Viemed(VMD) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents Viemed Healthcare, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents Viemed Healthcare, Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q1 2025 and FY2024 Condensed Consolidated Balance Sheets Summarizes the company's financial position, assets, liabilities, and equity for Q1 2025 and FY2024 Condensed Consolidated Balance Sheets Table | Metric | March 31, 2025 (Unaudited, in thousands) | December 31, 2024 (Audited, in thousands) | | :----------------------------- | :--------------------------------------- | :------------------------------------ | | Cash and cash equivalents | $10,160 | $17,540 | | Accounts receivable, net | $26,789 | $24,911 | | Total current assets | $49,120 | $52,880 | | Total long-term assets | $128,959 | $124,189 | | TOTAL ASSETS | $178,079 | $177,069 | | Total current liabilities | $35,487 | $37,326 | | Total long-term liabilities | $5,843 | $6,442 | | TOTAL LIABILITIES | $41,330 | $43,768 | | TOTAL SHAREHOLDERS' EQUITY | $136,749 | $133,301 | - Total assets increased slightly to $178.1 million as of March 31, 2025, from $177.1 million at December 31, 2024, driven by an increase in long-term assets, particularly property and equipment, net[8] - Cash and cash equivalents decreased by $7.38 million from $17.54 million at December 31, 2024, to $10.16 million at March 31, 2025[8] Condensed Consolidated Statements of Income Details the company's revenues, expenses, and net income for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Income Table | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change ($) | Change (%) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Revenue | $59,129 | $50,593 | $8,536 | 16.9% | | Gross profit | $33,279 | $29,802 | $3,477 | 11.7% | | Income from operations | $3,841 | $2,204 | $1,637 | 74.3% | | Net income | $2,710 | $1,603 | $1,107 | 69.1% | | Net income attributable to Viemed Healthcare, Inc. | $2,625 | $1,603 | $1,022 | 63.8% | | Basic EPS | $0.07 | $0.04 | $0.03 | 75.0% | | Diluted EPS | $0.06 | $0.04 | $0.02 | 50.0% | - Revenue increased by 16.9% year-over-year to $59.1 million for the three months ended March 31, 2025, primarily driven by ventilator rentals, other home medical equipment rentals, and service revenues[10][134] - Net income attributable to Viemed Healthcare, Inc. rose by 63.8% to $2.6 million, with basic EPS increasing from $0.04 to $0.07[10][142] Condensed Consolidated Statements of Changes in Shareholders' Equity Outlines changes in shareholders' equity, including common stock, retained earnings, and noncontrolling interest Condensed Consolidated Statements of Changes in Shareholders' Equity Table | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :---------------------------- | :------------------------------- | | Common Stock (Amount) | $28,151 | $23,365 | | Additional paid-in capital | $15,873 | $18,337 | | Retained earnings | $90,732 | $89,691 | | Noncontrolling interest in subsidiary | $1,993 | $1,908 | | Total Shareholders' Equity | $136,749 | $133,301 | - Total shareholders' equity increased to $136.7 million as of March 31, 2025, from $133.3 million at December 31, 2024, primarily due to net income of $2.6 million and an increase in common stock from shares issued for vesting of restricted stock units, partially offset by shares redeemed to pay income tax[12] - The Company redeemed 193,173 common shares at a cost of $1.6 million to satisfy employee income tax withholding associated with RSUs vesting during the three months ended March 31, 2025[12][84] Condensed Consolidated Statements of Cash Flows Presents cash flows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows Table | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating activities | $2,854 | $1,175 | | Investing activities | $(8,530) | $(5,365) | | Financing activities | $(1,704) | $(1,340) | | Net decrease in cash | $(7,380) | $(5,530) | | Cash at end of period | $10,160 | $7,309 | - Net cash provided by operating activities increased to $2.9 million for Q1 2025 from $1.2 million in Q1 2024, driven by higher net income and favorable changes in working capital[15][149][150] - Net cash used in investing activities increased to $8.5 million in Q1 2025 from $5.4 million in Q1 2024, primarily due to increased purchases of property and equipment, partially offset by proceeds from equipment sales[15][152][153] - Net cash used in financing activities increased to $1.7 million in Q1 2025 from $1.3 million in Q1 2024, mainly due to higher share redemptions for income tax withholding[15][154][155] Notes to the Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies, business operations, and specific financial line items 1. Nature of Business and Operations Describes Viemed Healthcare, Inc.'s core business as a home medical equipment and post-acute respiratory healthcare provider - Viemed Healthcare, Inc. provides home medical equipment (HME) and post-acute respiratory healthcare services across all 50 U.S. states, focusing on in-home treatment with clinical practitioners and cutting-edge technology[16] - The Company's common shares are traded on the Nasdaq Capital Market under the symbol "VMD"[17] 2. Summary of Significant Accounting Policies Outlines the accounting principles and estimates used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim information and SEC rules, reflecting management's estimates for revenue recognition, accounts receivable, income taxes, and fair value of financial instruments[18][22] - As of December 31, 2024, the Company no longer qualified as an "emerging growth company," leading to increased reporting requirements, including compliance with auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[19] - The Company operates as a single reportable segment, with revenues primarily derived from the rental and sale of HME products and services, including ventilator rentals (54.4% of Q1 2025 revenue) and other home medical equipment[23][34][40] Summary of Significant Accounting Policies Table | Revenue Source | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Ventilator rentals | $32,159 | $29,187 | | Other home medical equipment rentals | $12,962 | $10,934 | | Equipment and supply sales | $7,519 | $6,138 | | Service revenues | $6,489 | $4,334 | | Total revenues | $59,129 | $50,593 | 3. Business Combinations Details the acquisition of a controlling equity interest in East Alabama HomeMed, LLC - On April 1, 2024, Viemed Healthcare, Inc. acquired a controlling 60% equity interest in East Alabama HomeMed, LLC, resulting in the recognition of $3.2 million in goodwill and $0.4 million in trade name, along with a $1.8 million noncontrolling interest[56] 4. Property and Equipment Provides a breakdown of medical equipment and property, along with depreciation expenses Property and Equipment Table | Asset Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------- | :---------------------------- | :------------------------------- | | Medical equipment | $118,103 | $116,938 | | Property and equipment, net | $81,054 | $76,279 | - Depreciation expense included in cost of revenue was $6.3 million for the three months ended March 31, 2025, up from $5.9 million in the comparable 2024 period[57] 5. Current Liabilities Lists and explains the components of the company's accrued liabilities Current Liabilities Table | Accrued Liability | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :---------------------------- | :------------------------------- | | Accrued trade payables | $4,693 | $4,016 | | Accrued commissions payable | $1,139 | $1,027 | | Accrued bonuses payable | $2,542 | $6,589 | | Accrued vacation and payroll | $4,476 | $3,402 | | Current portion of phantom share liability | $917 | $1,701 | | Accrued other liabilities | $3,776 | $3,422 | | Total accrued liabilities | $17,543 | $20,157 | - Total accrued liabilities decreased to $17.5 million at March 31, 2025, from $20.2 million at December 31, 2024, primarily due to a reduction in accrued bonuses payable[58] 6. Debt and Lease Liabilities Details the company's debt obligations and operating lease liabilities Debt and Lease Liabilities Table | Debt Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | 2022 Senior Credit Facilities | $4,469 | $4,563 | | Long-term portion | $3,530 | $3,589 | - The Company was in compliance with all covenants under the 2022 Senior Credit Facilities as of March 31, 2025[64][159] - Operating lease liabilities, primarily for land and buildings, had a weighted average lease term of approximately 3.23 years as of March 31, 2025[71] 7. Fair Value Measurement Explains the valuation methods for financial instruments, including money market mutual funds Fair Value Measurement Table | Asset Category | March 31, 2025 (Level 1, in thousands) | December 31, 2024 (Level 1, in thousands) | | :--------------------- | :------------------------------------- | :---------------------------------------- | | Money market mutual funds | $253 | $10,582 | - Money market mutual funds, measured at Level 1 fair value, significantly decreased from $10.6 million at December 31, 2024, to $0.25 million at March 31, 2025[74] - Equity investments without readily determinable fair values are classified within Level 3 of the fair value hierarchy and are measured at cost less impairment, with no material adjustments during the reported periods[76] 8. Shareholders' Equity Reports on common shares issued and outstanding, and stock-based compensation expenses - As of March 31, 2025, there were 39,523,787 common shares issued and outstanding, an increase from 39,132,897 shares at December 31, 2024[83] Shareholders' Equity Table | Stock-Based Compensation | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Options | $16 | $111 | | Restricted stock units | $2,295 | $1,321 | | Total | $2,311 | $1,432 | - Total stock-based compensation expense increased by 61.4% to $2.3 million for the three months ended March 31, 2025, primarily due to restricted stock units[86][139] 9. Commitments and Contingencies Discusses potential legal and other financial obligations and their inherent uncertainties - The Company accrues estimates for legal and other contingencies when losses are probable and reasonably estimable, requiring significant judgment[95] - A lawsuit against Vyaire Medical, Inc. for breach of contract resulted in a partial summary judgment for the Company, but collection of the $0.9 million unsecured claim was deemed not probable due to Vyaire's Chapter 11 bankruptcy filing[96][97] - The Company is subject to various external governmental investigations, audits, and reviews, which could lead to recoupment of reimbursement, fines, or other sanctions[98] 10. Income Taxes Presents income tax expense and the effective tax rate for the reporting period - Income tax expense for the three months ended March 31, 2025, was $1.0 million, with an effective tax rate of 29.7% (excluding discrete tax benefits from stock-based compensation)[99][141] - The Company had no amounts recorded for uncertain tax positions at March 31, 2025, and does not expect material changes in uncertain tax benefits in the next 12 months[100] 11. Earnings Per Share Calculates basic and diluted earnings per share based on net income and share counts Earnings Per Share Table | EPS Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net income attributable to Viemed Healthcare, Inc. | $2,625 | $1,603 | | Basic weighted average common shares | 39,426,753 | 38,717,123 | | Diluted weighted average shares | 41,627,876 | 40,580,634 | | Basic earnings per share | $0.07 | $0.04 | | Diluted earnings per share | $0.06 | $0.04 | - Basic EPS increased to $0.07 in Q1 2025 from $0.04 in Q1 2024, while diluted EPS increased to $0.06 from $0.04, reflecting higher net income and a larger diluted share count[104] 12. Subsequent Events Reports on significant events occurring after the balance sheet date, such as acquisitions - On May 6, 2025, the Company agreed to acquire Lehan Drugs, Inc., a home medical equipment provider, for a base purchase price of $26 million, plus an estimated $2.2 million in contingent payments, to be funded by cash on hand and existing credit facilities[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on Viemed Healthcare, Inc.'s financial condition, operations, trends, liquidity, and accounting estimates Forward-Looking Statements Discusses future events and performance, including acquisition expectations, involving estimates and uncertainties - The report contains forward-looking statements regarding future events and performance, including expectations for the Lehan acquisition, which involve estimates, assumptions, and uncertainties that could cause actual results to differ materially[107][108][110] - Readers are cautioned not to place undue reliance on forward-looking statements due to inherent risks and uncertainties, including those identified under "Item 1A. Risk Factors"[110][111] General Matters Outlines the company's incorporation details and transition from a foreign private issuer - Viemed Healthcare, Inc. was incorporated on December 14, 2016, and as of January 1, 2021, is no longer a "foreign private issuer," subjecting it to U.S. proxy solicitation rules and Section 16 reporting requirements[113] Overview Describes the company's specialization in post-acute respiratory care and home medical equipment services - The Company specializes in post-acute respiratory care services and home medical equipment in the U.S., aiming for organic growth and positioning itself as a leading provider of in-home therapy for respiratory diseases[114] - Ventilator rentals, both non-invasive and invasive, constituted 54.4% of revenue for the three months ended March 31, 2025, with the Company employing 418 licensed Respiratory Therapists (RTs) as of that date[115][116] - The Company anticipates continued growth by expanding existing service areas and entering new territories through a cost-efficient model focused on personnel rather than physical location costs, aligning with the trend of home-based patient care[116][117][118] Trends Affecting Our Business Examines market growth, industry shifts, payor cost containment, and regulatory and macroeconomic challenges - The home medical equipment market, particularly for respiratory and Obstructive Sleep Apnea (OSA) devices, is projected to grow with CAGRs of approximately 6% and 8%, respectively, driven by an aging population and rising chronic disease incidence[119][120] - The industry is shifting towards value-based healthcare and home-based treatments, with U.S. home healthcare spending expected to reach $250 billion by 2031 (7% CAGR), benefiting HME providers[121] - Challenges include payor cost containment efforts, increased negotiating power from managed care consolidation, and regulatory uncertainty, particularly regarding ventilator coverage by CMS, with a final determination expected by June 9, 2025[123][124][125] - Inflationary pressures, including rising material, labor, and transportation costs, are impacting manufacturing and distribution, though CMS announced fee schedule adjustments for 2025 (2.4% to 3.0% increases) to partially offset these[126][127] - New U.S. government tariffs on imported goods and global supply chain constraints pose risks to equipment pricing and availability, prompting the Company to evaluate alternative sourcing and supply chain optimization[128][181][182] Results of Operations Analyzes revenue, cost of revenue, gross profit, and operating expenses for the reported periods Results of Operations Table | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change ($) | Change (%) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :--------- | :--------- | | Revenue | $59,129 | $50,593 | $8,536 | 16.9% | | Cost of revenue | $25,850 | $20,791 | $5,059 | 24.3% | | Gross profit | $33,279 | $29,802 | $3,477 | 11.7% | | Gross Profit % | 56.3% | 58.9% | -2.6% | | | Selling, general and administrative | $28,425 | $24,814 | $3,611 | 14.6% | | Income from operations | $3,841 | $2,204 | $1,637 | 74.3% | | Net income attributable to Viemed Healthcare, Inc. | $2,625 | $1,603 | $1,022 | 63.8% | - Revenue growth of 16.9% was primarily driven by a 10.2% increase in ventilator rental revenue, an 18.5% increase in other home medical equipment rentals (PAP, oxygen, percussion vest services), and a 49.7% increase in service revenue due to healthcare staffing growth[134] - Gross profit percentage decreased from 58.9% to 56.3% due to a shift in revenue composition, but is expected to improve with scaling efficiencies, partially offset by continued diversification[136] - Selling, general and administrative expenses as a percentage of revenue improved to 48.1% from 49.0%, reflecting economies of scale, despite a 14.6% increase in absolute terms due to a 19% rise in employee headcount[137] - A $2.4 million gain on disposal of property and equipment was recorded in Q1 2025, compared to a $0.2 million loss in Q1 2024, primarily from the sale of recalled ventilators[140] Non-GAAP Financial Measures Explains the use of Adjusted EBITDA as a key metric for assessing operating performance and compensation - Adjusted EBITDA is a non-GAAP financial measure used by management to assess operating performance, compare results consistently, calculate incentive compensation, and for planning purposes, excluding non-cash items like depreciation, stock-based compensation, and taxes[143] Non-GAAP Financial Measures Table | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | September 30, 2024 (in thousands) | June 30, 2024 (in thousands) | March 31, 2024 (in thousands) | | :------------------------------------ | :---------------------------- | :------------------------------- | :-------------------------- | :--------------------------- | :---------------------------- | | Net Income attributable to Viemed Healthcare, Inc. | $2,625 | $4,316 | $3,878 | $1,468 | $1,603 | | Add back: Depreciation & amortization | $6,613 | $6,366 | $6,408 | $6,309 | $6,285 | | Add back: Stock-based compensation | $2,311 | $1,521 | $1,712 | $1,620 | $1,432 | | Add back: Income tax expense | $952 | $1,881 | $1,594 | $768 | $518 | | Adjusted EBITDA | $12,765 | $14,242 | $13,954 | $12,813 | $10,098 | - Adjusted EBITDA for the three months ended March 31, 2025, was $12.8 million, an increase from $10.1 million in the comparable 2024 period[132][144] Liquidity and Capital Resources Assesses the company's cash position, operating cash flows, and credit facilities to meet future obligations - Cash and cash equivalents decreased to $10.2 million at March 31, 2025, from $17.5 million at December 31, 2024[146] - The Company expects current liquidity sources, including cash, operating cash flows, and the $30.0 million 2022 Senior Credit Facilities (revolving and delayed draw term loan), to be sufficient for the next 12 months[146][156][157] - A cybersecurity incident at Change Healthcare in Q1 2024 caused delays in patient claim submissions, temporarily reducing operating cash flow, though claims submissions have normalized with alternative platforms[147][150] Liquidity and Capital Resources Table | Obligation Category | Within 12 Months (in thousands) | Beyond 12 Months (in thousands) | | :------------------------ | :------------------------------ | :------------------------------ | | Debt Obligations, including interest | $731 | $4,544 | | Lease Obligations | $1,125 | $2,091 | | Total | $1,856 | $6,635 | Accounting and Disclosure Matters Highlights critical accounting estimates and the adoption or evaluation of new accounting standards - Accounts receivable is a critical accounting estimate, involving significant judgment in estimating adjustments for variable consideration and probable losses, which could impact operations and cash flows if estimates change[168][169] - The Company adopted ASU No. 2023-07 (Segment Reporting) in 2024 with no material impact and is evaluating ASU No. 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses) for future impact[53][54][55][170] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines Viemed Healthcare, Inc.'s exposure to market risks, primarily focusing on interest rate fluctuations related to its 2022 Senior Credit Facilities - The Company's primary market risk exposure is to interest rate fluctuations on its 2022 Senior Credit Facilities, which carry variable interest rates based on Term SOFR or a Base Rate plus an applicable margin[171] - Outstanding borrowings under the 2022 Term Loan Facility were $4.5 million as of March 31, 2025, and an immediate 100 basis point change in interest rates would not materially affect net income[171] Item 4. Controls and Procedures This section details management's evaluation of the effectiveness of Viemed Healthcare, Inc.'s disclosure controls and procedures, concluding that they are effective, and reports no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025, ensuring timely and accurate reporting of material information[172][174] - There have been no changes in the Company's internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[173] PART II - OTHER INFORMATION Provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Refers to detailed legal proceedings and contingencies in financial statement notes, highlighting uncertainties - The Company is subject to various ongoing or threatened legal actions and proceedings, including employment matters, breach of contract disputes, and governmental/regulatory matters, as detailed in Note 9 to the financial statements[176] - Outcomes of legal proceedings are inherently uncertain and may not be known for extended periods, potentially incurring substantial defense costs[95][176] Item 1A. Risk Factors Updates risk factors, emphasizing new or changed risks related to reimbursement policies and macroeconomic conditions - A significant risk is the potential reduction or elimination of coverage or reimbursement for products by third-party payors, including Medicare, especially concerning ventilator coverage, which is currently under a national coverage analysis by CMS[178][179] - Adverse global macroeconomic conditions, such as new U.S. government tariffs on imported goods, supply chain disruptions, and foreign currency exchange rate fluctuations, could negatively impact operations, costs, and profitability[180][181][182] - Changes to Medicare policy often influence commercial payors, meaning a new National Coverage Determination (NCD) for ventilators could have broader implications for coverage and reimbursement across the Company's payer base[179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered equity sales or repurchases and reiterates the company's dividend policy - There were no unregistered sales of equity securities or company repurchases of equity securities during the fiscal quarter ended March 31, 2025[185][186] - The Company has not declared or paid any cash or stock dividends since its inception, and future dividend decisions are at the Board's discretion, dependent on financial condition, contractual restrictions, and other factors[187] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the reporting period[188] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to Viemed Healthcare, Inc[189] Item 5. Other Information This section reports on Rule 10b5-1 and Non-Rule 10b5-1 trading arrangements by the Company's directors and officers - No director or officer of the Company adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025[190] Item 6. Exhibits Provides a comprehensive list of exhibits filed as part of the Quarterly Report on Form 10-Q - The report includes various exhibits such as the Stock Purchase Agreement, corporate articles, executive employment agreements, certifications from the CEO and CFO, and Inline XBRL documents[193]