Quipt Home Medical (QIPT) - 2022 Q2 - Quarterly Report

Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statements of Financial Position Total assets grew to $110.5 million, driven by a goodwill increase from acquisitions, while cash decreased significantly Key Balance Sheet Items (in thousands of US Dollars) | Account | March 31, 2022 | September 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Cash | $17,394 | $34,612 | ($17,218) | | Accounts receivable, net | $13,710 | $11,938 | $1,772 | | Goodwill | $25,999 | $12,456 | $13,543 | | Total Assets | $110,526 | $108,573 | $1,953 | | Total Liabilities | $44,816 | $49,951 | ($5,135) | | Total Shareholders' Equity | $65,710 | $58,622 | $7,088 | Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) The company achieved a net income of $5.0 million in Q2 2022, a turnaround driven by revenue growth and a government grant Income Statement Highlights (in thousands of US Dollars) | Metric | Q2 2022 (3 months) | Q2 2021 (3 months) | YoY Change | Six Months 2022 | Six Months 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $33,553 | $24,240 | +38.4% | $63,077 | $46,995 | +34.2% | | Operating Income | $4,444 | $1,418 | +213.4% | $3,262 | $2,847 | +14.6% | | Other Income (Gov't Grant) | $4,254 | $0 | N/A | $4,254 | $0 | N/A | | Net Income (Loss) | $5,036 | ($12,490) | Turnaround | $2,905 | ($11,125) | Turnaround | | Basic EPS | $0.15 | ($0.43) | Turnaround | $0.09 | ($0.39) | Turnaround | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity grew to $65.7 million, primarily driven by net income and stock-based compensation Reconciliation of Shareholders' Equity (in thousands of US Dollars) | Description | Amount | | :--- | :--- | | Balance at September 30, 2021 | $58,622 | | Net income | $2,905 | | Conversion of debentures | $887 | | Stock options exercised | $25 | | Stock-based compensation | $3,271 | | Balance at March 31, 2022 | $65,710 | Condensed Consolidated Interim Statements of Cash Flows Operating cash flow doubled to $12.2 million, but cash decreased by $17.3 million due to acquisition and financing activities Cash Flow Summary (Six months ended March 31, in thousands of US Dollars) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash flow provided by operating activities | $12,193 | $6,624 | | Net cash flow used in investing activities | ($19,941) | ($8,695) | | Net cash flow used in financing activities | ($9,553) | ($962) | | Net decrease in cash | ($17,301) | ($3,033) | | Cash, beginning of period | $34,612 | $29,227 | | Cash, end of period | $17,394 | $27,158 | - Cash paid for acquisitions was a major use of cash, increasing to $16.5 million in the first six months of fiscal 2022 from $7.7 million in the prior-year period[10] Notes to the Condensed Consolidated Interim Financial Statements Note 1: Nature of Operations The company provides medical respiratory equipment, pursues an acquisition-based growth strategy, and faces COVID-19 related risks - The company provides durable medical respiratory equipment and services and is actively pursuing an acquisition-based growth strategy[11] - The company changed its name to Quipt Home Medical Corp on May 13, 2021, and began trading on NASDAQ under the symbol QIPT on May 27, 2021[12][13] - The company identifies significant risks from the COVID-19 pandemic, including potential disruptions to supply chains, changes in patient demand, and general economic deterioration[15][16][19] Note 2: Summary of Significant Accounting Policies Key accounting policies include critical estimates for revenue recognition, accounts receivable valuation, and business combinations - Revenue recognition is a critical estimate, as amounts billed to third-party insurers are variable and reduced by an estimated allowance based on historical collection data[26][27] - The valuation of accounts receivable and the associated reserve for expected credit losses involve significant judgment, incorporating historical data and forward-looking factors like unemployment and inflation[36][37] - Accounting for business combinations requires management judgment to determine if a transaction is a business or asset acquisition and to estimate the fair value of acquired assets and liabilities[48] Note 3: Acquisition of Businesses The company completed four acquisitions for $16.5 million in cash, adding $13.5 million to goodwill Summary of Acquisitions (Six Months Ended March 31, 2022) | Acquired Company | Date | Purchase Price (in thousands) | Goodwill (in thousands) | | :--- | :--- | :--- | :--- | | Thrift Home Care, Inc | Oct 1, 2021 | $2,171 | $1,373 | | Heckman Healthcare | Nov 1, 2021 | $2,434 | $1,351 | | Southeastern Biomedical | Nov 9, 2021 | $697 | $487 | | At Home Health Equipment | Jan 1, 2022 | $13,265 | $10,332 | - The balance of purchase price payable for acquisitions increased from $2.5 million at September 30, 2021, to $3.4 million at March 31, 2022, after additions from new acquisitions and payments on prior ones[75] Note 4: Accounts Receivable Net accounts receivable increased to $13.7 million, with a corresponding rise in the reserve for credit losses Accounts Receivable Aging (in thousands of US Dollars) | Aging | Gross Receivable (Mar 31, 2022) | Net Receivable (Mar 31, 2022) | Gross Receivable (Sep 30, 2021) | Net Receivable (Sep 30, 2021) | | :--- | :--- | :--- | :--- | :--- | | 0 – 90 days | $15,144 | $12,245 | $11,279 | $9,861 | | 91 – 180 days | $2,591 | $1,163 | $2,027 | $1,296 | | Over 180 days | $1,999 | $302 | $2,107 | $781 | | Total | $19,734 | $13,710 | $15,413 | $11,938 | Note 7: Goodwill and Intangible Assets Goodwill more than doubled to $26.0 million due to a $13.5 million increase from business acquisitions Change in Goodwill and Intangibles (in thousands of US Dollars) | Account | March 31, 2022 | September 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Goodwill | $25,999 | $12,456 | +$13,543 | | Intangibles with finite lives, net | $13,959 | $14,874 | -$915 | | Total | $39,958 | $27,330 | +$12,628 | Note 8: Government Grant The company recognized $4.25 million in other income from the forgiveness of a Payroll Protection Program (PPP) loan - On March 23, 2022, the company's $4,254,000 Payroll Protection Plan (PPP) loan was forgiven, and this amount was recognized as other income[85] Note 11: Long-Term Debt Long-term debt includes convertible debentures and loans, with an undrawn $20 million credit facility providing liquidity - The company has C$10.1 million ($8.1 million) in face value of convertible debentures outstanding, resulting in a fair value gain of $1.1 million for the six months ended March 31, 2022[94][96] - The company has a $20 million asset-based revolving credit facility that matures in September 2024, with no borrowings as of March 31, 2022[107] Note 12: Share Capital Stock-based compensation expense increased substantially to $3.3 million, driven by stock options and new RSU grants Stock-Based Compensation Expense (in thousands of US Dollars) | Period | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended Mar 31 | $1,161 | $12 | +$1,149 | | Six Months Ended Mar 31 | $3,271 | $27 | +$3,244 | - The company granted 81,340 restricted stock units (RSUs) to officers on February 1, 2022, and had a total of 895,000 RSUs outstanding as of March 31, 2022[123][125] Note 14: Operating Expenses Operating expenses increased 45% to $35.2 million, driven by higher payroll, bad debt, and professional fees Operating Expense Breakdown (Six months ended March 31, in thousands of US Dollars) | Expense Category | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Payroll and employee benefits | $18,583 | $13,435 | +$5,148 | | Bad debt expense | $5,579 | $4,289 | +$1,290 | | Professional fees | $1,970 | $1,000 | +$970 | | Billing | $2,846 | $1,609 | +$1,237 | | Total operating expenses | $35,249 | $24,263 | +$10,986 | Note 17: Subsequent Event The company acquired Good Night Medical for $6.1 million on April 1, 2022, after the reporting period - On April 1, 2022, the company acquired Good Night Medical, LLC for a purchase price of $6.1 million[137] - The pro forma six-month revenues and net income for Good Night are estimated to be $5.3 million and $280,000, respectively[138]