Quipt Home Medical (QIPT) - 2023 Q2 - Quarterly Report

Condensed Consolidated Interim Financial Statements This section presents the unaudited condensed consolidated interim financial statements, including the statements of financial position, income, changes in equity, and cash flows, along with their explanatory notes Condensed Consolidated Interim Statements of Financial Position As of December 31, 2022, total assets were $131.7 million and total liabilities were $51.3 million, with shareholders' equity at $80.4 million, reflecting slight shifts from September 30, 2022 Consolidated Balance Sheet (As of Dec 31, 2022 vs. Sep 30, 2022) | Account | Dec 31, 2022 ($ thousands) | Sep 30, 2022 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 38,955 | 41,536 | | Total Long-term Assets | 92,770 | 90,678 | | TOTAL ASSETS | 131,725 | 132,214 | | Total Current Liabilities | 37,100 | 41,740 | | Total Long-term Liabilities | 14,182 | 10,927 | | TOTAL LIABILITIES | 51,282 | 52,667 | | TOTAL SHAREHOLDERS' EQUITY | 80,443 | 79,547 | | TOTAL LIABILITIES AND EQUITY | 131,725 | 132,214 | Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) For the three months ended December 31, 2022, the company achieved a net income of $325,000 and 38.2% revenue growth to $40.8 million, a significant turnaround from a net loss in the prior year Income Statement Highlights (Three Months Ended Dec 31) | Metric | 2022 ($ thousands) | 2021 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | 40,815 | 29,525 | +38.2% | | Operating Income (Loss) | 1,374 | (1,180) | Turnaround to Profit | | Net Income (Loss) | 325 | (2,131) | Turnaround to Profit | | Basic EPS | $0.01 | $(0.06) | +$0.07 | | Diluted EPS | $0.01 | $(0.06) | +$0.07 | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity increased from $79.5 million to $80.4 million during the quarter, primarily due to $325,000 in net income and $571,000 in stock-based compensation Changes in Shareholders' Equity (Three Months Ended Dec 31, 2022) | Description | Amount ($ thousands) | | :--- | :--- | | Balance at Sep 30, 2022 | 79,547 | | Net Income | 325 | | Stock-based compensation | 571 | | Balance at Dec 31, 2022 | 80,443 | Condensed Consolidated Interim Statements of Cash Flows For the three months ended December 31, 2022, operating activities provided $4.8 million in cash, while investing and financing activities used $1.3 million and $8.4 million respectively, leading to a net cash decrease of $4.9 million Cash Flow Summary (Three Months Ended Dec 31, 2022) | Activity | Amount ($ thousands) | | :--- | :--- | | Net cash flow from operating activities | 4,832 | | Net cash flow used in investing activities | (1,301) | | Net cash flow used in financing activities | (8,388) | | Net decrease in cash | (4,857) | | Cash, beginning of period | 8,516 | | Cash, end of period | 3,656 | Notes to the Condensed Consolidated Interim Financial Statements This section provides detailed explanations of accounting policies and financial figures, covering business operations, acquisition strategy, asset and liability breakdowns, share capital, and significant subsequent events Note 1: Nature of operations This note describes the company's primary business as a Medicare provider of durable medical respiratory equipment and its active acquisition strategy - The company is a Medicare provider of durable medical respiratory equipment and services, including nebulizers, oxygen concentrators, CPAP/BiPAP units, and non-invasive ventilation equipment[11] - Quipt has an active acquisition strategy to drive revenue and profit growth[11] Note 2: Summary of significant accounting policies This note outlines the significant accounting policies used in preparing the unaudited condensed consolidated interim financial statements, consistent with IFRS - The unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard (IAS) 34, 'Interim Financial Reporting', and are consistent with IFRS[13] Note 3: Purchase Price Payable This note details the decrease in purchase price payable related to prior acquisitions, following payments made during the period - The purchase price payable, related to prior acquisitions, decreased from $5.8 million at September 30, 2022, to $5.0 million at December 31, 2022, after payments of $823,000[15] Note 4: Accounts Receivable This note provides a breakdown of accounts receivable, including gross amounts and reserves for expected credit losses, and highlights the portion due from Medicare Accounts Receivable Breakdown ($ thousands) | Category | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Gross receivable | 27,788 | 27,122 | | Reserve for expected credit losses | (10,610) | (10,739) | | Total | 17,178 | 16,383 | - As of December 31, 2022, approximately 9% of the company's receivables were due from Medicare[16] Note 5: Inventory This note presents a detailed breakdown of inventory, distinguishing between serialized and non-serialized items and accounting for reserves Inventory Breakdown ($ thousands) | Category | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Serialized | 7,132 | 5,814 | | Non-serialized | 9,817 | 9,854 | | Reserve for shrink and slow-moving | (83) | (83) | | Total Inventory | 16,866 | 15,585 | Note 7: Goodwill and Intangible Assets This note details the net carrying amount of goodwill and intangible assets, including the amortization expense for the period Net Carrying Amount of Goodwill & Intangibles ($ thousands) | Asset | Dec 31, 2022 | Sep 30, 2022 | | :--- | :--- | :--- | | Goodwill | 28,208 | 28,208 | | Intangible Assets, net | 28,086 | 28,887 | | Total | 56,294 | 57,095 | - Amortization of intangible assets for the three months ended December 31, 2022, was $801,000[21] Note 8: Government Grant This note clarifies the status of government grants, including the full forgiveness of the PPP loan and recognition of the Relief Fund - The $4.25 million Payroll Protection Plan (PPP) loan received in 2020 was fully forgiven in March 2022[23] - The $1.8 million from the Public Health and Social Services Emergency Fund (Relief Fund) has been fully recognized, with no remaining liability as of December 31, 2022[24][25] Note 10: Long-term Debt This note provides details on the company's long-term debt, including the senior credit facility, equipment loans, lease liabilities, and the status of convertible debentures - In September 2022, the company entered a five-year, $110 million senior credit facility, consisting of an $85 million delayed draw term loan, a $5 million term loan, and a $20 million revolving credit facility[27] - As of December 31, 2022, the outstanding balance under the new facility was $8.04 million[28] - The C**$15 million** in 8.0% Convertible Unsecured Debentures issued in 2019 were fully converted during the year ended September 30, 2022, with no balance outstanding[32] Key Debt Balances (as of Dec 31, 2022) | Debt Type | Balance ($ thousands) | | :--- | :--- | | Senior Credit Facility (Net) | 6,332 | | Equipment Loans | 6,559 | | Lease Liabilities | 13,660 | | SBA Loan | 120 | Note 11: Share capital This note details the components of share capital, including total shareholders' equity, outstanding stock options, restricted stock units, and stock-based compensation expense - Total shareholders' equity was $80.4 million as of December 31, 2022[41] - As of December 31, 2022, there were 3,689,000 stock options outstanding with a weighted average exercise price of C**$4.09**[48] - As of December 31, 2022, there were 848,750 restricted stock units (RSUs) from the May 2021 grant and 81,340 from the February 2022 grant outstanding[49][50] - Stock-based compensation expense was $571,000 for the three months ended December 31, 2022, a significant decrease from $2,110,000 in the prior-year period[53] Note 13: Operating expenses This note provides a detailed breakdown of the company's operating expenses for the three months ended December 31, comparing current and prior-year figures Operating Expenses Breakdown (Three Months Ended Dec 31) | Expense Category | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | | Payroll and employee benefits | 12,359 | 8,618 | | Facilities | 1,044 | 600 | | Billing | 1,879 | 1,387 | | Professional fees | 992 | 635 | | All other | 3,188 | 2,174 | | Total operating expenses | 19,462 | 13,414 | Note 15: Income (loss) per share This note details the calculation of basic and diluted earnings per share, reflecting the net income or loss and weighted average shares outstanding Earnings Per Share Calculation (Three Months Ended Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) ($ thousands) | 325 | (2,131) | | Basic weighted average shares (000's) | 35,605 | 33,346 | | Diluted weighted average shares (000's) | 38,148 | 33,346 | | Basic EPS | $0.01 | $(0.06) | | Diluted EPS | $0.01 | $(0.06) | Note 16: Related party transactions This note discloses transactions with related parties, including lease agreements with an affiliated rental company and compensation for key management personnel - The company leases six facilities from a rental company affiliated with its CEO, with monthly lease payments of approximately $65,000 for the three months ended December 31, 2022[60][62] Key Management Personnel Compensation (Three Months Ended Dec 31) | Category ($ thousands) | 2022 | 2021 | | :--- | :--- | | Salaries and Benefits | 291 | 267 | | Stock-based compensation | 237 | 1,096 | | Total | 528 | 1,363 | Note 17: Subsequent event This note describes a significant subsequent event, the acquisition of Great Elm Healthcare, LLC, including its funding and pro forma financial impact - On January 3, 2023, the company acquired Great Elm Healthcare, LLC for a purchase price of $80 million[64] - The acquisition was funded with approximately $73 million in cash from the senior credit facility, $5 million in assumed debt, and $2 million (431,996 shares) in Quipt common stock[64] - Pro forma results for the three months starting October 1, 2022, indicate Great Elm would have generated approximately $15 million in revenue and a net loss of $500,000[65]