Viemed Healthcare, Inc.
Q1 2021 Earnings Call Transcript

Published: 8 May 2021

[Operator:]

Greetings and welcome to the Viemed's First Quarter 2021 Earnings Call . As a reminder, this conference is being recorded. It is now my pleasure to introduce Chief Operating Officer, Todd Zehnder. Thank you. You may begin.

[Todd Zehnder:]

All right, thank you, Daryl. 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 our forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or 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 first quarter financial news results and related financial statements are available on the SEC's website.

[Casey Hoyt:]

Okay. Thank you, Todd. Good morning, everyone and thank you for joining our call today. As customary, I'd like to leave my comments with acknowledgment of our Viemed family and express my deepest gratitude for their passion of our mission. Our people are the foundation of every successful metric within our business and I remain humbled and blessed to be at the helm of this organization. The focus on safety, persistent messaging to our referral sources and commitment to superior patient care has not wavered once with our team, despite working through many challenges posed by this pandemic. This morning I'll focus my comments on how we've experienced an abrupt trend to new patient growth in the last month of the quarter that we believe is signaling we are nearing an end to the pandemic access challenges. We'll also talk about the various investments and product line sectors that are contributing to growth of our core business. Lastly, I'll refresh and update everyone on the current stability of the regulatory landscape and will offer our perspective on how it will contribute to our growth strategy. First, let me provide an update on the core business. January and February of 2021 where some of the toughest months we've experienced in Viemed in many years of our core business. We saw the pandemic peaking in January, February, similar to the peak in April and May of 2020. The impact of this kept patients in their homes, reticent to leave the house to address their health care needs. Most physicians were spending the majority of their practice time treating COVID patients in the hospital and most facilities continue to severely limit access to outside companies. Furthermore, we also literally had to weather the storm, that being the ice storms in the southern region of the country that left many of our patients without power, forcing them back into the hospital to receive care. Despite these major challenges, we still achieved growth in the quarter of 19% over last year's pre-pandemic and pre-ice storm first quarter. We have expanded our coverage area to 45 states and started up 15 new territories by hiring 15 new reps through April. This execution is on pace to hire 60 new reps during the during 2021, which is the goal at the baseline -- which is the goal that this is the baseline to driving our organic growth. We also expanded our Home Sleep Delivered, sleep apnea business into six new areas, which is another new growth initiatives for 2021. The HSD reps are there separate team of reps that specifically focus on home sleep testing, PAP therapy, oxygen and remote patient monitoring. Their call points are typically cardiologists, internists and family physicians. Most of the early success with View, our remote patient monitoring platform has come by way of the HSD reps. We now have approximately 400 patients in the Veru platform utilizing scales, blood pressure cuffs, glucometer, and pulse oximetry devices to monitor these general physiological indicators within these patients.

[Todd Zehnder:]

All right. Thank you, Casey. In reviewing the Financial Results. All figures are in US dollars and the full results have been made available on the SEC website as well as SEDAR. Our core business generated revenue of $25.5 million during the first quarter of 2021 as compared to net revenues of $22.8 million in the first quarter of 2020, which equates to a 12% increase. As previously discussed, this is a slower growth rate than our normal quarter, primarily due to the latest COVID spike in January and February. In addition to the weather issues that impacted us during the quarter. During the first quarter we generated approximately $2.9 million of equipment and service revenue from the ongoing COVID-19 pandemic. The COVID-related revenue has once again come primarily from contact tracing services and sales of PPE. When comparing total revenue, including COVID sales, our first quarter 2021 revenue was up 19% over last year's comparable quarter. Our margin percentages, both gross and EBITDA continue to fluctuate as COVID-19 related product sales during the current year skew comparability. However, we once again posted very strong margins during the quarter. Our first quarter gross and EBITDA amounts came in at 17.7 and $5.5 million, respectively. Our diversification efforts have continued to pay off as our first quarter revenue from vents was approximately 81% of our core revenue, as compared to 84% in the first quarter of 2020.

[Casey Hoyt:]

Okay. Thanks, Todd. In summary, the trends of 2021 are already exhibiting this to be a year where we see patients, referral sources, hospital systems, payor sources and lawmakers valuing more home care. All parties are connecting with the mortality benefit, cost effectiveness, and readmission efficiencies realized in the home care setting. Our recently published study in the Respiratory Medicine journal, which can be found on our site supports this statement. Surrogates for health care costs have always been ER visits and hospital admissions. Our data exhibits that for every 5.5 patients we put on therapy, we save a life. For every five, we save a ER visit and for every 8.8 we save a hospital admission. These facts can no longer be debated and finally offer as published proof about the good that we've been doing in the home. The pandemic helped our management team realize many financial opportunities, which contributed to our current healthy cash position. COVID also allowed us the time to really focus on finalizing our technology investments, further develop our training and recruiting protocols deliver our behavioral health offering amongst other initiatives. All of these components we are creating are essential as payers and hospital systems look for partners who can provide awareness into actionable data insight. I feel strongly that the time is now to capitalize aggressively on both inorganic and organic growth opportunities for this business and we would hope the investment community feels the same. Our patient-centric mission has always been the reason we uncover new opportunities and we will continue to let the patient first focus be at the forefront. I personally want to thank my team once more for their continued commitment to Viemed, and I'd also like to thank our fellow shareholders for their trust in us, as we work hard to be good stewards of their investments. This concludes our prepared remarks we'll now open up for Q&A.

[Operator:]

Our first question is coming from the line of Brooks O'Neil with Lake Street Capital Markets. Please proceed with your question.

[Brooks O'Neil:]

I have a couple of questions, I guess, I'd like to start with, if you could provide any, I guess, more specific or numerical kind of a color on the progression through Q1 and into the beginning of Q2 in terms of what your growth rates were, that would help us get a better feel for kind of what you've seen in the marketplace.

[Casey Hoyt:]

Yes, I think the best way to think about it, Brooks, is the number of new patients we're bringing all on a monthly basis. And I guess to categorize it, we would say that the months of January and February were as low as anything we had seen since I guess April-May of last year where we were probably admitting maybe, call it 60%, 65% of our pre-COVID new patients on a monthly basis. In the month of March we were right around 90% in -- of pre-COVID numbers. So a pretty dramatic comeback and it looks like those trends are staying pretty consistent in April. So that's just a, it's a good sign that things are opening up around the country.

[Brooks O'Neil:]

Secondly, I think Casey use the words medium to large in regard to potential acquisitions. And I'm hoping you guys might kind of frame that up for us in terms that we can get our arms around in terms of, are you thinking about a $2 million acquisition $10 million, $50 million, $500 million, how are you thinking about it?

[Casey Hoyt:]

Well, I will say that we're not interested in doing about 10 acquisition that were $2 million. Brooks, while I don't have an exact number to throw on medium to large -- I mean we are really focused on finding quality companies less of your Fixer Upper if you will, more quality management team that are in place that can kind of carry our Viemed mission forward, we could introduce them into our technology platforms. We can leverage some of their payor contracts that are in place and areas that were not so, I'd rather not just talk about what that number is, because we're looking at so many different shapes, but I'd rather be a larger acquisition than a smaller one, that's our preference.

[Brooks O'Neil:]

And then I mean just a little color, obviously you're not announcing any transactions today but from your perspective, are you pleased with what you're seeing in the marketplace in terms of pricing for these acquisitions? Are you shocked but willing to go to where the market is, what are you seeing out there?

[Todd Zehnder:]

I mean, we're not seeing enough to be like I guess giving a ton of color, but I think that environment is one in which you know this, isn't a low single-digit multiple type world and we're going to be looking at things that are important to us. We're not just, like Casey said we're not going to do a bunch of little things that we can buy at 4 and 5 times, that's not what we're focused on. So I don't think we're surprised, because we watched some of our peers, be very acquisitive and we're watching what it takes to be in the game, I guess. So nothing has necessarily surprised us yet, but we're also not at a point where we have one teed up either.

[Brooks O'Neil:]

And then I'll just ask one more. Obviously, you didn't say anything about VA, but it's still an area of -- in my opinion immense opportunity is there any progress you can comment on with the VA and maybe do you have any line of sight to when you might see some decent revenue from that source?

[Casey Hoyt:]

The VA pilot study is still ongoing, Brooks. So there is no real major update from the last quarter so I didn't put it in my prepared remarks, but it's moving forward. It's probably going to take us 6 to 12 months to really generate some real data that they can prove out, and then from there, you have to think about the national rollout. So it's hard to think about when we're going to realize that VA revenue and that's why I'm just talking a little bit less about it, I really want to get through this pilot program and then kind of reset with these guys on what the strategy will be for incremental revenue. I agree with you a 100% and we're not giving up by any means. This is a huge opportunity with the VA being the second largest payer in the country and then not servicing COPDers on an NIV, major, major opportunities it's slow moving and it's bloody in your nose out there for our company. But we are taking the necessary steps to moving forward this VA pilot study.

[Operator:]

Our next question comes from the line of Anton Hie with RBC Capital Markets.

[Anton Hie:]

Glad to see some improvement in the trends from month-to-month and that's continuing on into April. Is there any kind of one factor that you can address that may be driving those new patient starts to improve so well is one way to kind of characterize that?

[Casey Hoyt:]

It's access, access our physicians, access to the hospitals that's been the biggest driver of new patient growth, so much what we do, Anton, is related to preventative, getting proactive maintenance with the patient, if you will. So it's educating the physician on the front end to look for these patients sooner rather than later. Don't give them to us when they're on their deathbed, let's really drive quality of life by diagnosing immediately. Our data shows that they are 3 times more likely that die in the first 90 days after diagnosis. So that's another driver of why we got to get out there and be progressive. But it's simply access now, we can have the conversation, and we can start to make it top of mind for the physicians to get in there and then the second piece of that is really the patient and consumer confidence to get back at it and take care of their health, they are now willing to go into the clinic, into the hospital, so address their concerns because they vaccinated and so as we see the vaccine spread throughout the country that's really driving the patient confidence for them to get back in there and help themselves.

[Anton Hie:]

It was glad to hear you -- well, okay, so the margins came in quite a bit lower than we were expecting, is there any reason -- obviously you had some top-line headwinds, is there any reason that margins can't get back well above 20% pretty quickly as you're seeing the new patient counts come in. And then together with that you mentioned G&A should be flat kind of rest of the year, at least I understood it that way, is there, can you help kind of rectify again. I would imagine your T&E and more, some of the discretionary spending may ramp back up as things kind of normalize. Can you help kind of rectify those 2 items?

[Todd Zehnder:]

Yes, I think that your EBITDA margins will be back to normal for the rest of the year really and that's going to -- that will immediately come back to us. I think G&A, we said it's going to be flat for the rest of the year for Q2, it very well could be down-some, just like we've had last year, I think it was 3Q, it was underneath what 2Q came in. We are going to have less phantom expense in the third -- in the second quarter than we did the first but you're right, we're going to have some other initiatives that things are ramping back up and we've hired some people in VCS and we've built out this M&A team, so I do think I do you think that, I guess in long and short, expect margins to go back up. We're going to keep driving those up, both top line and the middle part.

[Anton Hie:]

And then one more quickly seemed like last call we're talking some more about oxygen rollout kind of nationally where are you seeing those and I believe that's mostly just POCs kind of where is the demand headed in that. Are you seeing any slowdown as COVID winds down or opposite effect, or are you seeing kind of more of those patients move over to more kind of chronic states, where they stay on your patient census longer and then I'll hop off.

[Todd Zehnder:]

So O2 is still on a national rollout. And it will be our fastest growing product of the year. As it relates to COVID, we have gotten some COVID business that is more short term because you're COVID patients aren't your lifers and that's fine, we are there as a resource to serve for our physicians and patients. But the national rollout since the POC was pushed around and it also comes with the station area as well so it's both product. It's going very well, we are investing more resources in our back office into our sales infrastructure. There is no reason that oxygen won't be a huge growth driver for the company for years to come.

[Operator:]

Our next question comes from the line of Antonia Borovina with Bloom Burton.

[Antonia Borovina:]

My first question is related to some of the questions that were already asked, but can you give us a sense of some of the growth or can you give us a sense of what proportion of the growth in cancer patients that you're seeing in March is related to pent-up demand, because you said some of the patients were apprehensive of going into the clinics versus new contacts with physicians and referrals coming out of that.

[Casey Hoyt:]

I would say that a heavy portion of it is coming from pent-up demand just meaning that folks have been cooped up in the home, waiting for the time to get back in, as well as waiting for their physician to get back to work as well because a lot of those pulmonologists were pulled into the hospital systems to work with COVID-19 patients and now they're finally being able to get back in to their normal routine. So I don't have a number for you Antonio but it's got a lot to do with pent-up demand, and we're seeing more and more of that as we -- as we go through April as well. So that's, yes, I don't know if that answered your question, but I feel like that is driven by the patients.

[Antonia Borovina:]

And then the average revenue per patient was down in first quarter sequentially. So can you maybe just provide some commentary on that?

[Todd Zehnder:]

I don't know of anything dramatic that the especially with other ancillary products coming in at a -- we're down 81% of our revenue coming from vents. I'll have to look into it. I haven't seen a massive decline there. I guess there is really nothing out there on vents specifically that would drive that number down. But we can look into it and get back to you, Antonio.

[Antonia Borovina:]

And then just finally, about the behavioral service that you talked about. I'm just wondering if you can give us a sense or what the reimbursement landscape is for that kind of service.

[Casey Hoyt:]

The reimbursement for the actual assessment is it can range depending on what type of visit it is, but it's something like between $70 and $80 each visit. And so, but it's less about the incremental revenue that behavioral health screening itself will generate. It's more about how it will really help drive our core business in terms of vent pickup prevention whenever someone appears to be done with the ventilation for the wrong reason we can kind of come in if the RT is struggling as Viemed's special forces if you will. To have that tough conversation about the end of life and what's next, and the reasons to keep the vent and then the other piece. I'll say that's really hot right now is the fact that these hospitals are really training physicians to be less of fixtures and more of coaches. They're really good at fixing things but they struggle whenever it's time to have that tough conversation about end of life and so when you are offering them a solution that you can help them with that and it's as easiest checking a box on your order form, then they are very inclined to take advantage of those services and so it's just, it's another value add that ultimately will help drive more vent business far. So that's the reason that we're so excited about.

[Operator:]

Our next question comes from the line of Nick Corcoran with Acumen Capital.

[Nick Corcoran:]

The first question just has to do with the primary or the Commonwealth Primary Care ACO can you give an update on that and whether there is any other ACO in the pipeline?

[Todd Zehnder:]

What was the first part of your question? Nick, I missed it…

[Nick Corcoran:]

Commonwealth.

[Todd Zehnder:]

Yes, so Commonwealth is ongoing in Phoenix we are taking care of patients and it's one of the things we're learning more and more as we work with their care teams, the ACO has a care team that is really -- offers a lot of insight into which patients or candidates for our therapy. So our folks are becoming more internal if you will, within the ACO to find these list of patients that qualify for our care, it's almost like having a warm lead, we go out there, we know the patient has a diagnosis, we know the patient has the need, we visit with the physician, and then we're able to get the patient on therapy. So it's really, really nice to have your access to that data, to where you can walk around with these warm leads, but it's no different than in working a co-lead if you will, so our process is pretty darn similar. We just have a big patient pool to work within.

[Casey Hoyt:]

And then the second part, Yes, the answer is we are taking those learnings and having discussions with other ACOs around the country, I've asked by the most important thing about having Commonwealth is that we're learning ways to work together and we are having those discussions, both locally and around the country as well.

[Nick Corcoran:]

Then a housekeeping question from me, how many salespeople did you end 2020 with and where do you expect to end 2021?

[Todd Zehnder:]

We ended 2020 with around 60 and we're trying to. We're trying to double that for 2021.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing remarks.

[Todd Zehnder:]

Yes, we'd like to thank everybody for their attention today and follow up with me -- any follow-up questions that you might have. And we look forward to talking to you in the future.

[Operator:]

This does conclude today's teleconference. We appreciate your participation, you may disconnect your lines at this time. Have a great day.