Viemed Healthcare, Inc. (VMD) Earnings Call Transcript & Summary

Greetings, and welcome to the Viemed investor presentation. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the conference over to your host, Glen Akselrod, President of Bristol Capital. Thank you. You may begin.

Thank you, Diego, and thank you, everybody, for joining our webcast today with Viemed. The purpose of today's presentation is to give our audience a better understanding of the business through a PowerPoint review and discussion with management. That discussion will be led by Casey Hoyt, CEO, who is also joined by Todd Zehnder, Chief Operating Officer. We'll break for Q&A at the end of the formal presentation. When we do break, we encourage questions to take place. [Operator Instructions] I'll ask the questions on the air for everyone to hear and management will then answer. I'm not going to reference any names, but simply read the questions asked. And if I can't get to your question online in our available hour, it has not yet been addressed and can't be, I'll get back to via e-mail. And for some reason, you're experiencing the issues once we start, remember, you could also e-mail me [email protected]. I'll be happy to assist. I'm not going to read the forward-looking statements, but I do state that they apply, and I reference them in Page 2 of this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. And now I'll turn the call over to Casey to start his part of the discussion and presentation.

Great. Thanks, Glen, and thanks, everyone, for joining the call today. We're just going to hop right into this investor presentation, and we'll try to be as efficient as possible to allow for plenty of time for Q&A on the back side of the presentation. So starting on Slide 3, Viemed at a glance, we are the largest independent provider of noninvasive ventilation in the country. We've established that status through deploying respiratory therapies across the country, across the 45 state region to treat very sick patients. Our patient is typically struggling with COPD or some sort of neuromuscular disease that's leading to where their lungs are failing them. And what we do is we intervene at a critical moment in time when they're really prone to going back inside of the hospital or the ER. We prevent those costly readmissions from happening by offering a next level type of TLC type of care in the home. Highly profitable organization with a 40% CAGR in revenue since 2010. These respiratory therapists are on call 24/7, operating out of their vehicles and designed to kind of drop everything they have going on and go at a moment's notice for our patients. The company is based and headquartered in Lafayette, Louisiana. We're currently serving over 35,000 patients. Currently listed on the Nasdaq under the ticker symbol VMD as well as dual-listed on to the TSX under VMD.TO. This next slide is about our time line. We started the company back in 2006 under the name Sleep Management. I'm one of the original founders with my good friend and current President, Mike Moore, who's a respiratory therapist by trade. In 2010, we started one of the first home sleep testing companies in the country called Home Sleep Delivered. Home Sleep Delivered is still a sub of ours today, but it's an important piece of our history because we had to really develop a new sales pitch and embrace new innovation and new technology. Our manufacturer at that point in time was Philips of our CPAPs, and they were keeping a very watchful eye on that whole transition that we made into Home Sleep. Fast forward to 2012, that was probably one of the reasons that they offered us the opportunity to bring the Trilogy ventilator, the noninvasive vent, into the home market space. So from 2012 to 2015, you can see that we're rapidly growing. In 2015, PHM, Patient Home Monitoring, who was trading up in Canada and the Toronto Venture Exchange at this time, finds us, they acquire us. They hire myself and Mike to be the CEO of the organization. And off we go, our job was to integrate and organize the 11 businesses that they had previously rolled up. As we go to 2017, we realized that we had 2 different strategies for capital. And so we set a strategy to spin out from the PHM companies. At this point in time, we were on the Toronto Venture Exchange, we quickly up listed the Toronto Senior Exchange shortly thereafter. 2019, we take our story down south to the U.S. and up list on to the Nasdaq. As you can see, our annual revenues are $80.3 million at this point in time. And then we finished 2021 with $117 million on the top line. We'll talk a little bit more in greater detail about the financials as we get into the back half of the presentation. So our key investment consideration, we are treating these COPD patients. COPD is the third largest killer in the U.S. behind cancer and congestive heart failure. We've got about $50 billion being split annually on the disease. And it's just a high market growth opportunity for this business model. It's definitely servicing the 10,000 baby boomers that are turning 65 every day. That's the push of the aging population that struggles with this disease. We have an opportunity as well to expand our service offering into the VA, which we've been working on for the past couple of years. The VA is the second largest payer in the country behind Medicare, and we're getting very close to making noninvasive, the gold standard of care for those guys. And so they're just always a little bit behind with their bureaucratic ways. But these are all favorable market trends. That where increasing the need that's supported by government and effective home care solutions to reduce patient hospital admissions, increasing the system efficiency, offering better comfort and family lifestyle options. And ultimately, it saves money for the patient, insurers and governments that are doing business with us. So this next slide is about the Medicare population and how it's growing. We've got 63 million beneficiaries in 2021 that were enrolled with Medicare. That's expected to grow up to 80 million by 2030. The DME industry as a whole has to invest. It's going from $58.3 billion in '19 to $98.4 billion that they'll have to invest in 2028. And so this aging population is all playing into our hand right now. This next slide is about the NIV market penetration. This is really how we hone in on our market space, if you will. If you think about the COPD-ers in the country, we've got 25 million estimated, about 16 million of those are diagnosed, but roughly 10% are at stage 4 of the disease state, which is the most severe level of the disease state. These are when their lungs are most prone to failing them and leading them to chronic respiratory failure. About half of those are actually at chronic respiratory failure, which is when they become candidates for a noninvasive event. So we've got 1.25 million patients out there walking around that need us today. And currently, we have less than 70,000 Medicare beneficiaries that are on service. This is representative of less than a 6% market penetration number, so 94% of these guys that need us today are really walking around, going in and out of a hospital and burdening these facilities with unnecessary visits. Viemed is the third largest provider. We're the largest independent, but we do have 2 large nationals that are greater than us, Apria and Lincare. But collectively, the top 10 providers in this space control 63% of the overall market. So how do we do it? We are putting these registered respiratory therapists on call 24/7, as I mentioned. They're all trained as COPD educators. They're trying to get in there and assess and service the medical equipment that's in the home. We have a chief pulmonologist that oversees all of our staff and all of our clinical protocols. And then the latest thing that we added on at the beginning of last year was a behavioral health component, and we're plugging into gas right now with behavioral health specialists that work alongside of the respiratory therapists. They handle all things that go beyond respiratory. We have patients that are very sick and towards the end of life and often working through that transition as going from dealing with their respiratory disease to transitioning the hospice can be more of a behavioral health component than anything else. 50% of the reasons that these folks go back into the hospital are anxiety and emotional driven. So our new division, VCS, has been super helpful and not only bit retention, but increasing the quality of life of these patients and giving them the confidence that they need to improve quality of life. Our patients are very, very sick. A win for them is if they get to go to the mailbox, if they get to do the dishes or something like this. What we do is we document these activity daily living reports with our therapist in the home, and then they'll report that back to the physician and any little nugget that they get of where they're improving, that's a win for us. But overall, this is affordable for patients. The majority of all these services are paid for and reimbursed by Medicare or other commercial providers. This next slide is an overview of all the products that we use while in the home. And the major theme here is that we are a device agnostic company. We're not a Philips company. We're not a ResMed company. We're the paint shop that will sell Sherwin-Williams or Benjamin Moore. Doc, you just pick which paint you want. And that kind of goes for all of the products, but we have noninvasive vents at the top. Percussion vest is a product that's very complementary to the respiratory disease in COPD in the noninvasive vent. It treats bronchiectasis, stiffening of the lung disease. We have 3 different manufacturers that we use for that cough assists for our neuromuscular patients that help them produce secretions in cough. And then oxygen therapy. Our oxygen offering is fairly unique to our competitors around the country. We have a tankless model, where we put out a stationary concentrator alongside of a portable oxygen concentrator that can be lodged to the hip of the patient and offer them a lot of portability for what they need to get out and about of the town. That's typically for our stage 1, 2 and 3 and ultimately 4 guys. Sleep therapy, we do a remote sleep offering where we have a therapist that mails out the machine or the home sleep study first. We get it back in-house, we get the results, and then we'll follow up with Auto PAP and hold the hand of the patient with telehealth caller or even just a phone call to make sure that they're getting compliant with their sleep therapy. And then the last bullet is remote patient monitoring. We'll talk a little bit more about some technology that we're using in the home in the coming slides. A proven growth strategy, how do we do it? We're selecting a location. We look at all sorts of wonderful data points. We certainly look at COPD prevalence. We target hospitals and facilities that have high readmissions, and maybe you're struggling with those readmission burdens. We look at the scripts that the doctors are writing and pay attention to what the competitors are doing, too. But really, at the end of the day, the biggest thing we're looking for is to find that person that has existing relationships, oftentimes a clinician that we can train how to walk and talk the Viemed way, convert them into a salesman, if you will, they're called patient care coordinators in our organization, but they're typically a clinician that we have trained how to sell. It's a very unique lean deployment model. We don't rely on brick-and-mortar facilities to function as a part of our business model. So think inventory in the trunks of their cars. These folks are monitored by GPS, and they're very lean and mean, and they're designed to just respond faster than the competitor and always have the things that they need to service the patient at a moment's notice. It's a high service model, high touch. So I always explain our business as human interaction in the home, with -- coupled with high tech. So we'll talk a little bit more about that in the coming slides here. Okay. These are some of our studies that we've produced over the years. Our first one, all the way to the left was our proof-of-concept study with KPMG. It showed that patients were 3x more likely to die in the first 90 days if they go untreated. That was important that we understood that we needed to get these folks on therapy sooner rather than later in order for them to really receive the mortality benefit. The mortality benefit and KPMG showed up as for every 6 patients we put on therapy, we save a life. It was a 16% reduction in mortality. We saw the same thing with the next study, the American Journal of Managed Care, are very similar, had 12% reduction of mortality and then respiratory MEDICINE, which was published had a 50% reduction in all-cause mortality. So this is the data that docs are really want to see to establish it as a gold standard of care. If you think about numbers needed to treat the save a life, a doc needs to prescribe 1,000 flu shots in order to save 1 life or 72 cases of Lipitor before they'll save 1 life-threatening heart attack. So it's a major clinical needle mover that we're showing here. And we also showed some cost savings for the payer and KMPG. North of $20,000 per patient per year whenever you stratified the study by the most extensive patients. That one wasn't published, but we've got a spoiler alert headed our way, another cost study that's coming here in the coming months and will be published that shows some other cost savings, which is one of the first published studies that shows cost savings in our space for noninvasive ventilation. So we're very excited about that tool headed our way. The technology that I've been hinting around and touching on. We developed an in-house platform, we call it Engage. And what it is, is it's a hub that we put in the home with the patient. It has a telehealth feature that goes back and forth from our respiratory therapist to the patient. They can quickly pull us up, and we can identify if it's just a panic attack if something or an easy reason that we can talk to muscle allege and prevent them from going back into the hospital. We can also solve really easy problems that the machines not plugged into the wall or if we need to file an alarm or something like that along the way. The thesis behind developing this was that we needed to get our length of stay from 17 months to 18 months or 19 months to try to improve quality of life by extending it. We're seeing those numbers. We're in the middle of a national rollout with it right now. In the first 90 days, we used to lose 20% of our patients. We would lose 8% month 1, 6% in month 2 and another 6% in month 3 to death. We've gotten that down to 13% on everyone who's on the Engage platform. So we know that this works. We know that it's going to help increase our length of stay. And so we're in the middle of a national rollout of this. We've also developed a Connect App, which is a smartphone app for -- in the event that we can't get a tablet out in the home due to some supply restraints with the tablets, we can put a smartphone app on them to get Engage up and running as soon as possible. But we're very excited about these initiatives. We're going to continue to bolt things on that makes sense. The other piece of this is that we're capturing data. And so this data we can report back to payers with positive outcomes and really be relevant as we develop these value-based discussions and arrangements, which is the future of reimbursement in our mind for our industry. So the objective over the next 24 months. Growing our occupation base is just through developing new areas is always on the top of the totem pole. The game that Viemed has always been to find people faster, get them in areas where we're not in, get them trained the right way and so on and so forth. So we are really good at doing that. We're ahead of schedule this year. I think we set a goal out for 25 new areas, and we're trending to be ahead of schedule. We certainly want to communicate the findings of these new research studies that are headed out. When you reflect on a 6% market penetration number, why -- what's taken so long with the 94%? We believe that we need more data, and so we've been investing in these studies along the way to really make this the gold standard of care for every physician across the country. And so all that data helps do that accomplish that goal. The respond the payer base goes back to working with the VA and really other commercial payers that we have room to grow with, and so we are always grinding in that realm. Expand technology capabilities to increase our length of stay we talked about that. We're going to continue to build off of Engage and make it talk to as many different Bluetooth elements that are in the home and give us the data that we need to respond to truly drive length of stay. And expanding our service offerings in home-based products and offerings through strategic partnerships. This is really hitting around to the joint ventures that we're discussing with hospitals in an effort to become a preferred partner for our service as a continuation of their care from the facility to the home. These are all hot topics right now, and we are very relevant and have some wonderful conversations and strategies working as we speak. Growing our clinical resource and recruiting platform through VieMed Healthcare Staffing. We started a staffing division at the end of October in 2021. We were already executing through COVID on a good bit of staffing business for the VA centers around the country. We were using the third party to fill that. We brought that in-house at the end of 2021, and now we are expanding that as a permanent offering for Viemed. But the other piece of it is, is that it's our own internal recruiting platform. It beefs up how fast we can find our clinicians in the environment of being in a labor shortage. We've been able to have one of the greatest hiring rates in a long time, maybe in existence of the company here at the beginning of 2022. Pursue strategic acquisitions is a new way of growing for us as well. We have traditionally been an organic growth engine. That is changing for us. We have an active M&A pipeline. We're working through deals. We're analyzing companies in certain areas around the country, geographic footprints that we're not in, with contracts that we don't have, possibly with different types of patients that we're not servicing. There's a lot of synergies that we can create. The Philips recall has uncovered. A lot of folks that are struggling right now. We just have accessing equipment. Viemed has equipment to offer. And so we have life lines by way of M&A to offer other companies that are struggling out around the country and then teach them the high-margin business. So we've got deals that we're working through right now. Hopefully, we expect that to be a part of our strategy by the end of 2022 or certainly early 2023. Okay. I'm going to transfer the next section over to Todd Zehnder, our COO, and he'll wrap it up.

All right. Thanks, guys, moving into kind of a COVID/regulatory update. Obviously, everybody knows COVID has been hard on the country over the last couple of years, hard on respiratory patients, providers, physicians, but there have been a couple of good things as a result of it. CMS has made many improvements to the ability to treat patients, both telephonically, through remote patient monitoring, making it easier on patients to get the therapies that they need. The respiratory pandemic, it became, I guess, important to get patients treated as efficiently and effectively as possible. As a result of the beginning of the pandemic, noninvasive vents were pulled from the 2021 competitive bidding round early. And as important, about 7 or 8 months later, our other 2 most significant products, oxygen and sleep therapy were also removed from competitive bidding as a result of a lack of savings through the process, which shows that the pricing that we're receiving and the reimbursements appear to be somewhat stable. As of the second quarter of this year, we are officially seeing consecutive months of pre-pandemic Viemed growth. We're seeing patient adds like we used to. That's really as a result of hiring more good people through the pandemic, training them effectively but probably most importantly, having access to physicians and hospitals and just patients in general going back to the ED on a more regular cadence. So that's a very encouraging thing from us, and you'll see it in our guidance numbers. And then lastly, we just recently announced that the OIG report that was put out a couple of years back. Clearly, that 98% of our patients were not medically necessary has been overturned by CMS in an emphatic way. We did receive basically a full 100% medical necessity overturn, but we have a handful of patients that we're working on getting cleared up with CMS. We have about a 20% failure rate for those 8 patients. We don't think any of those will be failed at the end of the day. But nevertheless, this is a significant move for our industry and for those patients that we are treating the right patients as we've always intended. A little bit on our model. We do make up about 70% of our revenue or just a little bit over 70% of our revenue is from ventilation. Virtually, all of our products are paid on a rental basis. So we buy the equipment and rip them out. When it comes to ventilators, they are uncapped, meaning the patient as long as the patient is alive and not at a facility, we get to continue to bill for that therapy. It comes along with respiratory therapists, supplies, all the maintenance because we own it in perpetuity. Our other major revenue items being oxygen, CPAP and percussion vest do have cap periods. And as I mentioned, the pricing for ventilation is a bundle rate. It's an uncapped bundle rate due to it being classified as a life-saving device and frequent and substantial service. Looking at our historical revenues, there's a little choppiness when it came to COVID because we served as the resources to states and so forth, sales of equipment and our call centers and so forth. But what's most exciting is last year, we had another core revenue record. We've set core revenue records in consecutive years every year. And if you look at this year, we're on our way to another core revenue record growth. If you look at the guidance of second quarter, we are showing -- if you use the midpoint of the second quarter over second quarter last year, we're showing about a 23% increase in revenue. So that's getting back to what we used to say we can grow into the mid to high 20s or even into the 30s, which is our expectation when we wake up in the morning. What drives that is our vent patients. Those are back in a growth trajectory. You can see at the end of the quarter, we ended at just over 8,400, which was once again a company record. The balance sheet and the capital structure is extremely clean. We have less than 40 million shares, 39.6 million, I guess, as of the end of the quarter. We are in a share repurchase program. Currently, we began that in March of this year and have continued to buy into this quarter. As of the quarter end, we had roughly $29 million of cash, $25 million on a net basis. As the only debt we carry on the balance sheet is that $4 million really related to our corporate headquarters. We continue to grow. We're hiring across all of our divisions. We are staffing up in order to keep this patient growth and revenue growth that we are accustomed to. And as you can see, as of -- I guess, as of May 31, we're just shy of 700 employees. And we as the management team and the Board are heavily invested into the company, we own roughly 17% of the company. Looking at the valuation, you can see at the end of the month, we had about a $225 million market cap, which puts us at roughly $200 million enterprise value. So you can see on our historical EBITDA of roughly a little bit under $30 million. This is trading at 6x or so. So for a company that's growing and growing debt free, we feel like it's a very healthy opportunity from a valuation standpoint. I'm going to skip over this slide. This just shows the corporate structure very clean. And then lastly, our Board of Directors. We are extremely proud of the Board that we've put together. We have 5 outside directors and 3 insiders being Casey, Dr. Frazier and myself but our outside Board is an extremely talented group of individuals that all have a different role, a different skill set in their careers. All of them have health care experience and significant health care experience in different aspects of the business. So we're extremely blessed to have the Board that we put together. And that's going to conclude our prepared remarks. Glen, we will open it up for questions at this time.

That's great. Thanks, guys. And we do have quite a few questions in the queue. So I will get going. [Operator Instructions] So first question is, can you just go into a little bit more detail to describe what is a noninvasive vent versus an invasive vent and who would take it?

Well, you can use the machine in both settings for noninvasive and invasive. But what noninvasive means is that you don't have to intubate the patient. You don't have to cut a hole in their neck, jam a tube down their throat. You're basically using a mask. It's no different than a CPAP mask, but what you're doing is it's using an average volume assured pressure support mode that gets down to the lungs. And gets the gas exchanged, right? It pumps out that carbon dioxide and lets the good gas oxygen in. And so it's a very extremely more comfortable way of treating these patients rather than intubating them.

Yes. Thank you. Can you discuss the reimbursement environment and compare contrast commercial versus government payers?

Yes. I mean, I briefly touched on it. We are currently -- we feel in a very stable environment with competitive bidding being tabled during the last round due to we and our competitors submitting bids that did not show significant savings to the government, which, in our opinion, means that we bid -- our reimbursements currently are at a fair market value. We are subject to CPI adjustments. We got an increase this year as a result of last year's inflation. And we would like to think that with all the inflationary pressures that are around right now, we would see some sort of CPI increase for next year as well. That's really for the Medicare environment. On a commercial plan, that's just individualized. Every payer and every provider will have a different relationship, and we are in with most payers on a state-by-state basis. We would generally say that our reimbursement structure, specifically, for vents, oxygen and PAP is along the lines of very similar with our government contracts to our commercial payers.

Okay. Thank you. Next question. Has the successful OIG IPO provided any additional marketing benefits since the announcement?

That's hard to actually say whether we've gotten more business or less business. We don't think we were losing business as a result of it. But it takes some explaining from our sales force and really for investors for that matter. But it's hard to say that we turn on any new benefit as a result of it.

Well, I mean, you have an overhang from investors that I think we're paying close attention to the regulatory environment, and the fact that we did receive relief was a very big deal for investors more so than our patients or our referral sources.

Thank you. If you're able to increase the number of products and services sold, would this lead to operating leverage and higher revenues per sales rep?

Yes. As long as the products are complementary to our existing referral sources and/or for our therapists to be able to use -- to be able to provide treatment in the home. And so the operating leverage piece would be as long as we don't have to, as a drastic example, hire a fleet of nurses to go administer whatever the product is. So that's why you'll see us utilize products that are generally going to be sold to pulmonologists and internal medicine family docs that treat respiratory diseases and have therapies that can be administered by RTs in the home.

Okay. Thank you. Is your current distribution system and the quality of team employees and sales reps, a competitive advantage for you versus your competitors?

Yes. Our existing sales force and our model being the high-touch, high-tech model is definitely a competitive advantage. We utilize a very different model than many of our competitors. So yes, our employees and the way we do business is a competitive advantage.

Okay. And are there any other modes that investors should think about when it comes to competition?

Any other what, Glen?

Modes. Additional competitive advantages beyond just the team.

Just that our model is a little bit different than theirs. It's not that, okay, the competitor is more your one-stop shop durable medical equipment business. They want the wheelchair, the walker, the bed, CPAP, the vent, right? We're -- and they oftentimes are in the van in the parking lot, waiting for a case management to deploy it and off they go. That works for them. They're profitable, they're successful. Where we went out with our more niche focus on complex respiratory is that we're dealing with a clinician that stress and scrubs, working inside of the hospital, walking shoulder to shoulder with the pulmonologist, really educating them on what a good-looking chart, a good chart should look like and getting their agreement that this patient would benefit from the bed. And so we oftentimes become an extension of case management to help them work through their stack up charge to deploy that patient and pair them up with the right provider. And so we're very much on the front end of the sales process, if you will, with a more clinical approach than just a more of a delivery approach from our competitor.

Okay. Thank you. And I guess second with this theme, can you discuss unique recruiting or retention strategies for your workforce, I guess, in this public study, number one? And then producing differentiated recruiting retention performance as compared to the rest of the market?

Well, look, we try, we, and have tried everything with recruiting. The only thing I can say about that is that what's really working well is our VieMed Healthcare Staffing division. They're kicking a lot of butt right now, and they're good at finding people. They're good at getting them in the door, and we're converting at a higher rate than we ever have.

Okay. Excellent. And sort of sticking with this theme and given the fact that we've heard a lot about this in the media, are you finding it difficult to hire and retain employees right now?

Not at this time. I know that's a crazy answer, but we're doing really well right now and finding clinicians.

Okay, thank you. Can you talk a little bit about the Philips recall and how that impacted Viemed today?

Yes. So the Philips recall, we saw this one coming back in, I guess, July of last year and really got ahead of it, we started ordering from a bunch of our other manufacturers, some across the pond and some domestic. We stock ourselves pretty heavy. But Philips own 50% of the overall sleep market. So this has been a devastating blow to all sleep apnea patients across the country, to all durable medical equipment businesses that are trying to help these patients right now finding equipment. We've been in a unique position because we have equipment, and it's one of these things where we're helping find patients and going out and making sure that they have the equipment they need, and it's allowed our sleep business to grow at a rapid rate.

Okay. Thank you. And I guess, Philips aside, going back to the macro economy again and supply chain issues that we're hearing about in the media. Are you experiencing any supply chain issues for your business?

We have not had to turn down a patient yet, and that's something we're pretty proud of or first set up. We've been ahead of it on the sleep business. As Casey alluded to, we've been headed on the vents. And the only thing that's gotten hit a couple of times has been portable oxygen concentrators. But with our largest supplier is Inogen, and they're back manufacturing and distributing to companies like ourselves, and so we're in good shape there as well. Now we've had to make some big purchases and had to prepay from some certain things. Once again, as a result of our clean balance sheet, we've been able to do that.

Okay. Thank you. How many patients can a single respiratory therapist handle given the 24/7 strategy?

It really depends on the area, the traffic, the types of patients. And when I say that, rural areas with mountain ranges and things like that, high congestion, traffic areas, patients, if you have a higher load of invasive versus noninvasive vents, those all matter. We like to think that on average, our RTs can handle between 50 and 60. It also matters if we have an oxygen driver in the region or not. If they're doing all the oxygen as well or doing all the percussion vest drop-offs and so forth. So there's a lot of different things, but if they are pretty much steady vent RT, somewhere between 50 and 60.

Okay. This next question, I think you touched on part of it, but I'll ask it just for you to elaborate a little bit more. I've always understood the business to involve severe COPD, how common is it for a patient to leave the program? And then as a follow-up to that, those would remain, how long did you typically stay on the program prior to expiration?

Very uncommon for a patient to leave the program. The only reason we'll lose a patient, I mean, I shouldn't say it only, but the majority of the reasons that someone would shift would be payer related in the event that we wouldn't have a payer contract that they switch to. But from a clinical standpoint, they rarely leave, Glen.

And the most common -- I mean, to elaborate on that, the most common reason is due to death and expanded on the comment, our average length of stay for our vent patients is 17 months.

I have a few questions regarding competition. So I'm just going to characterize it all in one question and then have you answer it. So maybe if you could be a little bit more specific on who your main competitors are? And I guess, what the competitive landscape looks like for you?

Well, the big nationals are Lincare, Apria and Adapt. Adapt is a little bit harder to track just because they purchased companies and allow them to keep their brand and name. So you have to do a lot of digging to figure out who the Adapt companies are. But Adapt has really become probably the largest player here in the country. The rest of our competitors are really mom and pops in just various regions. We consider the most threatening competitor, someone who has a bleeding heart, respiratory therapists, clinician that is truly cares about taking care of patients the right way, has a nice program, is accredited with respiratory therapists, delivers that service protocol in the home. Those guys who are doing the right things by the patients are more of a threat to our model than the bigger nationals who are more one-stop shops.

Okay. Thank you for that. Can you expand on the potential hospital joint ventures expanded service offerings?

That is really just an initiative to make the hospital a partner of ours and become a preferred provider of the hospital. But we're working on a bunch of different strategies with that. I'd rather not share or go into too much detail on what our strategy is. But it's -- there's many DMEs around the country that are hospital owned that don't really have the service arm attached to it. And so they have more closets with equipment in it. What we offer is the service piece to their business model. And so those are the things that we're working on.

Okay. Thank you. I'm going to read this question word for word, just to make sure I don't screw it up for you. So is there a competitive advantage by being focused on one core therapy class? Or is it a disadvantage not being able to service all of the comorbid patients' needs?

I'd say both. There's an advantage because we like to think that we're the best-in-class when it comes to respiratory therapy. And I think that our brand as a result of that and from a physician's standpoint and patient standpoint, we probably have a top-in-class brand. The negative is when you're dealing with some payers, they want to have someone that does everything, everything from bed, metal down to a ventilator and that could be the disadvantage.

Okay. Thank you. I've got a couple of questions here on competitive bidding, so I'll start with that. With the competitive bidding on the back burner, can you talk about the current stability of the regulatory environment?

Yes. I mean we kind of -- I kind of talked to it a little bit earlier. I think that right now, the -- with competitive bidding on pause, I guess, at a minimum until 2024, and we would think that if it is coming in '24, we would have been hearing and having to start our bidding processes by now. We think that rates appear in a fair range. With competitive bidding being suspended, that means that the rates that people bid and said they could provide services for were above where the rates were at the time. So it doesn't appear that the rate cuts are high on the agenda, but this is CMS, and we always have to be aware that they have to do things on their own. We did get an increase as a result of inflationary costs from last year. And like I said earlier, we do -- we all see the inflation that's happening out there this year, and we would expect to see some CPI increase for next year.

Okay. Thank you. I believe you covered part of this again, but just in case, what percentage of revenue currently is COPD related versus apnea and which patients are the most profitable?

If you're just saying sleep roughly plus or minus 10%, and the other 90% would be COPD or other related, I guess, respiratory issues. So sleep would not be a respiratory disease. We think of it more by product and 70% or a little bit higher than 70% of our revenue comes from ventilators. Which patients are the most profitable? We tend to see that if we can keep patients alive for 17 months, that patients are the most profitable, but we have patients that expire in the first 30 days, and those are not very profitable. The most profitable is the ones that we can have multiple products on that our RT can service at once.

Yes. Thank you. Can you spend a little bit of time discussing your sales force and your sales force strategy?

Our sales force are typically clinicians or we like to prefer them to be clinicians, not all of them are, but they're generally trained to take care of patients, and then we teach them how to be managed by the numbers and driven by quotas and so on and so forth, really becoming a sales rep. We don't call our salesman salespeople. We call them patient care coordinators just because they have a different mindset than your typical sales rep, but our strategy is always just going to spend more time training your clinician how to sell versus training a salesman out to be clinical.

Okay. Thank you. Do you believe your company will be more diversified in 10 years in terms of payers and in terms of revenue of different products and services?

Yes. It already is moving in that direction. I mean we get better and better with commercial contracts. We still haven't completely cracked the nut with the VA being the second largest payer, but those types of wins. And as we get value-based arrangements down the road, that will even diversify our payer mix more, but it's continued to diversify with every year that goes by.

Okay. Thank you. I actually have a few questions on this VA opportunity, and it's a good time to ask them. Can you just, I guess, update the listeners on where that is and whatever next steps are or, I guess, in line for Viemed?

Yes. The VA is 3x more likely to have -- these patients are 3x more likely to have COPD. So it's a major opportunity to help a lot of veterans. Unfortunately, they don't recognize the noninvasive vent as the gold standard of care to treat COPD despite having studies, despite having Medicare it since 2012. They're just behind the game. Very bureaucratic organization, slow moving. They don't like to do new things. Where we're at with them right now is that we're in the middle of a pilot study with the VA, and we are proving out the benefits of treating these patients in the home with noninvasive vents and only doing it with VA patients, which is something that they've asked us to do. Once we get the results and the findings of that, we then will have the proof that they have asked for. And hopefully, we'll establish it as a gold standard of care curve everyone in the country to go out and pursue the treatment on veterans.

Thank you. Can you discuss any reimbursement risk that Viemed, I guess, is exposed to?

I mean we're always exposed to CMS changing reimbursement, but I've kind of alluded to that a couple of times already, and we think that the reimbursement is pretty stable right now.

Okay. Thank you. Just there are some other questions. Where are you seeing inflationary pressures in your business?

It's across a lot of different areas. We're seeing some pricing increase on supplies. It's been relatively managed. I guess it's been managed well, and we haven't seen significant increases. Shipping costs, fuel costs, we've seen some labor cost increases, professional services. So it's creep, but it's not any one significant item.

Okay. Thank you. Given all the reasons you said for why seriously-ill COPD patient should get a home-based NIV, why are 94% of Americans still not getting it?

Lack of education to the physician, the lack of studies and research, which is why we've been investing in the Harvard study and then the American Journal of Managed Care. And yes, once you get docs on stage of the Thoracic Society and on chest kind of beat on their chest about the data that proves the good, we've been doing in the home for the past few years, I think that's what the country needs and even our competitors need to go out and find these patients and get them on care, prevent them from going back to the hospital.

Thank you. What is your payer coverage? And what percent of managed care insurance coverage do you nationally or perhaps more relevant in the states in which you operate have?

It's hard to say what our payer coverage is. We are covered in the 50 states. I mean, we're covered in every state from Medicare purposes. We have commercial contracts very likely in all of the 45 that we're doing business in. We don't have every managed care contract out there. We work on the ones where our salespeople are active. So we -- and we work on areas where we're recruiting, but as far as a percentage of total claims, that's really impossible for us to site that number. We are significantly more covered than we were 3 to 5 years ago, but it's always something that we're going to try to increase as well.

Okay. Thank you. If your test with the VA goes well, are you being considered a sole provider as an exclusive project? Or are there other competitors to you that are part of that?

There would be other competitors that would be a part of that. We're not going to get -- we're not blind to the fact that we're going to be an exclusive provider to the VA, but we would definitely be way ahead of the curve in getting this rolled out.

Okay. Thank you. Can you talk a little bit more about the relationships that you acquired over the past few years during COVID, and I guess, the transformation of part of your business model? And that's how, that's impacted your company short term and long term?

COVID, for us, when we started providing a lot of our hospital referral sources in the states with ventilators, we offered staffing solutions throughout the country. We provided PPE. We were just very nimble in just offering whatever solutions our folks needed to treat the COVID patients. And as we responded and became a solutions provider, the conversations transition after COVID into what else can Viemed do for us and how can we be more helpful in that continuum of care. If there's one thing that we learned through COVID is we don't have enough hospital beds in this country to treat the patients that we have. So everybody was opened up with the fact that we've got to have a continuation of care in the home, in some way, shape or form, even Medicare create these hospital to the home codes for the hospitals to make more money once they partner up with guys like Viemed. So as a result of our effort of just being problem solvers throughout the turmoil that was going on, the conversations and the ways that we get in the room with the C level are so much more strategic and helpful and collaborative as we go forward.

Okay. Thank you. And speaking of COVID, have COVID fatalities impacted your business and your addressable market in the near term? And if so, how?

It's hard to say, but it's a very good question. Our compliance with our Engage patients has improved, as I mentioned earlier, were from 20% to 30%, but our overall length of stay did not move. And our thesis, which we can't really prove, but I don't mind talking about, is that we were receiving a lot more sick patients. It makes a lot of sense that folks were on the sidelines, letting their disease progress, afraid to go in and address it. And so by the time they did get in there, they were in later stages of their disease state. And so while we've gotten that, we haven't been able to move our overall length of stay number just yet, but we expect that to change here in the future.

Thank you. Is your outgoing M&A activity picking up as multiples are starting to come down?

Our activity is ramping up. I think one of the things that we are seeing is that the multiples that sellers expected probably at the beginning of this year or even late last year are not realistic compared to where the public multiples are. And we have seen some reengagement by people who are willing to accept lower multiples. But once again, this is still kind of a new process for us. So it's hard to say that if the whole market is moving towards us as a result of multiple compression.

Okay. Thank you. Just a quick follow-up on the VA opportunity. What are the time horizons for the current test and how many patients are in this test? And how long has it been going on? And when do you expect it to finish?

It just started, and we're expecting to put -- we have a $500,000 budget that we're starting with. And so it's going to be 50 to 100 patients that we put in there, depending on how severe they are and how long they stay under care.

Okay. Thank you. Next question is, your CapEx has increased somewhat or substantially. Can you please discuss your current CapEx needs, and I guess what you've seen in it historically?

I'm not sure if it's fair to say that our CapEx has significantly increased. We generally buy equipment for our increasing patients. We'd like to say that the majority, if not the vast majority of our CapEx is growth CapEx. So when we're adding vent patients when we're adding oxygen, and we're adding CPAP and vest, CapEx is going to go up. Substantially, all of our CapEx at this point is for those 4 products. We have done, we've purchased our real estate over the last few years, but outside of that, everything is for medical CapEx.

Okay. Great. Thanks. What would you view as the greatest bottleneck for growth for Viemed?

The last couple of years, it was access to physicians, patients, hospitals. At this point, it's back to our number -- our single biggest governor is whether we can find enough salespeople or not. So we're only as successful as finding good salespeople. Our protocols are in place. Our technology is in place, access is back, so we're back full sprint towards trying to hire every good clinician, sales person in the country.

Okay. Super. Thank you. I've got a couple more questions for you. Recognizing the time check, and then we'll end the call. So next question is, just spin off from PHM, you've obviously had about 4.5 years as a stand-alone company. Can you talk about hindsight, things you did really well, things you did poorly, things you'd like to redo, just, I guess, at a very high level.

I think we're very proud of the spinout that we effectuated both sides have done really well. Viemed got back to its organic growth engine, and now it was Protec and now it's Quip. Quip has done a good job there growing in the right direction. We made a very sound move for all investors that were involved during that time. Yes. I mean that's, I wouldn't consider anything that we did wrong there. I thought we made all the right moves and both sides are healthy. And I enjoy watching Quip grow just as much as I like watching Viemed grow.

I guess what I'd say we're probably about as proud of is that we've organically grown the business like we said we were. During COVID, we pivoted to help systems, to help states. We added new lines of revenue while things were a little bit slower from our organic growth model. And now that, that's drying up, we're back to full sprint on our organic growth.

Okay. Thank you. One last question, and then I'll ask you for some closing remarks. Apart from findings of different researchers, are you making any efforts to educate the end customer directly? And do you pay referral fees in your industry from -- for referral sources?

We don't necessarily go to patients with education. Our way of educating is educating physicians, case managers, people who are the conduit to patients, they would just, we don't have a direct marketing campaign to patients. This is a very clinical product. It's very -- it's much easier for us to educate the physicians and case managers. And on the last part, absolutely not. Referral fees are completely off the table.

Perfect. Really appreciate it. That concludes the Q&A portion of our presentation. To our audience, if you still have any questions, please e-mail me [email protected], and I'll be happy to get back to you. And Casey, Todd, any closing remarks you'd like to leave with the group.

No. I mean I think those are all very thoughtful questions. Thanks to everyone for presenting them. We were happy to answer them and would love and welcome all feedback. We think that Viemed has a wonderful opportunity for all investors right now, and we're excited about the positive momentum that we have on the back half of this pandemic into getting back to our explosive growth mode. And so that's what we'll be doing. Stay tuned.

Super. Thanks, guys. Thanks to our audience, and this concludes our presentation.

Thank you.

Thank you.

Thank you for your participation.