The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the accompanying notes included elsewhere in this report. The forward-looking statements include statements that reflect management's beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our future development plans, capital resources and requirements, results of operations, and future business performance. Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those discussed in the section entitled "Special Note Regarding Forward-Looking Statements" immediately preceding Part I of this report.
In this Annual Report on Form 10-K, unless the context otherwise requires, the terms the "Company," "we," "us" and "our" refer toViemed Healthcare, Inc. and its wholly-owned subsidiaries. We were incorporated onDecember 14, 2016 pursuant to the Business Corporations Act (British Columbia ). As ofJune 30, 2020 , we determined that we no longer qualify as a "foreign private issuer," as defined in Rule 3b-4 of the Exchange Act, for the purposes of the informational requirements of the Exchange Act. As a result, effectiveJanuary 1, 2021 , we became subject to the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and our officers, directors, and principal shareholders became subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. We will continue to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with theSEC and with the relevant Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval (SEDAR)
We are an “emerging growth company,” as defined in the JOBS Act, and as such, we
have elected to comply with certain reduced
requirements.
Based on the annual assessment performed onJune 30, 2022 , the Company met the re-entry thresholds to qualify as a "smaller reporting company" under Rule 12b-2 of the Exchange Act, and, as such, has elected to comply with certain reducedU.S. public company reporting requirements.
Overview
We provide an array of home medical equipment, services and supplies, specializing in post-acute respiratory care services inthe United States . Our primary objective is to focus on the organic growth of the business and thereby solidify our position as one ofthe United States' largest providers of in-home therapy for patients suffering from respiratory diseases. Our respiratory care programs are designed specifically for payors to have the ability to treat patients in the home for less total cost and with a superior quality of care. Our services include respiratory disease management (through the rental of various DME devices), neuromuscular care, in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies. We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 67.9% and 77.3% of our traditional revenue, excluding COVID-19 response sales and services for the years endedDecember 31, 2022 and 2021, respectively. We combine the benefits of home ventilation support with licensed RTs to drive improved patient outcomes and reduce costly hospital readmissions. We expect to grow through expansion of existing service areas as well as in new territories through a cost efficient launch that reduces location expenses. We currently serve patients in all 50 states. We expect to continue to employ more RTs in order to assure our high service model is accomplished in the home. As ofDecember 31, 2022 , we employed 292 licensed RTs, representing more than 39% of our company-wide employee count. By focusing overhead costs on personnel that service the patient rather than physical location costs, we anticipate that we will efficiently scale our business in regions that are currently not being effectively serviced. The continued trend of servicing patients in the home rather than in hospitals is aligned with our business objective and we anticipate that this trend will continue to offer growth opportunities for us. We expect to continue to be a solution to the rising health costs inthe United States by offering more cost effective, home based solutions while increasing the quality of life for patients fighting serious respiratory diseases. For the year endedDecember 31, 2022 , we generated revenues of$138.8 million and had net income of$6.2 million , compared to revenues of$117.1 million and net income of$9.1 million for the year endedDecember 31, 2021 . Excluding COVID-19 response sales and services, net revenue increased$28.1 million (or 25.9%) from the comparable period in 2021. Page 28 --------------------------------------------------------------------------------VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021
Our primary sources of capital to date have been from operating cash flows. Our
existing commercial credit facilities provide access to additional liquidity
through a revolving credit facility of up to $30.0 million and a delayed draw
term loan facility of up to $30.0 million . An accordion feature allows the
Company to increase the size of such facilities by up to an additional $30.0
million , subject to certain conditions, for a total borrowing capacity of up to
$90 million .
Trends Affecting our Business
On
pandemic. Various policies and initiatives were implemented to reduce the
transmission of COVID-19, including travel bans and restrictions, the
postponement of non-essential medical surgeries, limiting access to medical
facilities, and adoption of social distancing and remote working policies.
Employee and patient safety is our first priority, and as a result, we put
preparedness plans in place for our employees, especially our clinical
personnel, and modified our clinical protocols to limit unnecessary patient
encounters.
At this time, COVID-19 related measures do not appear to be negatively impacting our patient attrition rate, but we cannot assure you that future governmental policies and initiatives will not significantly disrupt our operations or adversely affect our ability to provide services to our patients in the future. OnJanuary 30, 2023 , theU.S. government announced that it plans to end the COVID-19 PHE onMay 11, 2023 . At the end of the COVID-19 PHE, many waivers and flexibilities available during the COVID-19 pandemic will become unavailable. While COVID-19 related measures have not had a material impact on our consolidated operating results for the year endedDecember 31, 2022 , we cannot predict at this time the impact that the end of the COVID-19 PHE will have on our business and financial condition. It is also possible that theU.S. government will ultimately decide not to end the COVID-19 PHE onMay 11, 2023 , creating additional uncertainties about our future business and financial condition. Accordingly, we cannot assure you that demand for our products and services will continue or that we will be able to maintain operations necessary to satisfy such demand, including sufficient personnel, supply chains and distributions channels. The COVID-19 pandemic has led to significant disruptions and volatility in capital and financial markets. Broad economic factors resulting from the current COVID-19 pandemic, including high unemployment and underemployment levels and reduced consumer spending and confidence, could also affect our service mix, revenue mix, payor mix and patient base, as well as our ability to collect outstanding receivables. Business closures and layoffs in the geographic areas in which we operate may lead to increases in the uninsured and under-insured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our financial results and require an increased level of working capital. In addition, we may experience supply chain disruptions, including delays and price increases in equipment and supplies. Staffing, equipment and supplies shortages may also impact our ability to assess potential patients in hospitals and set up and treat patients in the home. We believe we presently have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. The CARES Act, which was signed into law onMarch 27, 2020 , provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The legislation provides for relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19. As a result, we received a general distribution payment from theProvider Relief Fund of$3.5 million inApril 2020 , a targeted distribution payment of$1.5 million inNovember 2021 , and a general distribution payment of$0.4 million inJanuary 2022 . Payments from theProvider Relief Fund are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic. The HHS has stated thatProvider Relief Fund payments are not loans and will not need to be repaid. However, as a condition to the receipt of funds, the Company and any other providers must agree to a detailed set of terms and conditions. CMS has indicated that the terms and conditions may be subject to ongoing changes and reporting. To the extent that reporting requirements and terms and conditions are modified, it may affect our ability to comply and may require the return of funds. In accordance with the terms of acceptance for the grant, we believe we have utilized these funds to prevent, prepare for, and respond to the COVID-19 pandemic. The CARES Act also provides for a temporary suspension of the 2% payment sequestration adjustment currently applied to all Medicare fee-for-service claims. InDecember 2021 ,President Biden signed into law legislation that extended the suspension on the 2 percent payment sequestration throughMarch 31, 2022 . The payment sequestration adjustment was fixed at 1 percent fromApril 1, 2022 toJune 30, 2022 and it returned to 2 percent onJuly 1, 2022 . We are continuing to monitor any effects or requirements that may result from the CARES Act as many of the provisions in the CARES Act are temporary and may require us to modify our operations and compliance procedures. CMS and other federal agencies have and are likely to issue rules and regulations to implement the CARES Act. The impact of these rules and regulations are unknown and may affect us. To the extent these provisions will expire as stated in the CARES Act, we will be required to unwind any changes. Page 29 --------------------------------------------------------------------------------VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021
While the impact of COVID-19 on our consolidated results of operations for the
year ended December 31, 2022 has resulted in supplemental revenues related to
COVID-19 response sales and services during the period, revenues related to
COVID-19 response sales and services decreased in 2022 when compared to 2021 and
the overall impact that COVID-19 will continue to have on our consolidated
results of operations in future periods remains uncertain and difficult to
predict and will depend on, among other factors, the duration and severity of
the pandemic, as well as any negative economic conditions arising from the
pandemic, our ability to assess potential patients in hospitals and set up and
treat patients in the home and the impacts of government actions and
administrative regulations on the healthcare industry and broader economy,
including through existing and any future stimulus efforts. We will continue to
evaluate the nature and extent of these potential impacts to our business,
consolidated results of operations, liquidity and capital resources. If COVID-19
intensifies or if the response to contain the COVID-19 pandemic is unsuccessful,
we could experience a material adverse effect on our business, financial
condition, and results of operations. For additional information, see Part I -
Item 1A. "Risk Factors."
In 2019, CMS announced the inclusion of non-invasive ventilator products on the
list of products subject to the competitive bidding program in Round 2021 which
covers the period of January 1, 2021 through December 31, 2023 . On March 9,
2020 , CMS announced that due to the COVID-19 pandemic, the United States
President's exercise of the Defense Production Act, public concern regarding
access to ventilators, and the non-invasive ventilators product category being
new to the competitive bidding program, non-invasive ventilators were removed as
a product category from Round 2021. On October 27, 2020 , CMS announced that it
had removed 13 of the 15 remaining product categories from Round 2021, including
oxygen and PAP devices, because the payment amounts did not achieve expected
savings. As a result of these announcements, we retain the ability to continue
to furnish non-invasive ventilators and oxygen and PAP devices for all of our
Medicare accredited areas, however, we are uncertain if non-invasive
ventilators, oxygen, and PAP devices will be included in future competitive
bidding programs. The current Round 2021 contracts expire on December 31, 2023
and CMS has not announced a new round of competitive bidding. Historically, CMS
announces new rounds of competitive bidding and starts the process approximately
18 months prior to the contract start date.
The below table highlights summary financial and operational metrics for the
trailing eight quarters.
(Tabular amounts expressed in
thousands of
December 31, September 30, December 31, September 30,
For the quarter ended 2022 2022 June 30, 2022 March 31, 2022 2021 2021 June 30, 2021 March 31, 2021
Financial Information:
Revenue $ 37,508 $ 35,759 $ 33,310 $ 32,255 $ 31,962 $ 29,285 $ 27,399 $ 28,416
Gross Profit 22,896 21,651 20,390 19,743 19,662 18,381 17,625 17,742
Gross Profit % 61 % 61 % 61 % 61 % 62 % 63 % 64 % 62 %
Net Income 2,438 1,055 967 1,762 4,087 1,789 1,566 1,684
Cash and Cash Equivalents
(As of) 16,914 21,478 21,922 29,248 28,408 26,867 31,151 31,097
Total Assets (As of) 117,043 119,419 115,904 119,007 117,962 115,486 111,014 113,001
Adjusted EBITDA(1) 9,306 6,982 6,458 7,273 9,549 7,419 6,847 5,468
Operational Information:
Vent Patients(2) 9,306 9,127 8,837 8,434 8,405 8,200 8,103 7,733
(1) Refer to “Non-GAAP Financial Measures” section below for definition of
Adjusted EBITDA.
(2) Vent Patients represents the number of active ventilator patients on
recurring billing service at the end of each calendar quarter.
Critical Accounting Estimates
We are required to disclose "critical accounting estimates" which are estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and that have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted inthe United States . The more significant of these policies are summarized in Note 2 to our consolidated financial statements included in Part II, Item 8 of this report. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet theSEC's definition of a critical accounting estimate.
Allowance for Doubtful Accounts
The Company estimates that a certain portion of receivables from customers may
not be collected and maintains an allowance for doubtful accounts. The Company
evaluates the net realizable value of accounts receivable as of the date of
Consolidated Balance Sheets. Specifically, we consider historical realization
data, including current and historical cash collections, accounts receivable
aging trends, other operating trends and relevant business conditions. Because
of continuing changes in the healthcare industry and third-party reimbursement,
it is possible that the estimates could change, which could have a material
impact on the operations
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VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021
and cash flows. If circumstances related to certain customers change or actual
results differ from expectations, our estimate of the recoverability of
receivables could fluctuate from that provided for in our consolidated financial
statements. A change in estimate could impact bad debt expense and accounts
receivable. The continued volatility in market conditions and evolving shifts in
credit trends are difficult to predict causing variability and volatility that
may have a material impact on our allowance for doubtful accounts in future
periods. Our allowance for doubtful accounts was $8.5 million and $7.0
million as of December 31, 2022 and 2021, respectively.
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, % of Total % of Total $ % 2022 Revenue 2021 Revenue Change Change Revenue$ 138,832 100.0 %$ 117,062 100.0 %$ 21,770 18.6 % Cost of revenue 54,152 39.0 % 43,652 37.3 % 10,500 24.1 % Gross profit 84,680 61.0 % 73,410 62.7 % 11,270 15.4 % Selling, general and administrative 68,161 49.1 % 54,893 46.9 % 13,268 24.2 % Research and development 2,696 1.9 % 2,110 1.8 % 586 27.8 % Stock-based compensation 5,202 3.7 % 5,150 4.4 % 52 1.0 % Depreciation 1,012 0.7 % 851 0.7 % 161 18.9 % Loss on disposal of property and equipment 346 0.2 % 448 0.4 % (102) NM Other expense (income) (989) (0.7) % (1,622) (1.4) % 633 (39.0) % Income from operations 8,252 5.9 % 11,580 9.9 % (3,328) (28.7) %
Non-operating income and expenses
Income from equity method investments 935 0.7 % 1,241 1.1 % (306) (24.7) % Interest expense, net (197) (0.1) % (318) (0.3) % 121 (38.1) % Net income before taxes 8,990 6.5 % 12,503 10.7 % (3,513) (28.1) % Provision for income taxes 2,768 2.0 % 3,377 2.9 % (609) NM Net income$ 6,222 4.5 %$ 9,126 7.8 %$ (2,904) (31.8) % Page 31
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VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021 Revenue
The following table summarizes our revenue for the years ended
and 2021:
Year Ended December 31,
% of Total % of Total $ %
2022 Revenue 2021 Revenue Change Change
Net revenue from rentals
Ventilator rentals, non-invasive and
invasive $ 92,710 66.8 % $ 83,849 71.6 % $ 8,861 10.6 %
Other home medical equipment rentals 21,446 15.4 % 13,843 11.8 % 7,603 54.9 %
Net revenue from sales and services
Equipment and supply sales 13,927 10.0 % 8,765 7.5 % 5,162 58.9 %
COVID-19 response sales and services 2,278 1.6 % 8,558 7.3 % (6,280) (73.4) %
Service revenues 8,471 6.1 % 2,047 1.7 % 6,424 313.8 %
Total net revenue $ 138,832 100.0 % $ 117,062 100.0 % $ 21,770 18.6 %
For the year ended
increase of
Excluding COVID-19 response sales and services, net revenue increased$28.1 million (or 25.9%) from the comparable period in 2021. Ventilator rental revenue increased$8.9 million (or 10.6%) due to our organic growth in active ventilator patient base sustained throughout the year. In addition to the ventilator rental revenue growth, rental revenue from other HME grew$7.6 million (or 54.9%) which primarily consisted of product revenue from continued national expansion of PAP, oxygen therapy, and percussion vest activities. Equipment and supply sales have increased by$5.2 million (or 58.9%) year over year and are primarily driven by growth associated with PAP resupply and other sleep offerings. The increase in service revenue is primarily due to the addition of our healthcare staffing offerings. While ventilator rentals continue to make up the majority of our revenue, the growth of PAP and oxygen related sales and services, as well as our healthcare staffing offerings, is contributing significantly to the diversity of our overall revenue mix. For the year endedDecember 31, 2022 , net revenue for COVID-19 response sales and services totaled$2.3 million , compared to$8.6 million during the year endedDecember 31, 2021 . Current period COVID-19 response sales and services consist primarily of contact and vaccination tracing services. The magnitude and persistence of future COVID-19 response sales and services revenue remains uncertain and is dependent on the intensity and length of the COVID-19 pandemic and the demand for ongoing services from primarily governmental customers.
Cost of Revenue and Gross Profit
For the year endedDecember 31, 2022 , cost of revenue totaled$54.2 million , an increase of$10.5 million (or 24.1%) from the comparable period in 2021. Gross profit percentage decreased from approximately 62.7% to approximately 61.0% from the year endedDecember 31, 2021 to year endedDecember 31, 2022 , respectively. The decrease in gross profit percentage is due to migration of the revenue mix associated with product and service diversification. As inflationary cost pressures subside and inflation adjusted reimbursements increase in upcoming periods, gross profit percentage for our normal operations is expected to increase, offset by some decreases associated with product and service diversification.
Selling, General and Administrative Expense
For the year endedDecember 31, 2022 , selling, general and administrative expenses totaled$68.2 million , an increase of$13.3 million (or 24.2%) from the comparable period in 2021. Excluding COVID-19 related revenues, selling, general and administrative expenses as a percentage of revenue decreased to 49.9% for the year endedDecember 31, 2022 compared to 50.6% for the year endedDecember 31, 2021 . The increase in overall selling, general and administrative expense as compared to the prior period is primarily attributable to additional employee related expenses related to the overall growth of the Company. Employee compensation expenses increased$10.4 million (or 38%) as a result of the increases in our employee headcount, volume based sales commissions and market based individual compensation rates associated with inflation. Our full time employee count increased by 19% from 627 onDecember 31, 2021 to 743 onDecember 31, 2022 . The remaining increase in selling, general, and administrative expense over the prior year period is largely due to an increase in auto and travel related expenses associated with increases in travel and in-person activities combined with increasing costs for fuel. We expect that selling, general and administrative expenses will decline as a percentage of Page 32 --------------------------------------------------------------------------------VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021
revenue in 2023 as costs stabilize relative to revenue growth.
Research and Development Costs
For the year endedDecember 31, 2022 , research and development costs totaled$2.7 million , an increase of$0.6 million (or 27.8%) from the comparable period in 2021. As we continue to invest in research and development related projects to support our technology initiatives, we expect that the associated costs will remain consistent in 2023 relative to 2022 costs.
Other Expense (Income)
The decrease of$0.6 million in other income was driven by reductions in current year state and federal government grants. During the year endedDecember 31, 2021 , the Company received and recognized a targeted distribution payment of$1.5 million from theProvider Relief Fund . The Company received a general distribution payment of$0.4 million in 2022. Payments from theProvider Relief Fund are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic as described in detail above. Stock-Based Compensation For the year endedDecember 31, 2022 , stock-based compensation totaled$5.2 million , an increase of$0.1 million (or 1.0%) from the comparable period in 2021. This increase is attributed to the expense of additional stock-based awards during 2022. We expect that as we continue to increase our employee count and utilize stock-based awards as an aspect of employee compensation, stock-based compensation expense will increase accordingly. Revenue growth has historically exceeded the growth in stock based compensation and stock-based compensation as a percentage of revenue is expected to continue to decline.
Interest Expense, Net
For the year ended
a decrease of
Provision (Benefit) for Income Taxes
For the year endedDecember 31, 2022 , the provision for income taxes was a$2.8 million expense, compared to a$3.4 million expense during the 2021 period. Excluding the effect of discrete items, our annual estimated effective tax rate for 2022 is 30.6%. Net Income For the year endedDecember 31, 2022 , net income was$6.2 million , a decrease of$2.9 million (or 31.8%) from the comparable period in 2021. Net income as a percentage of net revenue decreased from 7.8% for the year endedDecember 31, 2021 to 4.5% for the year endedDecember 31, 2022 , primarily driven by a decrease in higher margin COVID-19 response sales and an increase to selling, general, and administrative expenses associated with inflationary pressures, as described above. Non-GAAP Financial Measures The Company uses Adjusted EBITDA, which is a financial measure that is not prepared in accordance with GAAP to analyze its financial results and believes that it is useful to investors, as a supplement to GAAP measures. Management believes Adjusted EBITDA provides helpful information with respect to the Company's operating performance as viewed by management, including a view of the Company's business that is not dependent on the impact of the Company's capitalization structure and items that are not part of the Company's day-to-day operations. Management uses Adjusted EBITDA (i) to compare the Company's operating performance on a consistent basis, (ii) to calculate incentive compensation for the Company's employees, (iii) for planning purposes including the preparation of the Company's internal annual operating budget, and (iv) to evaluate the performance and effectiveness of the Company's operational strategies. Accordingly, management believes that Adjusted EBITDA provides useful information in understanding and evaluating the Company's operating performance in the same manner as management. In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including interest, taxes, stock based compensation, and depreciation of property and equipment. Set forth below are descriptions of the financial items that have been excluded from net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income.
-Depreciation may be useful for investors to consider because it generally
represents the wear and tear on the property and equipment used in our
operations. However, we do not believe these charges necessarily reflect the
current and ongoing cash charges related to our operating costs.
Page 33
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VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021
-The amount of interest expense we incur or interest income we generate may be
useful for investors to consider and may result in current cash inflows or
outflows. However, we do not consider the amount of interest expense or interest
income to be a representative component of the day-to-day operating performance
of our business.
-Stock-based compensation may be useful for investors to consider because it is
an estimate of the non-cash component of compensation received by the Company's
directors, officers, employees and consultants. However, stock-based
compensation is being excluded from our operating expenses because the decisions
which gave rise to these expenses were not made to increase revenue in a
particular period, but were made for the Company's long-term benefit over
multiple periods. While strategic decisions, such as those to issue stock-based
awards are made to further our long-term strategic objectives and do impact our
earnings under GAAP, these items affect multiple periods and management is not
able to change or affect these items within any period.
-Income tax expense may be useful for investors to consider because it generally
represents the taxes which may be payable for the period and the change in
deferred income taxes and may reduce or increase the amount of funds otherwise
available for use. However, we do not consider the amount of income tax expense
to be a representative component of the day-to-day operating performance of our
business.
The following table is a reconciliation of Net income, the most directly
comparable GAAP measure, to Adjusted EBITDA, on a historical basis for the
periods indicated:
December 31, September 30, June 30, December 31, September 30, June 30, March 31,
For the quarter ended 2022 2022 2022 March 31, 2022 2021 2021 2021 2021 Net Income$ 2,438 $ 1,055 $ 967 $ 1,762 $ 4,087 $ 1,789 $ 1,566 $ 1,684 Add back: Depreciation 4,373 4,120 3,740 3,397 3,120 2,867 2,716 2,609 Interest expense 32 42 59 64 69 75 83 91 Stock-based compensation 1,317 1,309 1,271 1,305 1,305 1,302 1,236 1,307 Income tax expense (benefit) 1,146 456 421 745 968 1,386 1,246 (223) Adjusted EBITDA$ 9,306 $ 6,982 $ 6,458 $ 7,273 $ 9,549 $ 7,419 $ 6,847 $ 5,468
Use of Non-GAAP Financial Measures
Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of the Company's liquidity, and may not be comparable to other similarly titled measures of other businesses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Liquidity and Capital Resources
Cash and cash equivalents atDecember 31, 2022 was$16.9 million , compared to$28.4 million atDecember 31, 2021 . The primary non-recurring uses of excess cash during the period were associated with the 2022 Share Repurchase Program and the repayment of debt. Based on our current plan of operations, we believe this amount, when combined with expected cash flows from operations and amounts available under our existing commercial credit facilities will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months from the date of this filing. The Company utilizes short term leases with a major supplier that could be extended over a longer term if there was a need for additional liquidity. In addition, our existing commercial credit facilities were fully undrawn as ofDecember 31, 2022 . Page 34 --------------------------------------------------------------------------------VIEMED HEALTHCARE, INC. (Tabular amounts expressed in thousands ofU.S. Dollars, except per share amounts)December 31, 2022 and 2021 Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended
2022 2021
Net Cash provided by (used in):
Operating activities $ 27,748 $ 22,494
Investing activities (23,976) (19,746)
Financing activities (15,266) (5,321)
Net decrease in cash and cash equivalents $ (11,494) $ (2,573)
Net Cash Provided by Operating Activities
Net cash provided by operating activities during the year endedDecember 31, 2022 was$27.7 million , resulting from net income of$6.2 million , increased by non-cash net income adjustments of$30.6 million , a change in net operating liabilities of$3.1 million , and$1.1 million of distributions from equity method investments, and decreased by a change in net operating assets of$13.2 million . The non-cash net income adjustments primarily consisted of$10.0 million of provision for uncollectible accounts,$15.6 million of depreciation,$5.2 million of stock-based compensation, and$0.9 million of income from equity investments. The primary changes in operating assets and liabilities were an increase in gross accounts receivable of$12.6 million , an increase in prepaid expenses and other assets of$2.8 million , a net increase in income taxes payable of$1.9 million , and a decrease in accrued liabilities of$2.5 million . Included in our operating cash flows for the period is the receipt of$0.4 million in Provider Relief Funds. Net cash provided by operating activities during the year endedDecember 31, 2021 was$22.5 million , resulting from net income of$9.1 million , non-cash net income adjustments of$26.9 million and an increase in net operating liabilities of$5.8 million , which was partially offset by an increase in net operating assets of$7.8 million . The non-cash net income adjustments primarily consisted of$6.9 million in change of allowance for doubtful accounts,$11.3 million of depreciation,$3.9 million in change in deferred tax asset,$5.2 million of stock-based compensation, and$1.2 million of income from equity investments. The primary changes in operating assets were an increase in gross accounts receivable of$7.3 million , a net increase in income taxes receivable/(payable) of$2.2 million , and a decrease in accrued liabilities of$4.0 million . Included in operating cash flows for the period is the receipt of$1.5 million in Provider Relief Funds.
Net cash used in investing activities during the year endedDecember 31, 2022 was$24.0 million , consisting of$22.9 million of purchases of property and equipment,$2.0 million in debt investments, and$0.1 million in equity investments, partially offset by$1.1 million of sales proceeds from the disposal of property and equipment. Purchases of property and equipment during the year endedDecember 31, 2022 were primarily related to medical equipment rented to our patients. Cash purchases of property and equipment represents a$3.2 million , or 32.0%, increase year over year. Net cash used in investing activities during the year endedDecember 31, 2021 was$19.7 million , consisting of$19.7 million of purchases of property and equipment and$0.6 million in equity investments, partially offset by$0.6 million of sales proceeds from the disposal of property and equipment. Included in the purchase of property and equipment are patient capital expenditures of$16.4 million related to medical equipment.
Net cash used in financing activities during the year endedDecember 31, 2022 was$15.3 million , consisting of 1,794,163 repurchased and canceled common shares at a cost of$9.6 million pursuant to the share repurchase program authorized by the Board of Directors onMarch 7, 2022 (the "2022 Share Repurchase Program"),$1.3 million in principal payments on the term note under the prior Commercial Business Loan Agreement withHancock Whitney Bank (the "Term Note"), and$4.5 million in principal payments on the building term note under the prior Commercial Business Loan Agreement withHancock Whitney Bank (the "Building Term Note"), and$0.1 million for shares repurchased and canceled for tax withholding in connection with RSUs vested in the period, partially offset by$0.3 million proceeds from the exercise of stock options. Net cash used in financing activities during the year endedDecember 31, 2021 was$5.3 million , consisting of$1.7 million in principal payments on the Term Note,$0.2 million in principal payments on theBuilding Term Note , and$2.2 million in repayments of finance lease liabilities, partially offset by$0.1 million proceeds from the exercise of stock options. Page 35 --------------------------------------------------------------------------------VIEMED HEALTHCARE, INC. (Tabular amounts expressed in thousands ofU.S. Dollars, except per share amounts)December 31, 2022 and 2021 Senior Credit Facilities OnNovember 29, 2022 , the Company refinanced its existing borrowings under the prior Commercial Business Loan Agreement withHancock Whitney Bank and entered into a new credit agreement (the "2022 Senior Credit Facilities") with the lenders from time to time party thereto, andRegions Bank , as administrative agent and collateral agent that provides for an up to$30 million revolving credit facility (the "2022 Revolving Credit Facility") and an up to$30 million delayed draw term loan facility (the "2022 Term Loan Facility"), both maturing inNovember 2027 . The proceeds of the 2022 Revolving Credit Facility may be used to refinance existing indebtedness, for working capital purposes, capital expenditures and other general corporate purposes (including permitted acquisitions), and to pay transaction fees, costs and expenses related to the Senior Credit Facilities. The proceeds of the 2022 Term Loan Facility and any additional term loans established in accordance with the 2022 Senior Credit Facilities may be used to finance permitted acquisitions and to pay transaction fees, costs and expenses related to such acquisitions. AtDecember 31, 2022 , there were no borrowings outstanding under the 2022 Senior Credit Facilities. The interest rates per annum applicable to the 2022 Senior Credit Facilities are Term SOFR (as defined in the 2022 Senior Credit Facilities) plus an applicable margin, which ranges from 2.625% to 3.375%, or, at the option of the Company, a Base Rate (as defined in the 2022 Senior Credit Facilities) plus an applicable margin, which ranges from 1.625% to 2.375%. The 2022 Senior Credit Facilities require the Company to comply with certain affirmative, as well as certain negative covenants that, among other things, will restrict, subject to certain exceptions, the ability of the Company to incur indebtedness, grant liens, make investments, engage in acquisitions, mergers or consolidations and pay dividends and other restricted payments. The 2022 Senior Credit Facilities also include certain financial covenants, which generally include, but are not limited to the following: •Consolidated Total Leverage Ratio (defined generally as total indebtedness to adjusted EBITDA) of not greater than (i) for any fiscal quarter ending during the period from the closing date to and includingDecember 31, 2024 , 2.75 to 1.0 and (ii) for any fiscal quarter ending on and afterMarch 31, 2025 , 2.50 to 1.0, subject to certain adjustments following a material acquisition. •Consolidated Fixed Charge Coverage Ratio (defined generally as (a) adjusted EBITDA minus capital expenditures minus cash taxes to (b) the sum of scheduled principal payments plus cash interest expense plus restricted payments) of not less than 1.25:1.0.
The Company was in compliance with all covenants under the 2022 Senior Credit
Facilities in effect at
Sources of Funds
Cash provided by operating activities during the year endedDecember 31, 2022 was$27.7 million compared to$22.5 million during the year endedDecember 31, 2021 .
As of
million
Use of Funds
Our principal uses of cash are funding our new rental assets and other capital purchases, operations, and other working capital requirements. The following table presents our material contractual obligations and commitments to make future payments as ofDecember 31, 2022 : Within 12 Months
Beyond 12 Months
Debt Obligations, including interest $ - $ -
Lease Obligations 520 209
Total $ 520 $ 209
Except for the funding of potential acquisitions and investments, we anticipate
that our operating cash flows will satisfy our material cash requirements for
the 12 months after December 31, 2022 . In addition to our operating cash flows,
we may need to raise additional funds to support our contractual obligations and
investing activities beyond such 12 month period, and such funding may not be
available to us on acceptable terms, or at all. If we are unable to raise
additional funds when needed, our operations and ability to execute our business
strategy could be adversely affected. We may seek to raise additional funds
through equity, equity-linked or debt financings. If we raise additional funds
through the incurrence of indebtedness, such indebtedness would have rights that
are senior to holders of our equity securities and could contain covenants that
restrict our operations. Any additional equity financing may be dilutive to our
stockholders.
Page 36
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VIEMED HEALTHCARE, INC.
(Tabular amounts expressed in thousands of
December 31, 2022 and 2021 Leases Leases under which we assume substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lesser of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. The associated lease liability is drawn down over the life of the lease by allocating a portion of each lease payment to the liability with the remainder being recognized as finance charges. Leases that do not transfer the risks and rewards of ownership to the Company are treated as operating leases and are expensed as incurred.
Retirement Plan
The Company maintains a 401(k) retirement plan for employees to which eligible employees can contribute a percentage of their pre-tax compensation. Matching employer contributions to the 401(k) plan totaled$1.1 million and$0.8 million for the years endedDecember 31, 2022 and 2021, respectively.
Off Balance Sheet Arrangements
The Company has no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its results of operations or financial condition.
Recent Accounting Pronouncements
See Note 2 – Summary of Significant Account Policies of the Notes to
Consolidated Financial Statements for a description of recently issued
accounting pronouncements, including the expected dates of adoption and
estimated effects on our results of operations, financial positions and cash
flows.
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