Greetings, and welcome to the Viemed Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Zehnder, Chief Operating Officer. Thank you, Todd. You may begin.

Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the US federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The second quarter financial results news release, including the related financial statements are available on the SEC's website. I'll now turn it over to Casey to get things started.

All right. Thank you, Todd, and good morning, everyone. Welcome to our second quarter 2023 earnings call. Today, we are excited to share a comprehensive overview of our robust business performance along with a positive forward-looking outlook for the industry. Our organization is positioned exceptionally well to expand our reach and strategically capitalize on prevailing tailwinds in our operating environment. During this period, we've achieved significant organic growth, a testament to our management team and their commitment to continuing to our proven growth model, and we simultaneously initiated our long-awaited M&A strategy. We are pleased to announce the successful completion of HMP acquisition on June 1, which further accelerates our growth engine and broadens our capabilities geographically. This acquisition reinforces our dedicated care while building a larger Viemed team with expanded resources. Before we delve further, I want to take a moment to acknowledge and express our gratitude to our dedicated team of respiratory therapists, behavioral health specialists, staffing professionals and administrative support staff. Their continuous commitment to delivering best-in-class care to the patients we serve is the driving force behind our outstanding quarter and continued growth for Viemed. As of the end of the second quarter, our Viemed family grew to 974 employees, including 172 new onboarded employees from the HMP team. We are fortunate and excited to welcome the HMP team into our families. The second quarter of 2023 exhibited the strength of our business model. Our revenue results again landed at the top end of our guided range, confirming that even as a larger company, we continue to experience strong growth. Our success is built on a robust and resilient strategy, which has consistently demonstrated its ability to overcome challenges and drive sustainable growth. We are pushing our growth strategy to new heights by executing on strategic…

All right. Thanks, Casey. In reviewing the financial results, all figures are in US dollars and the full results have been made available on the SEC website as well as SEDAR. Our core business generated net revenue of $43.3 million during the second quarter of 2023, as compared to net revenues of $33.1 million during the second quarter of 2022, which equates to a 31% increase. This revenue amount includes approximately $2.5 million of revenue related to our acquisition of HMP during June. Excluding that impact, our organic growth over the second quarter of 2022 was an impressive 23%. Our sequential growth for the core business was 9%, and we see that continuing to increase as we will have HMP for the entire third quarter and our organic growth remains very strong. We continue to stay optimistic that we will be able to continue our high organic growth rates as well as continue our evaluation of inorganic opportunities. Our gross and EBITDA margin percentages are once again strong as we are focused on both margin and diversification. We remain committed to our dual strong -- dual-pronged strategy of continuing to diversify our revenue stream, all while looking to expand our bottom-line margins. We continue to see our margin percentages be influenced by our product mix and continue to be pleased by the notional growth. Our gross and EBITDA margins during the quarter came in at 60.3% and 22.6%, respectively. Our second quarter gross and EBITDA amounts came in at $26.1 million and $9.8 million, respectively. Our second quarter 2023 EBITDA is approximately 52% higher than second quarter 2022 EBITDA, which is a testament to our overall focus for the last 12 months. Our second quarter revenue from vents was approximately 60% of our core revenue as compared to 69% in…

All right. Thanks, Todd. In the midst of these exciting developments in the quarter, we are most pleased with the fact that our commitment to organic growth remains unwavering. Our team has done some incredible orchestration for this next chapter of our growth story and their careful work on the integration of the HMP acquisition has not slowed us down in any way. On the contrary, we're firing on all cylinders, continuously improving, growing and expanding our operations. We remain focused on maintaining our position as the leader in the industry, never taking our eye off the ball. As we move forward, with the help of the stable regulatory environment, we remain aggressive on creating more preferred partnerships with our hospital partners. Driving innovation and ongoing improvements to our clinical model will continue to be a major part of our strategy. We are confident in our ability to navigate the evolving healthcare landscape and deliver sustainable value to our stakeholders. Once again, thank you all for joining us today, and we look forward to sharing the exciting developments ahead for Viemed Healthcare. This concludes our prepared remarks. We'll now open up the floor for further questions. Thank you.

[Operator Instructions] Our first question is from Brooks O'Neil with Lake Street Capital Markets. Please proceed with your question. Brooks O’Neil: Thank you, and good morning, guys. Congratulations on the terrific results.

Good morning, Brooks. Thank you. Brooks O’Neil: Yeah. So I have a couple of questions here. The first, I guess, is if I remember correctly, the business mix from HMP was modestly -- I mean, it overlaps with yours, but it's maybe more skewed to the sleep side. Can you just talk a little bit about initial efforts to cross-sell in their geographies and maybe take advantage of some of the strength you have on the vent side of the business?

Yes. Good point. The HMP mix was, I guess, very heavy on the sleep side, call it what, 50%, I would say 10% was ventilation. So that was one of the things that really excited us about the acquisition when we were analyzing on the front end. So, I mean, June 1, we closed the deal, Brooks, we had our bid team up at their offices the following week and training their folks on how to walk and talk the Viemed way from selling our complex respiratory model, which is ventilation. And they hit record numbers in month one for vents. So we really got jazzed about that. We were excited about the ability to -- for them to receive the training and really adopt it. And we were impressed with how much incremental growth was out and about in their respective markets. So they're going to continue to double down on sleep as well. They have -- they've got a strong sleep program with many locations throughout the Tennessee, Mississippi and Alabama markets. They service labs. There are some opportunities to grow their sleep business through initializing some home sleep programs in rural markets outside of where they currently service. So we're excited about being able to help them with that because that's something that we're really good at too, is developing a home sleep program. So yeah, all of the revenue synergy things are the things that we've been focused on right out of the gate. We're obviously uncovering other opportunities to tighten screws down on some costs here and there. But right now, we got a major opportunity with just growing sales, and that's what we're focused on. Brooks O’Neil: Great. Appreciate all that color. So I'm curious, you and Todd both talked about continuing to mine the pipeline of acquisition opportunities. Would you say this first acquisition has been a slam dunk template for what you're going to do going forward? Or have you learned some things from this one that might make you even better at making acquisitions down the road?

I think the answer is yes to both of them. This was an -- I think this was an ideal transaction for a lot of reasons, just because we know all the business units that they are in, but at the same time is the diversification of the revenue streams. It's in an area that we weren't very strong. And lastly, but probably most importantly, is culturally, it was a very good fit. But at the same time, it would be disappointing if we didn't learn things during our first pretty significant acquisition, and we are learning things. But, it's kind of like Casey said, we haven't uncovered anything that spooks us. It's all been good. It's a new way of growing for our company. But the main thing is to do it right, get it integrated get the revenue synergies all while making sure our organic growth doesn't get impacted. And that's the main thing we've been able to do. So we're looking forward to the next one. When it comes we'll see. We're not necessarily pressing to do another one immediately. But if another one comes soon, we'll be ready for it. So it's all good on this first one. Brooks O’Neil: Great. Let me just ask one last one, and it's sort of revisiting an old friend, if you will. Any progress with the VA in terms of opening the doors for the oxygen programs broadly across that opportunity set?

Yeah. The pilot program is not dead. It's still ongoing and pressing forward. We're dealing with some employees that are coming and going that we're developing the program, which slowed things down. Again, the main success that we're having inside of the VA is coming through staffing where we've become a -- we've got a lot of experience now. We have that background of being a quality provider for the VA. And so that has boded well for us landing staffing contracts, which has been some of the bigger wins, but it doesn't mean that our complex respiratory push is over or dead. I mean it's just -- it's still waiting on the VA and status quo as from quarter-to-quarter as we always talk about it. Brooks O’Neil: Okay, cool. Thanks for the color. I’m excited for the future.

All right. Thanks, Brooks.

Thank you. Our next question is from Doug Cooper with Beacon Securities. Please proceed with your question.

Hey, good morning, guys. And terrific work on the quarter. Just a couple of quick ones for me. I just want to confirm pro forma because you only had the acquisition in for one month. Would pro forma would have been if you had it for the full quarter, roughly $48 million, $48.5 million of revenue and $11 million of EBITDA. Is that sort of in the ballpark?

The $48 million is a good approximate. We don't have an estimate of EBITDA, but I don't think it's going to change the composition very much, Doug.

Okay. I saw the vent, your over 10,000 vent patients now, a nice milestone. That looked like it had the strongest growth, certainly sequentially, it's up 7% sequentially for some time. How much of that was due to HMP? Casey, you mentioned they were out of the gate selling and how much of it is just, I don't know, maybe the physicians finally realizing that this is a good therapy.

I think HMP, I don't have the exact number, Doug, but I think HMP made up about 340 bps to 350 bps of the growth. The rest was our traditional sequential growth, which I want to -- I don't have the exact number, but it was probably about 300 bps for the quarter? Yeah, that makes sense because we grew at about 700 bps. So our own efforts made up about half of it. So the organic piece is clicking for sure, but then folding their group in obviously gave us a really good bulk.

Another little nugget, Doug, is we set an internal goal to kind of end the year with 115 quality sales reps. We're sitting at 112 right now. So our recruiting efforts are really clicking. And it's -- we've put up a lot of good people into the system. It's just a matter of getting them trained and making sure that they have the back-end infrastructure to support not only the new guys that we've been finding, but also the new HMP team as well. So a lot of our focus is building up sales training and sales managers and so on and so forth right now.

Okay. So just to be clear, you added 300 bps over three months, and they added 340 bps in a month?

Well, no, I mean that gets all added at once. That's part of the acquisition. So that was their active…

Got it. Okay. And just on the non-vent business, just call it the sleep and the oxygen and so forth, even excluding the contribution from HMP, it looks like it grew 50%. Is that -- did I read that right?

You're talking about our ancillary services with…

Just the non-vent revenue.

Yes. That's going to be encompassed by a lot of growth in oxygen, a lot of growth in sleep. And then, you got staffing up and running, just our sales revenues are higher at this point. So that's probably about right. I don't see the number exactly that you're talking about. I want to make sure that HMP is not included in that, but…

HMP, I guess if I added $2.5 million of that non-vent revenue, obviously, your non-vent revenue up, I think it was over 100%. So if I [indiscernible]

Yeah, that’s right.

It would be incredible growth. So how -- obviously you’re making great inroads into the sleep and oxygen space. Can you just -- can you keep that kind of growth rate going? Like...

Well, that kind of goes back to our age old like how long can we keep growing. I mean our intent is to always grow this thing organically in these high rates that we've been posting, call it, 25%, 30%. It gets harder when the numbers get bigger. But inherently, as our sleep business grow, that means the resupply piece starts growing with it and that's sort of the annuity, if you will. And as we have more sales reps around the country, they're out there pushing everything, which includes vents, vest, oxygen, sleep and -- so I'll tell you that, that is the intention to keep growing those numbers dramatically. There's a smaller base, so they have an advantage over events to keep those high percentage growth rates. But we just want to see everything grow. That's what it comes down to.

Yeah. It was interesting for me with, I guess, Owens & Minor with Apria, they had organic growth rate year-over-year of 10.5%, I think, and AdaptHealth was 9% or 10%. So, I mean the sleep side of the business continues to have pretty strong fundamentals, I would suspect?

Yes, it does. I mean sleep apnea is a growing disease state, for sure. And once again, we're still benefiting from only rolling that out nationally kind of during the COVID time. So it's still -- you get a new sales rep or two or three that hit their stride as being able to offer it in addition to everything else. So we're benefiting from having that and then once again, benefiting from bringing in HMP going forward, that's only going to bolster our non-vent revenue growth going forward.

Right. And I'm assuming the supply chain issues, ResMed has really picked up the pace, and there's no issue about getting equipment?

We have no issue on any product at this point. Yeah. So everything is good there.

Okay. Great, guys. Congratulations.

Thanks, Doug.

Thank you. Our next question is from Andrew Rem with Odinson Partners. Please proceed with your question.

Hey, gentlemen, great quarter. Congrats to your team. You guys are doing a great job executing.

Thank you.

Just maybe going back to HMP, what was their kind of organic growth profile prior to the acquisition or at the time of the acquisition?

Well, if you look at it over kind of a three-year period, I want to say the CAGR would be somewhere in the kind of high teens, low 20s. The last year wasn't as high. They had just slowed down to probably upper single digits. So we're hopeful that when we bring our skill set of growing the complex respiratory, we can get it back to kind of our organic growth rates, which is in that mid-20 type range.

Okay. And then, is that kind of factoring in the opportunities around ventilation as that sounds like that wasn't really necessarily a strength for them, but it is for you.

Yes. That's the goal. That's the goal, is to have them continue to grow their ventilation business at a much higher rate than they were historically. And then our sort of benchmark for them is if we can keep them growing at our growth rate, then we're doing a pretty good job.

Okay. And then, can you just maybe flush on a little bit more your comment about -- or just help me understand better, when you say a good cultural fit between these two -- or between you and HMP, just define that a little bit?

The best way to define it is that they're patient-centric. They put the patient first, which is something that is extremely important to us. They're just good people that are looking to do the right thing with -- and that's what we're looking for. We can work with that whenever we have the passion and the bleeding heart clinicians at our side, and that's what we saw with HMP. So we're kind of just spring boarding that passion into their communities.

And then on just operating expenses. Can you maybe talk about second half of the year and as you go into '24 and kind of beyond ability to kind of leverage maybe more just kind of the SG&A expense. Obviously, you had inflation pressure last year. You're getting some of that product with the improvement in reimbursement, but other things that you guys can do operationally to kind of leverage those expenses?

Yeah. I mean we're very proud in my prepared remarks that G&A was only up 17% this quarter, and revenue was up 31%. So it's happening. We're continuing to push on it and scale helps that just generally. We're able to leverage kind of C-level expenses versus a growing revenue base. The key is we're not necessarily going to try to slow down the G&A growth because that's what yields these impressive organic growth rates. We are always out there trying to hire new salespeople, try new innovative ideas. And we've always said and we're proud of it, that we invest in the future of this business, and it yields above-average organic growth rates. We do expect to grow margins. To say that we're going to be able to grow them in '24 as high as we -- or as much as we've grown them this year, we're kind of trending towards a 200 basis point bottom line increase. That would be difficult to replicate next year, but we fully intend on attempting to do that. And we do see the ability to continue to grow them. It's just at what rate we're not exactly sure yet.

And does that kind of -- is that assuming in the out year, I understand your comments about this year. On the out year, there's some component that's dependent on reimbursement and then a portion would be on your internal activities. So looking to improve next year, clearly not at the pace. But how much of that do you control in the improvement?

Well, there's probably three factors. You hit on two of them. One is the reimbursement. And looking at midyear CPI, that was running, I think, 3%, 3.5%. So we got a figure that we're probably going to see about an average of 2% next year. So that's not extremely meaningful. The majority will be what we do. The one thing that we always caution people on is ventilation has a higher EBITDA margin. So we are diversifying the product base. As I've said in my prepared remarks, we went from 69% last year to 60%. A lot of the business that we are getting into is feeders into higher margin later in kind of their product life cycle. So the composition of the revenue, the CPI adjustment and then those are sort of up to us, but I mean, the composition is sort of up to us, but we let that actually happen. The real thing that we can control is the cost. And once again, we know that we will see some corporate leverage as a result of -- you don't need two Todds and two Caseys when you double a company. So those are the type of things that we can do. But at the same time, we're always investing in the future. So we -- it's very important to us. I think the most impressive number for this conference call was that our EBITDA was up 52% year-over-year for the quarter basis. And that's our intent, is to keep growing that number.

All right. Thanks, guys. Thanks a lot. And again, congrats to your team.

Thanks, Andrew.

Our next question is from Eric Coldwell with Baird. Please proceed with your question.

Hey, thanks very much and good morning. I have, I think, three questions. The first one, I'd like to hear a bit about your traction with payers. I know it's still very early with HMP, but as you broaden your scale and your geographies and capabilities. I'm curious what your recent conversations with payers have been? And have you been able to expand any network access? Or do you have any opportunities that you could highlight for us as you look over the next 12 months?

Yeah. We have done a hell of a job with payers this year. Our network development team has been very active. They've added 5 million lives into our network year-to-date, and they've got another 5 million under contract headed our way. So we're very pleased with the efforts of that those guys are doing. We still have payer struggles that are typically with the big guys, United and Humana are tough cookies for us. We do some out of network work for them, but we have great opportunities to get those big guys on board. But as far as everybody else, I mean we're -- the payer conversation is really healthy. They understand that when we present data that shows that we can save money on our complex respiratory model. If we get these patients on at the right time, they understand that we bring a unique offering to the table in treating a very sick and typically expensive batch of their patients. So that's the reason and the driving force behind how we added 5 million lives, and we'll continue to double down on that message with -- through the lens of data.

Since you brought up Humana specifically, is one of -- a representative of a large MCO that's maybe a harder conversation right now. I suspect it's not an issue for you given perhaps underweighting there historically as well as geographic issues. But their recent deal with Rotech and Adapt on certain products being exclusive, does that have any impact on your thoughts? I know not all categories were covered either, but I am curious if you have any thoughts on that type [indiscernible] that we've seen, yeah.

For our company specifically, it didn't really affect us because we're not we weren't doing much business with United and Humana. I mean I -- my perspective on that deal is kudos to Apria and Rotech for getting that. I mean it's yet to be seen whether or not they'll be able to handle the entire network of Humana, which could be United and Humana now. So that is -- in my mind, it's just -- I don't -- I'm not -- the jury is still out on whether they can continue to support the coverage area. It doesn't give us much angst just because we really weren't even servicing those patients in the first place. But yeah, we'll just have to wait and see how that works out.

That's fair. And then on the -- the commentary on the organic growth rates, which are clearly pretty remarkable. I'm curious, how much of that, if you had to -- if you had to guess or if you maybe even have the information with you, how much of that organic growth, was there an inflection in market volumes, patients getting on first script or really, is this just a continuation of the expansion of the sales network, the payer network and some market share gains on top? I'm trying to get a sense on the underlying market dynamics and what you've seen in your core categories?

Are you -- Eric, are you specifically are you talking about existing areas versus new areas with that question or?

Yeah, it just kind of seems if you will, same-store apples-to-apples growth rates in your core areas, are you seeing a change in overall patient volume, national script trends, new access because of regulatory changes or statutory changes over the last couple of years? Or is that a pretty steady market. And really, the growth is just but for perhaps the recovery in sleep, which is obvious after the recall. But for that, is really this growth underlying growth that is clearly well above market. Is it all share gain? Or is it something -- is there something more underneath it?

It's really just -- I mean, so first of all, we generally run between kind of 85% and 90%. And I don't have the exact quarterly amount, but I can tell you it's going to be in that range for same-store sales. So generally, what happens is it takes a little while for our new reps to hit their stride. And when they do, they just progressively get larger, larger, larger. Inherently, our strongest reps continue to bear the load of the majority of the growth. So that's the general answer. But there's nothing unique to this quarter. I mean if you go back and look, there's it ebbs and flows a little bit, but we always have these type growth rates. It's the way we do things. We're a very sales-driven organization. We're -- we're aggressive with our recruiting and training and retaining new sales reps to get into new areas that ultimately become same-store sales. So I think over the last few years, offering additional products for these seasoned reps to sell, be it sleep, oxygen, percussion vest has given the ability to sustain the high growth rates, all while knowing that the complex respiratory population, primarily COPD and neuromuscular, is a very underserved market and continues to be. So the green pasture is still there. That's why we're confident that we can continue to grow it. The job is ours to continue to find new people to help spread the good news and get more people on therapy.

Last one for me, if I have time. The -- with the PHE ending last quarter, you got a partial impact under your belt. This will be a full quarter. Any notable call-outs there in terms of changes in market dynamics, reimbursement, regulatory changes, audit changes, what you're seeing on that side of the market? Are there any notable callouts that people should be paying attention to in a post-PHE environment?

No, not really. I mean, obviously, you hit on everything, but we fortunately, I guess -- or I guess unfortunately, during the relief, we didn't get too large of a revenue uplift from the blended rate and so forth. It impacted us some but it so inconsequential that we never had to really call it out or even think about it from a modeling perspective. It got blended in pretty easily when we look at things. So nothing that has been a knee-jerk reaction that we've seen that says, oh, man, this is back to some problem. We -- so it's kind of business as usual and no issues on that end.

One other thing I'll add is there is a movement, if you will, I guess, inspired by the PHE where we didn't have to get CMNs to standardize CMN’s Certificate of Medical Necessity for oxygen and that would reduce audit pressure on the oxygen business. So I think that's a positive that really came out of it, like what can we adopt going forward that really worked during the PHE. So we'll wait and see if CMS gets on that train, but they should -- it should be a win-win for us and for them in terms of just order pressure.

Yeah, perfect. Well, again, congrats. Nice results here and look forward to seeing you guys next month. Thanks so much.

Thanks, Eric.

Thank you, Eric.

Thank you. There are no questions at this time. I'd like to hand the floor back over to management for any closing comments.

All right. We want to thank everybody for participating once again on the call, and we look forward to visiting with anyone that has follow-up questions in the near future. Have a good day.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.