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Item 7. Management’s Discussion and Analysis

2021-03-03 compared with 2020-03-04 · 276 added, 212 removed, 224 unchanged (69% of the section changed)

3 unchanged sentences

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.

Prior Period Corrections

We have corrected our previously issued consolidated financial statements contained in this Annual Report on Form 10-K with respect to the fiscal year ended December 31, 2018 .

Refer to the "Explanatory Note" for background on the correction and other information.

General Matters

In this Annual Report on Form 10-K, unless the context otherwise requires, the terms the "Company," "we," "us" and "our" refer to Viemed Healthcare, Inc.

and its wholly-owned subsidiaries.

We were incorporated on December 14, 2016 pursuant to the Business Corporations Act (British Columbia).

As of June 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, effective January 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 the SEC.

We are an "emerging growth company," as defined in the JOBS Act, and as such, we have elected to comply with certain reduced U.S.

public company reporting requirements.

We provide an array of home medical equipment, services and supplies, specializing in post-acute respiratory care services in the United States.

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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 durable medical equipment devices), 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 86.0% and 89.8% of our revenue for the years ended December 31, 2019 and December 31, 2018 , respectively.

We combine the benefits of home ventilation support with licensed Respiratory Therapists ("RTs") to drive improved patient outcomes and reduce costly hospital readmissions.

Our services include respiratory disease management (through the rental of various DME devices), 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 80.8% of our traditional revenue, excluding COVID-19 response sales and services, and 86.0% of our revenue for the year ended December 31, 2020 and 2019, 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 use an organic growth model whereby expansion is accomplished through existing service areas as well as in new regions through a cost efficient launch that reduces location expenses.

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We expect to continue to employ more RTs in order to assure our high service model is accomplished in the home.

As of December 31, 2019 , we employed 228 licensed RTs, representing 55% of our company-wide employee count.

By focusing overhead costs to clinical personnel that service the patient rather than physical location costs, we aim to efficiently scale our business in regions that are currently not being effectively serviced.

As of December 31, 2020, we employed 262 licensed RTs, representing more than 51% 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.

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VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

The below table highlights summary financial and operational metrics for the last eight quarters.The information in the table below has been updated to reflect the reclassification described in Note 2 to the Notes to Consolidated Financial Statements and the correction to prior period financial statements described in Note 3 and Note 13 to the Notes to Consolidated Financial Statements.

Trends Affecting our Business

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

Various policies and initiatives have been implemented to reduce the transmission of COVID-19, including travel bans and restrictions, the postponement of non-essential medical surgeries, the limiting of access to medical facilities in certain areas, the promotion of social distancing and the adoption of remote working policies.

Local, state and national governments continue to emphasize the importance of essential medical personnel and we remain open to meet the needs of our communities.

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 in order to ensure the safety of our employees as well as the safety of our patients.

These measures do not appear to be negatively impacting our patient attrition rate at this time, 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.

In addition, our current ability to assess potential patients in hospitals varies by hospital and city, but overall our business of setting up new patients in the home is continuing although at lower levels than in recent periods.

Many state governments have begun a phased reopening of their economies while adhering to new guidelines and enhanced safety measures, including social distancing and face mask protocols.

However, certain states have paused or reversed plans to reopen their economies as new cases of COVID-19 have been on the rise in recent weeks and months and such measures could negatively affect our operations or our ability to provide services to our patients.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the year ended December 31, 2020, it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time and we cannot assure you that demand for our products and services will continue or that we will be able to maintain operations, including sufficient personnel, supply chains and distribution channels to continue to satisfy demand for our products and services.

The COVID-19 pandemic has resulted in a significant economic downturn in the United States and globally and has also 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, such as limiting discretionary spending across the organization.

The CARES Act, which was signed into law on March 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 $100 billion in 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 payment from the Provider Relief Fund of $3.5 million in April 2020.

Payments from the Provider 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 that Provider 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.

The suspension is effective for claims with dates of service from May 1, 2020 through December 31, 2020.

The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, extends the suspension through March 31, 2021.

However, CMS and Medicare Administrative Contractors may issue guidance that affects the implementation of this provision.

As part of the CARES Act legislation, certain Payroll Protection Program ("PPP") loans were authorized for small businesses to pay their employees, subject to potential debt forgiveness.

We evaluated the PPP extensively and after evaluation, decided not to submit a PPP loan application.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

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.

While the overall impact of COVID-19 on our consolidated results of operations for the year ended December 31, 2020 has resulted in an overall increase in revenues related to additional product sales and services during the period, 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 continues to spread 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.

Rental revenue from ventilator products represents a significant portion of our revenue (approximately 81% of total traditional revenue, excluding COVID-19 response sales and services, in 2020).

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.

The next competitive bidding round is anticipated to begin on January 1, 2024.

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.

We cannot predict at this time the full impact the competitive bidding program and the developments in the competitive bidding program will have on our business and financial condition.

In addition, we cannot assure you that non-invasive ventilators and oxygen and PAP devices will not be included on the list of products subject to the competitive bidding program in the future.

If changes are made to the competitive program in the future, it could affect our reimbursement and review.

The below table highlights summary financial and operational metrics for the last eight quarters.

(Tabular amounts expressed in thousands of U.S.

Dollars, except vent patients)

For the quarter ended

September 30, 2019 (3)(4)

June 30, 2019 (3)(4)

March 31, 2019 (3)(4)

December 31, 2018 (3)

September 30, 2018 (3)

June 30, 2018 (3)

March 31, 2018 (3)

For the quarter ended December 31,

2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

Financial Information:

Revenue $ 31,202 $ 33,447 $ 42,854 $ 23,806 $ 21,448 $ 20,368 $ 20,325 $ 18,115

Gross Profit 19,178 19,453 25,927 15,553 14,243 14,050 14,639 13,074

Gross Profit % 61 % 58 % 61 % 65 % 66 % 69 % 72 % 72 %

Net Income 5,071 2,804 19,412 4,243 2,388 2,853 1,326 1,958

Cash (As of) 30,981 32,396 29,707 8,409 13,355 12,630 7,691 7,410

Total Assets (As of) 112,560 113,969 112,178 86,801 82,596 79,981 71,014 58,718

Adjusted EBITDA (1)

9,458 7,720 16,287 7,869 5,569 4,883 4,116 4,466

Operational Information:

Vent Patients (2)

7,892 7,788 7,705 7,965 7,759 7,421 7,130 6,393

(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.

(3) Revenue, gross profit, gross profit percentage, net income, total assets, and Adjusted EBITDA have been updated to reflect the correction as discussed in Note 3 and Note 13 to the Notes to the Consolidated Financial Statements.

(4) Revenue has been updated to reflect the reclassification as discussed in Note 2 to the Notes to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Critical Accounting Principles and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

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Actual results may differ from these estimates and such differences could be material to our financial position and results of operations.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this report, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in Part II, Item 8 of this report, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Reporting Currency

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dollar, which was determined using management’s assumption that the primary economic environment which it will derive its revenue and expenses incurred to generate those revenues is the United States.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

Revenue Recognition

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The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, “ Leases” , the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term.

Under FASB Accounting Standards Codification Topic 842, “ Leases” , we recognize rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental.

The lease term begins on the date products are delivered to patients, and revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private commercial payors, and Medicaid.

Certain customer co-payments are included in revenue when considered probable of payment, which is generally when paid.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required to record net revenue and accounts receivable at their net realizable values.

Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.

1 unchanged sentence

Such adjustments are typically identified and recorded at the point of cash application or claim denial.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

Revenue Accounting under Topic 606

The Company sells DME, replacement parts and supplies to customers and recognizes revenue based on contractual payment rates as determined by the payors at the point in time where control of the good or service is transferred through delivery to the customer.

The Company sells DME, replacement parts and supplies to customers and recognize revenue based on contractual payment rates as determined by the payors at the point in time when control of the good or service is transferred through delivery to the customer.

The customer and, if applicable, the payors are generally charged at the time that the product is sold.

The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met.

The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided.

Due to the nature of the durable medical equipment business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid.

The Company also provides sleep study services to customers and recognizes revenue when the sleep study results are complete, satisfying the performance obligation.

In response to the COVID-19 pandemic, the Company began offering contact tracing services, which revenues are recognized in the period in which the service has been provided.

The transaction price on equipment sales, sleep studies, and contact tracing is the amount that the Company expects to receive in exchange for the goods and services provided.

Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid.

As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients.

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The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the payor billings at contractual rates.

The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

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Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Returns and refunds are not accepted on either equipment sales or sleep study services.

Returns and refunds are not accepted on equipment sales, sleep study services or contact tracing services.

The Company does not offer warranties to customers in excess of the manufacturer’s warranty.

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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 the consolidated balance sheets.

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 health care industry and third-party reimbursement, it is possible that the estimates could change, which could have a material impact on the operations and cash flows.

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 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.

1 unchanged sentence

Our allowance for doubtful accounts was $9.0 million and $7.8 million as of December 31, 2020 and 2019, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Stock-Based Compensation

1 unchanged sentence

Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model.

Stock-based compensation costs for restricted stock units are determined at the grant date based on the closing stock price.

Stock-based compensation costs for RSUs are determined at the grant date based on the closing stock price.

The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period and the offsetting credit is recorded as an increase in additional paid-in capital.

2 unchanged sentences

For the Company’s phantom share units settled in cash, the Company computes the fair value of the phantom share units using the closing price of the Company's stock at the end of each period and records a liability based on the percentage of requisite service.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

Interest Rate Swaps

The Company utilizes an interest rate swap contract to reduce exposure to fluctuations in variable interest rates for future interest payments on the Term Note (as defined below).

For determining the fair value of the interest rate swap contract, the Company uses significant other observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk.

These fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves.

The Company includes unrealized gains in prepaid expenses and other assets, as a component of long-term assets, and unrealized losses in accrued liabilities, as a component of long-term liabilities on the Consolidated Balance Sheets.

The Company recognizes any differences between the variable interest rate payments and the fixed interest rate settlements from its swap counterparty as an adjustment to interest expense over the life of the swap.

If determined to be an effective cash flow hedge, the Company will record the changes in the estimated fair value of the swaps to accumulated other comprehensive income or loss on the Consolidated Balance Sheets.

To the extent that interest rate swaps are determined to be ineffective, the Company would recognize the changes in the estimated fair value of swaps in interest and other non-operating expenses, net on its Consolidated Statements of Income.

The Company is subject to income taxes in numerous jurisdictions.

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The current and deferred income tax assets and liabilities are also impacted by expectations about future operating results and the timing of reversal of temporary differences as well as possible audits of tax filings by regulatory agencies.

Changes or differences in these estimates or assumptions may result in changes to the current and deferred tax assets and liabilities on the consolidated statements of financial position and a charge to or recovery of income tax expense.

Changes or differences in these estimates or assumptions may result in changes to the current and deferred tax assets and liabilities on the Consolidated Balance Sheets and a charge to or recovery of income tax expense.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable earnings.

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When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

There were no impairment charges recognized during the periods ended December 31, 2019 and 2018 .

There were no impairment charges recognized during the fiscal years ended December 31, 2020 and 2019.

Net Income per Share Attributable to Common Stockholders

The Company uses the two-class method to compute net income per common share attributable to common stockholders because the Company issued securities, other than common stock, that contractually entitled the holders to participate in the dividends and earnings prior to the initial listing after the Arrangement.

The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period.

Net income attributable to common stockholders is computed by subtracting from net income the portion of the current period's earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed.

No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Basic net income per common share is computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted net income per common share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential stock-based awards outstanding during the period using the treasury stock method.

Dilutive potential stock-based awards include outstanding common stock options and time-based RSUs.

See Note 11 to the audited financial statements for the fiscal years ended December 31, 2020 and 2019 included in this Annual Report on Form 10-K for earnings per share computations.

Results of Operations

The following financial information includes certain prior period corrections relating to daily revenue recognition of the Company’s home medical equipment rentals.

The Company concluded that the cumulative effect of such corrections in fiscal year 2019 would materially misstate the Company’s consolidated statement of income for the year ended December 31, 2019 .

The financial results for the prior year have been restated.

Comparison of the Years Ended December 31, 2019 and 2018 :

C omparison of the Years Ended December 31, 2020 and 2019:

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

Years Ended December 31,

% of Net Revenue

Year Ended December 31,

2020 % of Total Revenue 2019 % of Total Revenue $

Revenue $ 131,309 100.0 % $ 80,256 100.0 % $ 51,053 63.6 %

Cost of revenue 51,198 39.0 % 24,250 30.2 % 26,948 111.1 %

Gross profit 80,111 61.0 % 56,006 69.8 % 24,105 43.0 %

Selling, general and administrative 52,829 40.2 % 41,381 51.6 % 11,448 27.7 %

1 unchanged sentence

Stock-based compensation 4,882 3.7 % 3,886 4.8 % 996 25.6 %

Loss on disposal of property and equipment

Other expense

Depreciation 816 0.6 % 671 0.8 % 145 21.6 %

(Gain) loss on disposal of property and equipment (2,328) (1.8) % 360 0.4 % (2,688) NM

Other (income) expense (3,952) (3.0) % 3 — % (3,955) NM

Income from operations 26,781 20.4 % 8,857 11.0 % 17,924 202.4 %

Non-operating expenses

Unrealized (gain) loss on warrant conversion liability

Unrealized (gain) on warrant conversion liability — — % (363) (0.5) % 363 NM

(Gain) loss from equity investment (91) (0.1) % 110 0.1 % (201) NM

Interest expense, net 509 0.4 % 314 0.4 % 195 62.1 %

Net income before taxes 26,363 20.1 % 8,796 11.0 % 17,567 199.7 %

Provision for income taxes

(1) Net revenue, gross profit, selling, general and administrative expenses, income from operations, net income before taxes, and net income have been updated to reflect the correction described in Note 3 to the Notes to Consolidated Financial Statements.

(2) Net revenue reflects the reclassification as discussed in Note 2 to the Notes to the Consolidated Financial Statements.

(Benefit) provision for income taxes (5,167) (3.9) % 271 0.3 % (5,438) NM

Net income $ 31,530 24.0 % $ 8,525 10.6 % $ 23,005 269.9 %

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

The following table summarizes our revenue for the years ended December 31, 2020 and 2019:

Years Ended December 31,

% of Net Revenue

Net revenue from rentals under Topic 842 and 840 (3)

Year Ended December 31,

2020 % of Total Revenue 2019 % of Total Revenue $

Net revenue from rentals

Ventilator rentals, non-invasive and invasive $ 78,286 59.6 % $ 69,067 86.0 % $ 9,219 13.3 %

Other durable medical equipment rentals 9,888 7.5 % 5,379 6.7 % 4,509 83.8 %

Net revenue from sales and services under Topic 606

Equipment sales

Net revenue from sales and services

Equipment and supply sales 7,357 5.6 % 4,395 5.5 % 2,962 67.4 %

COVID-19 response sales and services 34,379 26.2 % — — % 34,379 100.0 %

Service revenues 1,399 1.1 % 1,415 1.8 % (16) (1.1) %

Total net revenue $ 131,309 100.0 % $ 80,256 100.0 % $ 51,053 63.6 %

(1) Net revenue from rentals has been updated to reflect the correction described in Note 3 to the Notes to Consolidated Financial Statements.

(2) Net revenue reflects the reclassification as discussed in Note 2 to the Notes to the Consolidated Financial Statements.

(3) Net revenue from rentals for the years ended December 31, 2019 and 2018 are presented under Topic 842 and 840, respectively.

For the year ended December 31, 2019 , net revenue totaled $80.3 million , an increase of $15.8 million (or 24.5% ) from the comparable period in 2018 .

The revenue growth was primarily driven by an $11.1 million (or 19.2% ) increase in ventilator rental revenue.

This increase is attributable to our organic growth in active ventilator patient base.

Our active ventilator patient base grew from 5,905 as of December 31, 2018 to 7,759 as of December 31, 2019 , an increase of 31% .

In addition to the ventilator rental revenue growth, rental revenue from other DME grew $2.6 million (or 96.5% ).

As a result of the current year adoption of ASC 842, bad debt is required to be presented within net revenue, instead of within selling, general administrative expenses as presented in the prior year.

Current year net revenue has been reduced by $9.8 million as a result of this change in presentation.

For the year ended December 31, 2020, revenue totaled $131.3 million, an increase of $51.1 million (or 63.6%) from the comparable period in 2019.

The revenue growth was significantly driven by COVID-19 response sales and services of $34.4 million as described in more detail below.

We expect further COVID-19 response revenue to continue into 2021, but the quantity and impact of such revenue remains uncertain and dependent on the length and intensity of the COVID-19 pandemic.

Excluding COVID-19 response sales and services, net revenue increased $16.7 million (or 20.8%) from the comparable period in 2019.

Ventilator rental revenue increased $9.2 million (or 13.3%) 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 DME grew $4.5 million (or 83.8%) which primarily consisted of product revenue from percussion vests, PAPs, and oxygen therapy.

Non-COVID-19 related equipment sales and services combined increased by $3.0 million (or 67.4%) year over year primarily as a result of increasing demand for respiratory supplies, specifically for PAP resupply patients, that are less impacted by the ongoing pandemic.

As we continue to expand geographically into new states and further expand our presence in our existing territories, we expect continued growth in our active ventilator patient base and ventilator rental revenue, as well as in our other growing respiratory offerings, although in the short term we anticipate growth to continue to occur at a slower rate than in recent periods as a result of the pandemic.

Cost of Revenue and Gross Profit

For the year ended December 31, 2020, cost of revenue totaled $51.2 million, an increase of $26.9 million (or 111.1%) from the comparable period in 2019.

For the years ended December 31, 2019 and 2018 , gross profit percentage decreased from 74.1% to 69.8% .

The primary driver for the decreased gross profit percentage is the result of the current year adoption of ASC 842, which requires bad debt to be presented within net revenue reducing current year net revenue by $9.8 million .

Selling, general & administrative expense

For the years ended December 31, 2020 and 2019, gross profit percentage decreased from approximately 69.8% to approximately 61.0%.

The lower margins are primarily the result of the high volume of COVID-19 response sales and services.

Historically the majority of our revenue has come from equipment rentals.

For the year ended December 31, 2020, COVID-19 response sales and services accounted for 26.2% of total revenue, thus driving our company-wide gross profit percentage lower.

Excluding COVID-19 response sales and services, gross profit percentage for the year ended December 31, 2020 was 66.5%.

The reduction in gross profit percentage is partly a reflection of our current product mix, but is also due in part to direct labor cost for RTs.

While our active ventilator patient base growth was impacted by the pandemic in the short term, we have not experienced a corresponding change in the number of RTs employed.

We believe it is in the long term interest of our patients and the business to continue to employ these essential employees.

We expect our gross profit percentage for our normal operations to remain relatively consistent with (non-COVID-19 related) 2020 levels.

Selling, General and Administrative Expense

For the year ended December 31, 2020, selling, general and administrative expenses totaled $52.8 million, an increase of $11.4 million (or 27.7%) from the comparable period in 2019.

The increase was primarily the result of an increase in employee costs which includes the impact of our phantom stock plan.

Our phantom stock plan is measured at fair value as of the reporting period and is driven primarily by our stock price.

During the year ended December 31, 2019 , our stock price increased 55% , resulting in higher expenses related to these awards.

Offsetting these increases is the current year change in bad debt presentation required as a result of the current year adoption of ASC 842.

Current year selling, general and administrative expenses are $9.8 million lower as a result of this change in presentation.

Selling, general, and administrative expenses as a percentage of revenue increased to 51.6% for the year ended December 31, 2019 compared to 53.2% and for the year ended December 31, 2018 .

As noted, the primary driver of our selling, general and administrative expenses is employee associated cost.

As we continue to grow into new markets and increase our employee count, we expect overall selling, general and administrative expenses will increase accordingly.

However, we expect that selling, general and administrative expenses as a percentage of revenue will remain relatively consistent with 2019 levels.

Selling, general and administrative expenses as a percentage of revenue decreased to 40.2% for the year ended December 31, 2020, compared to 51.6% for the year ended December 31, 2019.

Excluding the impact of the COVID-19 response sales and services, selling, general and administrative expenses as a percentage of revenue was 53.9% for the year ended December 31, 2020.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

The increase in overall selling, general and administrative expense as compared to the prior year period is attributable to additional employee-related expenses to accommodate the overall growth of the Company as well as a full year of public company expenses relating to our NASDAQ listing in August 2019, partially offset by a decrease in travel, meals, and entertainment due to COVID-19 related restrictions.

Employee compensation increased $3.6 million (or 14.6%) as a result of higher incentive-based compensation and an overall increase in our employee headcount.

Our full time employee count increased from 418 on December 31, 2019 to 511 on December 31, 2020, an increase of 22.2%.

Partially offsetting these increases was a $1.8 million reduction in employee compensation expense related to the impact of our phantom stock plan.

Our phantom stock plan is measured at fair value as of the reporting period and is driven primarily by the number of eligible employees and our stock price.

For the year ended December 31, 2020 our stock price increased by 25.2% compared to an increase of 55.4% from the year ended December 31, 2019, resulting in lower comparable expenses related to these awards in the current period.

Additionally, professional fees increased $2.0 million (or 106.9%) from the comparable period in 2019, driven by higher legal and professional fees and public company expenses.

As we continue to respond to the COVID-19 pandemic, grow into new markets and increase our employee count, we expect selling, general and administrative expenses will trend upward accordingly.

We expect that selling, general and administrative expenses as a percentage of revenue will trend higher towards historical percentages as we continue into 2021.

Research and Development Costs

1 unchanged sentence

As we continue to invest in research and development related projects to support our technology initiatives, we expect that associated costs will increase in 2021 relative to 2020 costs.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

(Gain) Loss on Disposal of Property and Equipment

For the year ended December 31, 2020, we recorded a gain on disposal of property and equipment of $2.3 million, compared to a loss of $0.4 million during the comparable period in 2019.

As a result of our COVID-19 response efforts, certain of our previously placed in service property and equipment was sold.

As a result, during the year ended December 31, 2020, we recorded sales proceeds on used equipment of $5.0 million which resulted in a net gain on disposal for related equipment of $3.5 million.

We expect disposals of equipment to generally remain consistent with historical trends, with the exception of additional gains that could be realized from any additional COVID-19 response sales, but the impact of such sales remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment and supplies from other suppliers.

Other (Income) Expense

The increase of $4.0 million in other income was driven by current year state and federal government grants, the majority of which relate to the Provider Relief Funds of $3.5 million received in April 2020.

Payments from the Provider 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

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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.

Stock-based compensation as a percentage of net revenue has historically remained at or below 5%.

Stock-based compensation as a percentage of revenue has historically remained near or below 5%.

Interest Expense, Net

For the year ended December 31, 2019 , net interest expense totaled $314,000 , an increase of $133,000 (or 73.5% ) from the comparable period in 2018 .

We expect net interest expense to increase as a result of the Building Term Note and Term Note described below.

Provision for income taxes

For the year ended December 31, 2019 , the provision for income taxes was $271,000 , compared to $162,000 during 2018 .

The current period provision is related to state income tax liabilities.

We expect to continue to benefit from the federal tax environment in the United States.

Recent tax changes allow for accelerated deductions for capital expenditures and lower corporate tax rates.

As we continue to incur substantial capital expenditures to acquire medical equipment to accommodate our rapid patient base growth, combined with the deferred tax assets, we expect most near-term tax payments will continue to result from state tax liabilities.

For the year ended December 31, 2019 , net income was $8.5 million ,a decrease of $1.0 million (or 10.3% ) from the comparable period in 2018 .

Net income as a percentage of net revenue decreased from 14.7% for the year ended December 31, 2018 to 10.6% for the year ended December 31, 2019 , primarily driven by increased selling, general and administrative expenses, research and development costs, and stock-based compensation, as described above.

For the year ended December 31, 2020, net interest expense totaled $0.5 million, an increase of $0.2 million from the comparable period in 2019.

We expect net interest expense to remain materially consistent with 2020 levels.

(Benefit) Provision for Income Taxes

For the year ended December 31, 2020, the provision for income taxes was a $5.2 million benefit, compared to a $0.3 million expense during the 2019 period.

The decrease in income tax expense was primarily due to a lower effective tax rate which was caused by the release of a valuation allowance and recognition of a deferred tax asset during the current period.

Excluding the impact of this current year discrete item, our estimated tax rate for the year was 9.6%.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

For the year ended December 31, 2020, net income was $31.5 million, an increase of $23.0 million (or 269.9%) from the comparable period in 2019.

Net income as a percentage of net revenue increased from 10.6% for the year ended December 31, 2019 to 24.0% for the year ended December 31, 2020, primarily driven by COVID-19 response sales, increased other income and the Company's income tax benefit, as described above.

Non-GAAP Financial Measures

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These changes are non-cash, as is the settlement of the underlying derivative liability, which occurs upon the conversion of the derivative instrument into common shares of the Company.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

– 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 the our earnings under U.S.

GAAP, these items affect multiple periods and management is not able to change or affect these items within any period.

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 U.S.

GAAP measure, to Adjusted EBITDA, on a historical basis for the periods indicated:

For the quarter ended

December 31, 2019

September 30, 2019 (1)

June 30, 2019 (1)

March 31, 2019 (1)

December 31, 2018 (1)

September 30, 2018 (1)

June 30, 2018 (1)

March 31, 2018 (1)

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

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:

For the quarter ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

Net Income $ 5,071 $ 2,804 $ 19,412 $ 4,243 $ 2,388 $ 2,853 $ 1,326 $ 1,958

Depreciation 2,835 2,425 2,190 2,130 2,003 1,659 1,444 1,295

Interest expense 100 116 135 158 212 56 20 26

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Stock-based compensation 1,301 1,234 1,196 1,151 908 1,064 1,034 880

Income tax expense

Income tax expense (benefit) 151 1,141 (6,646) 187 58 51 24 138

Adjusted EBITDA $ 9,458 $ 7,720 $ 16,287 $ 7,869 $ 5,569 $ 4,883 $ 4,116 $ 4,466

(1) Net income has been updated to reflect the correction described in Note 3 and Note 13 to the Notes to Consolidated Financial Statements.

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 U.S.

It is not a measurement of our financial performance under U.S.

GAAP and should not be considered as alternatives to revenue or net income (loss), as applicable, or any other performance measures derived in accordance with U.S.

GAAP and may not be comparable to other similarly titled measures of other businesses.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under U.S.

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 and may not be comparable to other similarly titled measures of other businesses.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it 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;

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Cash and cash equivalents at December 31, 2020 was $31.0 million, compared to $13.4 million at December 31, 2019.

Based on our current plan of operations, including potential acquisitions, we believe this amount, when combined with expected cash flows from operations and amounts available under our $10.0 million line of credit 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.

Based on our current plan of operations, including potential acquisitions, we believe this amount, when combined with expected cash flows from operations and amounts available under our line of credit 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.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank, which was fully undrawn as of December 31, 2020.

The following table summarizes our cash flows for the periods indicated:

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Net increase in cash and cash equivalents $ 17,626 $ 2,942

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the year ended December 31, 2019 was $19.1 million , resulting from net income of $8.5 million and non-cash net income adjustments of $20.1 million , which was partially offset by an increase in net operating assets of $9.5 million .

The non-cash net income adjustments primarily consisted of $9.8 million of change in allowance for doubtful accounts, $6.4 million of depreciation and $3.9 million of stock-based compensation.

Net cash provided by operating activities during the year ended December 31, 2020 was $35.1 million, resulting from net income of $31.5 million, non-cash net income adjustments of $13.8 million and an increase in net operating liabilities of $2.9 million, which was partially offset by an increase in net operating assets of $13.1 million.

The non-cash net income adjustments primarily consisted of $9.1 million in change of allowance for doubtful accounts, $9.6 million of depreciation, $2.3 million of gains on disposal of property and equipment, $8.7 million in change in deferred tax asset, $4.9 million of stock-based compensation, $1.4 million in change in inventory reserve and $0.1 million of gain on equity investments.

The uses of cash related to changes in operating assets primarily consisted of an increase in gross accounts receivable of $10.0 million, an increase in inventory of $2.3 million and an increase in prepaid expenses and other assets of $0.8 million.

The increase in our operating assets was primarily driven by accounts receivable related to COVID-19 response sales and services occurring during the period.

Included in our operating cash flows for the period is the receipt of $3.5 million in Provider Relief Funds.

The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.2 million, an increase in accrued liabilities of $2.3 million, an increase in deferred revenue of $0.1 million, and an increase in income tax payable of $0.3 million.

Net cash provided by operating activities during the year ended December 31, 2019 was $19.1 million, resulting from net income of $8.5 million, non-cash net income adjustments of $20.2 million, and an increase in net operating liabilities of $3.9 million, which was partially offset by an increase in net operating assets of $13.5 million.

The non-cash net income adjustments primarily consisted of $9.8 million in change of allowance for doubtful accounts, $6.4 million of depreciation and $3.9 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $12.5 million and an increase in inventory of $0.3 million.

1 unchanged sentence

Net accounts receivable increased $2.7 million during the period.

The changes in operating liabilities primarily consisted of a decrease in accounts payable of $0.8 million , an increase in accrued liabilities of $2.5 million , and an increase in deferred revenue of $0.7 million .

The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.8 million, an increase in accrued liabilities of $2.5 million, an increase in deferred revenue of $0.7 million, and a decrease in income tax payable of $0.1 million.

The increase in operating liabilities was primarily attributed to higher expense incurred as a result of phantom stock awards and increased deferred revenue.

The increase in our operating assets and liabilities were primarily driven by our increased business volume period-over-period and higher compensation and personnel-related costs.

Net cash provided by operating activities during the year ended December 31, 2018 was $22.4 million , resulting from net income of $9.5 million , non-cash net income adjustments of $12.9 million , and an increase in net operating liabilities of $6.9 million , which were partially offset by an increase in net operating assets of $7.0 million .

The non-cash net income adjustments primarily consisted of $6.2 million of bad debt expense, $3.8 million of depreciation and $2.7 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in gross accounts receivable of $5.3 million as a result of increased revenue growth and an increase in inventory of $1.3 million .

The changes in operating liabilities primarily consisted of increases in accounts payable of $2.5 million , accrued liabilities of $3.6 million , and deferred revenue of $0.8 million .

The increase in operating liabilities was primarily attributed to higher expense incurred as a result of phantom stock and bonus awards.

Net Cash Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2020 was $8.4 million, consisting of $13.0 million of purchases of property and equipment and $0.6 million in equity investments, partially offset by $5.2 million of COVID-19 response sales proceeds from the disposal of property and equipment.

Purchases of property and equipment were primarily related to medical equipment rented to our patients.

Combining cash purchases of property and equipment of $13.0 million and equipment financed through finance leases of $3.0 million, our total capital expenditures for the year ended December 31, 2020 were $16.0 million.

This represents a $9.4 million, or 36.8%, decrease year over year.

Net cash used in investing activities during the year ended December 31, 2019 was $12.8 million, consisting of $13.4 million of purchases of property and equipment, partially offset by $0.6 million of proceeds from the disposal of property and equipment.

Purchases of property and equipment were primarily related to the purchase of our new corporate headquarters in addition to medical equipment rented to our patients.

Combining cash purchases of property and equipment of $13.4 million and equipment financed through leases and long term debt of $12.0 million , our total capital expenditures for the year ended December 31, 2019 were $25.4 million .

This represents a $10.9 million , or 74.9% , increase year over year, which was driven by our revenue growth of 24.5% during the same periods combined with the purchase of our new corporate headquarters.

Net cash used in investing activities during the year ended December 31, 2018 was $5.3 million , consisting of $6.1 million of purchases of property and equipment, partially offset by $0.8 million of proceeds from the disposal of property and equipment.

Purchases of property and equipment were primarily related to the medical equipment we rent to patients.

Combining cash purchases of property and equipment of $6.1 million and equipment financed through finance leases and long term debt of $8.4 million , our total capital expenditures for the year ended December 31, 2018 were $14.5 million .

Combining cash purchases of property and equipment of $13.4 million and equipment financed through finance leases of $12.0 million, our total capital expenditures for the year ended December 31, 2019 were $25.4 million.

This represents a $10.9 million, or 74.9%, increase year over year, which was driven by our revenue growth during the same periods combined with the purchase of our new corporate headquarters.

Net Cash Used in Financing Activities

Net cash used in financing activities during the year ended December 31, 2019 was $3.3 million , consisting of $4.8 million in proceeds to finance the purchase of our corporate headquarters, $5.0 million in proceeds from the Term Note described below, partially offset by $11.6 million in repayments of finance lease liabilities and $1.5 million of shares repurchased and canceled under our normal course issuer bid described below.

Net cash used in financing activities during the year ended December 31, 2020 was $9.1 million, consisting of $1.6 million in principal payments on the Term Note (as defined below), $0.2 million in principal payments on the Building Term Note (as defined below), and $9.2 million in repayments of finance lease liabilities, partially offset by $1.9 million proceeds from the exercise of stock options.

Net cash used in financing activities during the year ended December 31, 2019 was $3.3 million, consisting of $4.4 million in proceeds from the Building Term Note to finance the purchase of our corporate headquarters, $4.9 million in proceeds from the Term Note, partially offset by $11.6 million in repayments of finance lease liabilities and $1.5 million of shares repurchased and canceled under our normal course issuer bid.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Net cash used in financing activities during the year ended December 31, 2018 was $11.8 million , consisting of $10.2 million in repayments of finance lease liabilities and $1.6 million of shares repurchased and canceled under our normal course issuer bid described below.

Credit Agreement

On February 20, 2018, the Company entered into a two year commercial business loan agreement with Hancock Whitney Bank.

Any amounts advanced will be secured by substantially all our assets and carry an interest rate of one month ICE libor plus 3.00%, with a 4.00% interest rate floor.

Advances on the line of credit initially were subject to a borrowing base as determined in accordance with the loan agreement, which was based on the value of our accounts receivable balance.

On March 19, 2019, the Company entered into an amendment to the loan agreement increasing the available line of credit from $5.0 million to $10.0 million and extending the expiration date to March 19, 2021.

In addition, the borrowing base restriction was removed from the loan agreement.

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant

Required Ratio

Ratio as of December 31, 2019

Total Debt to Adjusted EBITDA (Quarterly)

not more than 1.50:1.00

Fixed Charge Coverage Ratio (Quarterly)

not less than 1.35:1.00

Loan-to-Value Ratio (Quarterly)

not more than 0.85

The Company was in compliance with all covenants in effect at December 31, 2019 .

There were no borrowings against this line of credit at December 31, 2019 and December 31, 2018 .

Line of Credit

The Company maintains a line of credit in the amount of $10.0 million that expires May 1, 2023 under the Commercial Business Loan Agreement.

Any amounts advanced on this line will be subject to an interest rate equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor, and will be secured by substantially all of the Company's assets.

There were no borrowings against this line of credit at December 31, 2020 or December 31, 2019.

While we currently have no immediate plans to draw on this line of credit, the line of credit allows flexibility in funding our future operations subject to compliance with the covenants described below.

Commercial Term Notes

On May 30, 2019, the Company entered into an amendment to the loan agreement providing for a term note (the “Building Term Note”) with Hancock Whitney Bank in the principal amount of $4.8 million .

The proceeds of the Building Term Note were used to purchase a building to utilize as a corporate headquarters.

Beginning July 1, 2019, the Company makes monthly payments towards the outstanding balance.

The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrowers, including the real property acquired with the proceeds of the Building Term Note.

On May 30, 2019, the Company entered into an amendment to the loan agreement providing for a term note (the “Building Term Note”) in favor of Hancock Whitney Bank in the principal amount of $4.8 million.

The proceeds of the Building Term Note were used to purchase a building to utilize as a new corporate headquarters for the Company.

Beginning July 1, 2019, the Company began making monthly payments towards the outstanding balance.

The Building Term Note matures on May 30, 2026 and is secured by substantially all of our assets, including the real property acquired with the proceeds of the Building Term Note.

The Building Term Note bears interest at a variable rate equal to the one month ICE LIBOR index plus a margin of 2.45% per annum.

1 unchanged sentence

In connection with the Building Term Note, the Company entered into an interest rate swap transaction (the "Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68%.

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") with Hancock Whitney Bank in the principal amount of $ 5,000,000 .

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") in favor of Hancock Whitney Bank in the principal amount of $5.0 million.

The proceeds of the Term Note will be used for general corporate purposes.

Beginning October 19, 2019, the Company makes monthly payments towards the outstanding balance.

The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrowers.

Beginning October 19, 2019, the Company began making monthly payments towards the outstanding balance.

The Term Note matures on September 19, 2022 and is secured by substantially all of our assets.

The Term Note bears interest at the rate of 4.60% per annum.

Under the terms of the Commercial Business Loan Agreement, the Company is subject to the following financial covenants:

Financial Covenant Required Ratio Ratio at December 31, 2020

Total Debt to Adjusted EBITDA (Quarterly) not more than 1.50:1.00 0.27

Fixed Charge Coverage Ratio (Quarterly) not less than 1.35:1.00 3.12

Loan-to-Value Ratio (Quarterly) not more than 0.85 0.71

The Company was in compliance with all covenants under the Commercial Business Loan Agreement in effect at December 31, 2020.

Sources of Funds

Our cash provided by operating activities for the year ended December 31, 2019 was $19.1 million compared to $22.4 million for the year ended December 31, 2018 .

As of December 31, 2019 , we had cash and cash equivalents of $13.4 million .

Our principal uses of cash are funding our new rental assets and other capital purchases, operations, and other working capital requirements.

Over the past two years, our revenue has increased significantly from year-to-year and, as a result, our cash provided by operating activities has increased over time and now is a significant source of capital to the business, which we expect to continue in the future.

Cash provided by operating activities during the year ended December 31, 2020 was $35.1 million compared to $19.1 million during the year ended December 31, 2019.

HHS Provider Relief Funds

The Company received $3.5 million of Provider Relief Funds from the HHS that was provided to eligible healthcare providers out of the $100 billion Public Health and Social Services Emergency Fund provided for in the CARES Act.

The funds are allocated to eligible healthcare providers for expenses and lost revenue attributable to the COVID-19 pandemic.

The HHS has stated that Provider 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 the Company's ability to comply and may require the return of funds.

In accordance with the terms of acceptance for the grant, the Company has utilized these funds to prevent, prepare for, and respond to the COVID-19 pandemic and to offset any lost patient care revenues attributable to the pandemic.

As of December 31, 2020, the Company had cash and cash equivalents of $31.0 million.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Our principal uses of cash are funding our new rental assets and other capital purchases, operations, and other working capital requirements.

Over the past two years, our revenue has increased significantly from year-to-year and, as a result, our cash provided by operating activities has increased over time and is now a significant source of capital to the business, which we expect to continue in the future.

We may need to raise additional funds to support our investing operations, and such funding may not be available to us on acceptable terms, or at all.

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Any additional equity financing may be dilutive to our stockholders.

For the year ended December 31, 2019 , the Company re-purchased and canceled 365,100 common shares pursuant to our Normal Course Issuer Bid (the "NCIB") at a cost of $1,522,000 .

For the year ended December 31, 2018 , the Company repurchased and canceled 410,703 common shares pursuant to our NCIB at a cost of $1,594,000 .

Total shares repurchased under the NCIB were 775,803 as of December 31, 2019 .

Under the NCIB, we were authorized to repurchase up to a maximum of 1,875,575 common shares throu gh November 28, 2019.

Leases under which we assume substantially all the risks and rewards of ownership are classified as finance leases.

For the year ended December 31, 2019, the Company re-purchased and canceled 365,100 common shares pursuant to our Normal Course Issuer Bid ("NCIB") at a cost of $1.5 million.

Leases under which we assume substantially all the risks and rewards of ownership are classified as capital 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.

4 unchanged sentences

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 $615,000 and $440,000 for the years ended December 31, 2019 and 2018 , respectively.

Matching employer contributions to the 401(k) plan totaled $0.8 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively.

Off Balance Sheet Arrangements

2 unchanged sentences

In August 2018, the FASB issued ASU No.

2016-15, “ Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments ,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows.

The ASU is effective for annual periods beginning December 31, 2018, and its adoption did not impact our condensed consolidated financial statements.

In July 2018, the FASB issued ASU No.

2018-07 “Improvements to Non-employee Share-Based Payment Accounting ,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees.

The ASU is effective for interim periods as of January 1, 2019, and its adoption did not have any material impact on our consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “ Leases ” (Topic 842) (“ASC 842”), which supersedes the existing guidance for lease accounting, “ Leases ” (Topic 840) (“ASC 840”).

ASC 842 requires lessees to recognize a lease liability and a right of use asset for all leases that extend beyond one year.

This standard was adopted using the modified retrospective transition approach at the adoption date of January 1, 2019.

This approach does not require the restatement of previous periods.

The Company completed a qualitative and quantitative assessment of its leases from both a lessee and lessor perspective.

As part of this process, the Company elected to utilize certain practical expedients that provided transition relief.

Accordingly, the Company did not reassess expired or existing contracts, lease classifications or related initial direct costs as part of the assessment process for either lessee or lessor leases.

From a lessor perspective, the Company recognizes revenue on rentals in accordance with Topic 842 on a straight line basis over the term of the lease.

The adoption of this standard, from a lessee perspective, resulted in the recording of Right of Use (“ROU”) operating lease assets as a component of property and equipment, net and liabilities as a component of current and non-current liabilities of approximately $1.5 million on the Condensed Consolidated Balance Sheet as of January 1, 2019, with no impact to retained earnings.

In addition, the Company elected as an accounting policy, not to record leases with an initial term of less than 12 months.

(See Note 6 – “Debt and lease liabilities” for additional information and required disclosures.) Adoption of this standard had no change on finance leases previously subject to capital lease treatment under Topic 840.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

December 31, 2019 and 2018

In August 2017, the FASB issued ASU No.

2017-12, " Derivatives and Hedging ", which changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results, in order to better align an entity’s risk management activities and financial reporting for hedging relationships.

The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

The Company adopted this standard on June 1, 2019 and adoption of this standard did not have a material impact on the Company’s consolidated financial statement presentation or results.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The new guidance modifies the disclosure requirements on fair value measurements.

The Company adopted this standard on January 1, 2020 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis