Quipt Home Medical Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2025

Key Takeaways

  • Positive Sentiment: Quipt achieved a return to positive organic growth with a 1.6% quarter-over-quarter revenue increase, driven by strength in core respiratory therapies and sleep resupply.
  • Positive Sentiment: The company sustained a strong adjusted EBITDA margin of 23.5%, reflecting structural efficiency improvements initiated in late 2024.
  • Positive Sentiment: Strategic collaborations with Ballad Health and a joint venture including Henry Ford, McLaren Health and Blanchard Valley embed Quipt in key discharge pathways and expand its national footprint.
  • Negative Sentiment: Fiscal Q3 revenue fell 4.1% year-over-year to $58.3 million and net loss widened to $3 million ($0.07 per share), reflecting modest declines in patient setups.
  • Negative Sentiment: Operating expenses rose to 53.3% of revenue and CapEx climbed to 15.2% of revenue, partly due to increased equipment investment amid the Philips ventilator recall.
AI Generated. May Contain Errors.
Earnings Conference Call
Quipt Home Medical Q3 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Third Quarter twenty twenty five Earnings Results Conference Call for Quipt Home Medical Corp. As a reminder, all participants are in a 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 conference over to Chairman and Chief Executive Officer, Greg Crawford.

Speaker 1

Thank you, operator, and thank you to everyone joining us today. I'm Greg Crawford, Chairman and CEO of Quick Toll Medical. I'm pleased to be joined today by our Chief Financial Officer, Hardik Mehta and our Chief Accounting Officer, Tom Rerich. Let me begin by expressing our appreciation to the entire Quiptole team for their continued execution and commitment and to our shareholders for their support. Quiptoe Medical is a healthcare services company delivering a comprehensive range of home medical equipment and services to patients across The United States.

Speaker 1

We operate with a mission to deliver high quality technology enabled care that allows patients to remain in comfort of their homes with a particular focus on chronic respiratory condition. As we look at the improved results for fiscal third quarter, we saw clear revenue stabilization across the business and a return to positive organic growth driven by strength in our core therapies, consistent activity in our sleep resupply channel after the seasonal weakness experienced in fiscal Q2 and a return to more balanced overall referral volumes. We believe the most difficult period is behind us and our operating engine is well positioned to scale again. During the quarter, we continued to demonstrate a strong and consistent adjusted EBITDA margin performance coming in at 23.5%. Despite a dynamic environment, we have delivered steady margin results quarter after quarter, a direct outcome of the structural improvements we began implementing in late twenty twenty four.

Speaker 1

Subsequent to quarter end, we made significant strategic progress on our healthcare system expansion strategy. Following the end of the quarter, we announced a milestone transaction with Ballad Health, a prominent integrated health system comprised of 20 hospitals serving 29 counties of the Appalachian Highlands in Tennessee, Virginia, North Carolina and Kentucky. This transaction embeds Quip directly into Ballot's discharge pathway positioning us as their preferred provider across their network. While it's early, the operational momentum coming out of the deal has been promising and it validates our broader strategy to scale through value based relationships. Then earlier this morning, we announced a definitive agreement to form a joint venture anchored by three powerhouse health systems, Henry Ford Health, McLaren Health and Blanchard Valley Health.

Speaker 1

These partnerships embed us into the discharge process of a significant number of hospitals and affiliated care sites, giving us the ability to serve patients at the exact point their care transitions to the home. That's an incredibly valuable position in today's healthcare environment. This joint venture strengthens our Midwest presence and formerly launches us into Michigan, one of the most important markets in our expansion strategy. Just as important, it creates a scalable blueprint for future health system partnerships across the country. Heart's two decade reputation for clinical excellence and their alignment with health system care coordination perfectly complement our mission of delivering high quality respiratory and home medical equipment solutions nationwide.

Speaker 1

Heart has built a best in class reputation for quality patient care and operational excellence with over 60,000 patients served monthly and direct alliances with some of the Midwest's largest integrated health systems. These partnerships are deeply embedded in Heart's operation and hospital discharge processes providing a steady and reliable flow of patient referrals. This joint venture with three major health systems marks Quip's formal entry extending our geographic footprint into one of the Midwest most attractive and strategically important healthcare markets. Moreover, the transaction expands us in Ohio and surrounding markets. This joint venture exemplifies our strategy of scaling through healthcare system integration and we see tremendous opportunity to leverage Heart's infrastructure with its 29 branch locations, highly experienced management team and a strong culture alignment with Quip, Heart will serve as a cornerstone in our evolution as a national leader in the respiratory focused home medical equipment.

Speaker 1

We have entered the 2025 with confidence backed by the firming of our operating metrics, recent healthcare system transaction and a clear roadmap for growth. Revenue stabilization is evident across our business underpinned by resilient demand in our core rental segment and resupply program, which remains the foundation of our recurring revenue profile. As the environment normalizes, we are seeing referral activity return to more predictable patterns and set up activity rise accordingly. Importantly, our product portfolio has proven durable. Demand for our core offerings particularly oxygen, sleep therapy, ventilator services and sleep resupply continues to be stable and well diversified.

Speaker 1

Our infrastructure is purpose built for scalability and efficiency, allowing us to support a growing patient population while preserving operational leverage. The structural improvements we implemented in late twenty twenty four are yielding results. We are now positioned with a more agile cost structure, a reinvigorated sales effort and a broader base of healthcare relationships. These factors reinforce our confidence in delivering consistent operating performance. Before I turn the call over to Hardik, I want to reiterate that the Board and management remain laser focused on making thoughtful decisions that we believe are in the best interest of maximizing long term shareholder value.

Speaker 1

With that, I'll turn the call over to Hardik to walk through our fiscal third quarter twenty twenty five financial results.

Speaker 2

Thanks, Greg. On Monday evening, we announced our fiscal third quarter twenty twenty five financial results for the three and nine months ended 06/30/2025. Please note that all financial values are in U. S. Dollars and are reported under GAAP accounting principles with comparison periods also restated under GAAP for consistency.

Speaker 2

This quarter marks a return to positive organic growth and signals clear revenue stabilization across our business. Here are the key highlights from the quarter. The company's customer base decreased modestly serving 151,000 unique patients as of 06/30/2025 compared to 153,000 unique patients as of 06/30/2024. The company completed 210,000 unique setups deliveries in Q3 twenty twenty five compared to 216,000 in Q3 twenty twenty four. Respiratory resupply setups deliveries totaled 119,000 in Q3 twenty twenty five, a change from 120,000 in the prior year quarter.

Speaker 2

Revenue for fiscal Q3 twenty twenty five came in at $58,300,000 compared to $60,800,000 in Q3 twenty twenty four, a decrease of 4.1. This compares to revenue of $57,400,000 in Q2 twenty twenty five, reflecting a return to positive quarter over quarter organic growth of 1.6%. Revenue for nine months ended 06/30/2025 was $177,000,000 compared to $184,600,000 for the nine months ended 06/30/2024, a decrease of 4.1%. Recurring revenue for Q3 twenty twenty five continues to be strong at 81% of total revenue. Adjusted EBITDA for Q3 twenty twenty five was $13,700,000 or 23.5% of revenue compared to $14,200,000 or 23.4% of revenue for Q3 twenty twenty four, representing a 3.6% decrease.

Speaker 2

Adjusted EBITDA of $41,000,000 or 23.2% of revenue for the nine months ended 06/30/2025 compared to $44,000,000 or 24% of revenue for nine months ended 06/30/2024, a decrease of 7.7%. Net loss for Q3, twenty twenty five was $3,000,000 or $0.07 per diluted share compared to $1,600,000 loss or $0.04 per diluted share for Q3 twenty twenty four. Cash flow from operations was 27,900,000 for the nine months ended 06/30/2025 compared to $25,400,000 for the nine months ended 06/30/2024. The company reported $11,300,000 of cash on hand as of 06/30/2025 as compared to $17,100,000 of cash on hand as of 03/31/2025. Approximately $5,000,000 of change in cash compared to the previous quarter was used to pay down the line of credit balance.

Speaker 2

Total credit availability was $35,300,000 as of 06/30/2025, with $14,300,000 available on a revolving credit facility and $21,000,000 available pursuant to the delayed draw term loan facility. Operating expenses as a percentage of revenue came in at 53.3% in Q3 twenty twenty five compared to 50.4% in the corresponding period in 2024. CapEx also known as rental equipment transferred from inventory for the nine months ended 06/30/2025 was 15.2% of revenue compared to 13.3 of revenue for the same period in 2024. As previously mentioned, current Philips recall on its ventilators has contributed to the increase in our rental equipment CapEx. Our net debt to adjusted EBITDA leverage ratio was 1.5x well within our target range.

Speaker 2

We are pleased with the important progress we made during the fiscal third quarter. Our results indicate we are seeing clear revenue stabilization in the business with a return to positive organic growth quarter over quarter. These outcomes are direct results of the operational initiatives we have executed over the past three quarters. Moreover, we delivered a strong and consistent adjusted EBITDA margin of 23.5% underpinned by structural efficiency improvements initiated in late twenty twenty four. Following quarter end, we executed our first acquisition of a healthcare system on DME provider, generating $6,600,000 in annualized revenue in a strategic transaction completed with Ballard Health.

Speaker 2

This transaction includes a preferred provider agreement covering 20 hospitals across four states. Moreover, as Greg mentioned earlier, this morning we announced that we have entered into a joint venture to acquire 60% ownership stake in Heart Medical Equipment, nationally accredited provider of home medical equipment and supplies based in Michigan. This joint venture adds immediate scale to our platform. Heart generated approximately $60,000,000 in revenue and $7,000,000 in adjusted EBITDA as of 06/30/2025. And once the transaction closes, which we expect to occur by the end of fiscal Q4 twenty twenty five, we anticipate reaching an annualized run rate revenue of roughly $300,000,000 companywide.

Speaker 2

Quip will acquire a 60% ownership interest for total consideration in the range of $17,000,000 to $18,000,000 This structure allows us to preserve balance sheet flexibility while adding a strategically aligned asset. HUD's 29 location across Michigan and Ohio along with its embedded partnership with Henry Ford Health, McLaren Health and Blanchard Valley Health System, Wood County Hospital and the Bellevue Hospital create direct access to a recurring patient base of more than 67,000 patients each month. Once closed, we expect Hart's adjusted EBITDA margin to align with our historical corporate averages within three quarters, driven by operational integration, shared best practices and cost efficiencies. This transaction fits squarely into our disciplined capital allocation strategy, is health system aligned and repeatable as a template for future partnership. This is a clear validation of our strategy to partner with leading healthcare systems in The United States that are aligned in mission and values.

Speaker 2

As we progress to calendar 2025, we are energized by the opportunity before us to drive a consistent growth path. Our commitment to operational excellence, disciplined growth and patient focused care remains the cornerstone of our approach, positioning us for long term success. With that, I'll now turn the call back over to Greg.

Speaker 1

Thank you, Hardik. Today, Quip now operates over 160 locations across 27 states serving over 325,000 active patients. Our scalable infrastructure and growing national presence enable us to deliver consistent high quality service while expanding our reach across both established and emerging markets. 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, we have developed a scalable model that addresses the complexities and evolving demands of the durable medical equipment ecosystem.

Speaker 1

At this time, respiratory care comprises over 75% of our product mix and this strategic emphasis aligns with critical macro trends including an aging population, rising chronic respiratory disease rates and sustained demand in sleep care. These long term drivers coupled with our execution reinforce our confidence in the future. Moving to our sleep business, recent real world data shared by the leading sleep device manufacturer involving one point six million patients underscores the positive effects of GLP-1s on treatment adherence. The study found that individuals with an obstructive sleep apnea diagnosis who were prescribed a GLP-one were eleven percent more likely to start positive airway pressure compared to those not on GLP-1s. Additionally, these patients exhibited higher CPAP resupply order rates at both the one year mark showing a 300 basis point increase and at the two year mark showing a 500 basis point mark increase post setup.

Speaker 1

This data now tracking nearly one point six million patients have been steady with some positive trends. Moreover, there is a growing use of wearables for sleep tracking that is also driving awareness and funneling patients into diagnostics. GLP-one drugs are increasing engagement with sleep health not displacing CPAP demand. As we look at our growth roadmap, we've made targeted progress on several fronts. During the year, we have successfully opened two de novo locations in Florida and Alabama and we expect to continue expanding our de novo footprint in the months ahead as part of a focused national market expansion strategy.

Speaker 1

In parallel, we are deepening our referral networks across both new and existing markets by reinforcing relationships with physicians, hospitals and other healthcare verticals. We are positioning Quip to capture a larger share of patient volume at the point of discharge. This is already contributing to improve setup activity and a more consistent pipeline of recurring patients. We've also continued to involve our product portfolio with a specific focus on respiratory care. Most recently, we introduced a new Medicare approved respiratory device designed to enhance airway clearance and secretion mobilization, particularly relevant for our higher acuity patients.

Speaker 1

This fits seamlessly into our strategy of expanding care offerings while serving more complex clinical needs. To support our sales productivity, we also launched the Quip Sales Academy, a formal program to accelerate onboarding, improve rep performance and strengthen referral conversion. This is a direct investment in our front end commercial capabilities. Taken together with the recent transactions announced with major healthcare systems, this truly is a transformative time for Quipt. We are embedding ourselves directly into some of the most influential patient care networks in the country.

Speaker 1

These transactions are not just incremental, they fundamentally enhance our competitive positioning, open the door to large consistent patient volumes and create a scalable blueprint for future healthcare system collaborations nationwide. When combined with our expanding geographic reach, deeper referral integration, operational optimization and an increasingly diversified product mix, we are building a durable engine capable of delivering consistent organic expansion while protecting and enhancing margins. Backed by a strong balance sheet, a stable and growing recurring revenue base and an execution focused leadership team, Quip is exceptionally well positioned to accelerate growth, deepen healthcare system partnerships and create substantial long term shareholder value. On the capital market fronts, we will continue to engage actively with investors across North America given the company's low valuation, important business progress, return to organic growth and the backdrop of significant recent healthcare system focused transactions, we are excited to tell our story. In closing, we remain committed to maximizing long term shareholder value shareholders.

Speaker 1

The Board and management team are actively evaluating all ways to enhance the company's strategic position while advancing growth and operational performance. As we look ahead, we're confident in the strength of our business and our positioning in the market and our ability to execute on initiatives that support sustained value creation. And with that, operator, we are now ready to take questions.

Operator

Thank you. We will now begin the analyst question and answer session. Our first question is from Doug Cooper with Beacon Securities. Please go ahead.

Speaker 3

Hi, good morning everybody. And guess nice work on sort of stabilizing the business. Hardik or Greg, just first question, when I track what I would call adjusted EBITDA, call it EBITDA minus patient CapEx, By my calculation, that ticked up to that margin ticked up to 8% in the quarter, which is the best in about a year, I guess, since it was over 12.5% in Q2 twenty twenty four. Can you just talk a little bit about what do you think you can target on that to get that moving back continue to move in the right direction?

Speaker 2

Doug, thanks for the call and the question. Look, I think we would expect for us to kind of continue improvements on our EBITDA margins. Patient CapEx has been a drag as we have kind of mentioned in our previous calls. We are continuing to see our investments in replacing ventilators due to Phillips recall. So if anything I would say as long as we can maintain our EBITDA margins to some revenue growth and stabilization of the expenses, which we have demonstrated we can, we kind of look forward to keeping EBITDA less CapEx margin steady or kind of expand.

Speaker 3

Okay. Greg, can you just talk about the sort of JV, congratulations on that, looks like an interesting transaction. EBITDA margin for that heart right now at $7,000,000 How do you you mentioned in your speech there that you anticipated moving back up to Cribs average, which is implied, obviously, over in a doubling of that EBITDA from 7,000,000 to 14,000,000 or whatever the number is. How do you do that?

Speaker 1

Yes. So we expect over the next few quarters in that, once we get that business fully integrated in that and get it under similar cost structures in that, Quipt has historically seen, we'll be able to do that. And that's what we've historically done in the past with most acquisitions. That's going to I come from multiple levers from cost structures in that that are kind of totally related in that.

Speaker 3

Just walk through me. It sounds interesting to get these patients at source when they're being discharged. What are they being discharged for? What is that what do they actually go into those health centers for hospitals for?

Speaker 1

Yes. Well, I mean, hey, that could be a whole various types of diagnosis and treatments, but primarily in that we're treating respiratory conditions in that. So the majority of what we would see out of in that the new JV and that would be respiratory related. So that would be your ventilation, your oxygen and then you move kind of into the sleep in that department and that that's doing the sleep testing and things and then also providing that complementary in that equipment solutions in that for those patients. So that's kind of the primary drivers.

Speaker 1

We don't expect the product mix to kind of change or anything there. We do expect to see an increase in the respiratory and that referrals in that. So we've got some programs that we would like to implement in that throughout that those systems that we believe will help drive additional in that referrals and that there may be going to other providers in the marketplace.

Operator

We seem to have lost our caller in queue. So I will the next caller is Bill Sutherland with Benchmark Company. Please go ahead.

Speaker 4

Thank you. Hey, Greg and Hardik. The JV that you just announced, is there any financial aspect to it, any stake that you put up?

Speaker 2

Bill, this is Harek. Not sure I completely understand your question. Could you rephrase that a little bit differently, please?

Speaker 4

Well, is there any financial component to the JV or is it just an agreement Yes. In terms

Speaker 2

Yes. It's a true investment. So yes, we are going to take equity position in the JV alongside the hospital systems that we mentioned in our earnings call and the press release that we gave out. So it's almost like an acquisition for lack of a better word except for the fact that we are kind of not only just equity holders, but we are going to work very closely with this hospital systems to further enhance their discharge processes and then how do we capture most of those patients that are getting discharged from this hospital system. So it's also a lot of alignment at the C level to make sure that there are seamless discharges that we could as an operating entity would be able to service, which they have been they have 60 plus million in top line revenue.

Speaker 2

So they have been really doing well and successful at doing it. Being a classic healthcare system DME, they tend to have some inefficiencies. They saw us as a good partner that runs good DME. And we are fortunate to partner with them in again, the JV is a classic financial JV where we're going to be an equity partner.

Speaker 4

I didn't see the press release forgive me, but did you talk about kind of what the level of investment is and any other?

Speaker 3

Yes.

Speaker 4

Yes. Okay. Yes. So, Yes. I'll take a look at that.

Speaker 4

Do you all think you've made a lot of progress with the plan for improving operating efficiencies starting in a year ago. Is there more to go there? Or have you pretty much completed what you set out to do?

Speaker 1

Well, I think we set out to do with what was in our core business. But now with the recent acquisitions in that, as you've historically seen with us, is that we've been able to increase the margins in that on those acquired assets. And I think we've kind of clearly laid that out is that we expect both of those and that to be up the corporate average and that in the coming quarters, especially for the larger $60,000,000 one. We think that's going to take us a few quarters. And then from there, I think there could be further margin improvement, but we'll be laser focused on integrating those assets and continue to work on our organic growth initiatives throughout the rest of the business.

Speaker 4

Great. And then Greg, maybe just update us now that you've gotten you've been completing a couple of deals. Any how should we think about the M and A pipeline right now?

Speaker 1

Yes. Our M and A pipeline remains strong in that. So we continue to work through the pipeline of kind of what's the best strategic fit for us. There's certainly no shortage of acquisitions right now, I'll say. We're starting to receive a lot of inbounds in that, especially now that we've been a little more active in the marketplace in that.

Speaker 1

So we've got a full pipeline and expect to continue to evaluate those and work towards closing the best one that's going to create the most value for us long term.

Speaker 4

Do you think you're going to lean just basically focus primarily on the kind of things you've just done or you have a partnership?

Speaker 1

No, I think it will be a combination. We've got both in our current pipeline.

Speaker 4

Okay. And then last thing, I don't think I heard most of your prepared commentary. Did you talk about the One Big Beautiful bill and any impact at all from that?

Speaker 1

We did not. No, we don't have anything that we anticipate that would affect our operational or anything along those lines.

Speaker 4

Okay. That's what I was figuring, but I just want to double check. Okay. Yes. Thank you both.

Speaker 1

Thank you.

Operator

The next question is from Justin Keywood with Stifel GMP. Please go ahead. Justin Keywood, your line is open. I'll try one more time. Justin Keywood, your line is open.

Operator

It appears not to be able. This concludes the question and answer session. I'd like to turn the conference back over Crawford for any closing remarks. I'm sorry, Mr.

Operator

Crawford, your line was muted. I'll conclude the call. Thank you for participating and have a pleasant

Powered by Quartr