What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-03 compared with 2020-11-04 · 158 added, 255 removed, 340 unchanged (55% of the section changed)

36 unchanged sentences

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

September 30, 2020 and 2019

March 31, 2021 and 2020

By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, including those identified under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and the other documents we file with the SEC, including under “Item 1A.

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the general business, market and economic conditions in the regions in which the we operate;

the impact of the COVID-19 pandemic and of the actions taken by governmental authorities, individuals and companies in response to the pandemic on our business, financial condition and results of operations, including on our patient base and revenues, employees, and equipment and supplies;

we may be subject to significant capital requirements and operating risks;

significant capital requirements and operating risks that we may be subject to;

our ability to implement business strategies and pursue business opportunities;

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the adverse effects on our business, results of operations, financial condition and stock price, as a result of the restatement and correction process;

our status as an emerging growth company and a foreign private issuer;

and the occurrence of natural and unnatural catastrophic events or health epidemics or concerns, such as the recent COVID-19 pandemic, and claims resulting from such events or concerns, as well as other general economic, market and business conditions;

our status as an emerging growth company and a smaller reporting company;

and the occurrence of natural and unnatural catastrophic events or health epidemics or concerns, such as the COVID-19 pandemic, and claims resulting from such events or concerns, as well as other general economic, market and business conditions;

and other factors beyond our control.

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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 will become subject to the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and our officers, directors, and principal shareholders will become subject to the reporting and short-swing profit recovery provisions contained in Section 16 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 Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, we have elected to comply with certain reduced U.S.

We are an "emerging growth company," as defined in the JOBS Act and a "smaller reporting company" under Rule 12b-2 of the Exchange Act, and as such, we have elected to comply with certain reduced U.S.

public company reporting requirements.

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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 ("DME") devices), in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies.

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.

In December of 2020, we acquired a 5% interest in VeruStat, Inc, a newly created company focusing on remote patient monitoring (“RPM”).

The investment is part of an ongoing initiative to enable our salesforce to offer a new revenue source to its physician network around the country.

RPM platforms allow physicians to bill for safely monitoring patients inside of the home that are struggling with chronic diseases.

The VeruStat RPM solution will be placed in the home in conjunction with Viemed’s existing patient engagement platform (“PEP”).

VIEMED HEALTHCARE, INC.

1 unchanged sentence

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

September 30, 2020 and 2019

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 80.2% of our traditional revenue, excluding the COVID-19 response sales and services, and 84.5% of our revenue for the three months ended September 30, 2020 and 2019, respectively, and 82.9%, excluding the COVID-19 response sales and services, and 86.7% for the nine months ended September 30, 2020 and 2019, respectively.

March 31, 2021 and 2020

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 79.9% of our traditional revenue, excluding COVID-19 response sales and services, and 82.5% of our traditional revenue, excluding the COVID-19 response sales and services, for the three months ended March 31, 2021 and 2020, respectively.

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

2 unchanged sentences

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

As of September 30, 2020, we employed approximately 258 licensed RTs, representing more than 52% of our company-wide employee count.

By focusing overhead costs on personnel that service the patient rather than physical location costs, we anticipate efficiently scaling our business in regions that are currently not being effectively serviced.

As of March 31, 2021, we employed 267 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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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.

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.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the nine months ended September 30, 2020, it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the three months ended March 31, 2021, 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.

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

September 30, 2020 and 2019

March 31, 2021 and 2020

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.

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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 Department of Health and Human Services has stated that Provider Relief Fund payments are not loans and will not need to be repaid.

The Department of Health and Human Services ("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.

3 unchanged sentences

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.

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.

On Wednesday, April 14, 2021, the President signed H.R.

1868 into law, which further extended the suspension of Medicare sequestration until December 31, 2021.

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.

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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 nine months ended September 30, 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 have on our consolidated results of operations throughout the remainder of 2020 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.

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.

1 unchanged sentence

For additional information, see Part II.

Item 1A “Risk Factors.”

“Risk Factors.”

In 2019, CMS announced the inclusion of noninvasive ventilator products on the list of products subject to the competitive bidding program for 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 revenues (approximately 86% of total revenue in 2019).

At the end of 2019, approximately 19% of ventilator product-related revenue was set to be subject to the competitive bidding process under Medicare.

On March 9, 2020, CMS announced that due to the COVID-19 pandemic, the 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 has 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.

Rental revenue from ventilator products represents a significant portion of our revenues (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.

3 unchanged sentences

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

September 30, 2020 and 2019

March 31, 2021 and 2020

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

1 unchanged sentence

Dollars, except vent patients)

For the quarter ended September 30,

2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018

For the quarter ended March 31,

2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Financial Information:

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Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019:

The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Comparison of the Three Months Ended March 31, 2021 and 2020:

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

2021 % of Total Revenue 2020 % of Total Revenue $

6 unchanged sentences

Depreciation 200 0.7 % 205 0.9 % (5) (2.4) %

Loss on disposal of property and equipment 203 0.6 % 167 0.8 % 36 21.6 %

Other (income) expense (19) (0.1) % 1 — % (20) NM

Loss (gain) on disposal of property and equipment 76 0.3 % (1,169) (4.9) % 1,245 NM

Other income (21) (0.1) % — — % (21) NM

Income from operations 1,332 4.7 % 4,615 19.4 % (3,283) (71.1) %

Non-operating expenses

Unrealized (gain) on warrant conversion liability — — % (800) (3.9) % 800 (100.0) %

(Gain) loss from equity investment (21) (0.1) % 26 0.1 % (47) NM

Interest expense, net 116 0.3 % 56 0.3 % 60 NM

Loss (gain) from equity method investments (220) (0.8) % 27 0.1 % (247) NM

Interest expense, net 91 0.3 % 158 0.7 % (67) (42.4) %

Net income before taxes 1,461 5.1 % 4,430 18.6 % (2,969) (67.0) %

Provision for income taxes 1,141 3.4 % 51 0.3 % 1,090 NM

Provision (benefit) for income taxes (223) (0.8) % 187 0.8 % (410) NM

Net income $ 1,684 5.9 % $ 4,243 17.8 % $ (2,559) (60.3) %

2 unchanged sentences

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

September 30, 2020 and 2019

The following table summarizes our revenue for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

March 31, 2021 and 2020

The following table summarizes our revenue for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

2021 % of Total Revenue 2020 % of Total Revenue $

Net revenue from rentals under Topic 842

Net revenue from rentals

Ventilator rentals, non-invasive and invasive $ 20,351 71.6 % $ 18,792 78.9 % $ 1,559 8.3 %

Other durable medical equipment rentals 2,930 10.3 % 2,131 9.0 % 799 37.5 %

Net revenue from sales and services under Topic 606

Net revenue from sales and services

Equipment and supply sales 1,768 6.2 % 1,533 6.4 % 235 15.3 %

2 unchanged sentences

Total net revenue $ 28,416 100.0 % $ 23,806 100.0 % $ 4,610 19.4 %

For the three months ended September 30, 2020, revenue totaled $33.4 million, an increase of $13.1 million (or 64.2%) from the comparable period in 2019.

The revenue growth was primarily driven by COVID-19 response sales and services of $8.6 million.

For the three months ended March 31, 2021, revenue totaled $28.4 million, an increase of $4.6 million (or 19.4%) from the comparable period in 2020.

Excluding COVID-19 response sales and services revenue, net revenue increased $2.7 million (or 11.8%) from the comparable period in 2020.

The net revenue growth was primarily driven by an increase in ventilator rental revenue of $1.6 million (or 8.3%) and rental revenue from other DME of $0.8 million (or 37.5%).

This growth was largely attributable to product revenue from oxygen therapy, PAPs, and percussion vests.

Non-COVID-19 related equipment sales and services combined increased by $0.3 million (or 18.3%) from the comparable period in 2020, primarily as a result of increasing demand for respiratory supplies for our PAP and non-invasive vent patients.

In response to the COVID-19 pandemic, we have been working in close cooperation with state agencies and hospital systems to source urgently needed medical equipment such as ventilators, ventilator supplies, other respiratory equipment, and personal protective equipment.

During the three months ended September 30, 2020, the $8.6 million of COVID-19 response sales and services consisted primarily of PAPs, ventilators, associated supplies, personal protective equipment, and contact tracing services.

We expect further COVID-19 response related revenue during the remainder of 2020, but the quantity and impact of such revenue remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment, supplies, and services from other suppliers.

Excluding the COVID-19 response sales and services revenue, net revenue increased $4.5 million (or 22.2%) from the comparable period in 2019.

The increase was primarily driven by an increase in ventilator rental revenue of $2.7 million (or 16.0%).

Rental revenue from other DME grew $1.2 million (or 82.8%) quarter over quarter.

This growth was largely attributable to product revenue from percussion vests, PAPs, and oxygen therapy.

Non-COVID-19 related equipment sales and services combined increased by $0.6 million (or 33.8%) 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, though 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.

During the three months ended March 31, 2021, net revenue of COVID-19 response sales and services totaled $3.0 million, consisting primarily of personal protective equipment and contact tracing services.

While we expect further COVID-19 response related revenue during the remainder of 2021, the quantity is expected to be lower and impact of such revenue remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment, supplies, and services from other suppliers.

As we continue to expand geographically into new states and further expand our presence in our existing territories, we expect growth in our active ventilator patient base and ventilator rental revenue, as well as in our other growing respiratory offerings, though 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 three months ended September 30, 2020, cost of revenue totaled $14.0 million, an increase of $7.7 million (or 121.5%) from the comparable period in 2019.

COVID-19 response sales and services accounted for $5.6 million (or 39.8%) of these costs.

For the three months ended September 30, 2020 and 2019, gross profit percentage decreased from approximately 69.0% to approximately 58.2%.

For the three months ended March 31, 2021, cost of revenue totaled $10.7 million, an increase of $2.4 million (or 29.3%) from the comparable period in 2020.

For the three months ended March 31, 2021, COVID-19 response sales and services accounted for $1.9 million (or 17.7%) of these costs, compared to $0.6 million (or 6.9%) of these costs from the comparable period in 2020.

Gross profit percentage decreased from approximately 65.3% in the three months ended March 31, 2020 to approximately 62.4% in the three months ended March 31, 2021.

The decreased margins were primarily the result of the above mentioned COVID-19 response sales and services which contributed a weighted average gross profit percentage of 36.2%.

Excluding COVID-19 response sales and services, gross profit percentage for the three months ended September 30, 2020 was 66.2%.

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 respiratory therapists.

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

Excluding COVID-19 response sales and services, gross profit percentage for the three months ended March 31, 2021 and 2020 was 65.5% and 66.2%, respectively.

The reduction in overall 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 current pandemic in the short term, we have not experienced a corresponding change in the number of RTs employed.

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

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

September 30, 2020 and 2019

Selling, general & administrative expense

For the three months ended September 30, 2020, selling, general and administrative expenses totaled $13.6 million, an increase of $3.3 million (or 32.4%) from the comparable prior period.

Selling, general, and administrative expenses as a percentage of revenue decreased to 40.5% for the three months ended September 30, 2020 compared to 50.2% for the three months ended September 30, 2019.

Selling general and administrative expenses for the three months ended September 30, 2020 include $512,000 for direct selling expenses related to COVID-19 response sales and services.

Excluding both the impact of the COVID-19 response sales and services and direct expenses, selling, general, and administrative expenses as a percentage of revenue was 52.4% for the three months ended September 30, 2020.

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 additional 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.

March 31, 2021 and 2020

Selling, general and administrative expense

For the three months ended March 31, 2021, selling, general and administrative expenses totaled $14.5 million, an increase of $3.9 million (or 37.2%) from the comparable prior period.

Selling, general, and administrative expenses as a percentage of revenue increased to 51.1% for the three months ended March 31, 2021 compared to 44.4% for the three months ended March 31, 2020.

The increase in overall selling, general and administrative expense as compared to the prior period is attributable to additional employee related expenses to accommodate the overall growth of the Company.

Our full time employee count increased from 469 on March 31, 2020 to 528 on March 31, 2021, an increase of 12.6%.

Employee compensation expenses increased $3.9 million (or 76.7%) as a result of higher incentive-based compensation and an overall increase in our employee headcount.

Our full time employee count increased from 411 on September 30, 2019 to 499 on September 30, 2020, an increase of 21.4%.

Partially offsetting these increases, was a $0.6 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 three months ended September 30, 2020 our stock price declined by 10.0% compared to an increase of 2.4% during the three months ended September 30, 2019, resulting in lower comparable expenses related to these awards in the current period.

Additionally, professional fees increased $1.0 million for the comparable period, driven by higher legal and consulting 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 accordingly.

We expect that selling, general and administrative expenses, in absolute terms, will remain relatively consistent with the current quarter through the end of 2020.

Also included in the employee compensation expense increases was a $3.2 million increase related to the impact of our phantom stock plan.

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

During the three months ended March 31, 2021, our stock price increased by 30.4% compared to a decrease of 23.2% for the previous period.

During the three months ended March 31, 2021, volatility of our stock price resulted in higher comparable expenses related to these awards of $2.5 million compared to a benefit of $0.7 million in the prior comparable period.

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 will stabilize through the end of 2021, resulting in a reduction of selling, general and administrative expenses as a percentage of revenue.

Research and development

For the three months ended March 31, 2021, research and development expense totaled $0.3 million, an increase of $0.2 million (or 94.8%) from the comparable period in 2020.

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

Loss on disposal of property and equipment

For the three months ended September 30, 2020, we recorded a loss on disposal of property and equipment of $0.2 million.

This was consistent with the prior period and remained less than 1% of revenue.

In prior 2020 periods, as a result of our efforts for the COVID-19 response, certain of our previously placed in service property and equipment was sold and substantial gains resulting from these disposals was recognized.

No such disposals occurred in the current period.

For the three months ended March 31, 2021, we recorded a loss on disposal of property and equipment of $0.1 million, compared to a gain of $1.2 million during the comparable period in 2020.

During the three months ended March 31, 2020, as a result of our COVID-19 response efforts, certain of our previously placed in service property and equipment was sold and substantial gains resulting from these disposals was recognized.

We expect disposals of equipment to generally remain consistent with historical trends, with the exception of any 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.

Stock-based compensation

For the three months ended September 30, 2020, stock-based compensation totaled $1.2 million, an increase of $0.2 million (or 16.0%) from the comparable period in 2019.

For the three months ended March 31, 2021, stock-based compensation totaled $1.3 million, an increase of $0.2 million (or 13.6%) from the comparable period in 2020.

This increase is attributable to the expense of additional stock-based awards during 2021.

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Interest expense, net

For the three months ended September 30, 2020, net interest expense totaled $0.1 million, which remained consistent with the comparable period in 2019.

We expect net interest expense to remain relatively consistent through the end of 2020.

Provision for income taxes

For the three months ended September 30, 2020, the provision for income taxes was a $1.1 million expense, compared to a $0.1 million expense during the 2019 period.

The increase in income tax expense was primarily due to a higher effective tax rate during the current period.

Excluding the impact of the current year discrete items for the release of valuation allowances and the recognition of a deferred tax asset, our estimated tax rate for the year was 12.3%.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

C omparison of the Nine Months Ended September 30, 2020 and 2019:

The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

2020 % of Total Revenue 2019 % of Total Revenue $

Revenue $ 100,107 100.0 % $ 58,808 100.0 % $ 41,299 70.2 %

Cost of revenue 39,174 39.1 % 17,045 29.0 % 22,129 129.8 %

Gross profit 60,933 60.9 % 41,763 71.0 % 19,170 45.9 %

Selling, general and administrative 40,555 40.5 % 31,207 53.1 % 9,348 30.0 %

Research and development 688 0.7 % 645 1.1 % 43 6.7 %

Stock-based compensation 3,581 3.6 % 2,978 5.1 % 603 20.2 %

Depreciation 612 0.6 % 460 0.8 % 152 33.0 %

(Gain) loss on disposal of property and equipment (2,424) (2.4) % 308 0.5 % (2,732) NM

Other (income) expense (3,593) (3.6) % (1) — % (3,592) NM

Income from operations 21,514 21.5 % 6,166 10.5 % 15,348 248.9 %

Non-operating expenses

Unrealized (gain) on warrant conversion liability — — % (363) (0.6) % 363 (100.0) %

(Gain) loss from equity investment (36) — % 77 0.1 % (113) (146.8) %

Interest expense, net 409 0.4 % 102 0.2 % 307 NM

Net income before taxes 21,141 21.1 % 6,350 10.8 % 14,791 232.9 %

(Benefit) provision for income taxes (5,318) (5.3) % 213 0.4 % (5,531) NM

Net income $ 26,459 26.4 % $ 6,137 10.4 % $ 20,322 331.1 %

The following table summarizes our revenue for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

2020 % of Total Revenue 2019 % of Total Revenue $

Net revenue from rentals under Topic 842

Ventilator rentals, non-invasive and invasive $ 58,672 58.6 % $ 50,990 86.7 % $ 7,682 15.1 %

Other durable medical equipment rentals 7,184 7.2 % 3,464 5.9 % 3,720 107.4 %

Net revenue from sales and services under Topic 606

Equipment and supply sales 3,962 3.9 % 3,202 5.4 % 760 23.7 %

COVID-19 response sales and services 29,306 29.3 % — — % 29,306 100.0 %

Service revenues 983 1.0 % 1,152 2.0 % (169) (14.7) %

Total net revenue $ 100,107 100.0 % $ 58,808 100.0 % $ 41,299 70.2 %

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

For the nine months ended September 30, 2020, revenue totaled $100.1 million, an increase of $41.3 million (or 70.2%) from the comparable period in 2019.

The revenue growth was primarily driven by COVID-19 response sales and services of $29.3 million as described in more detail above.

We expect further COVID-19 response revenue during the remainder of 2020, but the quantity and impact of such revenue 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.

Excluding the COVID-19 response sales and services, net revenue increased $12.0 million (or 20.4%) from the comparable period in 2019.

Ventilator rental revenue increased $7.7 million (or 15.1%) due to our organic growth in active ventilator patient base.

In addition to the ventilator rental revenue growth, rental revenue from other DME grew $3.7 million (or 107.4%) which primarily consisted of product revenue from percussion vests, PAPs, and oxygen therapy.

Non-COVID-19 related equipment sales and services combined increased by $0.6 million (or 13.6%) 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.

Cost of revenue and gross profit

For the nine months ended September 30, 2020, cost of revenue totaled $39.2 million, an increase of $22.1 million (or 129.8%) from the comparable period in 2019.

For the nine months ended September 30, 2020 and 2019, gross profit percentage decreased from approximately 71.0% to approximately 60.9%.

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 nine months ended September 30, 2020, COVID-19 response sales and services accounted for 29.3% of total revenue, thus driving margin lower.

Excluding COVID-19 response sales and services, gross profit percentage for the nine months ended September 30, 2020 was 66.3%.

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 respiratory therapists.

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 respiratory therapists employed.

We believe it to be 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 (non-COVID-19 related) to remain relatively consistent with the current quarter through the end of 2020.

Selling, general & administrative expense

For the nine months ended September 30, 2020, selling, general and administrative expenses totaled $40.6 million, an increase of $9.3 million (or 30.0%) from the comparable period in 2019.

Selling, general, and administrative expenses as a percentage of revenue decreased to 40.5% for the nine months ended September 30, 2020, compared to 53.1% and for the nine months ended September 30, 2019.

Excluding the impact of the COVID-19 response sales and services, selling, general, and administrative expenses as a percentage of revenue was 56.6% for the nine months ended September 30, 2020.

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 additional 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 $2.8 million (or 15%) as a result of higher incentive based compensation and an overall increase in our employee headcount.

Our full time employee count increased from 411 on September 30, 2019 to 499 on September 30, 2020, an increase of 21.4%.

Partially offsetting these increases, was a $1.6 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 nine months ended September 30, 2020 our stock price increased by 39.4% compared to an increase of 74.8% during the nine months ended September 30, 2019, resulting in lower comparable expenses related to these awards in the current period.

Additionally, professional fees increased $1.9 million (or 135%) from the comparable period in 2019, driven by higher legal and consulting 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 accordingly.

We expect that selling, general and administrative expenses as a percentage of revenue will trend higher towards historical percentages toward the end of 2020.

For the three months ended March 31, 2021, net interest expense totaled $0.1 million, a decrease of $0.1 million (or 42.4%) from the comparable period in 2020.

We expect net interest expense to remain relatively consistent with the current quarter through the end of 2021.

Provision (benefit) for income taxes

For the three months ended March 31, 2021, the provision for income taxes was a $0.2 million benefit, compared to a $0.2 million expense during the 2020 period.

The decrease in income tax expense was primarily due to a discrete tax benefit of $0.9 million for excess tax benefits associated with stock-based compensation arrangements.

Excluding discrete items, our annual estimated effective tax rate for 2021 is 43.7%.

VIEMED HEALTHCARE, INC.

1 unchanged sentence

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

September 30, 2020 and 2019

(Gain) loss on disposal of property and equipment

For the nine months ended September 30, 2020, we recorded a gain on disposal of property and equipment of $2.4 million, compared to a loss of $0.3 million during the comparable period in 2019.

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

As a result, during the nine months ended September 30, 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

For the nine months ended September 30, 2020, other income totaled $3.6 million, an increase of $3.6 million from the comparable prior period.

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 as described in detail above.

Stock-based compensation

For the nine months ended September 30, 2020, stock-based compensation totaled $3.6 million, an increase of $0.6 million (or 20.2%) from the comparable period in 2019.

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 revenue has historically remained near or below 5%.

Interest expense, net

For the nine months ended September 30, 2020, net interest expense totaled $0.4 million, an increase of $0.3 million from the comparable period in 2019.

We expect net interest expense to remain materially consistent through the end of 2020.

(Benefit) provision for income taxes

For the nine months ended September 30, 2020, the provision for income taxes was a $5.3 million benefit, compared to a $0.2 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 12.3%.

March 31, 2021 and 2020

For the three months ended March 31, 2021, net income was $1.7 million, a decrease of $2.6 million (or 60.3%) from the comparable period in 2020.

Net income as a percentage of net revenue decreased from 17.8% for the three months ended March 31, 2020 to 5.9% for the three months ended March 31, 2021, primarily due to the increased selling, general and administrative expenses, as described above.

Non-GAAP Financial Measures

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However, we do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating costs.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

– 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.

7 unchanged sentences

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.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

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 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018

For the quarter ended March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019

Net Income $ 1,684 $ 5,071 $ 2,804 $ 19,412 $ 4,243 $ 2,388 $ 2,853 $ 1,326

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Liquidity and Capital Resources

Cash and cash equivalents at September 30, 2020 was $32.4 million, compared to $13.4 million at December 31, 2019.

Cash and cash equivalents at March 31, 2021 was $31.1 million, compared to $31.0 million at December 31, 2020.

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.

Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully undrawn as of September 30, 2020.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully undrawn as of March 31, 2021.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net Cash provided by (used in):

2 unchanged sentences

Financing activities (2,814) (3,842)

Net increase in cash and cash equivalents $ 19,041 $ 2,217

Net increase (decrease) in cash and cash equivalents $ 116 $ (4,946)

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the nine months ended September 30, 2020 was $29.3 million, resulting from net income of $26.5 million and non-cash net income adjustments of $7.3 million and an increase in net operating liabilities of $5.7 million, which was partially offset by an increase in net operating assets of $10.2 million.

The non-cash net income adjustments primarily consisted of $7.0 million in change of allowance for doubtful accounts, $6.7 million of depreciation, $2.4 million of gains on disposal of property and equipment, change in deferred tax asset of $7.6 million and $3.6 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $7.0 million and an increase in inventory of $1.4 million.

The changes in operating liabilities primarily consisted of an increase in accounts payable of $2.7 million and an increase in accrued liabilities of $2.4 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.

Net cash provided by operating activities during the nine months ended September 30, 2019 was $11.7 million, resulting from net income of $6.1 million, non-cash net income adjustments of $14.3 million, and an increase in net operating liabilities of $0.8 million, which was partially offset by an increase in net operating assets of $9.5 million.

Net cash provided by operating activities during the three months ended March 31, 2021 was $4.6 million, resulting from net income of $1.7 million and non-cash net income adjustments of $5.4 million and an increase in net operating liabilities of $0.4 million, which was partially offset by an increase in net operating assets of $2.8 million.

The non-cash net income adjustments primarily consisted of $1.8 million in change of allowance for doubtful accounts, $2.6 million of depreciation, $0.1 million of loss on disposal of property and equipment, $1.3 million of stock-based compensation, $0.2 million gain on equity investments and $0.2 million change in deferred tax asset.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $2.7 million, an increase in prepaid expenses and other current assets of $0.2 million, partially offset by a decrease in inventory of $0.1 million.

The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.4 million, partially offset by a decrease in accrued liabilities of $0.1 million.

Net cash provided by operating activities during the three months ended March 31, 2020 was $0.6 million, resulting from net income of $4.2 million, non-cash net income adjustments of $5.0 million, and an increase in net operating liabilities of $1.5 million, which was partially offset by an increase in net operating assets of $10.1 million.

The non-cash net income adjustments primarily consisted of $2.8 million in change of allowance for doubtful accounts, $2.1 million of depreciation and $1.2 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $9.8 million as a result of increased revenue growth, which was partially offset by a decrease in inventory of $1.6 million.

The changes in operating liabilities primarily consisted of a decrease in accounts payable of $1.8 million, partially offset by increases in accrued liabilities of $1.9 million and deferred revenue of $0.8 million.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $6.8 million, which was partially offset by a decrease in inventory of $0.4 million.

The changes in operating liabilities primarily consisted of a decrease in accounts payable of $3.6 million, partially offset by an increase in accrued liabilities of $2.4 million.

The increase in our operating assets was primarily driven by accounts receivable related to COVID-19 response sales occurring at the end of the quarter.

Additionally, prepaid expenses and other current assets increased as a result of deposits related to ventilator supplies.

Net Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2020 was $3.0 million, consisting of $8.2 million of purchases of property and equipment, partially offset by $5.2 million of COVID-19 response sales proceeds from the disposal of property and equipment.

Net cash used in investing activities during the three months ended March 31, 2021 was $1.7 million, consisting of $1.8 million of purchases of property and equipment, partially offset by $0.1 million of 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 $8.2 million and equipment financed through finance leases of $3.0 million, our total capital expenditures for the nine months ended September 30, 2020 were $11.2 million.

Combining cash purchases of property and equipment and equipment financed through finance leases, our total capital expenditures for the three months ended March 31, 2021 were $1.8 million.

This represents a $5.4 million, or 75.0%, decrease year over year.

Net cash used in investing activities during the nine months ended September 30, 2019 was $10.2 million, consisting of $10.6 million of purchases of property and equipment, partially offset by $0.4 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 $10.6 million and equipment financed through finance leases of $14.7 million, our total capital expenditures for the nine months ended September 30, 2019 was $25.3 million.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities during the nine months ended September 30, 2020 was $7.2 million, consisting of $1.2 million in principal payments on the Term Note (as defined below) and $7.7 million in repayments of finance lease liabilities, partially offset by $1.8 million proceeds from the exercise of stock options.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

Net cash provided by financing activities during the nine months ended September 30, 2019 was $0.8 million, consisting of $4.8 million in proceeds from the Building Term Note (as defined below) to finance the purchase of our corporate headquarters, $5.0 million in proceeds from the Term Note, partially offset by $7.9 million in repayments of finance lease liabilities and $1.5 million of shares repurchased and canceled under our normal course issuer bid.

Net cash used in investing activities during the three months ended March 31, 2020 was $1.7 million, consisting of $4.2 million of purchases of property and equipment, partially offset by $2.5 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 $4.2 million and equipment financed through finance leases of $3.0 million, our total capital expenditures for the three months ended March 31, 2020 were $7.2 million.

Net Cash Used in Financing Activities

Net cash used in financing activities during the three months ended March 31, 2021 was $2.8 million, consisting of $0.4 million in principal payments on the Term Note (as defined below), $1.0 million in repayments of finance lease liabilities, and $1.4 million for shares redeemed and canceled for tax withholding in connection with RSUs vested in the period.

Net cash used in financing activities during the three months ended March 31, 2020 was $3.8 million, consisting of $0.4 million in proceeds from the new Term Note, partially offset by $3.4 million in repayments of finance lease liabilities.

Line of Credit

1 unchanged sentence

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 September 30, 2020 or December 31, 2019.

There were no borrowings against this line of credit at March 31, 2021 or December 31, 2020.

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 above.

Under the Commercial Business Loan Agreement, the Company is subject to several restrictive covenants that, among other things, impose operating and financial restrictions on the Company.

Financial covenants include a Total Debt to Adjusted EBITDA, a Loan-to-Value Ratio and a Fixed Charged Coverage Ratio, as defined in the Credit Agreement.

The Credit Agreement also contains certain customary events of default, including, among other things, failure to make payments when due thereunder and

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

failure to observe or perform certain covenants.

The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at March 31, 2021.

Commercial Term Notes

2 unchanged sentences

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 borrower, including the real property acquired with the proceeds of the Building Term Note.

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.

4 unchanged sentences

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 borrower.

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 September 30, 2020

Total Debt to Adjusted EBITDA (Quarterly) not more than 1.50:1.00 0.35

Fixed Charge Coverage Ratio (Quarterly) not less than 1.35:1.00 2.75

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 September 30, 2020.

Sources of funds

Our cash provided by operating activities in the nine months ended September 30, 2020 was $29.3 million compared to $11.7 million in the nine months ended September 30, 2019.

Our cash provided by operating activities in the three months ended March 31, 2021 was $4.6 million compared to $0.6 million in the three months ended March 31, 2020.

HHS Provider Relief Funds

The Company received $3.5 million of Provider Relief Funds from the United States Department of Health and Human Services (“HHS”) provided to eligible healthcare providers out of the $100 billion Public Health and Social Services Emergency Fund provided for in the CARES Act.

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 Department of Health and Human Services has stated that Provider Relief Fund payments are not loans and will not need to be repaid.

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.

2 unchanged sentences

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.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

As of September 30, 2020, we had cash and cash equivalents of $32.4 million.

As of March 31, 2021, we had cash and cash equivalents of $31.1 million.

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

5 unchanged sentences

Any additional equity financing may be dilutive to our stockholders.

For the three months ended March 31, 2021, the Company repurchased and canceled 181,320 common shares at a cost of $1.4 million due to tax withholding for RSUs vesting.

The Company’s retained earnings were reduced by the amount paid for the shares repurchased for cancellation.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

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

5 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 $175,000 and $120,000 for the three months ended September 30, 2020 and 2019, respectively, and $577,000 and $455,000 for the nine months ended September 30, 2020 and 2019, respectively.

Matching employer contributions to the 401(k) plan totaled $174,000 and $179,000 for the three months ended March 31, 2021 and 2020, respectively.

Off balance sheet arrangements

8 unchanged sentences

We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

Revenue recognition

3 unchanged sentences

The Company considers these rentals to be operating leases.

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.

Under FASB ASC 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.

5 unchanged sentences

Revenue Accounting under Topic 606

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

We sell 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.

We also provide sleep study services to customers and recognize 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 we expect to receive in exchange for the goods and services provided.

We also provide sleep study services to customers and recognize revenue when the sleep study results are complete, satisfying the performance obligation.

In response to the COVID-19 pandemic, we 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 we expect 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 we are ultimately paid.

11 unchanged sentences

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.

We do not offer warranties to customers in excess of the manufacturer’s warranty.

Any taxes due upon sale of the products or services are not recognized as revenue.

We do not have any partially or unfilled performance obligations related to contracts with customers and as such, we have no contract liabilities as of September 30, 2020.

We do not have any partially or unfilled performance obligations related to contracts with customers and as such, we have no contract liabilities as of March 31, 2021.

Allowance for doubtful accounts

2 unchanged sentences

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

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

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.

A change in estimate could impact bad debt expense and accounts receivable.

Our allowance for doubtful accounts was $8.8 million and $7.7 million as of September 30, 2020 and 2019, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

Our allowance for doubtful accounts was $8.0 million and $10.2 million as of March 31, 2021 and 2020, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

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 cost for restricted stock units are determined at the grant date based on the closing stock price.

Stock-based compensation cost 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.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2021 and 2020

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.

Interest rate swaps

17 unchanged sentences

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.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

September 30, 2020 and 2019

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

Recently Issued Accounting Pronouncements

1 unchanged sentence

VIEMED HEALTHCARE, INC.

September 30, 2020 and 2019

March 31, 2021 and 2020

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

This item is not applicable to smaller reporting companies.

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-Q

Item 2. Management’s Discussion and Analysis