What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-03 · 189 added, 111 removed, 282 unchanged (52% of the section changed)

35 unchanged sentences

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

March 31, 2022 and 2021

June 30, 2022 and 2021

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.

10 unchanged sentences

the availability of funds and resources to pursue operations;

reductions in reimbursement rates and audits of reimbursement claims by various govermental and private payor entities;

reductions in reimbursement rates and audits of reimbursement claims by various governmental and private payor entities;

dependence on few payors;

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critical accounting estimates and changes to accounting standards, policies, and methods used by us;

our status as an emerging growth company;

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;

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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 and with the relevant Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval (SEDAR).

The Company no longer qualifies as a “smaller reporting company” and is required to comply with the larger company disclosure obligations (subject to certain exemptions and relief from various reporting requirements that are applicable to emerging growth companies) beginning in this Quarterly Report on Form 10.

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

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.

4 unchanged sentences

Our services include respiratory disease management (through the rental of various DME devices), in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies.

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 68.6% and 77.3% of our traditional revenue, excluding COVID-19 response sales and services, for the three months ended June 30, 2022 and 2021, respectively, and 69.9% and 78.6% for the six months ended June 30, 2022 and 2021, respectively.

We combine the benefits

VIEMED HEALTHCARE, INC.

1 unchanged sentence

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

March 31, 2022 and 2021

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 71.3% of our traditional revenue, excluding COVID-19 response sales and services, and 79.9% of our traditional revenue, excluding the COVID-19 response sales and services, for the three months ended March 31, 2022 and 2021, respectively.

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

June 30, 2022 and 2021

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 territories through a cost efficient launch that reduces location expenses.

1 unchanged sentence

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

As of March 31, 2022, we employed 278 licensed RTs, representing more than 42% of our company-wide employee count.

As of June 30, 2022, we employed 284 licensed RTs, representing approximately 40% 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.

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In addition, our 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.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the three months ended March 31, 2022, 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 necessary to satisfy such demand, including sufficient personnel, supply chains and distributions channels.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the six months ended June 30, 2022, 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 necessary to satisfy such demand, including sufficient personnel, supply chains and distributions channels.

The COVID-19 pandemic has led to significant disruptions and volatility in capital and financial markets.

12 unchanged sentences

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

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.

In December 2021, President Biden signed into law legislation that extended the suspension on

VIEMED HEALTHCARE, INC.

1 unchanged sentence

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

March 31, 2022 and 2021

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.

In December 2021, President Biden signed into law legislation that extended the suspension on the 2 percent payment sequestration through March 31, 2022.

The payment sequestration adjustment was fixed at 1 percent from April 1, 2022 to June 30, 2022 and it returns to 2 percent on July 1, 2022.

June 30, 2022 and 2021

the 2 percent payment sequestration through March 31, 2022.

The payment sequestration adjustment was fixed at 1 percent from April 1, 2022 to June 30, 2022 and it returned to 2 percent on July 1, 2022.

We are continuing to monitor any effects or requirements that may result from the CARES Act as many of the provisions in the CARES Act are temporary and may require us to modify our operations and compliance procedures.

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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.

To the extent these provisions will expire as stated in the CARES Act, we will be required to unwind any modifications.

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 71.3% of total traditional revenue, excluding COVID-19 response sales and services, during the three months ended March 31, 2022 ).

Rental revenue from ventilator products represents a significant portion of our revenues (approximately 69.9% of total traditional revenue, excluding COVID-19 response sales and services, for the six months ended June 30, 2022).

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.

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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 and oxygen and PAP devices will be included in future competitive bidding programs.

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.

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Dollars, except vent patients)

For the quarter ended March 31,

2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

For the quarter ended June 30,

2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Financial Information:

15 unchanged sentences

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

March 31, 2022 and 2021

June 30, 2022 and 2021

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021:

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2022 and 2021:

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

2022 % of Total Revenue 2021 % of Total Revenue $

6 unchanged sentences

Depreciation 243 0.7 % 207 0.8 % 36 17.4 %

Other income (455) (1.4) % 55 0.2 % (510) NM

Loss (gain) on disposal of property and equipment (110) (0.3) % 83 0.3 % (193) (232.5) %

Other expense (income) (223) (0.7) % (32) (0.1) % (191) 596.9 %

Income from operations 1,001 3.0 % 2,664 9.7 % (1,663) (62.4) %

Non-operating income and expenses

Income from equity method investments (323) (1.0) % (220) (0.8) % (103) NM

Income from equity method investments 446 1.3 % 231 0.8 % 215 93.1 %

Interest expense, net (59) (0.2) % (83) (0.3) % 24 (28.9) %

Net income before taxes 1,388 4.2 % 2,812 10.3 % (1,424) (50.6) %

Provision (benefit) for income taxes 745 2.3 % (223) (0.8) % 968 NM

Provision (benefit) for income taxes 421 1.3 % 1,246 4.5 % (825) (66.2) %

Net income $ 967 2.9 % $ 1,566 5.7 % $ (599) (38.3) %

The following table summarizes our revenue for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table summarizes our revenue for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

2022 % of Total Revenue 2021 % of Total Revenue $

7 unchanged sentences

Total net revenue $ 33,310 100.0 % $ 27,399 100.0 % $ 5,911 21.6 %

For the three months ended March 31, 2022, revenue totaled $32.3 million, an increase of $3.8 million (or 13.5%) from the comparable period in 2021.

For the three months ended June 30, 2022, net revenue totaled $33.3 million, an increase of $5.9 million (or 21.6%) from the comparable period in 2021.

Excluding COVID-19 response sales and services revenue, net revenue increased $6.9 million (or 26.1%) from the comparable period in 2021.

The net revenue growth was driven by an increase in ventilator rental revenue of $1.2 million (or 5.7%), rental revenue from other DME of $1.4 million (or 48.8%), equipment and supply sales of $1.3 million (or 71.8%), and service revenues of $0.8 million (or 202.4%).

The net revenue increase was comprised of an increase in ventilator rental revenue of $2.4 million (or 12.0%), rental revenue from other DME of $1.6 million (or 48.7%), equipment and supply sales of $1.2 million (or 56.3%), and service revenue of $1.7 million (or 286.5%).

The growth in other durable medical equipment rentals and equipment and supply sales has been primarily driven by PAP and oxygen related sales and services.

The increase in service revenue is primarily due to the addition of our healthcare staffing offerings.

While ventilator rentals continue to make up the majority of our revenue, the growth of PAP and oxygen related sales and services over the comparable period in 2021 is contributing significantly to the diversity of overall revenue mix.

While ventilator rentals continue to make up the majority of our revenue, the growth of PAP and oxygen related sales and services, as well as our healthcare staffing offerings, over the comparable period in 2021 is contributing significantly to the diversity of overall revenue mix.

VIEMED HEALTHCARE, INC.

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

March 31, 2022 and 2021

During the three months ended March 31, 2022, net revenue from COVID-19 response sales and services totaled $2.1 million, consisting primarily of contact and vaccine tracing services.

Compared to the three months ended March 31, 2021, COVID-19 response sales and services declined by $0.9 million (or 29.1%).

While we expect some further COVID-19 response related revenue during the remainder of 2022, 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 our other respiratory offerings, and additional revenue from our new staffing and recruitment division.

While we expect growth for the remainder of the current year to exceed growth in pandemic periods, we anticipate that the rate of growth may be impacted by residual effects of the pandemic.

June 30, 2022 and 2021

During the three months ended June 30, 2022, net revenue from COVID-19 response sales and services totaled $0.2 million, compared to $1.1 million during the comparable three month period in 2021.

Current period COVID-19 response sales and services consist primarily of contact and vaccination tracing services.

The amount of COVID-19 response sales and services revenue is expected to be lower through the end of 2022 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 territories and further expand our presence in our existing territories, we expect growth in our active ventilator patient base and our other respiratory offerings, and additional revenue from our new staffing and recruitment division.

While we expect growth for the remainder of the current year to exceed growth in pandemic impacted periods, the rate of growth may be impacted by residual effects of the pandemic.

Cost of revenue and gross profit

For the three months ended March 31, 2022, cost of revenue totaled $12.5 million, an increase of $1.8 million (or 17.2%) from the comparable period in 2021.

For the three months ended March 31, 2022, COVID-19 response sales and services accounted for $1.0 million (or 7.7%) of these costs, compared to $1.9 million (or 17.7%) of these costs from the comparable period in 2021.

Excluding COVID-19 response sales and services, gross profit percentage for the three months ended March 31, 2022 and 2021 was 61.7% and 65.5%, respectively.

Overall gross profit percentage decreased from approximately 62.4% in the three months ended March 31, 2021 to approximately 61.2% in the three months ended March 31, 2022.

For the three months ended June 30, 2022, cost of revenue totaled $12.9 million, an increase of $3.1 million (or 32.2%) from the comparable period in 2021.

Overall gross profit percentage decreased from 64.3% in the three months ended June 30, 2021 to 61.2% in the three months ended June 30, 2022.

The decrease in gross profit percentage is due to migration of the revenue mix associated with product and service diversification.

Excluding COVID-19 response sales and services, gross profit percentage for the three months ended March 31, 2022 and 2021 was 61.7% and 65.5%, respectively.

We expect our gross profit percentage for our normal operations (non-COVID-19 related) to increase slightly through the end of 2022 as a result of growth in lower margin product sales partially offset by growth in higher margin services.

We expect our gross profit percentage for our normal operations to remain relatively consistent with the current quarter through the end of 2022.

Selling, general and administrative expense

For the three months ended March 31, 2022, selling, general and administrative expenses totaled $15.8 million, an increase of $1.3 million (or 8.7%) from the comparable prior period.

Selling, general, and administrative expenses as a percentage of revenue decreased to 48.9% for the three months ended March 31, 2022 compared to 51.1% for the three months ended March 31, 2021.

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

Our full time employee count increased from 528 on March 31, 2021 to 662 on March 31, 2022, an increase of 25.4%.

Employee compensation expenses increased $0.8 million (or 8.4%) as a result of higher compensation expense associated with an overall increase in our employee headcount, offset by a decrease related to the impact of our phantom stock plan.

For the three months ended June 30, 2022, selling, general and administrative expenses totaled $17.5 million, an increase of $4.7 million (or 36.1%) from the comparable prior period.

Selling, general, and administrative expenses as a percentage of revenue increased to 52.6% for the three months ended June 30, 2022 compared to 47.0% for the three months ended June 30, 2021.

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

Our full time employee count increased from 575 on June 30, 2021 to 715 on June 30, 2022, an increase of 24.3%.

Employee compensation expenses increased $3.4 million (or 48%) as a result of the increase in our employee headcount, volume based sales commissions, and an increase in market based individual compensation rates.

Included in this amount is a $0.5 million increase related to the remeasurement of phantom stock liability associated with the increase in share price.

The remaining increase in selling, general, and administrative expense over the prior year period is largely due to an increase in auto and travel related expenses associated with increases in travel and in-person activities combined with increasing costs for fuel.

We expect that current year selling, general and administrative expenses will remain materially consistent with the current quarter as a percentage of revenue through the end of 2022.

We expect that current year selling, general and administrative expenses will decline as a percentage of revenue through the end of 2022 as costs stabilize relative to revenue growth.

Research and development

For the three months ended March 31, 2022, research and development expense totaled $0.6 million, an increase of $0.3 million (or 86.4%) from the comparable period in 2021.

For the three months ended June 30, 2022, research and development expense totaled $0.7 million, an increase of $0.1 million (or 15.3%) from the comparable period in 2021.

As we continue to invest in research and development related projects to support our technology initiatives, we expect that associated costs will continue to increase in 2022 relative to 2021 costs.

Stock-based compensation

For the three months ended March 31, 2022, stock-based compensation totaled $1.3 million, remaining relatively unchanged from the comparable period in 2021.

For the three months ended June 30, 2022, stock-based compensation totaled $1.3 million, remaining consistent with the comparable period in 2021.

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%.

Revenue growth has historically exceeded the growth in stock based compensation and stock-based compensation as a percentage of revenue is expected to continue to decline.

Interest expense, net

For the three months ended March 31, 2022 and during the comparable period in 2021, net interest expense totaled $0.1 million.

For the three months ended June 30, 2022 and during the comparable period in 2021, net interest expense totaled $0.1 million.

As a result of low levels of interest bearing debt, we expect net interest expense to remain relatively consistent with the current quarter through the end of 2022.

2 unchanged sentences

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

March 31, 2022 and 2021

Provision (benefit) for income taxes

For the three months ended March 31, 2022, the provision for income taxes was $0.7 million, compared to a $0.2 million benefit during the 2021 period.

The increase in income tax expense was primarily due to a discrete tax benefit associated with share based compensation during the 2021 period.

Excluding discrete items, our annual estimated effective tax rate for 2022 is 28.9%.

For the three months ended March 31, 2022, net income was $1.8 million, a increase of $0.1 million (or 4.6%) from the comparable period in 2021.

Net income as a percentage of net revenue decreased from 5.9% for the three months ended March 31, 2021 to 5.5% for the three months ended March 31, 2022, primarily due to the increased income tax expense, as described above.

June 30, 2022 and 2021

Provision for income taxes

For the three months ended June 30, 2022, the provision for income taxes was a $0.4 million expense, compared to a $1.2 million expense during the 2021 period.

The decrease in income tax expense was primarily due to a decrease in non-deductible compensation expenses.

Our annual estimated effective tax rate for 2022 is 29.4%.

For the three months ended June 30, 2022, net income was $1.0 million, a decrease of $0.6 million (or 38.3%) from the comparable period in 2021.

Net income as a percentage of net revenue decreased from 5.7% for the three months ended June 30, 2021 to 2.9% for the three months ended June 30, 2022, primarily due to changes in the product mix as a result of diversification and increases of direct and indirect costs driven by market forces within the supply and labor environments.

Comparison of the Six Months Ended June 30, 2022 and 2021:

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

2022 % of Total Revenue 2021 % of Total Revenue $

Revenue $ 65,565 100.0 % $ 55,815 100.0 % $ 9,750 17.5 %

Cost of revenue 25,432 38.8 % 20,448 36.6 % 4,984 24.4 %

Gross profit 40,133 61.2 % 35,367 63.4 % 4,766 13.5 %

Selling, general and administrative 33,312 50.8 % 27,393 49.1 % 5,919 21.6 %

Research and development 1,304 2.0 % 922 1.7 % 382 41.4 %

Stock-based compensation 2,576 3.9 % 2,543 4.6 % 33 1.3 %

Depreciation 480 0.7 % 407 0.7 % 73 17.9 %

Loss (gain) on disposal of property and equipment (124) (0.2) % 159 0.3 % (283) NM

Other expense (income) (664) (1.0) % (53) (0.1) % (611) 1,152.8 %

Income from operations 3,249 5.0 % 3,996 7.2 % (747) (18.7) %

Non-operating expenses

Income from equity method investments 769 1.2 % 451 0.8 % 318 NM

Interest expense, net (123) (0.2) % (174) (0.3) % 51 (29.3) %

Net income before taxes 3,895 5.9 % 4,273 7.7 % (378) (8.8) %

Provision for income taxes 1,166 1.8 % 1,023 1.8 % 143 NM

Net income $ 2,729 4.2 % $ 3,250 5.8 % $ (521) (16.0) %

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

June 30, 2022 and 2021

The following table summarizes our revenue for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

2022 % of Total Revenue 2021 % of Total Revenue $

Net revenue from rentals

Ventilator rentals, non-invasive and invasive $ 44,254 67.5 % $ 40,656 72.8 % $ 3,598 8.8 %

Other durable medical equipment rentals 9,271 14.1 % 6,234 11.2 % 3,037 48.7 %

Net revenue from sales and services

Equipment and supply sales 6,282 9.6 % 3,844 6.9 % 2,438 63.4 %

COVID-19 response sales and services 2,278 3.5 % 4,091 7.3 % (1,813) (44.3) %

Service revenues 3,480 5.3 % 990 1.8 % 2,490 251.5 %

Total net revenue $ 65,565 100.0 % $ 55,815 100.0 % $ 9,750 17.5 %

For the six months ended June 30, 2022, revenue totaled $65.6 million, an increase of $9.8 million (or 17.5%) from the comparable period in 2021.

Non-COVID-19 related net revenue increased $11.6 million (or 22.4%) from the comparable period in 2021.

The net revenue increase was comprised of an increase in ventilator rental revenue of $3.6 million (or 8.8%), rental revenue from other DME of $3.0 million (or 48.7%), equipment and supply sales of $2.4 million (or 63.4%), and service revenue of $2.5 million (or 251.5%).

The growth in other durable medical equipment rentals and equipment and supply sales has been primarily driven by PAP and oxygen related sales and services.

The increase in service revenue is primarily due to the addition of our healthcare staffing offerings.

During the six months ended June 30, 2022, net revenue from COVID-19 response sales and services totaled $2.3 million, compared to $4.1 million during the comparable six month period in 2021.

Current period COVID-19 response sales and services consist primarily of contact and vaccination tracing services.

While we expect growth for the remainder of the current year to exceed growth in pandemic impacted periods, we anticipate that the rate of growth may be impacted by residual effects of the pandemic.

Cost of revenue and gross profit

For the six months ended June 30, 2022, cost of revenue totaled $25.4 million, an increase of $5.0 million (or 24.4%) from the comparable period in 2021.

Overall gross profit percentage decreased from 63.4% for the six months ended June 30, 2021 to 61.2% for the six months ended June 30, 2022.

Excluding COVID-19 response sales and services, gross profit percentage for the six months ended June 30, 2022 was 61.6%.

The decrease in gross profit percentage is due to migration of the revenue mix associated with product and service diversification.

We expect our gross profit percentage for our normal operations to remain relatively consistent with the current quarter through the end of 2022.

Selling, general and administrative expense

For the six months ended June 30, 2022, selling, general and administrative expenses totaled $33.3 million, an increase of $5.9 million (or 21.6%) from the comparable period in 2021.

Selling, general, and administrative expenses as a percentage of revenue increased slightly to 50.8% for the six months ended June 30, 2022 compared to 49.1% for the six months ended June 30, 2021.

Our full time employee count increased from 575 on June 30, 2021 to 715 on June 30, 2022, an increase of 24.3%.

Employee compensation expenses increased $3.6 million (or 22%) as a result of the increase in our employee headcount, volume-based sales commissions, and an increase in

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

June 30, 2022 and 2021

market based individual compensation rates.

Included in this amount is a $0.9 million increase related to the remeasurement of phantom stock liability associated with the increase in share price.

We expect that current year selling, general and administrative expenses will decline as a percentage of revenue through the end of 2022 as costs stabilize relative to revenue growth.

Research and development

For the six months ended June 30, 2022, research and development expense totaled $1.3 million, an increase of $0.4 million (or 41.4%) from the comparable period in 2021.

As we continue to invest in research and development related projects to support our technology initiatives, we expect that associated costs will continue to increase in 2022 relative to 2021 costs.

Stock-based compensation

For the six months ended June 30, 2022, stock-based compensation totaled $2.6 million, remaining relatively unchanged from the comparable period in 2021.

We expect that as we continue to increase our employee count and utilize stock-based awards as an aspect of employee compensation, stock-based compensation expense will increase accordingly.

Revenue growth has historically exceeded the growth in stock based compensation and stock-based compensation as a percentage of revenue is expected to continue to decline.

Interest expense, net

For the six months ended June 30, 2022, net interest expense totaled $0.1 million.

As a result of low levels of interest bearing debt, we expect net interest expense to remain relatively consistent with the current quarter through the end of 2022.

Provision for income taxes

For the six months ended June 30, 2022, the provision for income taxes was a $1.2 million expense, compared to a $1.0 million benefit during the 2021 period.

The slight increase in the overall effective tax rate was due to the effect of discrete deductible compensation expenses during the prior year interim period.

Our annual estimated effective tax rate for 2022 is 29.4%.

For the six months ended June 30, 2022, net income was $2.7 million, a decrease of $0.5 million (or 16.0%) from the comparable period in 2021.

Net income as a percentage of revenue decreased from 5.8% for the six months ended June 30, 2021 to 4.2% for the six months ended June 30, 2022, primarily due to changes in the product mix as a result of diversification and increases of direct and indirect costs driven by market forces within the supply and labor environments.

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)

June 30, 2022 and 2021

– The amount of interest expense we incur or interest income we generate may be useful for investors to consider and may result in current cash inflows or outflows.

5 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, 2022 and 2021

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 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

For the quarter ended June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Net Income $ 967 $ 1,762 $ 4,087 $ 1,789 $ 1,566 $ 1,684 $ 5,071 $ 2,804

10 unchanged sentences

and other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2022 and 2021

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2022 was $29.2 million, compared to $28.4 million at December 31, 2021.

Cash and cash equivalents at June 30, 2022 was $21.9 million, compared to $28.4 million at December 31, 2021.

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 March 31, 2022.

Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully undrawn as of June 30, 2022.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

June 30, 2022 and 2021

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

Three Months Ended March 31,

Six Months Ended June 30,

Net Cash provided by (used in):

2 unchanged sentences

Financing activities (8,083) (3,883)

Net increase in cash and cash equivalents $ 840 $ 116

Net (decrease) increase in cash and cash equivalents $ (6,486) $ 170

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2022 was $7.1 million, resulting from net income of $1.8 million and non-cash net income adjustments of $7.4 million and an increase in net operating liabilities of $0.9 million, which was partially offset by an increase in net operating assets of $2.9 million.

The non-cash net income adjustments primarily consisted of $3.4 million in change of allowance for doubtful accounts, $3.4 million of depreciation, $0.7 million in change in deferred tax asset, and $1.3 million of stock-based compensation.

The primary changes in working capital were an increase in gross accounts receivable of $4.2 million, offset by an increase in income taxes payable of $1.2 million and a decrease in inventory of $1.4 million.

Net cash provided by operating activities during the six months ended June 30, 2022 was $12.1 million, primarily resulting from net income of $2.7 million, increased by non-cash net income adjustments of $14.4 million, increased by a change in net operating liabilities of $0.3 million, and decreased by a change in net operating assets of $6.0 million.

The non-cash net income adjustments primarily consisted of $6.3 million of provision for uncollectible accounts, $7.1 million of depreciation, $2.6 million of stock-based compensation, $0.8 million gain on equity investments and a $0.7 million change in deferred tax asset.

The primary changes in working capital were an increase in gross accounts receivable of $7.8 million, offset by an increase in income taxes payable of $1.4 million and an increase in inventory of $1.0 million.

Included in our operating cash flows for the period is the receipt of $0.4 million in Provider Relief Funds.

Net cash provided by operating activities during the 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 six months ended June 30, 2021 was $8.8 million, resulting from net income of $3.3 million, non-cash net income adjustments of $12.0 million, and an increase in net operating liabilities of $3.4 million, which was partially offset by an increase in net operating assets of $3.1 million.

The non-cash net income adjustments primarily consisted of $3.4 million in a change of allowance for doubtful accounts, $5.3 million of depreciation, $0.2 million of gains on disposal of property and equipment, change in deferred tax asset of $1.0 million and $2.5 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $3.2 million and an increase in inventory of $0.2 million.

The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.4 million and an increase in accrued liabilities of $3.8 million.

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months ended March 31, 2022 was $3.8 million, consisting of $4.0 million of purchases of property and equipment, partially offset by $0.3 million of sales proceeds from the disposal of property and equipment.

Net cash used in investing activities during the six months ended June 30, 2022 was $10.5 million, consisting of $11.0 million of purchases of property and equipment, partially offset by $0.6 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.

Cash purchases of property and equipment represents a $5.9 million, or 117.2%, increase year over year.

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.

Net cash used in investing activities during the six months ended June 30, 2021 was $4.8 million, consisting of $5.0 million of purchases of property and equipment, partially offset by $0.3 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 and equipment financed through finance leases, our total capital expenditures for the six months ended June 30, 2021 were $5.1 million.

Net Cash Used in Financing Activities

Net cash used in financing activities during the six months ended June 30, 2022 was $8.1 million.

For the six months ended June 30, 2022, the Company repurchased and canceled 1,350,567 common shares at a cost of $7.0 million pursuant to the Share Repurchase Program authorized by the Board of Directors on March 7, 2022 (the "2022 Share Repurchase Program").

Net cash used in financing activities during the six months ended June 30, 2022 also consisted of $0.9 million in principal payments on the Term Note (as defined below).

Net cash used in financing activities during the six months ended June 30, 2021 was $3.9 million, consisting of $0.8 million in principal payments on the Term Note and $1.7 million in repayments of finance lease liabilities, partially offset by $0.1 million of proceeds from the exercise of stock options.

VIEMED HEALTHCARE, INC.

1 unchanged sentence

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

March 31, 2022 and 2021

Net Cash Used in Financing Activities

Net cash used in financing activities during the three months ended March 31, 2022 was $2.5 million.

For the three months ended March 31, 2022, the Company repurchased and canceled 389,878 common shares at a cost of $1.9 million pursuant to the Share Repurchase Program authorized by the Board of Directors on March 7, 2022 (the "2022 Share Repurchase Program").

The Company also acquired and cancelled 23,742 common shares at a cost of $0.1 million to satisfy employee income tax withholding associated with RSUs vesting during the three months ended March 31, 2022.

Net cash used in financing activities during the three months ended March 31, 2022 also consisted of $0.4 million in principal payments on the Term Note (as defined below).

Net cash used in financing activities during the three months ended March 31, 2021 was $2.8 million, consisting of $0.4 million in proceeds from the Term Note, partially offset by $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..

June 30, 2022 and 2021

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 March 31, 2022 or December 31, 2021.

There were no borrowings against this line of credit at June 30, 2022 or December 31, 2021.

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.

2 unchanged sentences

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 March 31, 2022.

The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at June 30, 2022.

Commercial Term Notes

7 unchanged sentences

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 were used for general corporate purposes.

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.

1 unchanged sentence

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

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2022 and 2021

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

The following table presents our material contractual obligations and commitments to make future payments as of March 31, 2022:

The following table presents our material contractual obligations and commitments to make future payments as of June 30, 2022:

Within 12 Months Beyond 12 Months

2 unchanged sentences

Total $1,106 $5,021

We anticipate that our operating cash flows will satisfy our material cash requirements for the 12 months after March 31, 2022.

We anticipate that our operating cash flows will satisfy our material cash requirements for the 12 months after June 30, 2022.

In addition to our operating cash flows, we may need to raise additional funds to support our contractual obligations and investing activities beyond such 12 month period, and such funding may not be available to us on acceptable terms, or at all.

3 unchanged sentences

Any additional equity financing may be dilutive to our stockholders.

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

June 30, 2022 and 2021

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 $271,000 and $174,000 for the three months ended March 31, 2022 and 2021, respectively.

Matching employer contributions to the 401(k) plan totaled $351,000 and $283,000 for the three months ended June 30, 2022 and 2021, respectively, and $622,000 and $457,000 for the six months ended June 30, 2022 and 2021, respectively.

Off balance sheet arrangements

10 unchanged sentences

The Company evaluates the net realizable value of accounts receivable as of the date of Consolidated Balance Sheets.

Specifically, we consider historical realization data, including current and historical cash collections, accounts receivable

VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2022 and 2021

aging trends, other operating trends and relevant business conditions.

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.

1 unchanged sentence

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

For the three months ended March 31, 2022, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends.

For the six months ended June 30, 2022, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends.

The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for doubtful accounts in future periods.

Our allowance for doubtful accounts was $8.5 million and $8.0 million as of March 31, 2022 and 2021, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

Our allowance for doubtful accounts was $9.4 million and $7.3 million as of June 30, 2022 and 2021, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

Recently Issued Accounting Pronouncements

1 unchanged sentence

VIEMED HEALTHCARE, INC.

March 31, 2022 and 2021

June 30, 2022 and 2021

Quantitative and Qualitative Disclosures About Market Risk

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