Quipt Home Medical Corp. Price & Performance (QIPT)

To withdraw The first question comes from Richard Close with Canaccord Genuity. Please go ahead. Yes. Thanks for the questions and I apologize if there's any background on traveling. [indiscernible] calendar 2024 revenue headwind impact of $8,000,000 on those moving parts. I was wondering if you could provide us some background on the contract termination the disposable supply, and how much of a headwind do you think that's going to be in the remainder of this fiscal twenty twenty five? That's my first question.

Yes, sure. So that was an incontinence supply contract in that that we had had with a state that we operate in. Through a home health agency and it ended up getting terminated there on November 1. So we expect that to be about a $2,500,000 headwind in that kind of look at it say in calendar twenty five.

Okay. And that includes the first quarter impact, the $2,500,000 Well, that's the total.

In that for the entire calendar year. So if you it's probably a little more heavily weighted in the first quarter than it would be. Going out into say our fiscal Q1 twenty twenty six.

Okay. That's helpful. And then also on the capital contract that shifted, I guess, at the end of twenty twenty three. That was MA mostly As well with them and how should we be thinking about like that headwind maybe some of those PPO [indiscernible] I'm really just trying to get a feel of how much of headwinds are behind you because you'll be lapping essentially January '5. And how much of the headwinds are sort of continuing this year and obviously the $2,500,000 that you just mentioned is part of that?

Hey, Richard, this is Hautic. Yes, great question. So you're right. We kind of go into fiscal twenty twenty five, so sorry, calendar twenty twenty five, so fiscal Q2, Q3 and Q4, you would see the larger impact year over year in the first couple of quarters versus the later half because Humana's impact to us was really it kind of scaled up and so Q2, Q3 of last year we saw the most impact of Humana.

So quarter over quarter. Year over year, you would probably see about a somewhere in the neighborhood of $1,000,000 in Q2 maybe $750,000,000 to $800,000,000 in Q3. Q4 similar and then Q1 $2,025,000,000 dollars might be much lesser So again, if you take that $2,600,000 is probably weighted towards the couple of quarters and the second two quarters. Canada 2025.

Okay.

Then my final question is I think I'll just add to that Richard, in that is that it's important to note that the TPO and that has stabilized and that as far as and that what we've seen fall off and we're starting to make some progress in the referral community with the sales team in that of some initiatives in that to let them know that, hey, we still can take the PPO plans.

Okay. So it sounds like not much from Humana PPO rolling off in calendar twenty twenty five and you just have this very small disposable contract termination. So most of the headwinds are behind you. [indiscernible] Yes, that would be a good characterization.

Okay. That's helpful. A little bit of Humana will be in the first half.

It will be in the first half, that's all.

It is so It is certainly stabilized.

Okay. Perfect. And then final question is, good job on the margins. And interested in some of the cost of efficiencies or optimization that you're talking about and how much of that's still to come. Just curious, Hardik, in terms of how you're thinking about the progression of margins as we go through through the year? Is it should we think about steady stair step as we progress through the year? And then how did you guys think about 25% adjusted EBITDA margins? Is that attainable this year or timeline to get in there? I would say [indiscernible] definitely stabilized from where we are. I think we made some adjustments needed, we could make some more. We have always striven staffed this company to kind of allow for more revenue growth and And that has certainly been our strategy. And so with that said, For 2025, of course, our goal is here to get more organic growth. That's our primary focus here. [indiscernible] in the event that's not going to happen, then we would have to certainly adjust our cost structure. But for now, we are certainly planning for revenue growth and stabilization of EBITDA is kind of where we see things are.

Course, with growth, we would be probably we'd certainly will be seeing that step increases in EBITDA margins as well. I know it stabilized from a dollar perspective, with some proportionally should we have to take some.

And is 25% still a long term target?

Yes. Certainly, long term and achievable target. Maybe not in the near [indiscernible] next three quarters, but again, certainly it's a target we believe can be achieved with a little bit more of scale that we hope to bring in 2025. But yes, it's certainly achievable target. But just not in the next near future.

Okay.

Thank you.

The next question comes from Doug Cooper with B. Securities. Please go ahead.

Good morning, everybody. I just want to look at the so EBITDA minus patient CapEx, sorry, you said patient CapEx was $9,400,000 in the quarter or total CapEx. So That gets me a margin adjusted margin of 7.5% versus 12.8% last year.

Just I don't have a number for Q4 for patient CapEx. Do you have that number? And what would Yes, I do.

Okay.

Yes. So patient CapEx in Q4 of twenty twenty for fiscal year Q4 mean Q1 of twenty twenty four fiscal year was certainly on the lower end. And that was kind of an anomaly for that particular Quipt, which shows year over year to be at a much larger percentage points. So last year, this quarter, our medical equipment CapEx was around $7,300,000 versus nine point nine point three, 9.2, 9.3 that we reported this year. But if you look at our Q2, Q3 and Q4 of twenty twenty four those respective quarters were 7.1, ten and nine point one. So what we have is kind of more along the lines. We are also the middle of swapping out some recall for Philips on ventilators. So we do expect that will impact us for another couple of quarters as we kind of turn over this affiliation speronic ventilators.

I see. So it would seem to me target of 10% plus should be a target there to generate some real free cash flow. Is that fair?

Sorry, can you ask that one more time, please?

Yes, the adjusted EBITDA margin or EBITDA minus patient CapEx margin to generate some material free cash flow, that's got to be over 10%. [indiscernible] [indiscernible] Okay. And when would we expect to have that over 10% Obviously, it helps if you get EBITDA margin towards the 25 Right. I mean So Sure. I mean if you look at fiscal twenty twenty four, we were at 10%, right, for the whole year. Again, we might have to replace some ventilators here for the next couple of quarters, as I just mentioned earlier. But we should be kind of heading back to that margin rate sooner than later.

Okay.

We are not saying that you are deviating from what historically we have performed at least. Like if you look at the whole fiscal twenty twenty four, I think that is a good measurement of what to expect overall in 2025. Of course, quarters might move here and there, but keep that as a goal for 2025 certainly what we would look we would consider steady state.

Okay. Moving on. Resupply business, hasn't gained a lot of traction, I would say, over the past five or six quarters. It ended fiscal twenty twenty three at one hundred and sixty nine thousand patients and it fiscal twenty four at one hundred and seventy two and now we're one hundred and seventy four. What can you do to drive that business? Because in my opinion, I guess that's a real generator of free cash flow. [indiscernible] This is Greg. Really good question in that. I think one of the several things in that we've actually been working on is one, we've been working to improve and we've started to see slight improvements in our catchment rates and that for new setups. So we're trying to exceed 80% plus on our catchment rate for new set up That's going to drive more patients in there. Also, our sleep compliance in that, we're doing some transitions there. We've already seen a couple percentage points in that of increasing compliance, which ultimately in that also in that more patients into the resupply program So we do have several handles that we're kind of pulling there for that. The other piece too is there are some other pockets.

Within that resupply and that we focused on that we haven't traditionally would be getting we've got a really high catchment rate of patients in that ordering their first order after a new setup. And then these patients kind of fall off that after the ninety days because we don't necessarily need compliance in that for the continuation of the rental. So now we have started to focus [indiscernible] on patients and that to kind of follow them all the way out for a year because we're seeing that we've got a large drop off in that during like months five to ten, So we expect in that, that should continue to add more patients in that within the system.

Okay. And my final question, maybe this might be a bit of an up the wall question, but the Doge Department of Government Efficiency, obviously in there looking around. Do you think Medicare is somewhere that they're looking to save money could possibly be the impact on reimbursement if under such a scenario?

Yes.

I mean, as it stands right now, and we don't know of any that would affect us. I mean, right now and that I mean, we're still expecting their could be some positive news on the 07/2025. The reinstatement. It seems like there is a lot of momentum in that within the industry on the seventy five point two five. And then I think finally in that the discontinuation in that finally kind of putting the nail on the coffin on the competitive bid.

But other than that, and that we haven't had anything from updates from a regulatory front.

Okay, great. Thanks very much. The next question comes from Julien Huang with Stifel.

Please go ahead. Hi. This is Julian sitting in for Justin today. My first question is with the switch from IFRS to U. S. GAAP, debt expense is now embedded in revenue. Can you just give us a reminder of historically how much bad debt expense made up and if you see that Yes. Historically, I mean, we did make that switch in last quarter of fiscal twenty twenty four but try to read that we were running around 4%, 4.5% I think you will see that for we kind of saw similar numbers for this quarter and Q2 of just calendar Q1 is always the roughest months of all from a cyclical perspective, we do expect those percentages to drop going into the second half of twenty twenty five calendar year with some of the improvements that we are making on our RCM team and and some of the resources that we are allocating to our RCM team. [indiscernible] we would say that were around the same percentages in Q1. We would probably be around similar percentages in Q2.

And then Maybe we'll see some decline in Q3, Q4. Okay. And on the organic growth end, I think last quarter there was you alluded to maybe returning to eight to 10% organic growth in 2025%. Is that still a good expect Yes. I mean, that's what our goal is. That's what the team is currently working towards is to get back to that historical sequential 2% or so in that organic growth.

Thank you.

The next question comes from Bill Sutherland with Benchmark company Please go ahead. Thanks, Jim. Good morning, guys. Greg, back to that organic growth question for a second.

When the now that you've anniversaried 75.25, Where does that kind of put you regardless of all your other initiatives in terms of organic growth? And do you think it's just a steady progress to the last quarter of the year to get to the 2% or so target that you've had Yes, it's certainly not a steady progress to get there. We've got a lot of different levers that we're pulling. We have a new therapy in that for respiratory that's in our respiratory in that of utilization. We've also created an internal Quick Accelerator Academy in that for our sales team and that from current sales team and then for any potential new hires Like I had spoke in that we're expecting to see our catchment rate in that on new orders in that increase in that through some technological there also in that we're looking to reduce the attrition rate and that also on our resupply and that's we have a lot of different levers in that that we're starting to see some good early signs. So just internally in that those things there and that we anticipate and that we could get back to that historical organic growth that we've previously seen.

Okay.

And then just the removal of the 07/2025 anniversarying at should say, what does that do for your year over year. [indiscernible] yes.

I mean year over year and that's a quarters and that I mean that is certainly and that's going to help. And that as we especially as we're kind of in our fiscal Q2 right now.

That part of the impacts you've had was in the ballpark of on an annual basis 3,000,000 was that I'm looking back at my notes.

Last year, that's about right. Yes, just about $3,000,000 for the seventy fivetwenty Okay. That's good.

Health expense you called out last quarter is that I assume that is still something that's weighing on the margin a bit?

What is the expense again, I'm sorry? Health. Your self insured plan was running a little high. Expense wise?

I'll let Hardik take that.

Just making sure, are you talking about our internal health insurance costs? I thought Like employee health Yes, yes, yes, sorry. Yes.

Yes. We did have relative to our so we did a a plan consolidation. We also well self insured last year. That was our first year. So against the initial estimates, we were running a little higher on our health costs. But as far as where we stand today, it seems to have been stabilized over the last couple of quarters. We are not I mean, we are targeting for the nominal annual increases that everybody is seeing in the market, something in the neighborhood of 6% to 9% But But we expect at this point the first year I guess, ramp up is kind of stabilized.

Okay. [indiscernible] balance sheet is is is in good shape. [indiscernible] how we should think about capital deployment in the coming March?

I mean, As we've kind of said in the past, I mean, the company does evaluate other strategic growth opportunities. We will certainly do that That is on our radar. We have some good portion it is in front of us that we are actively engaged in looking at. Well, mean apart from that, I don't think there's anything dramatically different from what we have done historically. I mean it we will definitely look at deploying capital towards inorganic growth opportunities as well as trying to fund our organic growth. Okay. Thanks Hardik.

Greg. Appreciate it.

This concludes the question and answer session I would like to turn the conference back over to Mr. Croft for any closing remarks. Thank you, operator, and thanks everyone for your for your participation today. As always, you can find us on the web at www.quiptolemedical.com where we will be posting a transcript of this call and also our update in our updated Investor Day. On the site, you can also view some of the exciting products and [indiscernible] Thank you and have a great day.

This brings to a close today's conference call.

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