Quipt Home Medical Q1 2025 Earnings Report

Quipt Home Medical EPS Results

• Actual EPS: -$0.03
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Quipt Home Medical Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Quipt Home Medical Announcement Details

• Quarter: Q1 2025
• Date: 2/10/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 11, 2025
• Conference Call Time: 10:00AM ET

Quipt Home Medical (NASDAQ:QIPT), through its subsidiaries, engages in the provision of durable and home medical equipment and supplies in the United States. The company offers nebulizers, oxygen concentrators, and CPAP and BiPAP units; traditional and non-traditional durable medical respiratory equipment and services; non-invasive ventilation equipment, supplies, and services; and engages in the rental of medical equipment. It offers management of various chronic disease states focusing on patients with heart and pulmonary disease, sleep apnea, reduced mobility, and other chronic health conditions. The company was formerly known as Protech Home Medical Corp. and changed its name to Quipt Home Medical Corp. in May 2021. Quipt Home Medical Corp. is headquartered in Wilder, Kentucky.

Quipt Home Medical Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the First Quarter twenty twenty five Earnings Results Conference Call for QuipT Home Medical Corporation. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions.

[Operator]

We remind you that the remarks today will include forward looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of the company's results news release. The company's actual performance could differ materially from these statements. At this point, I'd like to turn the call over to Chairman and Chief Executive Officer, Greg Crawford.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Thank you, operator, and thank you to everyone joining us today. I'm Greg Crawford, Chairman and CEO of Quiptoe Medical. I'm pleased to have Hardik Mehta, our Chief Financial Officer and Tom Rehrig, our Chief Accounting Officer joining me today. Quick Tone Medical is a diversified healthcare services company delivering a comprehensive range of home medical equipment and services to patients across The United States. Our commitment to clinical excellence powered by a patient centric model and advanced technology enabled solutions.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

These combined with our specialized respiratory programs allow us to effectively meet patient needs in the comfort of their own homes. At present, Quip has expanded to 135 locations across 26 states with over 314,000 active patients, which has enabled us to strengthen our coast to coast reach. Our go to market strategy is rooted in providing an integrated end to end respiratory care solution complemented by a diverse portfolio of durable medical equipment. As a trusted partner for patients and healthcare providers alike, we have developed a scalable model that addresses the complexities and evolving demands of the durable medical equipment ecosystem. Respiratory care comprises approximately 77% of our product mix demonstrating our unwavering commitment to patients with pulmonary and cardiovascular conditions.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

This strategic focus aligns with critical macro trends such as the aging population, the rising prevalence of chronic respiratory disease like COPD and the significant untapped opportunities in the sleep apnea market. These drivers combined with our operational expertise and expanding scale position Quip to meet the growing demand for high quality in home respiratory care solution. On today's call, we will review our fiscal first quarter twenty twenty five performance as well as provide insights into emerging demand trends, operational highlights and strategic initiatives shaping our growth trajectory for the remainder of fiscal 'twenty five. For the first quarter of fiscal 'twenty five, we experienced consistent demand across all major product categories and steady referral patterns. We achieved stable revenue generation of $61,400,000 alongside a strong sequential improvement in adjusted EBITDA margin, which reached 22.8% leading to adjusted EBITDA of $14,000,000 We are particularly encouraged by the meaningful improvement in our adjusted EBITDA margin sequentially during fiscal Q1 twenty twenty five.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

This progress reflects the proactive steps we've taken to streamline our operations and optimize our organizational structure. These enhancements are enabling us to operate more efficiently while maintaining our commitment to high quality patient care. As we continue to execute on our growth initiatives, we expect this operational discipline to support steady margin expansion throughout the year. Shifting the focus to our sleep business, we are pleased to report that GLP-one medications continue to have no impact on demand. Referral activity for new device setups remain solid while replacement supply volumes continued to demonstrate strong and consistent performance.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Recent real world data shared by the leading sleep device manufacturer involving nearly 1,200,000 patient underscores the positive effects of GLP-1s on treatment adherence. The study found that individuals with an obstructive sleep apnea OSA diagnosis who were prescribed the GLP-one were ten point seven percent more likely Additionally, these patients exhibited higher resupply order rates over both twelve and twenty four month periods. These data points have now been steady with the same trend plus or minus a couple of tens of a basis points as the leading manufacturer has grown their analysis from a year ago with approximately three hundred thousand patients to now tracking nearly one point two million patients. On 01/17/2025, the American Academy of Sleep Medicine released a quick reference guide for providers discussing the use of novel pharmotherapies in the treatment of OSA. The AASM continues to emphasize positive airway pressure therapy as the frontline treatment for OSA.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Additionally, the guide suggests that weight loss medications may serve as useful adjunctive or combination therapies. We believe GLP-one medications will serve the long term tailwind for our sleep business, introducing more motivated patients into the healthcare system as they focus on improving their overall health. Additionally, the regulatory environment remains stable and we are not seeing any significant headwinds over the near term. This stability allows us to operate with greater efficiency and confidence, supporting both margin performance and continued strategic execution. With this regulatory clarity, we are well positioned to sustain long term growth as we expand our footprint and deepen partnerships across the healthcare ecosystem.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

We continue to manage our balance sheet prudently with net leverage at 1.5 times, which gives us the flexibility to invest in strategic initiatives. As we move forward, we are confident in our ability to deliver exceptional patient care, strengthening relationships with payers and execute on a disciplined scalable growth strategy. Through these efforts, we are well positioned to drive consistent long term value for our shareholders. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal first quarter twenty twenty five financial results.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Thanks, Greg. On Monday evening, we announced our fiscal first quarter twenty twenty five financial results for the three months ended 12/31/2024. Please note that all financial values are in U. S. Dollars and are now reported under GAAP accounting principles with comparison periods also reported under GAAP for consistency.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Here are some key highlights from the quarter. We completed 221,000 unique setups and deliveries in the fiscal first quarter twenty twenty five, an increase of 3% from 215,000 unique setups and deliveries in fiscal Q1 twenty twenty four. Resupply resupply setups and deliveries increased to 124,000 for the quarter reflecting growth of 1% year over year driven by our centralized intake processes and technological innovations. The customer base grew by 1%, serving 157,000 unique patients as of 12/31/2024, compared to 155,000 unique patients as of 12/31/2023. Revenue for fiscal Q1 twenty twenty five was $61,400,000 compared to $62,600,000 in fiscal Q1 twenty twenty four.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

This represents a 2% decrease year over year. Revenue for Q1 twenty twenty five was flat compared to Q4 twenty twenty four. The Medicare 7,525 blended rate which had been providing rate relief for certain geographies was discontinued as of 01/01/2024. Although this change is still under legislative review and could return, its immediate cessation had a negative impact on our revenue and operating results. Moreover, in certain regions, we also experienced the withdrawal of Medicare Advantage members due to a capitated agreement engaged with other providers in the industry.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

In November 2024, a disposable supply contract was not renewed. The cumulative annual impact of these three events is estimated to be approximately $8,000,000 with a reduction of approximately $1,500,000 for the three months ended 12/31/2024 as compared to the three months ended 12/31/2023. Recurring revenue for Q1 twenty twenty five was very strong and was approximately 77% of total revenue. Adjusted EBITDA for Q1 twenty twenty five was $14,000,000 at 22.8% margin compared to $15,300,000 at 24.5% margin for Q1 twenty twenty four, representing an 8.7% decrease. Adjusted EBITDA sequentially increased by 4.5% from Q4 twenty twenty four in which the company reported adjusted EBITDA of $13,400,000 at 21.8% margin.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Net loss improved from Q1 twenty twenty five to 1,100,000 or $0.03 per diluted shares compared to net loss of $1,500,000 or $0.04 per diluted share for Q1 twenty twenty four. Operating expenses as a percentage of revenue came in at 49.5 percent in fiscal Q1 twenty twenty five compared to 47.6% the corresponding period in 2024. CapEx also known as rental equipment transferred from inventory for fiscal Q1 twenty twenty five was $9,400,000 compared to $7,300,000 in fiscal Q1 twenty twenty four. Cash flow from continuing operations was $9,300,000 for the three months ended 12/31/2024 compared to $10,600,000 in the prior period. The company reported $15,500,000 in cash on hand as of availability of $32,400,000 including $11,400,000 available on revolving credit facility and $21,000,000 on delayed draw term loan facility.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

We maintained a conservative balance sheet with a net debt to adjusted EBITDA leverage of 1.5 times. Our financial performance in fiscal Q1 twenty twenty five demonstrates the stability of our business model. We delivered an improvement in adjusted EBITDA margin compared to previous quarter reflecting the initial benefits of the structural optimization efforts we began implementing at the start of the fiscal year. These initiatives are focused on enhancing operational efficiency across the organization, reducing inefficiencies and unlocking margin expansion opportunities. We are pleased with the results so far and we plan to deliver steady margins throughout the year as we continue to refine our processes and optimize our cost structure.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

We continue to see steady referral activity demonstrating the durability of our operating model and our ability to meet evolving market needs. This consistent demand trend reinforce that strength of our business which continues to benefit from macro tailwinds such as the aging population and the rising prevalence of chronic respiratory conditions. While some headwinds persisted, we are pleased with our ability to build upon the foundation established in prior quarters and position ourselves for growth in the calendar year ahead. The strength and consistency of our revenue base was underpinned by our recurring model, which accounted for over 77% of total revenue in fiscal Q1 twenty twenty five. A cornerstone of this model is our resupply program, which has grown to support more than 174,000 patients as of 12/31/2024.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

This program not only extends the duration of each patient's relationship, but also reinforces the value of our high touch patient centered care model. Our financial position remains a critical driver of growth. With $47,900,000 in liquidity and a net leverage ratio of 1.5, we are well equipped to advance our growth initiatives. As capital market dynamics evolve, we remain confident in our ability to see strategic opportunities that align with our long term goals, all while safeguarding our strong financial foundation. As we progress through calendar 2025, we are energized by the opportunities before us.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Our commitment to the operational excellence, disciplined growth and patient focused care remains the cornerstone of our approach positioning us for continued success. With that, I will now turn the call back to Greg.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Thank you, Hardy, for that comprehensive overview of our financial performance and operational highlights. Our top priorities for fiscal twenty twenty five and beyond are driving organic revenue growth, achieving operational net profit, generating positive cash flow and expanding both adjusted EBITDA and adjusted EBITDA margin. We are focused on expanding our presence in both existing and new markets, leveraging our scalable business platform to broaden our product offering and service reach. To support these objectives, we continue to optimize our organizational structure, enhancing operational efficiencies by reducing redundancies and centralizing back office processes. These measures are streamlining operations, improving scalability and positioning the business for a sustainable long term growth.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

At the heart of our strategy is our commitment to addressing chronic respiratory conditions, including sleep apnea, COPD and other pulmonary diseases, while ensuring patients can access high quality care in the comfort of their homes. As demand for home based healthcare solution grows, we are exploring new ways to expand our reach, including entering into untapped markets and fostering strategic partnerships with payers, referral sources and healthcare providers. Our competitive strengths lie in the unique combination of our expanding national footprint, growing market share and deep clinical expertise. These advantages enable us to operate at scale creating efficiencies while delivering a seamless patient centric experience that meets the rising demand for home based care solutions. As it relates to the execution of our growth strategy, we are committed to leveraging technology in every way we can to consistently improve our operational performance.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

We are also focused on enhancing our workflow processes which creates efficiencies and removes friction points. We believe the keys to success are strong organizational efficiency and building economical scale to create long term value. Looking ahead, we are continued to maintaining active engagement with our investors across both U. S. And Canada as we focus on delivering value through an expected return to consistent organic growth in calendar twenty twenty five.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Importantly, despite trading well below the valuation levels at which recent acquisitions have occurred within our space, our business fundamentals remain solid. We are pleased that the margins have been steady and improved nicely on a sequential basis this quarter, reflecting the positive impact of our operational initiatives. Having effectively navigated recent challenges, we are well positioned to capitalize on growth opportunities. With steady demand across our product portfolio, we are optimistic about the balance of calendar twenty twenty five and excited to share continued progress with you. We look forward to reporting our fiscal Q2 results in May.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

In closing, we remain committed to exploring and pursuing all avenues to drive increased shareholder value and I would like to take this chance to thank the entire Quip team for their tireless work and our stakeholders for their continued support.

[Operator]

We will now begin the analyst question and answer session. The first question comes from Richard Close with Canaccord Genuity. Please go ahead.

[Richard Close, Managing Director at Canaccord Genuity Group]

Yes. Thanks for the questions and I apologize if there's any background on traveling. I appreciate providing the calendar '20 '20 '4 revenue headwind impact of $8,000,000 on those moving parts. I was wondering if you can provide us some background on the contract termination, the disposable supply and how much of a headwind do you think that's going to be in the remainder of this fiscal twenty twenty five? That's my first question.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes, sure. So that was an incontinence supply contract and that we have had with a state that we operate in through a home health agency and it ended up getting terminated there on November 1. So we expect that to be about a $2,500,000 headwind in that kind of look at it say in calendar 2025.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay. And that includes the first quarter impact that $2,500,000

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Well, that's the total in that for the entire calendar year. So if you it's probably a little more heavily weighted in that in the first quarter than it would be going out into say our fiscal Q1 twenty twenty six.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay. That's helpful. And then also on the capitated contracts that shifted I guess at the end of twenty twenty three. That was MA mostly, but you also I think have PPO patients as well with them. And how should we be thinking about like that headwind maybe some of those PPO patients rolling off in the remainder of fiscal twenty twenty five?

[Richard Close, Managing Director at Canaccord Genuity Group]

I'm really just trying to get a feel of how much of the headwinds are behind you because you'll be lapping essentially 01/01/1975 point '2 '5 dollars and how much of the headwinds are sort of continuing this year and obviously the $2.5 that you just mentioned is part of that?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Hey, Richar. This is Hardik. Yes, great question. So you're right. As we kind of go into fiscal twenty twenty five, so sorry, calendar 2025, so fiscal Q2, Q3 and Q4, you would see the larger impact year over year in the first couple of quarters versus the later half because Humana's impact to us was really it kind of scaled up.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

And so Q2, Q3 of last year, we saw the most impact of Humana. So quarter over quarter, year over year, you would probably see about somewhere in the neighborhood of $1,000,000 in Q2, maybe $750,000,000 to $800,000,000 in Q3, Q4 similar and then Q1 twenty five million dollars might be much lesser. So again, if you take that 2.6%, it's probably weighted towards the front couple of quarters than the second other quarter the two quarters in Canada Twenty Twenty Five.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay. And then my final question

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

I think I'll just add to that Richard in that is that it's important to note that the TPO in that has stabilized and that as far as and that what we've seen fall off and we're starting to make some progress in the referral community with the sales team in that of some initiatives in that to let them know that, hey, we still can take the PPO plans.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay. So it sounds like not much from Humana PPO rolling off in calendar twenty twenty five. You just have this very small disposable contract termination. So most of the headwinds are behind you?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

That's what we said last year. Yes, that would be a good expectation.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

The rest of Humana will be in the first half. It is certainly stabilized.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay.

[Richard Close, Managing Director at Canaccord Genuity Group]

Perfect. And then final question is good job on the margins and interested in some of the cost efficiencies or optimization that you're talking about and how much of that's still to come. Just curious Hardik in terms of how you're thinking about the progression of margins as we go through the years? Should we think about steady stair step as we progress through the year? And then how did you guys think about 25% adjusted EBITDA margins?

[Richard Close, Managing Director at Canaccord Genuity Group]

Is that attainable this year or a timeline to get in there?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

I would say, so definitely stabilized from where we are. I think we made some adjustments. If needed, we could make some more. We have always tried and staffed this company to kind of allow for more revenue growth and that has certainly been our strategy. And so with that said, for 2025, of course, our goal is here to get more organic growth.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

That's our primary focus here. But in the event that's not going to happen, then we will have to certainly be addressed our cost structure. But for now, we are certainly planning for revenue growth and stabilization of EBITDA is kind of where we see things are. Of course with growth we would be probably we'd certainly will be seeing that step increases in EBITDA margins as well. Certainly, it's stabilized from a dollar perspective with some opportunity should we have to take some.

[Richard Close, Managing Director at Canaccord Genuity Group]

And is 25% still a long term target?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Yes. Certainly, long term and achievable target, maybe not in the near first next three quarters. But again, certainly, it's a target we believe can be achieved with a little bit more of scale that we hope to bring in 2025. But yes, it's certainly achievable target, but just not in the next near future.

[Richard Close, Managing Director at Canaccord Genuity Group]

Okay. Thank you.

[Operator]

The next question comes from Doug Cooper with Beacon Securities. Please go ahead.

[Doug Cooper, Managing Director at Beacon Securities]

Hey, good morning, everybody.

[Doug Cooper, Managing Director at Beacon Securities]

I just

[Doug Cooper, Managing Director at Beacon Securities]

want to look at the EBITDA minus patient CapEx. You said patient CapEx was $9,400,000 in the quarter or total CapEx. So that gets me in a margin adjusted margin of 7.5% versus 12.8 last year. I just I don't have a number for Q4 for patient CapEx. Do you have that number?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

And what was Yes, I do.

[Doug Cooper, Managing Director at Beacon Securities]

Okay.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Yes. So patient CapEx in Q4 of twenty twenty four fiscal year, Q4 mean Q1 of twenty twenty four fiscal year was certainly on the lower end. And that was kind of an anomaly for that particular quarter, which shows year over year to be at a much larger percentage points. So last year, this quarter, our medical equipment CapEx was around $7,300,000 versus $9300000.0.9200000.0 dollars 9 point 3 million dollars that we reported this year. But if you look at our Q2, Q3 and Q4 of twenty twenty four, those respective quarters were at $7,100,000 10 million dollars and 9100000.0%.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

So what we have is kind of more along the lines. We are also in the middle of swapping out some recall for Phillips on ventilators. So we do expect that will impact us for another couple of quarters as we kind of turn over this the Phillips Respironic ventilators.

[Doug Cooper, Managing Director at Beacon Securities]

I see. So it would seem to me a target of 10% plus should be a target there to generate some real free cash flow. Is that fair?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Sorry, can you ask that

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

one more time, please?

[Doug Cooper, Managing Director at Beacon Securities]

Yes. The adjusted EBITDA margin or EBITDA minus patient CapEx margin to generate some material free cash flow, that's got to be over 10%, correct?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Yes.

[Doug Cooper, Managing Director at Beacon Securities]

Yes. Okay. And when would we expect

[Doug Cooper, Managing Director at Beacon Securities]

to have that over 10%? I mean, obviously, it helps if we get EBITDA margin towards the 25%.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Right. I mean So I mean if you look at fiscal twenty twenty four, we were at 10%, right, for the whole year. Again, we might have to replace some ventilators here for the next couple of quarters as I just mentioned earlier, but we should be kind of heading back to that margin rate sooner than later.

[Doug Cooper, Managing Director at Beacon Securities]

Okay.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

We are not saying that we are deviating from what historically we have performed at least.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

If you look at the whole fiscal twenty twenty four, I think that is a good measurement of what to expect overall in 2025. Post quarters might move here and there, but keep that as a goal for 2025 is certainly what we would look to consider steady state.

[Doug Cooper, Managing Director at Beacon Securities]

Okay. Moving on. The resupply business hasn't gained a lot of traction, I would say, over the past five or six quarters. It ended fiscal twenty twenty three at one hundred and sixty nine thousand patients, ended fiscal twenty twenty four at one hundred and seventy two and now we're 174. What can you do to drive that business?

[Doug Cooper, Managing Director at Beacon Securities]

Because in my opinion, I guess, that's a real generator of free cash flow.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes. This is Greg. Really good question in that. I think one of the several things in that we've actually been working on is one, we've been working to improve and we've started to see slight improvements in our catchment rates and that for new setups. So we're trying to exceed 80 plus on our catchment rate for new setups.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

So that's going to drive more patients in there. Also our sleep compliance in that we're doing some transitions there. We've already seen a couple of percentage points in that of increasing compliance, which ultimately and that also in that more patients into the resupply program. So we do have several handles that we're kind of pulling there for that. The other piece too is there are some other pockets within that resupply in that and that we focused on that we haven't traditionally focused on for compliance

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

would be getting so we've got

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

a really high catchment rate of patients in that ordering their first order after new setup. And then these patients kind of follow-up and that after the ninety days, because we don't necessarily need compliance in that for the continuation of the rental. So now we have started to focus and on patients and that could kind of follow them all the way out for a year because we're seeing that we've got a large drop off in that during like months five to ten. So we expect and that that should continue to add more patients in that within the system.

[Doug Cooper, Managing Director at Beacon Securities]

Okay. And my final question, maybe this might be a bit of an off the wall question, but the Doge Department of Government Efficiency he's obviously in there looking around. Do you think Medicare is somewhere that they're looking to save money? And what could possibly be the impact on reimbursement under such a scenario?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes. I mean, as it stands right now and we don't know of anything that would affect us. I mean, right now and I mean, we're still expecting there could be some positive news on the 7,525, the reinstatement. It seems like there is a lot of momentum in that within the industry on the seventy fivetwenty five. And then I think finally in that the discontinuation in that finally kind of putting the nail in the coffin on the competitive bid.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

But other than that, in that we haven't had anything from updates from a regulatory front.

[Doug Cooper, Managing Director at Beacon Securities]

Okay, great. Thanks very much.

[Operator]

The next question comes from Julian Hung with Stifel. Please go ahead.

[Julian Hung, Associate, Institutional Research at Stifel Financial]

Hi. This is Julian sitting in for Justin today. My first question is with the switch from IFRS to U. S. GAAP, bad debt expense is now embedded in revenue.

[Julian Hung, Associate, Institutional Research at Stifel Financial]

Can you just give us a reminder of how historically how much bad debt expense made

[Julian Hung, Associate, Institutional Research at Stifel Financial]

up and if you see that percentage going down over time?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Historically, I mean, we did make that switch in last quarter of fiscal twenty twenty four, but calculated that we were running around 4.5%. I think you will see that for we kind of saw similar numbers for this quarter. And Q2 of which is calendar Q1 is always the roughest months of all from a cyclical perspective. We do expect those percentages to drop going to the second half of twenty twenty five calendar year with some of the improvements that we are making on our RCN team and some of the resources that we are allocating to our RCN team.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

So I think for now, we would say we would say that we were around the same percentages in Q1. We would probably be around similar percentages in Q2. And then maybe we'll see some decline in Q3, Q4.

[Julian Hung, Associate, Institutional Research at Stifel Financial]

Okay. And on the organic growth end, I think last quarter there was you alluded to maybe returning to 8% to 10% organic growth in 2025%. Is that still a good expectation for now?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes. I mean that's what our goal is. That's what the team is currently working towards is to get back to that historical sequential 2% or so in that organic growth.

[Julian Hung, Associate, Institutional Research at Stifel Financial]

All

[Julian Hung, Associate, Institutional Research at Stifel Financial]

right. Thank you so much for taking my question.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Thank you.

[Operator]

The next question comes from Bill Sutherland with The Benchmark Company. Please go ahead.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Thanks and good morning guys. Greg, back to that organic growth question for a second. When the now you've anniversaried 75.25 where does that kind of put you regardless of all your other initiatives in terms of organic growth? And do you think it's just a steady progress to the last quarter of the year to get to the 2% or so target that you've had?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes. It's certainly in that a steady progress to get there. We've got a lot of different levers that we're pulling. We have a new therapy in that for respiratory that's in our respiratory category and that that we've seen some early signs in that of utilization. We've also created an internal quick accelerator academy in that for our sales team and that from current sales team and then for any potential new hires.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Like I spoke in that we're expecting to see our catchment rates and that on new orders and that increase in that through some technological and that things that we put in place and that's we're seeing some good early results there. Also in that we're looking to reduce the attrition rates and that also on our resupply and that's we have a lot of different levers in that, but we're starting to see some good early signs. So just internally in that those things there and that we anticipate and that we could get back to that historical organic growth that we've previously seen.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Okay. And then just the removal of the seventy fivetwenty five anniversary again, I should say. What does that do for your growth year over year?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Yes. I mean year over year and that's the quarters and that I mean that is certainly in that going to help in that as we especially as we're kind of in our fiscal Q2 right now.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

I think that part of the impacts you've had was in the ballpark of on

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

an annual basis $3,000,000

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

is that I'm looking back at my notes?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Last year, that's about right. Yes, just about $3,000,000 for the $525,007,000

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Okay, that's good. Health expense you called out last quarter, is that I assume that is still something that's weighing on the margin a bit. What is the expense again, I'm sorry? Health. Your self insured plan was running a little high, right, expense wise?

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

I'll let Harley take that.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Okay. Just making sure, are you talking about our internal health insurance costs?

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Yes, your own.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

I thought

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Like employee health insurance costs?

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Yes, yes, Sorry.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Yes. We did have related to our so we did a plan consolidation. We also well self insured last year and that was our first year. So against the initial estimates, we were running a little higher on our health costs. But as far as where we stand today, it seems to have been stabilized over the last couple of quarters.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

We are not I mean, we are forgetting for the nominal annual increases that everybody is seeing in the market, certainly in the neighborhood of 6% to 9%. But we expect at this point the first year, I guess, ramp up is kind of stabilized.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Okay. And balance sheet is in good shape. Any commentary on how we should think about capital deployment in the coming three or four quarters?

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

I mean, as we've kind of said in the past, I mean, the company does evaluate other strategic growth opportunities. We will certainly do that. That is on our radar. We have some good opportunities in front of us that we are actively engaged in looking at. I mean apart from that, I don't think there is anything dramatically different from what we have done historically.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

I mean we will definitely look at deploying capital towards inorganic growth opportunities as well as trying to fund our organic growth.

[Bill Sutherland, Director of Research at The Benchmark Company LLC]

Okay. Thanks, Kartik. Thanks, Greg. Appreciate it.

[Hardik Mehta, Chief Financial Officer at Quipt Home Medical]

Thank you.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Mr. Crawford for any closing remarks.

[Greg Crawford, Chairman & Chief Executive Officer at Quipt Home Medical]

Thank you, operator, and thanks everyone for your participation today. As always, you can find us on the web at www.quiptolmedical.com where we will be posting a transcript of this call and also our updated Investor Day. On the site, you can also view some of the exciting products and developments discussed on this call. Thank you and have a great day.

[Operator]

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a

Participants

Executives

• Greg Crawford, Chairman & Chief Executive Officer
• Hardik Mehta, Chief Financial Officer

Analysts

• Richard Close, Managing Director at Canaccord Genuity Group
• Doug Cooper, Managing Director at Beacon Securities
• Julian Hung, Associate, Institutional Research at Stifel Financial
• Bill Sutherland, Director of Research at The Benchmark Company LLC