mean, it overlaps with yours, but it's maybe more skewed to the sleep side. Can you just talk a little bit about initial efforts to cross sell in their geographies and Maybe take advantage of some of the strength you have on the vent side of the business?

Speaker 2

Yes. Good point. The H and P Mix was, I guess, very heavy on the sleep side, call it what, 50% and then I would say 10% was ventilation. So That was one of the things that really excited us about the acquisition when we were analyzing on the front end. So I mean June 1st, we closed the deal.

Speaker 2

Brooks, we had Our bid team up at their offices the following week and training their folks on how to walk and talk the Biomed way from Selling our complex respiratory model, which is ventilation, and they hit record numbers in month 1 For Vince, so we really got jazzed about that. We were excited about the ability to for them to See the training and really adopt it and we were impressed with how much incremental growth was out and about in their respective markets. So, they're going to continue to double down on sleep as well. They've got a strong sleep Program with many locations throughout the Tennessee, Mississippi and Alabama markets, they service labs, There are some opportunities to grow their sleep business through initializing some home sleep programs in rural markets outside of where they currently service. So we're excited about being able to help them with that because that's something that we're really good at too is developing a home suite program.

Speaker 2

So yes, all of the revenue synergy things are the things that We've been focused on right out of the gate. I mean, we're obviously uncovering other opportunities to tighten screws down on some costs here and there. But right now, we We got a major opportunity. We're just growing sales and that's what we're focused on.

Speaker 3

Great. Appreciate all that color. So I'm curious, you and Todd both talked about continuing to Mind the pipeline of acquisition opportunities, would you say this first acquisition has been A slam dunk template for what you're going to do going forward? Or have you learned some things from this one that might Make you even better at making acquisitions down the road.

Speaker 1

I think the answer is yes to both of them. Deanna, I think this was an ideal transaction for a lot of reasons just because we know all the business units that they're in, But at the same time, it's a diversification of the revenue streams. It's in an area that we weren't very strong. And lastly, but probably most importantly is culturally, it was a very good fit. But at the same time, It would be disappointing if we didn't learn things during our first pretty significant acquisition and we are learning things.

Speaker 1

But It's not kind of like Casey said, we haven't uncovered anything that spooks us. It's all been good. It's a new way of growing for our company. But the main thing is to do it right, get it integrated, get the revenue synergies, all while making sure our organic growth doesn't get And that's the main thing we've been able to do. So we're looking forward to the next one.

Speaker 1

When it comes, We'll see. We're not necessarily pressing to do another one immediately, but if another one comes soon, we'll be ready for it. So it's all good on this first one.

Speaker 3

Great. Let me just ask one last one and it's sort of revisiting an old friend, if you will. Any progress With the VA in terms of opening the doors for the oxygen programs broadly across That opportunity, Seth?

Speaker 2

Yes. The pilot program is not dead. It's still ongoing and pressing forward. We're dealing with some employees that are coming and going that were developing the program, which slowed things down. Again, the main success that we're having in Side of the VA is coming through staffing where we've become a we've got a lot of experience now.

Speaker 2

We have that background of being a quality provider for the VA. And so that has boded well for us landing staffing contracts, which has been some of the bigger wins. But it doesn't mean that Our Res Complex respiratory push is over or dead. I mean, it's just it's still waiting on the VA and Status quo as from quarter to quarter as we always talk about it.

Speaker 3

Okay, cool. Thanks for the color. I'm excited for the future.

Speaker 2

All right. Thanks, Brett. Thanks, Brett.

Speaker 4

Thank you.

Operator

Our next question is from Doug Cooper with Beacon Securities. Please proceed with your question.

Speaker 5

Hey, good morning guys and terrific work on the quarter. Just a couple quick One's from me. Just want to confirm pro form a because you only had the acquisition in for 1 month. With pro form a would have been, If you had it for the full quarter, roughly $48,000,000 $48,500,000 of revenue and $11,000,000 of EBITDA, is that sort of in the ballpark?

Speaker 1

The $48,000,000 is a good approximate. We don't have an estimate of EBITDA, but I don't think it's going to change the composition very much, Doug.

Speaker 5

Okay. I saw the vent, you're over 10,000 vent patients now, a nice milestone. That looked like it had The strongest growth certainly sequentially is up 7% sequentially for some time. How much of that was due to HMP? Casey, you mentioned they were out of the gate selling and how much of it is just I don't know maybe the physicians finally realizing that this is a good therapy?

Speaker 1

I think H and P I don't have the exact number, Doug, but I think H and P made up about 3.40 to 3.50 bps of the growth. The rest was our traditional sequential growth, which I want to say, I don't have the exact number in front of me, it was probably about 300 for the quarter. Yes, that makes sense because we grew at about 700. So our own efforts made up about half of it. So the organic Peace is clicking for sure, but then folding their group in obviously gave us a really good bump.

Speaker 1

Another little nugget, Doug, is we

Speaker 2

set an internal goal to kind of end the year with 115 quality sales reps. We're sitting at 112 right now. Our recruiting efforts are really clicking and it's we've put in a lot of good people into the system. It's just a matter of getting them trained and making sure that we have the back end infrastructure to support not only the new guys that we've been finding, but also The new H and P team as well. So a lot of our focus is building up sales training and sales managers and so on

Speaker 1

and so forth right now.

Speaker 5

Okay. So just to be clear, you added 300 over 3 months and they added 340 in a month?

Speaker 1

Well, no, I mean that gets all added at once. That's part of the acquisition.

Speaker 2

So That was their active question. Got it. Okay.

Speaker 5

And just On the non vent business, just call it the sleep and oxygen and so forth, even excluding the contribution from HMP, it looks like it grew 50%. Is that did I read that right?

Speaker 1

You're talking about our ancillary services?

Speaker 5

Yes, just the non Just the nonvent revenue?

Speaker 1

Yes. That's going to be encompassed by a lot of growth in oxygen, a lot of growth in sleep. And then you got staffing up and running just our sales revenues are higher at this point. So that's probably about right. I don't see the number exactly that you're talking about.

Speaker 1

I want to make sure that H and P is not included in that. But our whole

Speaker 4

Yes, H and P,

Speaker 5

I guess if I added $2,500,000 of that other nonvent revenue, obviously, your nonvent revenue up, I think, was up over 100%. So if I back that out, It would be about 50%.

Speaker 2

Yes, that's right.

Speaker 5

That's right. It would be incredible growth. So how obviously making great inroads into the sleep and oxygen Space, can you just have any can you keep that kind of growth rate going like

Speaker 1

Well, it kind of goes back to our age old like how long can we keep growing. I mean, Our intent is to always grow this thing organically in these high rates that we've been posting, call it 25%, 30%. It gets harder when the numbers get bigger, But inherently, as our sleep business grows, that means the resupply piece starts growing with it and that's sort of the annuity, if you will. And As we have more sales reps around the country, they're out there pushing everything, which includes vents, vest, oxygen, sleep. And so I'll tell you that that is the intention to keep growing those numbers dramatically.

Speaker 1

There's a smaller base, so they have an advantage over Vince to keep those High percentage growth rates, but we just want to see everything grow. That's what it comes down to.

Speaker 5

Yes, Interesting for me with, I guess, Owens and Minor with Apria, they had organic growth rate year over year of 10.5%, I think, and Adopt Health was 9% or 10 And so, I mean, the sleep side of the business continues to have pretty strong fundamentals, I would suspect.

Speaker 1

Yes, it does. I mean, sleep apnea is A growing disease state for sure. And once again, we're still benefiting from only rolling that out nationally kind of During the COVID time, so it's still you get a new sales rep or 2 or 3 that hit their stride as being able to offer it in addition to everything else. So we're Fitting from having that and then once again benefiting from bringing in HMP going forward, that's only going to bolster our non vent revenue growth going forward.

Speaker 5

Right. And I'm assuming the supply chain issues, ResMed has really picked up the pace and there's no issue about getting an equipment?

Speaker 1

We have no issue on any product at this point. Yes. So everything is good there.

Speaker 5

Okay. Great, guys. Congratulations.

Speaker 2

Thanks, Doug. Thanks, Doug.

Operator

Thank you. Our next question is from Andrew Rem with Odinson Partners. Please proceed with your question.

Speaker 4

Hey, gentlemen. Great quarter. Congrats to your team. You guys are doing a great job executing. Thank you.

Speaker 4

Just maybe going back to HMP, What was their kind of organic growth profile prior to the acquisition or at the time of the acquisition?

Speaker 1

Well, if you look at it over kind of a 3 year period, I want to say the CAGR would be somewhere in the Kind of high teens, low 20s. The last year wasn't as high. They had just slowed down to probably upper single digits. So we're hopeful that when we bring our skill set of growing the complex respiratory, we can get it back to kind of our organic growth rates, which is in that Mid-twenty type range.

Speaker 4

Okay. And then is that kind of factoring in The opportunities around ventilation, because that sounds like that wasn't really Necessarily a strength for them, but it is for you?

Speaker 2

Yes. That's the goal. That's the

Speaker 1

goal is to have them Continue to grow their ventilation business at a much higher rate than they were historically. And then our sort of benchmark for them is, If we can keep them growing at our growth rate, then we're doing a pretty good job.

Speaker 4

Okay. And then can you just Maybe flesh out a little bit more your comment about or just help me understand better when you say a good cultural fit between these two Between you and HMP, just define that a little bit.

Speaker 2

The best way to define it is that they're patient centric. They put the patient first, which is something that is extremely important to us. They're just Good people that are looking to do the right thing with and that's what we're looking for. We can work with that whenever we have The passion and the bleeding heart clinicians at our side, that's what we saw with H and P. So we're kind of just spring boarding that passion into their communities.

Speaker 4

And then on just operating expenses, can Can you maybe talk about second half of the year and as you go into 2024 and kind of beyond Ability to kind of leverage, maybe more just kind of the SG and A expense. Obviously, you had inflation pressure last year. You're getting some of that caught up with the improvement in reimbursement, but Other things that you guys can do operationally to kind of leverage those expenses?

Speaker 1

Yes. I mean, we're very proud in my Prepared remarks that G and A was only up 17% this quarter and revenue was up 31%. So it's happening. We're continuing to push on it and Scale helps that just generally. We're able to leverage kind of C level expenses versus a growing revenue base.

Speaker 1

The key is we're not necessarily going to try to slow down the G and A growth because that's what yields these impressive organic growth rates. We are always out there trying to hire new salespeople, try new innovative ideas. And we've always said and we're proud of it that we invest And the future of this business and it yields above average organic growth rates, we do Expect to grow margins. To say that we're going to be able to grow them in 2024 as high as we or as much as we've grown them this year, We're kind of trending towards a 200 basis point bottom line increase. That would be difficult to replicate next year, but we Fully intend on attempting to do that and we do see the ability to continue to grow them.

Speaker 1

It's just at what rate we're not exactly sure yet.

Speaker 4

And does that kind of is that assuming in the out year I understand your comments about this year, but On the out year, there's some component that's dependent on reimbursement and then a portion would be on your internal Activities, so looking to improve next year, clearly not at the pace, but how much of that do you control on the improvement?

Operator

Well, there's

Speaker 1

probably 3 factors. You hit on 2 of them. 1 is the reimbursement and looking at midyear CPI that was running I think 3%, 3.5%. So we got to figure that we're probably going to see about an average of 2% next year. So that's not extremely meaningful.

Speaker 1

The majority will be what we do. The one thing that we always caution people on is, ventilation has a higher EBITDA margin. So We are diversifying the product base. As I've said in my prepared remarks, we went from 69% last year to 60%. A lot of the business that we are getting into is feeders into higher margin later in kind of their product lifecycle.

Speaker 1

So The composition of the revenue, the CPI adjustment and then those are sort of up to us, But I mean the composition is sort of up to us, but we let that naturally happen. The real thing that we can control is the cost. And once again, We know that we will see some corporate leverage as a result of you don't need 2 Todds and 2 Casey's when you double a company. So those are the type of things that we can do. But at the same time, we're always investing in the future.

Speaker 1

So We it's very important to us. I think the most impressive number for this conference call was that our EBITDA was up 52% Year over year for the quarter basis, and that's our intent is to keep growing that number.

Speaker 4

All right. Thanks, Vikas. Thanks a lot. And again, congrats to your team.

Speaker 2

All right. Thanks, Andrew.

Operator

Thank you. Our next question is from Eric Coldwell with Baird. Please proceed with your question.

Speaker 6

Hey, thanks very much and good morning. I have, I think, three questions. The first one, I'd like to hear a bit about your traction with payers. I know it's still very early with HMP, but as you Broaden your scale and your geographies and capabilities, I'm curious what your recent conversations with Stations with payers have been and if you've been able to expand any network access or do you have any opportunities that you could highlight for us as you look over the next 12 months? Yes.

Speaker 2

We have done a hell of a job with payers this year. Our network development team has been very active. They've added 5,000,000 lives into our network year to date and they've got another 5,000,000 under contract headed our way. So we're very pleased with the efforts that those guys are doing. We still have payer struggles That are typically with the big guys, United and Humana are tough cookies for us.

Speaker 2

We do some other network Work for them, but we have great opportunities to get those big guys on board. But as far as everybody else, I mean, The payer conversation is really healthy. They understand that when we present data that shows that we can save money on our complex respiratory model, If we get these patients on at the right time, they understand that we bring a unique offering to the table in treating a very sick and typically expensive batch of their patients. So that's the reason and the driving force behind how We added 5,000,000 lives and we'll continue to double down on that message with through the lens of data.

Speaker 6

Since you brought up Humana specifically, as one of a representative of a large MCO that's Maybe a harder conversation right now. I suspect it's not an issue for you given perhaps underweighting there historically as Well as geographic issues, but their recent deal with Rotech and Adapt on certain products being Does that have any impact on your thoughts? I know not all categories were covered either, but I am curious if Do you have any thoughts on that type of arrangement that we've seen?

Speaker 2

Well, we go. For our company specifically, it didn't really affect us because we're not We weren't doing much business with United in Indiana. I mean, I my perspective on that deal is Kudos to Apria and Rotech for getting that. I mean, it's yet to be seen whether or not they'll be able to handle the Higher network of Humana, which could be United and Humana now. So that is, in my mind, it's just I don't I'm not the jury is still out on whether they can continue to support the coverage area.

Speaker 2

It doesn't give us much angst Just because we really weren't even servicing those patients in the 1st place. But yes, we'll just have to wait and see how that works out. That's

Speaker 6

fair. And then on the commentary on the organic growth rates, which are clearly Pretty remarkable. I'm curious how much of that if you had to guess or if you maybe even have the information With you, how much of that organic growth, was there an inflection In market volumes, patients getting on Firstscript or really is this just a continuation of the expansion of The sales network, the payer network and some market share gains on top. I'm trying to get a sense on the underlying market dynamics and what you've In your core categories?

Speaker 1

Eric, are you specifically talking about existing areas versus New areas with that question or Yes.

Speaker 6

It's just kind of seems if you will same store apples to apples growth rates in your core areas. Are you seeing A change in overall patient volume, national script trends, New access because of regulatory changes or statutory changes over the last couple of years or is that a pretty steady market and really the growth is just But for perhaps the recovery in sleep, which is obvious after the recall, but for that is really this growth underlying growth that Is clearly well above market? Is it all share gain or is it something is there something more underneath it?

Speaker 1

It's really just I mean, so first of all, we generally run between kind of 85% 90% And I don't have the exact quarterly amount, but I can tell you it's going to be in that range for same store sales. So generally what happens is it takes a little while for our new reps to hit their stride. And when they do, they just progressively get larger, larger, larger. Inherently, our strongest reps continue to bear the load of the majority of the growth. So That's the general answer.

Speaker 1

But there's nothing unique to this quarter. I mean, if you go back and look, there's it ebbs and flows a little bit, but we always At these type growth rates, it's the way we do things. We're a very sales driven organization. We're aggressive with our recruiting and training and retaining new sales reps to get into new areas that ultimately So I think over the last few years, offering additional products for these Seasoned reps to sell, be it sleep, oxygen, percussion vest has given the ability to sustain the high growth rates, all while knowing that the complex respiratory population, primarily COPD and neuromuscular It's a very underserved market and continues to be. So the green pasture is still there.

Speaker 1

That's why we're confident that we can continue to grow it. The job is ours to continue to find new people to help spread the good news and get more people on therapy.

Speaker 6

Last one for me if I have time. With the PHE ending last quarter, you got a partial impact under your belt. This will be a full quarter. Any notable callouts there in terms of changes in market dynamics, Reimbursement regulatory changes, audit changes, what you're seeing on that side of the market, Are there any notable call outs that people should be paying attention to in a post PHE environment?

Speaker 1

No, not really. I mean, obviously, you hit on everything, But we fortunately, I guess or I guess unfortunately during the relief, we didn't get too large of a revenue uplift From the blended rate and so forth, it impacted us some, but it was still inconsequential that we never had to really call it out or Even think about it from a modeling perspective, it got blended in pretty easily when we look at things. So nothing that Nothing that has been a knee jerk reaction that we've seen that says, oh man, this is back to some problem. We so it's kind of business as usual and no issues on that end.

Speaker 2

One other thing I'll add is there is A movement, if you will, I guess, inspired by the PHE where we didn't have to get CMNs to standardize CMNs, Certificate of medical necessity for oxygen and that would reduce audit pressure on the oxygen business. So I think that's a positive that really came out of it, like what can we adopt going forward that really worked during the PHE. So we'll wait and see if CMS gets on that train, but they should. It should be a win win for us and for them in terms of just audit pressure.

Speaker 6

Yes, perfect. Well, again, congrats. Nice results here and look forward to seeing you guys next month. Thanks so much.

Speaker 2

Thank you, Eric. All right. Thank you, Eric.

Operator

Thank you. There are no questions at this Time, I'd like to hand the floor back over to management for any closing comments. All

Speaker 1

right. We want to thank everybody for participating once again on the call, and We look forward to visiting with anyone that has follow-up questions in the near future. Have a good day.

Operator

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Viemed Healthcare Q2 2023
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