Quipt Home Medical Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 15, 2024

There are 9 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Fiscal Q1 twenty twenty four Earnings Results Conference Call for QuipT Home Medical Corp. As a reminder, all participants 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.

Operator

The company's actual performance could differ materially from these statements. At this point, would like to turn the call over to Chairman and Chief Executive Officer, Greg Crawford. Please go ahead.

Speaker 1

Thank you, operator, and thank you all for joining us today on the call. My name is Greg Crawford, and I'm the Chairman and Chief Executive Officer of Quick Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. Quip Thome Medical is a diversified healthcare services company providing a full spectrum of home medical and services to patients in the comfort of their own homes across the United States. At Quipt, our model is centered around delivering clinical excellence And we drive this through our patient centric ecosystem, leveraging technology enabled equipment solutions in conjunction with our specialized clinical respiratory programs to effectively treat patients at home in a way that best suits their needs.

Speaker 1

At present, approximately 80% of our product mix is dedicated to respiratory care, reflecting our dedication to meeting the needs of those with cardio and pulmonary condition. Our remarkable team exceeding over 1200 is the driving force behind our success, Bringing our vision to life daily with an unyielding commitment to superior patient care. We continue to achieve consistent Financial and operational results driven by our resilient business model. As of fiscal Q1, our recurring revenue base sits at 83% of total revenue, representing the strength and predictability of our financial foundation. Moreover, driving our market share growth is the targeted go to market we deploy and end to end respiratory solutions we offer in the marketplace.

Speaker 1

With 125 locations across 26 days and over 287,000 active patients, Quip has a strong reach from coast to coast. With the scale we have attained, we have been able to grow and monitor our constantly expanding patient base effectively, reduce organizational redundancy and increase our margins. On this call, we will update you on our record breaking fiscal Q1 2024 performance, the strong demand trends we are continuing to see across our product categories in real time and our strategic insights on the continued success of our core business. During fiscal Q1 twenty twenty four, we continued to build momentum across the business, recording record revenue of $65,400,000 or 60% year over year growth with strong margin of 23.5 percent equating to adjusted EBITDA of $15,300,000 or growth of 71%. We are seeing consistent strength in our margin profile As we drive economies of scale in the business and implement our effective cost management strategies, Our strategic emphasis on expanding the continuum of care, cross selling our product offerings, capitalizing on a stable supply chain Navigating a conducive regulatory landscape has positioned us very well.

Speaker 1

We've strategically targeted our efforts in areas with a higher prevalence of COPD, extending our reach and enhancing our sales touch points within these vital markets. In the United States, it's estimated that COPD affects nearly 16,000,000 adults and many more do not know they have it. This significant patient population is a key driver of our persistent growth. As we progress through the remainder of fiscal 2024, We are poised to achieve consistent and sustained organic growth aiming for an annualized rate of 8% to 10%. This growth trajectory is not only a reflection of our strategic initiatives, but also of our dedication to meeting and exceeding the evolving needs of our patient population.

Speaker 1

Additionally, we continue to implement our long term strategic expansion plan. Our approach of offering a full range of end to end respiratory solutions With our varied product mix is essential to maintaining our success and a key factor in the growth of our core markets. We can boost total volume growth, which is the key driver of organic growth by focusing on our primary sales channels, which include medical facilities like hospitals, physicians offices, long term care facilities, home health agencies and rehab centers. Moreover, I am pleased to provide an update on the demand trends we are seeing within our sleep business. Despite the ongoing market speculation and reaction concerning the adoption of GLP-one diabetes and weight loss medications, I can confidently report that our sleep segment continued to remain unaffected.

Speaker 1

Demand patterns continue to exhibit strength in real time and our anticipation is that this will persist well into the foreseeable future. Recently, the largest manufacturer of sleep devices in the industry published data from a real world study that showed a significant positive correlation between GLP-1s and TAP therapy. The findings were that patients with an OSA diagnosis and prescribed a GLP-one are actually more likely to initiate PAP therapy and order supplies more frequently. In addition, it is critical to stress that CPAP and BiPAP therapy remain the accepted gold standard of care for patients with obstructive sleep apnea. Furthermore, we firmly believe that over 20,000,000 Americans have OSA, but have not yet received a diagnosis, which represents a significant unrealized potential for future market expansion.

Speaker 1

As of right now, we think that Rising awareness and more OSA diagnosis could lead to a rise in the overall addressable market. Last but not least, We still think that the most important thing is to collaborate with our sleep patients to ensure their adherence to therapy, which is the foundation of our sleep segment focused on compliance. Looking at the regulatory landscape, we continue to see ongoing stability and have seen no signs suggesting a return to competitive bidding. In the past, CMS has started all competitive bidding procedures about 18 months before contracts and prices are finalized. As we look in the past year, we have seen positive policy developments such as the easing of restrictions for home oxygen That reduces the administrative burden on healthcare providers and opens up access to patients.

Speaker 1

Due to the nature of our business, which involves supplying patients in the home setting across the United States with viable respiratory products and services, Quipt is well positioned to thrive in any potential downturns in the economy. Our proactive approach to both organic and inorganic along with our steadfast focus on developing a strong operational foundation and infrastructure have put us in a position of strength as we proceed through fiscal 20 We plan to continue driving forward on the fundamental pillars of our strategic growth strategy, opening up additional attractive markets implement our innovative go to market strategy throughout the country. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal 1st Quarter 2024 Financial Results.

Speaker 2

Thanks, Greg. On Wednesday evening, we announced our fiscal first quarter 2024 financial results representing the 3 months ended December 31, 2023. Please note that all financial values are in U. S. Dollars.

Speaker 2

Here are some key highlights. The company's customer base increased 56% year over year to 155,430 4 unique patients served in Q1, 2024, up from 99,420 unique patients in Q1, 2023, Compared to 146,350 UNIX setups and deliveries in Q1 2023, The company completed 215,370 unique setups and deliveries in Q1 2024, an increase of 47%. This includes 123,190 respiratory resupply setups deliveries for the 3 months ended December 31, 2023 compared to 69,482 for the 3 months ended December 31, 2022, an increase of 77%. Revenue for fiscal Q1, 2024 was $65,400,000 compared to $40,800,000 for fiscal Q1 2023, representing a 60% increase in revenue year over year. Recurring revenue as of fiscal Q1, 2024 continues to be strong and exceeds 83% of Total revenue.

Speaker 2

Adjusted EBITDA for fiscal Q1, twenty twenty four was $15,300,000 23.5% margin compared to adjusted EBITDA for fiscal Q1 2023 of $9,000,000 at 22% margin, representing a 71% increase year over year. Cash flow from continuing operations was $11,700,000 for the 3 months ended December 31, 2023 compared to $4,800,000 for the 3 months ended December 31, 2022, a substantial increase of 143%. For fiscal Q1 2024, bad debt expense improved to 4.3% compared to 5.6% for fiscal Q1 2023. This exemplifies the company's ability to scale without compromising billing collection capabilities. Operating expense for the 3 months ended December 31, 2023 was 45.6% compared to 47.7% in the corresponding period in 2022.

Speaker 2

The company reported $18,300,000 of cash on hand at December 31, 2023 compared to $17,200,000 as of September 30, 2023. The company had total credit availability of $41,000,000 as of December 31, 2023, with $20,000,000 available towards the revolving credit facility and $21,000,000 available pursuant to the delayed draw term loan facility. The company maintains a conservative balance sheet with net debt to adjusted EBITDA leverage of 1.3x. Our results in fiscal Q1 showed the continuous strength in demand across our product categories and we are very proud to have produced another record breaking quarter. We are witnessing the solid organic growth and consistency in margin that we try towards.

Speaker 2

For fiscal Q1, our revenue reached $65,400,000 And adjusted EBITDA margin has reached 23.5%, an exciting accomplishment underpinned by our diverse respiratory product suite and dedicated service offerings. Our success in driving operational efficiency and cost management has also played a pivotal role. Looking at the annualized figures for Q1, our run rate revenue now stands at an impressive $262,000,000 coupled with a run rate adjusted EBITDA of $61,000,000 We expect steady organic growth in fiscal 2024 of 8% to 10% on an annual basis, which comes through volume growth as we continue to pick up market share. We drive organic growth through our growing sales team, the cross selling of products and continued expansion of the continuum of care in adjacent markets. We continue to observe improved net cash flow from operations as we proceed to fiscal 2024.

Speaker 2

We saw our cash position grow from $18,300,000 in fiscal Q1 from $17,200,000 in fiscal Q4 as a result of improved free cash flow. We continue to anticipate 6% to 8% cash flow from operations following CapEx and or lease payments, but prior to any payments relating to debt service and acquisition price payable. We see this as our baseline scenario going ahead with the long term objective of improving this as we continue to expand our business. We are confident in our ability to grow our net cash flow inclusive of our CapEx needs. The continued consistency of our revenue base is driven by our highly recurring revenue model, which accounts for more than 83% of our total revenue mix.

Speaker 2

A cornerstone of this recurring stream is our resupply program, which has experienced significant expansion and now serves 172,000 patients as of December 31, 2023, marking an impressive growth rate of 72%. The resupply program provides us A higher margin recurring revenue stream and plays a crucial role in extending the patient lifecycle with us. Our robust balance sheet with over $59,000,000 available between cash and credit availability positions us exceptionally well to navigate through an environment of high interest rates and to strategically pursue both organic and strategic inorganic growth avenues. With a prudent leverage ratio of 1.3 times, we are strategically positioned to utilize a balanced mix of debt and cash, reflecting our commitment to a disciplined approach to growth. Maintaining our capital allocation discipline is crucial to our continued financial success and we will continue to adhere to our strict approach.

Speaker 2

We are proud of our thoughtful acquisition approach and tie it into integration process that we have developed for many years. The successful integration of assets to date has been a major contributor to our sustained growth. Coupled with our ongoing investments in organic growth, we have strengthened the company's position in the marketplace and have all the resources at our disposal to continue on our strategic path. Thank you. And with that update, I'll turn the call back to Greg.

Speaker 1

Thanks, Hardik. Our main objective is to deliver exceptional patient care and establish alliances with payers and referral sources In order to increase the number of patients we can assist and gain access to desired geographic areas, our expanded market and overall reach allow us to take advantage of the economies of scale within the business to drive margin growth and free cash flow generation. Our sustained growth trajectory is a testament to the successful implementation of key facets of our expansion strategy. To date, we have focused on underpenetrated markets, made accretive acquisitions, committed to fueling our future organic development and have significantly extended our healthcare network nationwide through strategic national insurance contracts, regional insurance contracts and the expansion of Continuum Markets. Moreover, we are confident that our adeptness in seamlessly integrating new acquisitions is a driving force that further propels our organic growth plans.

Speaker 1

We constantly look for ways to improve our operational efficiencies through automation such as ordering systems, revenue cycle management and our automated resupply program. These activities assist us to increase productivity and produce long term value. Investments in our scalable healthcare platform generate strong cash flow and margin expansion. In looking at our core growth strategy, We have 3 foundational pillars, which include the following. 1st is driving organic growth with the objective of 8% to 10% annually.

Speaker 1

We have continued growing our sales team, which is one of the core initiatives on this front. This is how we connect with key touch points like hospital networks, doctors offices, long term care facilities and rehab centers. Furthermore, while examining the operating environment, the aging population And the noticeable rise in the number of Americans suffering from several chronic illnesses are extremely favorable demographic trends for QuipT. As the population ages, there is an increasing need for in home medical equipment and services, which presents a very viable long term growth opportunity. Furthermore, a great deal of work is being done to ensure that patients receive care at home whenever possible.

Speaker 1

2nd, we are steadfast in our result to use technology to further enhance our operational efficiency and promote automation as we grow our company. Our primary focus is on optimizing our workflow procedures to generate tangible benefits and eliminate friction points. For instance, enhanced procedures throughout our billing and collections department of the company have led to a noticeable decrease in our bad debt expense and an increase in our net cash flow. Furthermore, we are focused on the long term growth of e prescribing in our industry and have positioned ourselves well with our investments in this area in fiscal 2023. Electronic prescribing is essential to the industry as this technology can serve to boost productivity, cut down on errors, boost compliance and improve patient outcomes.

Speaker 1

As of now, less than 5% of our orders come from ePrescribe and we anticipate this will grow significantly over time given us an opportunity to improve the patient, prescriber and provider experience by eliminating inefficiencies and reducing paperwork. Our automated resupply platform is another excellent illustration of how we use technology. It not only helps us achieve higher margins, recurring revenue and organic growth, but it also offers us significant revenue synergies when we make strategic acquisitions. The resupply program also plays a crucial role in extending the patient lifecycle with us. The 3rd component of our growth strategy is scaling up through strategic accretive acquisitions in combination with our proven integration approach.

Speaker 1

Since 2018, we have successfully integrated 19 acquisitions totaling more than $150,000,000 in revenue. We focus on respiratory businesses that are well suited to be successfully integrated into our scalable Our strategy is to expand both our payer base and our geographic reach into attractive regions. Because of our strong balance sheet, we will be able to seize opportunities to expand our patient base, revenue, EBITDA and geographic reach when they arise. We will remain disciplined with our capital allocation approach and believe this to be one of the cornerstones of our ongoing financial success. Despite quadrupling the size of the business since 2019 in terms of revenue and adjusted EBITDA, as well as continue with growth of our Key operating metrics.

Speaker 1

Our current public valuation represents one of the lowest multiples we have traded at in at least 5 years. Given the continued strong performance of our business in real time and net disconnect, we are actively engaging with investors from the United States and Canada to share our ongoing financial and operating achievements and discuss our long term growth objectives. In calendar 2024, We have already attended 2 conferences, completed 2 roadshows and expect to be very active meeting with investors throughout 2024. Our prudent capital management is reflected in our conservative balance sheet characterized by a modest leverage of 1.3 times and bolstered by over $59,000,000 in liquidity positions us advantageously to capitalize on both Inorganic and organic growth opportunities throughout fiscal 2024. Given the recurring nature of our business model and strong financial foundation, We believe we are well insulated from any potential economic challenges that may arise.

Speaker 1

Our strategic approach driven by our Flexible capital structure positions us well to continually seek ways to enhance shareholder value. Finally, 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

The first question comes from Richard Close Canaccord Genuity. Please go ahead.

Speaker 3

Yes, thanks. Congratulations on the quarter. Greg, maybe if we can just start off with the disclosure on the I'm not sure if you're able to say anything about that, but if you are, that would be helpful.

Speaker 1

Yes, sure. It is an ongoing inquiry in that, but I think it would be important for everybody really to kind of understand in that, that what a CID is and that it's really a request For information and it's really kind of designed to gather facts in that that are necessary for regulatory authorities to make decisions and that whether a violation has occurred. So, and it's also the government has not reached a conclusion or anything like that any wrongdoings occurred. So it's essentially a fact finding mission. We believe we have very strong internal controls on billing and compliance procedures in place and we're confident in our practices.

Speaker 3

Okay. That's helpful. Is there any timeline That you can share or just is it open ended?

Speaker 1

Yes, it's really kind of open ended in that. I mean to kind of go through the inquiry to really figure out even what in that exactly and that they're looking for. So, but even kind of even given a timeline and that is just really tough.

Speaker 3

Okay. That's helpful. With respect to resupply and E prescribing, on the e prescribing, you mentioned less than 5% of orders come From that,

Speaker 4

what is

Speaker 3

the what do you do to essentially ratchet up that, I guess penetration moved that from 5% up to the 10%, 15%, 20% level?

Speaker 1

Yes. So the biggest Challenges is really the adoption in that from the physician side. That's really been the adoption or the challenge is getting them to kind of change habits in that. So that's what we've been working with our sales team to do. We've also we're in the process in that of Getting set up with actually the company that we're partnered with and that we own a portion of or whatever and we're going to start sending out what's called like supplier initiated orders.

Speaker 1

So we have an initiative to do that to where we're going to start sending out like our prescription renewals for supplies or Oxygen, whatever it may be, to where we're pushing these out to the doctor to kind of almost force them, hey, you can log into this portal, You can review all your prescriptions that are needed for your patients. And with one click, you can sign them all if you approve them all. And I think as they Start to kind of see in that the ease of that and that the hope would be is that they would start ordering equipment in that through the different portals and that we have available for e prescribe. That's actually one of the biggest challenges kind of on the front end is when an order comes over and that it doesn't have proper documentation to allow us to provide the equipment and the orders that do come over in that through the ePrescribe platforms and that that we have in place right now and that those orders are essentially able to be processed and almost delivered in that same day or rather than multiple calls back and forth and that to the physician's office to get the proper documentation.

Speaker 3

Okay. Thank you. And then my final question is related to maybe the sales force in new market opportunities. Can you give us an update on where you stand with respect to the size of the sales force? And Maybe any additional details in terms of expansion to new markets, I guess, within the 26 states that you currently serve?

Speaker 1

Yes, absolutely. And that we kind of we reached our goal there and that that we were seen there in 'twenty three in that. So we do have another goal here in 'twenty four in place in that. So we are in the process And that of getting additional sales reps onboarded, most of what we're seeing right now is really into continuum areas and that in states we're currently in that we feel there's opportunity for us to expand our services.

Speaker 3

And then any new markets or?

Speaker 1

New markets, yes, but they're within states that we they operate in. Okay. So for example, in Florida, we may be headed further south.

Speaker 3

Okay. Thanks.

Speaker 5

Sure.

Operator

The next question comes from Cooper Douglas with Deacon Securities. Please go ahead.

Speaker 4

Hi, good morning, everybody. I guess you got asked the question on the DOJ, so I'll Let's move on to a couple of things. First of all, revenue EBITDA minus patient CapEx, I think from the notes, it looks like Patient CapEx in the quarter was $7,300,000 which should imply EBITDA minus patient CapEx of 8% or 12.3%, $8,000,000 or 12.3 percent, that looks like the highest that ratio has ever been. Is that sustainable as we head through 2024? Yes.

Speaker 5

Thanks, Doug. I mean, you're right. I mean, that number has been highest that it has ever been. And We have always encouraged analysts and the investors to look at the company from a rolling 12 month basis. And if you look at the ratio, you've seen there has been continuous improvement even for Q4 Q3.

Speaker 5

So I mean, while we do encourage investors and analysts to look at it from a rolling 12 months, so it evens out any kind of Timing spikes and rallies, but it is certainly heading in the right direction and we are It comes with a lot of background work to translate into those numbers.

Speaker 4

Thanks, Harry. So to what degree is that expansion due to the resupply program, which obviously there's no CapEx involved in that Because you're just selling the equipment. So patients on the resupply program 172,000 as of December 31, what percentage of your patients or eligible patients are on that program? So how many could you onboard from your existing client base, in other words?

Speaker 5

Yes. So I guess when we do say an active patient list, I mean, there is Somebody who has taken a who has received a product from us in the last 12 months. So they are pretty much Our active pipeline to be solid sedated and to be reached out to in terms of whether they need a supplier, we feel on the supply and stuff. So they are When we say that number, that is pretty much anybody who's taken something from us over the last 12 months. And some of them would have taken multiple audits, but they're still counted as one patient And to answer your first question, is an increase in the sales revenue or the resupply program a contributor to an EBITDA less medical and CapEx number?

Speaker 5

I certainly believe there is A mathematical portion to that, right, your top line is increasing, but it doesn't commit an associated CapEx. So yes, there There's some contribution to that. But I would say there is also a larger contribution towards all the initiatives that the company has been undertaking to resulting to more cash flow. I think those there's elements of that as well. So it's a combination of both.

Speaker 4

Okay. Just to stick on the resupply program then. By my calculations given the numbers you gave 83% of your revenues recurring, 49% of that is from the resupply program, which all equates to about $26,000,000 and change. So the resupply program running about $106,000,000 annualized. Gross margin, I think, should be in the low 40s, if it's accurate from other companies who disclose such information.

Speaker 4

So Can you talk about the cash flow or free cash flow generated from just from the resupply program, which is obviously helping to Pay for some of the patient CapEx that you do?

Speaker 5

Yes. Again, yes, that's certainly everything you said is kind of all within our ballpark range of real numbers, right? But yes, they are kind of very indicative of the proportion of the revenues within our portfolio. So and then coming down to the resupply program, that is correct. The resupply program does have its own variable cost.

Speaker 5

It does have its own variable cost, which may not be a factor in some of our rental business. There is a cost to We talk to the stations on a timely basis and stuff like that. But net of net of net, they do have a much higher Cash flow, they certainly exceed the cash flow that comes from medical equipment less CapEx, if that's a way of looking at it. So I don't know what was the question, but the question is, does it have more accretive cash flow Then some of our rental business on if that's all we did in a silo, the answer would be yes. Obviously, The numbers are consolidated because there are other elements of the business that you have to operate, which is kind of serving the ecosystem of the patients that we have.

Speaker 4

Okay. Thanks very much, Hardik. Yes.

Operator

The next question comes from Michael Freeman Raymond James. Please go ahead.

Speaker 6

Hey, good morning, Greg. Good morning, Hardik. Congratulations on a very strong quarter. I'm going to ask another question on the DOJ investigation. I'm curious, I guess, much as you can tell us.

Speaker 6

So I wonder what if you could describe what instigated this investigation And if this was presented to you, the number of cases That are in question or the number of false claims that are in question by the DOJ.

Speaker 1

Yes. This is Greg. It's hard for us to determine at this point in time in that of what prompted the CID. There's many facets of that could be. I mean, they're looking at billing claims a lot of times, kind of based off things that you file and things like that.

Speaker 1

So it's really kind of a broad spectrum in that that they could really go into. So as far as the second part of your question in that I think you would ask about, if you could repeat that?

Speaker 6

I'm asking about the number of claims. I guess I'm trying to get to the potential total charge that could be

Speaker 1

Pardon again, Stew. If there is any wrongdoing with that. Yes, I get it. I get it. We don't know what that is.

Speaker 1

There's nothing right now in that With it, that would tell us that there's even anything that's probable or estimatable in that for what it is, Because it's still kind of in a fact finding stage for right now and that so they haven't concluded or anything like that that there was any wrongdoing anything. Okay.

Speaker 6

All right. That's helpful. Thanks for your response. Okay. Now, Happy question.

Speaker 6

Now let's I wonder if you could describe your inorganic pipeline and potentially give us an idea of the value of near term deals that might be approaching finish line or exclusivity within the next 3 months maybe and then maybe a longer term outlook on that pipeline?

Speaker 5

Yes. Thanks. This is Hardik. I mean, we certainly don't have a number that we would be comfortable in terms of which ones are closer to finish line versus which are in the more of the pre LOI phase. The LOI phase is kind of how we look at it internally.

Speaker 5

What we can say is we continue to selectively look at the deals that get presented to us or the ones that we can solicit on our own. And they are at various stages, one closer more closer than the other. We are, as Mentioned in our prepared remarks, we are kind of disciplined about our approach on the M and A and we would continue to do that. I mean, There is no particular concern that we have when it comes to opportunities to continue to do the eminent A portion that is a steady flow of deals coming into the market that We are able to develop on our own. All those metrics continues to be pretty consistent with what we have seen in 2022 and 2023, maybe I know I'm not answering the question as asked, but I think I didn't I don't want to give you the general flavor of How we see it on our end.

Speaker 6

All right. That's helpful. And if I can slide in one more. Thank you for the commentary on GLP-1s in the prepared remarks, Greg. I'm curious if there's if you've done any internal strategy work on Sort of the medium and long term outlook, addressing potential changes In CPAP utilization and even potential strategies toward CPAP and GLP-one combination therapy programs, like how could QuipT proactively participate in those sort of combinations?

Speaker 1

Yes, absolutely. And those are things that we're having internal discussions on now. It's just all different ways in that that we can continue in that to serve our patients in that and kind of grow that line of our business in that. That is certainly a stronghold for us and we expect that kind of continue well into the future. If anything with the most recent study that was brought out by one of the largest manufacturers of sleep devices and that The correlation in that was kind of surprising, I guess you could say, was that patients in that that were utilizing GLP-1s and that were more likely and more compliant in that on their CPAP or BiPAP device and they ordered supplies more frequently.

Speaker 1

So I think that would tell us that people get more health Conscience and they want to improve all facets of their life and that including sleeping better, which leads to a lot of other health conditions as we know.

Speaker 6

Great. Thanks very much. I'll get back in the queue.

Speaker 1

All right. Thank you.

Operator

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

Speaker 7

Hi, this is Julien subbing in for Justin today. We've noted from looking at some of the insurance companies that They've noted that there's higher utilization of Medicare Advantage and they expect this to continue for the rest of 2024. We were wondering if you've seen this and what are maybe some of the implications for the company going forward?

Speaker 1

Yes. This is Greg. Thanks, Julien. That's actually a really good question to that because that is something that we've monitored internally and that as far as looking for Patients that have converted over to a Medicare Advantage plan and that from traditional Medicare and thus far as this year, most of that happens in that in the 1st part of the year here. We haven't seen anything that's been material different than prior years.

Speaker 1

There are certain parts of the country in that to where you could say there are more patients that have converted over to Medicare Advantage Plans, but as a whole in that throughout the entire organization in that, We haven't seen any material change.

Speaker 7

Okay. And just 2 question on the investigative demand. Have you seen any similar cases across the industry? And if so, like what's been the result in those cases?

Speaker 1

Yes, absolutely in that. I mean, it's not uncommon in that for a DME company or any healthcare company in that within the U. S. To See these types of inquiries, especially larger companies, there's plenty of public information out there in that to kind of see these. I think each one probably takes a path of its own.

Speaker 1

And I think it's really important in that To just the government has not concluded any wrongdoing or anything and even if there was and that you still have the opportunity and that to come up with a mutual resolution in that. So and then even if that can't be reached in that, we also have the option to appeal. So anything you would likely find out there, if you just Google the CID and DME company related, you're probably going to find more settlement type cases there, then you are going to find ones that were had maybe been resolved or they came to A conclusion, nothing was done in that. So once again in that, we feel very, very confident in that in our internal controls and our billing and compliance, so we're confident in our practices.

Speaker 7

Okay. Thank you so much for taking my questions.

Speaker 1

Sure.

Operator

The next question comes from Stephan Quindrell with Echelon Capital Markets. Please go ahead.

Speaker 8

Hi, guys. Congrats on the quarter and thanks for taking my question. I wanted to also again probably a bit more on this Department of Justice and just Maybe get you to help me frame this a bit better. I have looked at a number of those cases and settlements and I have a bunch of here in front of me. And what I'm seeing largely is that these things take typically a number of years to occur.

Speaker 8

And even with much larger companies than We've seen settlements in the low to mid 1,000,000 of dollars. I think using the 2022 Overall numbers, the average settlement for one of these cases is about $6,000,000 Is that a fair way to frame sort of a worst case scenario? Obviously, like that in these cases something Some long wind did occur obviously or allegedly occurred. Is that a reasonable way to look at this? Like it will take a couple of years for this to be Settled or maybe help me understand the parameters?

Speaker 1

Yes. Well, I think based on information that's been provided in that by our counsel in that,

Speaker 2

That could be a good judgment of

Speaker 1

that, but also at the same time in that, I mean, these cases once again end up taking legs of their own and go down different paths in that. At this point in that we don't believe in that there's been any wrongdoing and once again we're very confident in our billing practices in that. So, it's just really tough to say whether or not it's going to take years. And then I guess if they continue to investigate, yes, It could take that long.

Speaker 5

Okay. And Stephen, this is Hardigan. I'll just add To what Greg said, I think you're right in terms of what you see in the public information. We're only seeing, for the most part, Information around companies that came to some kind of a resolution or some kind of a negative outcome from that. What you're not seeing is The phase that we are in, right, this is a predetermination phase.

Speaker 5

So we don't there are probably what we don't know is are there hundreds of this that results in 1 or 2 That actually reduced our settlement phase and the numbers that you kind of presented, right? And that there's not much of a public information in How many investigations actually led to some kind of a settlement or a number out there? So I just want to point that out. We are still in that phase.

Speaker 8

I said obviously this is more of a worst case scenario type thing. So I wasn't trying to assume imply that that was going to occur. I guess I have 2 sort of follow-up questions. One is, what kind of disclosure should we expect about this going forward? Is going to be on a sort of quarterly basis, we'll be hearing updates on this or And then finally, maybe tied into this, with this going on, is this in any way impacting you guys Operationally in terms of looking for different M and A opportunities, I think of that nature, like is this having an operational impact at this point or is It's still sort of early days and you're just monitoring it as part of normal sort of legal issues that pop up over time.

Speaker 1

Yes. Could you repeat the first part of the question?

Speaker 8

The first part is just sort of when would we expect updates on this. Should we expect like ongoing quarterly updates on what's occurring with this when you report your quarters? Is that meaningful? Got it.

Speaker 1

Yes. Absolutely in that. I mean, we will report in that whether it's on a quarterly basis or things become Material in that. We've been always been very transparent and disclosing in that different regulatory Issues that do come up in normal ordinary course and this is a perfect example and we will continue to update timely in that, whether that's quarterly or As something would happen, it would be done through a PR or something. As far as running the business, no, in that I mean we are Heads down here, we are focused on our strategic plan and that of growing both organic and through inorganic opportunities.

Speaker 1

And we're not going to deviate from that. We got a very, very strong balance sheet to go out on and execute in that. And once again, we're very confident in our billing and compliance procedures and that that we have in place.

Speaker 8

Okay, great. That's it for me. Thanks guys.

Speaker 1

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. Please go ahead.

Speaker 1

All right. Thank you, operator, and thank you all for your participation today. As always, you can find us on the web at www.quipthomemedical.com, where we will be posting a

Powered by Quartr

Key Takeaways

  • Recorded a Q1 2024 revenue of $65.4 million (up 60% YoY) and adjusted EBITDA of $15.3 million (up 71% YoY) with a 23.5% margin and 83% recurring revenue.
  • Expanded to 125 locations in 26 states, serving 287,000 active patients, driven by an 80% respiratory product mix and a resupply program now servicing 172,000 patients (72% growth).
  • Sleep segment demand remained strong despite GLP-1 drug adoption, supported by real-world data showing GLP-1 users initiate and adhere to PAP therapy more frequently, and a 20M+ undiagnosed OSA market opportunity.
  • Regulatory landscape stayed stable with no return to competitive bidding and eased home oxygen restrictions, enhancing patient access and cost predictability.
  • Maintained a robust balance sheet with $18.3 million cash, $59 million total liquidity, and net debt/EBITDA leverage of 1.3x, backing a disciplined M&A track record of 19 accretive deals since 2018.
AI Generated. May Contain Errors.
Earnings Conference Call
Quipt Home Medical Q1 2024
00:00 / 00:00