VIEMED HEALTHCARE, INC. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified entirely by, our condensed consolidated financial statements (including Notes to the Condensed Consolidated Financial Statements) and the other consolidated financial information under Item 1 of this Quarterly Report on Form 10-Q. Some of the information in this discussion and analysis includes forward-looking statements that involve risk and uncertainties. Actual results and timing of events could differ from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. We are closely monitoring the impact of the COVID-19 pandemic on our business. The suspension of Medicare sequestration through December 31, 2021 (resulting in a 2% increase in Medicare payments to all providers) and regulatory guidance from CMS expanding telemedicine and reducing documentation requirements during the emergency period are expected to result in increased revenues for certain products and services. However, based on the duration and severity of the impacts of the COVID-19 pandemic, including but not limited to 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 are uncertain of the ultimate impact COVID-19 could have on our business, financial condition and results of operations. Forward-Looking Statements Certain statements and information in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 or "forward-looking information" as such term is defined in applicable Canadian securities legislation (collectively, "forward-looking statements"). Any statements other than statements of historical information, including those that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. These forward-looking statements are made as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements relate to future events or future performance and reflect the expectations or beliefs of management regarding future events, and include, but are not limited to, statements with respect to: operating results; profitability; financial condition and resources; anticipated needs for working capital; liquidity; capital resources; capital expenditures; milestones; licensing milestones; information with respect to future growth and growth strategies; anticipated trends in our industry; our future financing plans; timelines; currency fluctuations; government regulation; unanticipated expenses; commercial or governmental disputes or claims; limitations on insurance coverage or other reimbursement; and availability of cash flow to fund capital requirements. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “potential”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes”, “projects”, or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results “will”, “should”, “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable. We cannot assure you, however, that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Page 24 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 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. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, and with the securities regulatory authorities in certain provinces of Canada, which contribute to the possibility that the predicted outcomes may not occur or may be delayed. The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to: 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, revenues, employees, and equipment and supplies; significant capital requirements and operating risks that we may be subject to; our ability to implement business strategies and pursue business opportunities; volatility in the market price of our common shares; our novel business model; the risk that the clinical application of treatments that demonstrate positive results in a study may not be positively replicated or that such test results may not be predictive of actual treatment results or may not result in the adoption of such treatments by providers; the state of the capital markets; the availability of funds and resources to pursue operations; reductions in reimbursement rates and audits of reimbursement claims by various governmental and private payor entities; dependence on few payors; possible new drug discoveries; dependence on key suppliers and the recall of certain Royal Philips BiPAP and CPAP devices and ventilators that we distribute and sell; granting of permits and licenses in a highly regulated business; competition; low profit market segments; disruptions in or attacks (including cyber-attacks) on our information technology, internet, network access or other voice or data communications systems or services; the evolution of various types of fraud or other criminal behavior to which we are exposed; the failure of third parties to comply with their obligations; difficulty integrating newly acquired businesses; the impact of new and changes to, or application of, current laws and regulations; the overall difficult litigation and regulatory environment; increased competition; changes in foreign currency rates; increased funding costs and market volatility due to market illiquidity and competition for funding; critical accounting estimates and changes to accounting standards, policies, and methods used by us; 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. General Matters In this Quarterly Report on Form 10-Q, 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 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. Unless otherwise noted herein, all references to "$" or "USD" are to the currency of the United States and references to "CAD$" or "Canadian dollars" are to the currency of Canada. Page 25 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Overview We provide an array of home medical equipment, services and supplies, specializing in post-acute respiratory care services in the United States. Our primary objective is to focus on the organic growth of the business and thereby solidify our position as one of the United States’ largest providers of in-home therapy for patients suffering from respiratory diseases. Our respiratory care programs are designed specifically for payors to have the ability to treat patients in the home for less total cost and with a superior quality of care. Our services include respiratory disease management (through the rental of various DME devices), in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies. We hold an approximate 10% equity interest in VeruStat, Inc, a 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 can be placed in the home in conjunction with Viemed’s existing patient engagement platform (“PEP”). During the three months ended September 30, 2021, we formed Viemed Healthcare Staffing LLC, a healthcare staffing division. The underlying recruiting platform is expected to support internal resource fulfillment as well as external, contractual placement of allied health and nursing professionals. We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 76.5% and 80.2% of our traditional revenue, excluding COVID-19 response sales and services, for the three months ended September 30, 2021 and 2020, respectively, and 77.9% and 82.9% for the nine months ended September 30, 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. We expect to grow through expansion of existing service areas as well as in new regions through a cost efficient launch that reduces location expenses. Our licensed RTs currently serve patients in 46 states. 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, 2021, we employed 280 licensed RTs, representing approximately 47% of our company-wide employee count. By focusing overhead costs on personnel that service the patient rather than physical location costs, we anticipate that we will efficiently scale our business in regions that are currently not being effectively serviced. The continued trend of servicing patients in the home rather than in hospitals is aligned with our business objective and we anticipate that this trend will continue to offer growth opportunities for us. We expect to continue to be a solution to the rising health costs in the United States by offering more cost effective, home based solutions while increasing the quality of life for patients fighting serious respiratory diseases. 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 have not had a material adverse impact on our consolidated operating results for the three months ended September 30, 2021, but we have experienced curtailment of revenue growth in certain of our product categories due to the disruption in our access to physician and facility referral sources. This curtailment was slightly offset by revenue related to COVID-19 response sales and services. 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. Page 26 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 The Coronavirus Aid, Relief, and Economic Security (“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 $175 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 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. 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. 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. 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 may experience adverse effects. 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 77.9% of total traditional revenue, excluding COVID-19 response sales and services, for the nine months ended September 30, 2021). 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 no sooner than 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, however, we are uncertain if non-invasive ventilators, oxygen, and PAP devices will be included in future competitive bidding programs. 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, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Financial Information: Revenue $ 29,285 $ 27,399 $ 28,416 $ 31,202 $ 33,447 $ 42,854 $ 23,806 $ 21,448 Gross Profit 18,381 17,625 17,742 19,178 19,453 25,927 15,553 14,243 Gross Profit % 63 % 64 % 62 % 61 % 58 % 61 % 65 % 66 % Net Income 1,789 1,566 1,684 5,071 2,804 19,412 4,243 2,388 Cash (As of) 26,867 31,151 31,097 30,981 32,396 29,707 8,409 13,355 Total Assets (As of) 115,486 111,014 113,001 112,560 113,969 112,178 86,801 82,596 Adjusted EBITDA (1) 7,419 6,847 5,468 9,458 7,720 16,287 7,869 5,569 Operational Information: Vent Patients (2) 8,200 8,103 7,733 7,892 7,788 7,705 7,965 7,759 (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. Page 27 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Results of Operations Comparison of the Three Months Ended September 30, 2021 and 2020: The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020: Three Months Ended September 30, 2021 % of Total Revenue 2020 % of Total Revenue $ Change % Change Revenue $ 29,285 100.0 % $ 33,447 100.0 % $ (4,162) (12.4) % Cost of revenue 10,904 37.2 % 13,994 41.8 % (3,090) (22.1) % Gross profit 18,381 62.8 % 19,453 58.2 % (1,072) (5.5) % Selling, general and administrative 13,260 45.3 % 13,550 40.5 % (290) (2.1) % Research and development 576 2.0 % 243 0.7 % 333 137.0 % Stock-based compensation 1,302 4.4 % 1,234 3.7 % 68 5.5 % Depreciation 211 0.7 % 202 0.6 % 9 4.5 % Loss on disposal of property and equipment 145 0.5 % 203 0.6 % (58) (28.6) % Other expense (income) (32) (0.1) % (19) (0.1) % (13) 68.4 % Income from operations 2,919 10.0 % 4,040 12.1 % (1,121) (27.7) % Non-operating income and expenses Income from equity method investments (331) (1.1) % (21) (0.1) % (310) 1476.2 % Interest expense, net 75 0.3 % 116 0.3 % (41) (35.3) % Net income before taxes 3,175 10.8 % 3,945 11.8 % (770) (19.5) % Provision for income taxes 1,386 4.7 % 1,141 3.4 % 245 21.5 % Net income $ 1,789 6.1 % $ 2,804 8.4 % $ (1,015) (36.2) % Revenue The following table summarizes our revenue for the three months ended September 30, 2021 and 2020: Three Months Ended September 30, 2021 % of Total Revenue 2020 % of Total Revenue $ Change % Change Net revenue from rentals Ventilator rentals, non-invasive and invasive $ 21,305 72.8 % $ 19,962 59.6 % $ 1,343 6.7 % Other durable medical equipment rentals 3,598 12.3 % 2,649 7.9 % 949 35.8 % Net revenue from sales and services Equipment and supply sales 2,415 8.2 % 1,890 5.7 % 525 27.8 % COVID-19 response sales and services 1,452 4.9 % 8,553 25.6 % (7,101) (83.0) % Service revenues 515 1.8 % 393 1.2 % 122 31.0 % Total net revenue $ 29,285 100.0 % $ 33,447 100.0 % $ (4,162) (12.4) % For the three months ended September 30, 2021, net revenue totaled $29.3 million, a decrease of $4.2 million (or 12.4%) from the comparable period in 2020. Excluding COVID-19 response sales and services revenue, net revenue increased $2.9 million (or 11.8%) from the comparable period in 2020. The non-COVID-19 related net revenue growth was driven by an increase in ventilator rental revenue of $1.3 million (or 6.7%) and rental revenue from other DME of $0.9 million (or 35.8%) primarily associated with oxygen and PAP rentals. Non-COVID-19 related equipment sales and services combined increased by $0.6 million (or 28.3%) from the comparable three month period in 2020, primarily as a result of increasing demand for PAPs and respiratory supplies for our PAP patients. Page 28 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 During the three months ended September 30, 2021, net revenue for COVID-19 response sales and services totaled $1.5 million, compared to $8.6 million during the comparable three month period in 2020 during the height of the pandemic. Current period COVID-19 response sales and services consist primarily of contact and vaccination tracing services. While we expect further COVID-19 response related revenue during the remainder of 2021, the 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 and further penetrate 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 occur at a slightly slower rate than historically realized. Cost of revenue and gross profit For the three months ended September 30, 2021, cost of revenue totaled $10.9 million, a decrease of $3.1 million (or 22.1%) from the comparable period in 2020. For the three months ended September 30, 2021, COVID-19 response sales and services accounted for $0.9 million (or 7.9%) of these costs, compared to $5.6 million (or 39.8%) of these costs from the comparable period in 2020. Gross profit percentage increased from 58.2% in the three months ended September 30, 2020 to 62.8% in the three months ended September 30, 2021. The increase in overall gross profit percentage is due to declines in lower margin COVID-19 response sales and services as well as fluctuations in product and service mix. 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 2021. Selling, general and administrative expense For the three months ended September 30, 2021, selling, general and administrative expenses totaled $13.3 million, a decrease of $0.3 million (or 2.1%) from the comparable prior period. Excluding COVID-19 related revenues, selling, general and administrative expenses as a percentage of revenue decreased to 47.6% for the three months ended September 30, 2021 compared to 52.4% for the three months ended September 30, 2020. The decrease in overall selling, general and administrative expense as compared to the prior period is primarily attributable to a decrease in employee related expenses associated with variable and incentive based compensation. Phantom stock compensation expense also decreased by $0.4 million related to the impact from remeasurement of our phantom stock plan. As we continue to grow into new markets and increase our employee count, we expect selling, general and administrative expenses will grow proportionally as a percentage of revenue through the end of 2021. Research and development For the three months ended September 30, 2021, research and development expense totaled $0.6 million, an increase of $0.3 million (or 137.0%) 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. Stock-based compensation For the three months ended September 30, 2021, stock-based compensation totaled $1.3 million, an increase of $0.1 million (or 5.5%) from the comparable period in 2020. 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 three months ended September 30, 2021, net interest expense totaled $0.1 million, remaining consistent with the comparable period in 2020. We expect net interest expense to remain relatively consistent with the current quarter through the end of 2021. Provision for income taxes For the three months ended September 30, 2021, the provision for income taxes was a $1.4 million expense, compared to a $1.1 million expense during the 2020 period, an increase of $0.2 million (or 21.5%). Excluding the benefit of discrete items, our annual estimated effective tax rate for 2021 is 43.4%. Page 29 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Net income For the three months ended September 30, 2021, net income was $1.8 million, a decrease of $1.0 million (or 36.2%) from the comparable period in 2020. Net income as a percentage of net revenue decreased from 8.4% for the three months ended September 30, 2020 to 6.1% for the three months ended September 30, 2021, primarily due to the decrease in COVID-19 related activities and the increase in the provision for income taxes, as described above. Comparison of the Nine Months Ended September 30, 2021 and 2020: The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020: Nine Months Ended September 30, 2021 % of Total Revenue 2020 % of Total Revenue $ Change % Change Revenue $ 85,100 100.0 % $ 100,107 100.0 % $ (15,007) (15.0) % Cost of revenue 31,352 36.8 % 39,174 39.1 % (7,822) (20.0) % Gross profit 53,748 63.2 % 60,933 60.9 % (7,185) (11.8) % Selling, general and administrative 40,653 47.8 % 40,555 40.5 % 98 0.2 % Research and development 1,498 1.8 % 688 0.7 % 810 117.7 % Stock-based compensation 3,845 4.5 % 3,581 3.6 % 264 7.4 % Depreciation 618 0.7 % 612 0.6 % 6 1.0 % Loss (gain) on disposal of property and equipment 304 0.4 % (2,424) (2.4) % 2,728 NM Other expense (income) (85) (0.1) % (3,593) (3.6) % 3,508 (97.6) % Income from operations 6,915 8.1 % 21,514 21.5 % (14,599) (67.9) % Non-operating income and expenses Income from equity method investments (782) (0.9) % (36) — % (746) NM Interest expense, net 249 0.3 % 409 0.4 % (160) (39.1) % Net income before taxes 7,448 8.8 % 21,141 21.1 % (13,693) (64.8) % Provision (benefit) for income taxes 2,409 2.8 % (5,318) (5.3) % 7,727 NM Net income $ 5,039 5.9 % $ 26,459 26.4 % $ (21,420) (81.0) % Page 30 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Revenue The following table summarizes our revenue for the nine months ended September 30, 2021 and 2020: Nine Months Ended September 30, 2021 % of Total Revenue 2020 % of Total Revenue $ Change % Change Net revenue from rentals Ventilator rentals, non-invasive and invasive $ 61,962 72.8 % $ 58,672 58.6 % $ 3,290 5.6 % Other durable medical equipment rentals 9,833 11.5 % 7,184 7.2 % 2,649 36.9 % Net revenue from sales and services Equipment and supply sales 6,258 7.4 % 3,962 3.9 % 2,296 58.0 % COVID-19 response sales and services 5,542 6.5 % 29,306 29.3 % (23,764) (81.1) % Service revenues 1,505 1.8 % 983 1.0 % 522 53.1 % Total net revenue $ 85,100 100.0 % $ 100,107 100.0 % $ (15,007) (15.0) % For the nine months ended September 30, 2021, revenue totaled $85.1 million, a decrease of $15.0 million (or 15.0%) from the comparable period in 2020. Non-COVID-19 related net revenue increased $8.8 million (or 12.4%) from the comparable period in 2020. Ventilator rental revenue increased $3.3 million (or 5.6%) due to our growth in active ventilator patient base. In addition to the ventilator rental revenue growth, rental revenue from other DME grew $2.6 million (or 36.9%) primarily from oxygen therapy and PAPs. In the short term, we anticipate our growth to occur at a slower rate than in historical periods as a result of the pandemic. Non-COVID-19 related equipment sales and services combined increased by $2.8 million (or 57.0%) from the comparable period in 2020, primarily as a result of increasing demand for home sleep studies, PAPs, and associated supplies for our PAP patients. Cost of revenue and gross profit For the nine months ended September 30, 2021, cost of revenue totaled $31.4 million, a decrease of $7.8 million (or 20.0%) from the comparable period in 2020. For the nine months ended September 30, 2021, COVID-19 response sales and services accounted for $3.5 million (or 11.1%) of these costs, compared to $15.3 million (or 39.1%) of these costs from the comparable period in 2020. Gross profit percentage increased from 60.9% in the nine months ended September 30, 2020 to 63.2% in the nine months ended September 30, 2021. The increase in overall gross profit percentage is due to declines in lower margin COVID-19 response sales and services as well as fluctuations in product and service mix. 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 2021. Selling, general and administrative expense For the nine months ended September 30, 2021, selling, general and administrative expenses totaled $40.7 million, an increase of $0.1 million (or 0.2%) from the comparable period in 2020. Excluding COVID-19 related revenues, selling, general and administrative expenses as a percentage of net revenue decreased to 51.1% for the nine months ended September 30, 2021, compared to 56.6% for the nine months ended September 30, 2020. The decrease in selling, general and administrative expense as a percentage of non-COVID-19 related revenues as compared to the prior year period is attributable to lower variable and incentive based employee compensation partially offset by higher employee related expenses to accommodate the overall growth of the Company, as our full time employee count increased to 597 at September 30, 2021, compared to 499 at September 30, 2020, an increase of 19.6%. We expect selling, general and administrative expenses will grow proportionally as a percentage of revenue through the end of 2021. Research and development For the nine months ended September 30, 2021, research and development expense totaled $1.5 million, an increase of $0.8 million (or 117.7%) 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. Page 31 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Loss on disposal of property and equipment For the nine months ended September 30, 2021, we recorded a loss on disposal of property and equipment of $0.3 million, compared to a gain of $2.4 million during the comparable period in 2020. 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 during the nine month period ended September 30, 2020. As a result, we recorded a net gain on disposal for related equipment during the prior comparable period. We expect disposals of equipment to generally remain consistent with historical trends, excluding COVID-19 related disposals, through the remainder of the year. Other expense (income) During nine months ended September 30, 2020, we recorded income from the receipt of Provider Relief Fund payments 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. There was no receipt of payments from the Provider Relief Fund during the nine months ended September 30, 2021. Stock-based compensation For the nine months ended September 30, 2021, stock-based compensation totaled $3.8 million, an increase of $0.3 million (or 7.4%) from the comparable period in 2020. 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 under 5%. Interest expense, net For the nine months ended September 30, 2021, net interest expense totaled $0.2 million, a decrease of $0.2 million (or 39.1%) from the comparable period in 2020, as a result of declines in index rates associated with loans. We expect net interest expense to remain materially consistent through the end of 2021. Provision (benefit) for income taxes For the nine months ended September 30, 2021, the provision for income taxes was a $2.4 million expense, compared to a $5.3 million benefit during the 2020 period. During the nine month period ended September 30, 2020, the Company determined it was more likely than not that deferred tax assets would be realized and made an adjustment to the deferred tax asset valuation allowance, which resulted in a net benefit for the period. Excluding the benefit of discrete items, our annual estimated effective tax rate for 2021 is 43.4%. Net income For the nine months ended September 30, 2021, net income was $5.0 million, a decrease of $21.4 million (or 81.0%) from the comparable period in 2020. Net income as a percentage of revenue decreased from 26.4% for the nine months ended September 30, 2020 to 5.9% for the nine months ended September 30, 2021, driven by a decrease in COVID-19 related sales and the comparative benefit from income taxes in the prior period, as described above. Non-GAAP Financial Measures The Company uses Adjusted EBITDA, which is a financial measure that is not prepared in accordance with generally accepted accounting principles in the United States ("GAAP") to analyze its financial results and believes that it is useful to investors, as a supplement to U.S. GAAP measures. Management believes Adjusted EBITDA provides helpful information with respect to the Company’s operating performance as viewed by management, including a view of the Company’s business that is not dependent on the impact of the Company’s capitalization structure and items that are not part of the Company’s day-to-day operations. Management uses Adjusted EBITDA (i) to compare the Company’s operating performance on a consistent basis, (ii) to calculate incentive compensation for the Company’s employees, (iii) for planning purposes, including the preparation of the Company’s internal annual operating budget, and (iv) to evaluate the performance and effectiveness of the Company’s operational strategies. Accordingly, management believes that Adjusted EBITDA provides useful information in understanding and evaluating the Company’s operating performance in the same manner as management. Page 32 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including interest, taxes and depreciation of property and equipment. Set forth below are descriptions of the financial items that have been excluded from net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income. – Depreciation may be useful for investors to consider because it generally represents the wear and tear on the property and equipment used in our operations. However, we do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating costs. – The amount of interest expense we incur or interest income we generate may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense or interest income to be a representative component of the day-to-day operating performance of our business. – Stock-based compensation may be useful for investors to consider because it is an estimate of the non-cash component of compensation received by the Company’s directors, officers, employees and consultants. However, stock-based compensation is being excluded from our operating expenses because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the Company’s long-term benefit over multiple periods. While strategic decisions, such as those to issue stock-based awards are made to further our long-term strategic objectives and do impact our earnings under GAAP, these items affect multiple periods and management is not able to change or affect these items within any period. – Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes and may reduce or increase the amount of funds otherwise available for use. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business. The following table is a reconciliation of Net income, the most directly comparable GAAP measure, to Adjusted EBITDA, on a historical basis for the periods indicated: For the quarter ended September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Net Income $ 1,789 $ 1,566 $ 1,684 $ 5,071 $ 2,804 $ 19,412 $ 4,243 $ 2,388 Add back: Depreciation 2,867 2,716 2,609 2,835 2,425 2,190 2,130 2,003 Interest expense 75 83 91 100 116 135 158 212 Stock-based compensation 1,302 1,236 1,307 1,301 1,234 1,196 1,151 908 Income tax expense (benefit) 1,386 1,246 (223) 151 1,141 (6,646) 187 58 Adjusted EBITDA $ 7,419 $ 6,847 $ 5,468 $ 9,458 $ 7,720 $ 16,287 $ 7,869 $ 5,569 Use of Non-GAAP Financial Measures Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of the Company's liquidity, and may not be comparable to other similarly titled measures of other businesses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Page 33 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Liquidity and Capital Resources Cash and cash equivalents at September 30, 2021 was $26.9 million, compared to $31.0 million at December 31, 2020. Based on our current plan of operations, 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, 2021. Cash Flows The following table summarizes our cash flows for the periods indicated: Nine Months Ended September 30, 2021 2020 Net Cash provided by (used in): Operating activities $ 13,839 $ 29,319 Investing activities (13,183) (3,047) Financing activities (4,770) (7,231) Net (decrease) increase in cash and cash equivalents $ (4,114) $ 19,041 Net Cash Provided by Operating Activities Net cash provided by operating activities during the nine months ended September 30, 2021 was $13.8 million, resulting from net income of $5.0 million and non-cash net income changes of $19.1 million, which was partially offset by a decrease in cash resulting from a change in operating assets and liabilities of $10.5 million. The non-cash net income changes primarily consisted of $5.3 million in change of allowance for doubtful accounts, $8.2 million of depreciation, $0.3 million of loss on disposal of property and equipment, $3.8 million of stock-based compensation, $0.8 million income from equity investments and $2.4 million of deferred income tax expense. The primary changes in operating assets and liabilities relate to an increase in accounts receivable of $5.6 million, an increase in prepaid expenses and other assets of $2.3 million, an increase in accounts payable of $2.6 million, a net increase in income taxes receivable/(payable) of $1.8 million, and a decrease in accrued liabilities of $3.7 million. 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, 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 Used in Investing Activities Net cash used in investing activities during the nine months ended September 30, 2021 was $13.2 million, consisting of $13.1 million of purchases of property and equipment and $0.6 million in equity investments, partially offset by $0.5 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 and equipment financed through finance leases, our total capital expenditures for the nine months ended September 30, 2021 were $13.1 million. This represents a $1.9 million, or 17.1%, increase year over year. Page 34 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 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. 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. Net Cash Used in Financing Activities Net cash used in financing activities during the nine months ended September 30, 2021 was $4.8 million, consisting of $1.3 million in principal payments on the Term Note (as defined below), $2.1 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 nine months ended September 30, 2020 was $7.2 million, consisting of $1.2 million in principal payments on the Term Note and $7.7 million in repayments of finance lease liabilities, partially offset by $1.8 million of proceeds from the exercise of stock options. 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 September 30, 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 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 September 30, 2021. 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”) 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 makes 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. The Company is required to maintain a loan to value ratio of 85% with respect to the appraised value of the real property. 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") 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 our assets. The Term Note bears interest at the rate of 4.60% per annum. Off balance sheet arrangements The Company has no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its results of operations or financial condition. Page 35 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Accounting and Disclosure Matters Critical Accounting Principles and Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those estimates related to allowance for doubtful accounts, inventory adjustments, impaired assets, income taxes, deferred tax valuation allowances and stock-based compensation costs. We state these accounting policies in the notes to the consolidated financial statements and at relevant sections in the Management's Discussion and Analysis of Financial Condition and Results of Operations. The estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions. We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements: Revenue recognition Revenue Accounting under Topic 842 We lease DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis. The customer generally has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases. 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. 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 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. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. Revenue Accounting under Topic 606 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 sleep study results are complete, satisfying the performance obligation. In response to the COVID-19 pandemic, we began offering contact and vaccine 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 and vaccine 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. 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. The transaction price therefore is predominantly based on contractual payment rates as determined by the payors. We do not generally contract with uninsured customers. The payment terms and conditions of customer contracts vary by customer type and the products and services offered. We determine our estimates of contractual allowances and discounts based upon contractual agreements, our policies and historical experience. While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient. We include in the transaction price only the amount that we expect 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. Page 36 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 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. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. Returns and refunds are not accepted on equipment sales, sleep study services or contact and vaccine 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, 2021. Allowance for doubtful accounts We estimate that a certain portion of receivables from customers may not be collected and maintain an allowance for doubtful accounts. We evaluate the net realizable value of accounts receivable as of the date of Consolidated Balance Sheets. Specifically, we consider historical realization data including current and historical cash collections, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the healthcare industry and third-party reimbursement, it is possible that the estimates could change, which could have a material impact on the operations 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 $7.1 million and $8.8 million as of September 30, 2021 and 2020, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses. Stock-based compensation We account for our stock-based compensation in accordance with ASC 718 —Compensation—Stock Compensation , which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. 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 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. 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 We utilize an interest rate swap contract to reduce our exposure to fluctuations in variable interest rates for future interest payments on Term Note. For determining the fair value of our interest rate swap contract, we use significant other observable market data or assumptions (Level 2 inputs) that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our 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 presents a positive ending period fair value of the interest rate swap contract in other long-term assets, as a component of long-term assets, and a negative ending period fair value of the interest rate swap contract in accrued liabilities, as a component of long-term liabilities on the Condensed Consolidated Balance Sheets. We recognize any differences between the variable interest rate payments and the fixed interest rate settlements from our swap counterparty as an adjustment to interest expense over the life of the swap. If determined to be effective cash flow hedges, we record the changes in the estimated fair value of the swaps to accumulated other comprehensive income or loss on our Condensed Consolidated Balance Sheets. To the extent our interest rate swaps are determined to be ineffective, we recognize the changes in the estimated fair value of our swaps in interest and other non-operating expenses, net on our Condensed Consolidated Statements of Income. Page 37 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) September 30, 2021 and 2020 Income taxes We are subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the provision for income taxes. Our income tax provisions reflect management’s interpretation of country and state tax laws. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and may remain uncertain for several years after their occurrence. We recognize assets and liabilities for taxation when it is probable that we will receive refunds or pay taxes to the relevant tax authority. Where the final determination of tax assets and liabilities is different from the amounts that were initially recorded, such differences will impact the current and deferred income taxes provision in the period in which such a determination is made. Changes in tax law or changes in the way tax law is interpreted may also impact our effective tax rate as well as our business and operations. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to temporary differences between the financial statement carrying value of assets and liabilities and their respective income tax bases. Deferred income tax assets or liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled. The calculation of current and deferred income taxes requires management to make estimates and assumptions and to exercise a certain amount of judgment concerning the carrying value of assets and liabilities. 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 Condensed Consolidated Balance Sheets and a charge to or recovery of income tax expense. Recently Issued Accounting Pronouncements See Note 2 – Summary of Significant Account Policies of the Notes to Condensed Consolidated Financial Statements for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows. Page 38 VIEMED HEALTHCARE, INC. September 30, 2021 and 2020 Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to smaller reporting companies.