VMD Q3 2026 earnings call transcript, November 5, 2026

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Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the U.S. 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 out of the conference call. As of today, the company undertakes no obligations to update or revise any forward-looking statements, except as required by law. The third quarter financial supplement and financial news release, as well as the related financial statements, are available on the SEC's website. With that, I'll turn the call over to our Chief Executive Officer, Casey Hoyt.

Good morning, everyone, and thank you for joining us. Before getting into the results, I want to thank our roughly 1,500 employees. Their daily work with patients and referral partners is what makes our growth possible. I appreciate the care they provide and the work they put into serving more patients. ViMed continues to grow. The third quarter was another strong quarter for ViMed, with record revenue of $80.7 million, representing 12.2% growth over last year. Just as importantly, that growth translated into stronger earnings. Net income attributed to ViMed... ...increased 32% year-over-year and approximately 68% from the second quarter. We're continuing to grow the business at a double-digit pace, demonstrating the earnings potential of the platform we've built. For the first time since the Lehan acquisition, both the current and prior year quarters include a full three months of Lehan's... operations. That gives us a much clearer picture of our growth, with the 12.2% increase reflecting expansion across our existing businesses, rather than the incremental revenue contribution of an acquisition. Sleep therapy was a particular source of strength this quarter, and we're also seeing encouraging results... ...from bringing maternal health services into our established bi-med markets. The success in those initial maternal health markets gives us confidence to broaden the rollout. We are now on track to enter two additional states per quarter, beginning in the fourth quarter, establishing a regular pace of expansion. The markets we have already entered...

are still early in their development. We see years of opportunity to build volume within each state as we develop referral relationships and reach more patients. Each launch adds to that opportunity so growth can continue within our existing markets as we expand into new ones. Breast pumps and related supplies are... ...are a practical example of how we can do more with the capabilities already in the company. Leiham brought a specialized experience in this business. BiMed's existing pay relationships and reimbursement capabilities give us a way to extend it into markets we already know. The early results have given us the confidence to take that next step. As we open those markets, we'll be paying close attention to fulfillment and reimbursement. We want the additional volume to become a productive part of the business with reliable service for mothers who depend on us. The two-state cadence gives our teams a clear operating plan for the next stage. Our growing sleep... ...patient population shows how we're expanding BiMed's reach and serving more people. During the quarter, we served 43,861 pap therapy patients, over 6,000 more than the second quarter, and 37.5% above a year ago. Pap setups also increased both... ...sequentially and year-over-year. Growth is coming through in patients receiving therapy, as well as the activity bringing patients into care. Resupply grew alongside that activity. We served 40,918 resupply patients, up approximately 22% from a year ago, and 10.5%.

in the second quarter. Our expanding patient population creates further opportunity to grow resupply, and increasing participation in the program is a priority. We are simplifying order processing to support that growth and make it easier for patients to receive supplies on time with a tenable service. That keeps them engaged over the course of their time. In ventilation, we have a longer revenue trend to assess under the revised CMS coverage rules issued in 2025. Ventilator rental revenue has increased in each quarter this year from $35.4 million to $36.4 million. and now $37.5 million. For the first nine months, it was approximately 8% above the same period last year. The comparison is particularly meaningful because much of the comparable 2025 period preceded the new CMS coverage rules. Growing ventilation revenue against that comparison supports our confidence. and our ability to expand the business under the new framework. More broadly, we view the legislative and rulemaking environment as generally favorable to established providers that have invested in clinical care and compliance. Audit activity has increased across the DME industry, including for providers with strong compliance programs. Our own teams are spending more time and resources responding to those reviews. We are encouraged that CMS is examining its audit contractor model and is specifically asked how to reduce unnecessary provider burden and protect patient access.

We see an opportunity for more targeted, consistent oversight. We intend to bring our experience to that discussion, so providers can develop more of their resources to caring for patients. Our responsibility is to help patients receive the care they need. We support appropriate oversight and we will advocate for coverage policies and review processes that preserve timely access to medically necessary care. Our clinical team sees the needs of these patients every day and we intend to make sure those needs remain part of the policy discussion. The third quarter showed that we can grow the business under the new coverage framework and convert more revenue into earnings. We are serving more patients and the opportunities ahead in sleep and maternal health give us the confidence. that we can enter the final quarter of the year. Todd, we'll now discuss the financial results and operating priorities supporting our next stage of the growth. All right. Thank you, Casey, and good morning, everyone. All figures are in U.S. dollars and our full results have been filed with the SEC. And I'll refer to information included in the quarterly financial supplement. which is also available on our Investor Relations website. Net income attributable to BiMed was $4.6 million, or 11 cents per diluted share, compared with $3.5 million, or 9 cents per diluted share a year ago, and $2.8 million, or 7 cents per diluted share in the second quarter of the year.

Net income increased 32% year-over-year, and approximately 68% from the second quarter. Adjusted EBITDA was $17.1 million, an increase of approximately 6% from the prior year quarter, and 24% sequentially. Adjusted EBITDA margin was 21.1% compared with 17.6% in the second quarter, and 22.4% a year ago. The sequential margin expansion was approximately 350 basis points. Revenue continued to grow this quarter, and SG&A declined from the second quarter. Both contributed to the sequential increase in profitability. With several compensation and benefit adjustments also affecting the results. Revenue increased 3.3% from the second quarter with growth across rentals, equipment and supply sales, and services. Other equipment rentals grew approximately 13.1% year over year, and equipment and supply sales grew. Approximately 23.7%, supported by sleep and women's health. Ventilator rental revenue was $37.5 million, up 7.4% from a year ago, supported by higher average patient count. Gross profit was $46.2 million, or 57.3% of revenue, compared with 57.5% a year ago, and 57.7% in the second quarter. Revenue from sales and services represented 32% of revenue, compared with 30.1% a year ago. The year-over-year shift towards equipment and supply sales affects growth. gross margin, because these offerings generally carry lower margins than equipment rentals, while also requiring less capital investment. As we discussed last quarter, we added a new distribution partner that, together with our existing suppliers, gives us supplier capacity well beyond our current needs across all product lines.

to support future growth. We are still implementing the related cost savings and expect them to improve gross margin by approximately 50 basis points once fully in place. SG&A was $35.5 million, or 44% of revenue, compared with 47.5% of the second quarter, and 44.4% of the second quarter. SG&A declined approximately $1.6 million sequentially. Year-over-year, revenue grew faster than SG&A, even as we added resources to support the larger business. Lower compensation-related accruals and benefit expense contributed to the sequential decline. Phantom stock expense also came down substantially, as expected, following the large mark-to-market adjustment in the second quarter associated with the increase in our share price. Benefit rebates also reduced expense during the quarter. Regular payroll and software spending increased as we added capacity to serve a growing patient population. That additional capacity is supporting higher volumes, including a 12% sequential increase in the pack resupply orders. At the same time, billing expense declined approximately 12% as revenue grew, reflecting the workflow changes and implementation timing. Our focus is on getting more volume through with the people and systems that we have in place. Compliance is another area where our personnel and systems can provide a competitive advantage as oversight increases across the industry. Enforcement and claims audit activity have picked up and our teams are devoting more resources to those reviews.

The documentation and follow-up work adds administrative and professional costs and in some cases can extend payment timelines. Our success rate under these audits remains very strong. Those outcomes support our confidence in the care we provide and the documentation supporting it. Our teams are focused on submitting complete responses. and moving reviews towards resolution. The increase in accounts receivable had several drivers this quarter. Audit related payment timing was one contributor, alongside other billing and collection factors, including delays associated with system migrations. We believe the related revenue remains fully relizable. These delays have extended the timing of cash collections and temporarily tied up more cash and working capital. Collections in October were extremely strong, so we are confident that this will work itself out during the fourth quarter. Operating cash flow was $11.5 million. After net capex of $7.5 million, free cash flow was $4 million. Net capex represented approximately 9.2% of revenue. For the first nine months of 2026, operating cash flow was $35.5 million, and free cash flow was $15.2 million, compared with $33.5 and $17.3 million, respectively. Lower equipment sales proceeds also affected the year-to-date cash flow comparison, as the prior year period benefited from the ventilator return program. On a trailing 12-month basis, free cash flow was approximately $26.1 million. The business continues to generate cash after funding

equipment needs, although the current quarter's collection timing reduced cash conversion. We continued to reduce debt and return capital during the quarter. We repaid approximately $2.1 million of term debt and repurchased and canceled 115,000 shares for approximately $1 million. At September 30th, cash was $9 million. $2.7 million, and borrowings under our credit facility were $5.3 million, with nothing on the revolver. We made an additional $2 million term loan repayment in October, further reducing our outstanding debt. Our first use of capital is supporting the growth within BiMed, including the maternal health expansion and the need to... of the larger sleek business. We retain the flexibility to consider acquisitions that fit our operations and return requirements and to repurchase shares when the value is attractive. The balance sheet allows us to evaluate those choices without committing to a fixed allocation among them. Turning to our outlook, we are raising the lower end of our... our full year revenue guidance and now expect revenue of $316 million to $320 million compared with our previous range of $314 to $320 million. We are narrowing our adjusted EBITDA guidance to $64 to $66 million compared with our previous range of $64 to $68 million. With nine months complete, the narrower range reflects our results through September and our updated expectations for the fourth quarter.

We are also lowering our net capex outlook to 8% to 9% of revenue compared with 8.5% to 10% previously. The increasing contribution from less capital-intensive... ...offerings reduces the equipment investment needed to support our growth. Our revised outlook anticipates sequential growth in both revenue and adjusted EBITDA in the fourth quarter and excludes any potential future acquisitions or strategic transactions. As we finish the year, our operating priorities include... improving collections and preparing the next maternal health markets for the rollout Casey described. We are seeing demand in the areas where we have addressed resources and our job is to turn that actively into earnings and cash as the business grows. With that, we'll wrap up our prepared remarks and take your questions.

Our first question is from Ilya Zubkov with Freedom Broker. Please proceed with your question.