Viemed(VMD) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated net revenue of $42.9 million in Q2 2020, a 111% increase from $20.3 million in Q2 2019, with approximately $19.7 million attributed to COVID-19 related equipment and supply sales [20] - Gross margin and EBITDA reached all-time highs of $25.9 million and $16.3 million respectively, although gross margins were affected by COVID-related product sales [23] - A tax benefit of $6.6 million was recorded due to the removal of a valuation allowance against deferred tax assets [24] - SG&A expenses totaled approximately $16.4 million, up from $11.5 million in the prior year [25] Business Line Data and Key Metrics Changes - Vent patient count declined slightly from Q1 but was up 8% compared to Q2 2019 [22] - Organic revenue growth was approximately 14% higher than Q2 2019, excluding COVID-19 impacts [21] - The company has pivoted to virtual training and inside sales, successfully hiring and training 7 new salespeople in new territories [8][10] Market Data and Key Metrics Changes - The company has seen a shift in demand for ventilators, with significant sales occurring in early epicenters like New York and Illinois, and now receiving requests from second-tier states [15][16] - The company is actively fulfilling requests for equipment and PPE, which could significantly contribute to Q3 revenue [16] Company Strategy and Development Direction - The company is focusing on technology investments, particularly in remote patient monitoring and the VieMed Connect app, to adapt to changing healthcare delivery methods [27] - A new call center for inside sales has been established to enhance communication with referral sources and patients [10] - The company aims to capitalize on relationships with hospitals through joint ventures and is targeting underserved markets with less than 5% market penetration [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the team's ability to adapt and innovate during the pandemic, positioning the company for future growth [39] - The company anticipates net revenue guidance for Q3 in the range of $31 million to $35 million, including $6.8 million to $9.8 million related to COVID-19 [33] - Management is optimistic about returning to historical growth rates once the pandemic subsides, citing ongoing demand for respiratory services [88] Other Important Information - The company has a solid balance sheet with approximately $29.7 million in cash and $11 million in accounts receivable [28] - The company is exploring both technology investments and potential inorganic growth opportunities, although technology solutions are currently the primary focus [78] Q&A Session Summary Question: Explanation of ventilator patient count decline despite revenue increase - Management explained that noncompliant patients were put on hold, allowing for increased revenue from compliant patients and equipment sales [46] Question: Future organic growth expectations - Management refrained from providing specific guidance but expressed a goal to return to historical growth rates through new technology and sales methods [48] Question: Progress with the VA and near-term revenue opportunities - Management remains optimistic about opportunities with the VA, noting new centers coming online and ongoing discussions with third-party payers [52] Question: Bad debt expense trends - Management indicated that low bad debt expense is a result of improved collection processes and effective workflow systems [61] Question: Conditions for CARES Act funding - Management clarified that the funds must be utilized for COVID-related expenses, which the company is well-positioned to demonstrate [64] Question: Adjustments in sales approach due to COVID - Management highlighted the shift to virtual communication and technology use, which has allowed for better patient management and engagement [71] Question: Future cash deployment strategies - Management confirmed that technology investments and equipment purchases are the primary focus for cash deployment, with inorganic opportunities considered but not prioritized [78] Question: Vent leasing program details - Management confirmed the introduction of a vent leasing program to assist hospitals struggling with cash flow, which is a new area of business for the company [102]