Viemed(VMD) - 2021 Q4 - Annual Report

Part I Business Overview Viemed Healthcare provides in-home durable medical equipment and respiratory healthcare, focusing on organic growth and ventilator rentals, primarily reimbursed by Medicare and Medicaid - The company's core business is providing in-home DME and post-acute respiratory healthcare services, with a focus on treating respiratory diseases like COPD and neuromuscular conditions[17][18] Revenue Contribution from Key Products (Traditional Revenue) | Product/Service | % of 2021 Traditional Revenue | % of 2020 Traditional Revenue | | :--- | :--- | :--- | | Ventilator Rentals | 77% | 81% | | Home Medical Equipment (Rental & Sale) | 98.1% | 98.6% | | In-home Sleep Testing | 1.9% | 1.4% | - Viemed is expanding its services, having formed a healthcare staffing division (Viemed Healthcare Staffing LLC) in 2021 and invested in a remote patient monitoring (RPM) company, VeruStat, Inc[18] - The company operates on an organic growth model, expanding in existing and new regions by employing more respiratory therapists (RTs) rather than investing heavily in physical locations. As of December 31, 2021, Viemed employed 627 people[19][74] - Medicare and Medicaid are the primary sources of reimbursement, accounting for 64% of traditional revenue in 2021 and 67% in 2020. The company's reimbursement is subject to fee-for-service pricing guidelines set by CMS[64][73] Risk Factors The company faces significant risks from the COVID-19 pandemic, supplier dependence, reimbursement changes, and extensive government regulations - COVID-19 Pandemic: The pandemic poses risks of operational disruption, supply chain delays, and negative impacts on patient base and receivables collection due to economic factors like unemployment[75][76][77] - Supplier Dependence and Recall: The company depends on key suppliers for equipment. A voluntary recall by Royal Philips for certain BiPAP, CPAP, and ventilator devices in June 2021 could lead to equipment shortages, increased costs, and potential litigation, significantly impacting business[87][88][91] - Reimbursement and Regulatory Risk: A substantial portion of revenue comes from Medicare and Medicaid. The business is at risk from reimbursement rate reductions, retroactive payment adjustments from audits, and potential inclusion of its products in future Medicare Competitive Bidding rounds. An OIG audit report has led to a request for repayment of purported overpayments, which the company is appealing[83][108][109] - Fraud and Abuse Laws: The company is subject to complex federal and state laws (e.g., Anti-Kickback Statute, Stark Law, False Claims Act). Violations can result in severe civil and criminal penalties, exclusion from government healthcare programs, and significant legal costs[105][132][134] - Emerging Growth Company Status: As an emerging growth company, Viemed takes advantage of reduced reporting requirements. This may make its common stock less attractive to some investors and could result in a less active trading market[68][145] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[163] Properties Viemed owns its Lafayette headquarters and recently acquired additional office and warehouse facilities, deemed adequate for current needs - The company owns its headquarters in Lafayette, Louisiana, which is subject to a mortgage[164] - During Q4 2021, Viemed acquired an office building and a warehouse previously leased from a company owned by its CEO and President[164] Legal Proceedings The company is involved in routine legal actions, not expected to materially impact financial condition or operations - The company is involved in ongoing or threatened legal actions arising from the ordinary course of business. Management believes these will not have a material adverse effect[165] Mine Safety Disclosures This item is not applicable to the company - Not applicable[166] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Viemed's common shares trade on Nasdaq and TSX; the company has never paid dividends due to loan agreement restrictions - Common shares trade on Nasdaq ("VMD") and the TSX ("VMD.TO")[167] - The company has never paid dividends and does not anticipate doing so in the foreseeable future, partly due to restrictions in its loan agreement[169] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue and net income declined in 2021 due to reduced COVID-19 related sales, while traditional business grew, maintaining strong liquidity Financial Performance Summary (2021 vs. 2020) | Metric | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $117.1M | $131.3M | ($14.2M) | (10.8)% | | Net Income | $9.1M | $31.5M | ($22.4M) | (71.1)% | | Traditional Revenue (ex-COVID) | $108.5M | $96.9M | $11.6M | 11.9% | - The decrease in total revenue and net income was primarily driven by a $25.8 million (75.1%) year-over-year reduction in COVID-19 response sales and services[197][199] - The company's core ventilator rental revenue grew by $5.6 million (7.1%) in 2021, driven by organic growth in its active patient base[198] - Gross profit margin increased from 61.0% in 2020 to 62.7% in 2021, attributed to the decline in lower-margin COVID-19 response sales and services[201] - The company maintains a strong liquidity position with $28.4 million in cash and cash equivalents and an undrawn $10.0 million line of credit as of December 31, 2021[216] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not applicable[236] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2021 and 2020, including balance sheets, income statements, equity changes, cash flows, and detailed notes - The financial statements were audited by Ernst & Young LLP, which issued an unqualified opinion, stating the financials are presented fairly in all material respects in conformity with U.S. GAAP[240][244] Consolidated Balance Sheet Highlights (As of Dec 31) | Account | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $28,408 | $30,981 | | Total Current Assets | $47,310 | $47,175 | | Total Assets | $117,962 | $112,560 | | Liabilities & Equity | | | | Total Current Liabilities | $17,811 | $23,017 | | Total Liabilities | $23,142 | $30,867 | | Total Shareholders' Equity | $94,820 | $81,693 | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $22,494 | $35,110 | | Net Cash used in Investing Activities | ($19,746) | ($8,415) | | Net Cash used in Financing Activities | ($5,321) | ($9,069) | | Net Change in Cash | ($2,573) | $17,626 | Notes to Consolidated Financial Statements These notes detail accounting policies, debt covenants, stock compensation, and significant legal contingencies, including an OIG audit and supplier dispute - Revenue Recognition: Rental revenue (ventilators, other DME) is recognized under Topic 842 (Leases), while equipment sales and services (including COVID-19 response) are recognized under Topic 606 (Revenue from Contracts with Customers)[281][283] - Debt Covenants: The company was in compliance with all financial covenants under its Commercial Business Loan Agreement as of December 31, 2021, including Total Debt to Adjusted EBITDA and Fixed Charge Coverage Ratio[227][320] - Legal Contingency (OIG Audit): Following an OIG report, the company received requests from Medicare Administrative Contractors (MACs) for repayment of purported overpayments. The company is appealing and estimates the maximum potential loss at approximately $9 million. No loss has been accrued as it is not deemed probable[348] - Legal Contingency (Vyaire Lawsuit): The company is in a legal dispute with supplier Vyaire over a purchase order, seeking to recover a $0.9 million prepayment and defending against a $4.7 million counterclaim from Vyaire. No loss has been accrued for the counterclaim[345][346] - CARES Act Funds: The company received and recognized Provider Relief Fund payments of $1.5 million in 2021 and $3.5 million in 2020. These are treated as government grants and are not expected to be repaid[350] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding financial matters - None[361] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[362] - Based on the COSO 2013 framework, management concluded that internal control over financial reporting was effective as of December 31, 2021[365] - No attestation report on internal control from the independent registered public accounting firm is included, as permitted for an emerging growth company[366] Other Information The company reports no other information to disclose for this item - None[368] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed later[371] Executive Compensation Information on executive compensation is incorporated by reference from the definitive proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed later[372] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed later[373] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed later[374] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the proxy statement - Information is incorporated by reference from the definitive proxy statement to be filed later[375] Exhibits and Financial Statement Schedules This section lists documents filed as part of the 10-K, including financial statements and exhibits, with no financial schedules required - The financial statements from Item 8 are filed as part of this report[377] - No financial statement schedules are required to be included[377] Form 10-K Summary The company reports no Form 10-K summary - None[383]