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. 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 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. 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, 2023, 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; 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; the state of the capital markets; the availability of funds and resources to pursue operations; inflation; 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; granting of permits and licenses in a highly regulated business; competition; 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; 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; 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 the occurrence of natural and unnatural catastrophic events Page 25 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 or health epidemics or concerns, 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 and with the relevant Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval (SEDAR). We no longer qualify as a “smaller reporting company” and are 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-Q. We are an "emerging growth company," as defined in the JOBS Act, and as such, we have elected to comply with certain reduced U.S. public company reporting requirements. 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 HME devices), neuromuscular care, in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies. We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 57.7% and 63.6% of our revenue for the three months ended March 31, 2024 and 2023, 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 territories through a cost efficient launch that reduces location expenses. We currently serve patients in all 50 states. We expect to continue to employ more RTs in order to assure our high service model is accomplished in the home. As of March 31, 2024, we employed 373 licensed RTs, representing approximately 36% 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 Home medical equipment markets are witnessing sustained expansion, with a notable focus on the complex respiratory and Obstructive Sleep Apnea ("OSA") device segments. Analysts in the industry anticipate a consistent and robust growth trajectory, projecting Compound Annual Growth Rates ("CAGR") of approximately 6% for respiratory devices and 8% for OSA devices. This upward trend underscores the increasing demand for innovative solutions in respiratory care and sleep apnea management, highlighting the industry's responsiveness to evolving healthcare needs. As technological advancements and awareness drive the adoption of these specialized devices, we believe the HME markets, particularly in respiratory and OSA, are positioned for continuous expansion, offering promising opportunities for both providers and consumers alike. Page 26 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 The aging population remains a pivotal driver for the industry, as the elderly, constituting a substantial portion of HME patients, are expected to represent a higher percentage of the overall population. Projections from industry analysts indicate a consistent annual growth in the number of Medicare beneficiaries, contributing to ongoing patient volume growth. A significant contributing factor to the industry's growth is the rising incidence of chronic diseases. Factors such as increasing obesity rates, consequences of past smoking prevalence, under-diagnosis of certain health conditions, and higher diagnosis rates for chronic diseases collectively shape the industry. There is a notable shift towards home-based treatment for these conditions. The industry is undergoing a transition to value-based healthcare, with both government and commercial payors increasingly adopting models that emphasize the transition of patients from acute care settings to home care. We believe HME providers are well-positioned to benefit from this industry shift. Advancements in technology and medical equipment have led to an increased prevalence of in-home treatments. The broader range of treatments administered in patient homes is expected to continue growing. Projections from industry analysts indicate that U.S. home healthcare spending will increase, reaching $250 billion by 2031, with a CAGR of approximately 7%. Market consolidation is a notable trend favoring larger, financially stable players. The decline in the number of smaller regional players is attributed to the capital investment and scale required to compete effectively. This has led to a more consolidated and competitive landscape in the DME market. Despite these positive trends, the industry faces challenges such as cost containment efforts of payors. The consolidation of managed care payors into larger purchasing groups has increased negotiating power, resulting in pricing pressure on HME providers. In addition to ongoing negotiations relating to contract management with third party payors to secure fair reimbursement, HME providers are engaging in value-based contracting, focusing on outcomes and patient satisfaction. These value-based contracts leverage data analytics to demonstrate the cost-effectiveness and quality of durable medical goods and provide evidence-based data to payors demonstrating the long-term benefits and cost savings associated with the use of certain medical goods. Impact of Inflation The Company faces current and potential future inflationary pressures driven by factors such as general cost increases, supply chain disruptions, and governmental policies. The manufacturing and distribution costs of Viemed's patient equipment are affected by rising material, labor, and transportation expenses, including fuel costs. Persistent inflation may impact overall demand, increase operating costs, and affect profit margins, potentially adversely affecting Viemed's business and financial performance. In its 2024 DMEPOS Fee Schedule, CMS announced the fee schedule adjustment based on the annual change to the Consumer Pricing Index for all urban areas. Items that were subject to the competitive bidding program in former competitive bidding areas will receive a 2.9% reimbursement rate increase. Items that were subject to the competitive bidding program in non-competitive bidding areas received a 3.0% reimbursement rate increase. Items not subject to the competitive bidding program received a 2.6% reimbursement rate increase. Future volatility in general price inflation and its impact on material availability, shipping, warehousing, and operational overhead could further impact financial results. Viemed attempts to address these pressures through its inflation-linked reimbursement contracts, negotiation, leveraging its purchasing power and embracing technology, such as its proprietary clinical management platform. Page 27 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 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 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Financial Information: Revenue $ 50,593 $ 50,739 $ 49,402 $ 43,311 $ 39,556 $ 37,508 $ 35,759 $ 33,310 Gross Profit 29,802 32,111 30,562 26,106 24,004 22,896 21,651 20,390 Gross Profit % 59 % 63 % 62 % 60 % 61 % 61 % 61 % 61 % Net Income 1,603 3,477 2,919 2,330 1,517 2,438 1,055 967 Cash (As of) 7,309 12,839 10,078 10,224 23,544 16,914 21,478 21,922 Total Assets (As of) 154,875 154,895 149,400 149,117 124,634 117,043 119,419 115,904 Adjusted EBITDA (1) 10,098 12,845 12,081 9,810 8,328 9,306 6,982 6,458 Operational Information: Vent Patients (2) 10,450 10,327 10,244 10,005 9,337 9,306 9,127 8,837 (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. Results of Operations Comparison of the Three Months Ended March 31, 2024 and 2023: The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 % of Total Revenue 2023 % of Total Revenue $ Change % Change Revenue $ 50,593 100.0 % $ 39,556 100.0 % $ 11,037 27.9 % Cost of revenue 20,791 41.1 % 15,552 39.3 % 5,239 33.7 % Gross profit 29,802 58.9 % 24,004 60.7 % 5,798 24.2 % Selling, general and administrative 24,814 49.0 % 19,762 50.0 % 5,052 25.6 % Research and development 750 1.5 % 780 2.0 % (30) (3.8) % Stock-based compensation 1,432 2.8 % 1,391 3.5 % 41 2.9 % Depreciation and amortization 415 0.8 % 240 0.6 % 175 72.9 % Loss (gain) on disposal of property and equipment 213 0.4 % (22) (0.1) % 235 (1068.2) % Other income, net (26) (0.1) % (81) (0.2) % 55 (67.9) % Income from operations 2,204 4.4 % 1,934 4.9 % 270 14.0 % Non-operating income and expenses Income from equity method investments (67) (0.1) % (35) (0.1) % (32) 91.4 % Interest expense (income), net 150 0.3 % (49) (0.1) % 199 (406.1) % Net income before taxes 2,121 4.2 % 2,018 5.1 % 103 5.1 % Provision for income taxes 518 1.0 % 501 1.3 % 17 3.4 % Net income $ 1,603 3.2 % $ 1,517 3.8 % $ 86 5.7 % Page 28 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Revenue The following table summarizes our revenue for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 % of Total Revenue 2023 % of Total Revenue $ Change % Change Net revenue from rentals Ventilator rentals, non-invasive and invasive $ 29,187 57.7 % $ 25,147 63.6 % $ 4,040 16.1 % Other home medical equipment rentals 10,934 21.6 % 6,906 17.5 % 4,028 58.3 % Net revenue from sales and services Equipment and supply sales 6,138 12.1 % 4,764 12.0 % 1,374 28.8 % Service revenues 4,334 8.6 % 2,739 6.9 % 1,595 58.2 % Total net revenue $ 50,593 100.0 % $ 39,556 100.0 % $ 11,037 27.9 % For the three months ended March 31, 2024, revenue totaled $50.6 million, an increase of $11.0 million (or 27.9%) from the comparable period in 2023. The net revenue increase was comprised of increases in ventilator rental revenue of $4.0 million (or 16.1%) , rental revenue from other HME of $4.0 million (or 58.3%) , equipment and supply sales of $1.4 million (or 28.8%) , and service revenues of $1.6 million (or 58.2%) . The growth in other home medical equipment rentals has been primarily driven by the continued national expansion of PAP, oxygen therapy, and percussion vest activities and the acquisition of HMP. The increase in equipment sales and supplies is primarily driven by the success of our PAP resupply program and other sleep offerings. The increase in service revenue is primarily due to the addition of our healthcare staffing offerings. While ventilator rentals continue to make up the majority of our revenue, the organic and acquired growth of PAP and oxygen related sales and services, as well as our healthcare staffing offerings, is contributing significantly to the diversity of our overall revenue mix. As we continue to expand geographically into new territories and further expand our presence in our existing territories, we expect continued growth in our active ventilator patient base and our other respiratory offerings. Cost of revenue and gross profit For the three months ended March 31, 2024, cost of revenue totaled $20.8 million, an increase of $5.2 million (or 33.7%) from the comparable period in 2023. Gross profit percentage decreased from approximately 60.7% in the three months ended March 31, 2023 to approximately 58.9% in the three months ended March 31, 2024. The decrease in gross profit percentage is primarily due to migration of the revenue mix associated with product and service diversification. Gross profit percentage is expected to remain relatively stable in upcoming periods due to subsiding inflationary cost pressures and the positive effects associated with reimbursement rates, offset by some decreases associated with product and service diversification. Selling, general and administrative expense Selling, general and administrative expenses as a percentage of revenue decreased to 49.0% for the three months ended March 31, 2024 compared to 50.0% for the three months ended March 31, 2023. Selling, general and administrative expenses totaled $24.8 million for the three months ended March 31, 2024, an increase of $5.1 million (or 25.6%) from the comparable period in 2023 . The overall increase in 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 765 on March 31, 2023 to 1,030 on March 31, 2024, an increase of 35%, which was partially due to the acquisition of HMP on June 1, 2023. Employee compensation expenses increased $3.4 million (or 24%) a s a result of the increase in our employee headcount and increases in incentive and volume based compensation. We expect that current year selling, general and administrative expenses as a percentage of revenue will continue to improve through the end of 2024 due to increased efficiencies and costs stabilization relative to revenue growth. Research and development For the three months ended March 31, 2023 and March 31, 2024, research and development expense totaled $0.8 million. As we continue to invest in research and development related projects to support our technology initiatives, we expect that the associated costs will remain consistent in 2024 relative to 2023 costs. Page 29 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Stock-based compensation For the three months ended March 31, 2024, stock-based compensation totaled $1.4 million, an increase of 2.9% from the comparable period in 2023. We anticipate that as we expand our workforce, incorporating stock-based awards as a component of employee compensation, stock-based compensation expenses will correspondingly rise. Historically, revenue growth has outpaced the growth in stock-based compensation, and as a result, the percentage of stock-based compensation relative to revenue is expected to continue declining. Provision for income taxes For the three months ended March 31, 2023 and March 31, 2024, the provision for income taxes was $0.5 million. Excluding discrete items, our annual estimated effective tax rate for 2024 is 29.2% . Net income For the three months ended March 31, 2024, net income was $1.6 million, an increase of $0.1 million (or 5.7%) from the comparable period in 2023. Net income as a percentage of net revenue decreased slightly from 3.8% for the three months ended March 31, 2023 to 3.2% for the three months ended March 31, 2024. Page 30 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 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 GAAP measures. Management believes Adjusted EBITDA provides helpful information with respect to the Company’s operating performance as viewed by management, including a view of the Company’s business that is not dependent on the impact of the Company’s capitalization structure and items that are not part of the Company’s day-to-day operations. Management uses Adjusted EBITDA (i) to compare the Company’s operating performance on a consistent basis, (ii) to calculate incentive compensation for the Company’s employees, (iii) for planning purposes, including the preparation of the Company’s internal annual operating budget, and (iv) to evaluate the performance and effectiveness of the Company’s operational strategies. Accordingly, management believes that Adjusted EBITDA provides useful information in understanding and evaluating the Company’s operating performance in the same manner as management. In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including net interest expense (income), taxes, stock based compensation, depreciation of property and equipment, and amortization of intangible assets. Beginning with financial results reported for periods in fiscal year 2023, Adjusted EBITDA also excludes transaction costs and expenses related to acquisition and integration efforts associated with recently announced or completed acquisitions. This modification enables investors to compare period-over-period results on a more consistent basis without the effects of acquisitions. We have recast Adjusted EBITDA for prior periods when reported to conform to the modified presentation. 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, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Net Income $ 1,603 $ 3,477 $ 2,919 $ 2,330 $ 1,517 $ 2,438 $ 1,055 $ 967 Add back: Depreciation & amortization 6,285 5,918 5,975 5,207 4,762 4,373 4,120 3,740 Interest expense (income) 150 256 237 (20) (49) 32 42 59 Stock-based compensation (a) 1,432 1,534 1,453 1,471 1,391 1,317 1,309 1,271 Transaction costs (b) 110 61 177 94 206 — — — Income tax expense 518 1,599 1,320 728 501 1,146 456 421 Adjusted EBITDA $ 10,098 $ 12,845 $ 12,081 $ 9,810 $ 8,328 $ 9,306 $ 6,982 $ 6,458 (a) Represents non-cash, equity-based compensation expense associated with option and RSU awards. (b) Represents transaction costs and expenses related to acquisition and integration efforts associated with recently announced or completed acquisitions. 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 companies or 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 31 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Liquidity and Capital Resources Cash and cash equivalents at March 31, 2024 was $7.3 million , compared to $12.8 million at December 31, 2023. Typically, our principal source of liquidity is the collection of our patient accounts receivable. In addition to our collection of patient accounts receivable, from time to time, we can and do obtain additional sources of liquidity by the incurrence of additional indebtedness. Based on our current plan of operations, we believe cash and cash equivalents, when combined with expected cash flows from operations and amounts available under our 2022 Senior Credit Facilities will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months from the date of this filing. The Company has also historically utilized short term financing arrangements with suppliers that could be extended over a longer term if there was a need for additional liquidity. The Company uses Change Healthcare, a subsidiary of UnitedHealth Group, to submit patient claims to certain non-Medicare payors for reimbursement. UnitedHealth Group announced that on February 21, 2024, Change Healthcare’s information technology systems were impacted by a cybersecurity incident. While the incident did not impact our day-to-day operations or the delivery of patient care, submissions of patient claims to certain payors were delayed. As of the end of the first quarter of 2024, the Company has resumed claims submission to several affected payors and utilized alternative platforms for the majority of its claims. However, the delayed claims submissions resulted in a reduction of our operating cash flow and an increase to our accounts receivable during the three months ended March 31, 2024. Cash Flows The following table summarizes our cash flows for the periods indicated: Three Months Ended March 31, 2024 2023 Net Cash provided by (used in): Operating activities $ 1,175 $ 10,496 Investing activities (5,365) (3,905) Financing activities (1,340) 39 Net increase (decrease) in cash and cash equivalents $ (5,530) $ 6,630 Net Cash Provided by Operating Activities Net cash provided by operating activities during the three months ended March 31, 2024 was $1.2 million, resulting from net income of $1.6 million, increased by net income adjustments of $7.9 million and offset by an increase in non-cash working capital of $8.3 million. The net income adjustments primarily consisted of $6.3 million of depreciation and amortization and $1.4 million of stock-based compensation. The primary changes in non-cash working capital were an increase in net accounts receivable of $6.0 million and a decrease in accrued li abilities of $3.6 million, partially offset by an increase in trade payables of $0.6 million. The increase in accounts receivable was primarily driven by the cybersecurity incident at Change Healthcare, which resulted in delays to submissions of patient claims to certain payors. Net cash provided by operating activities during the three months ended March 31, 2023 was $10.5 million, resulting from net income of $1.5 million, increased by net income adjustments of $5.5 million and a decrease in non-cash working capital of $3.5 million. The net income adjustments primarily consisted of $4.8 million of depreciation and amortization and $1.4 million of stock-based compensation. The primary changes in working capital were an increase in accrued liabilities of $1.8 million and an increase in income taxes payable of $1.3 million, partially offset by an increase in net accounts receivable of $0.9 million. Page 32 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Net Cash Used in Investing Activities Net cash used in investing activities during the three months ended March 31, 2024 was $5.4 million, consisting of $6.0 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 an increase of $1.3 million, or 28.3%, year over year. Net cash used in investing activities during the three months ended March 31, 2023 was $3.9 million, consisting of $4.7 million of purchases of property and equipment, partially offset by $0.8 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. Net Cash Provided By (used in) Financing Activities Net cash used in financing activities during the three months ended March 31, 2024 was $1.3 million. During the three months ended March 31, 2024, principal payments on the 2022 Senior Credit Facilities (as defined below) were $0.1 million. Additionally, principal payments on acquired loans were $0.5 million during the three months ended March 31, 2024. The Company acquired and cancelled 128,362 common shares at a cost of $1.0 million to satisfy employee income tax withholding associated with RSUs vesting during the three months ended March 31, 2024. Proceeds from the exercise of options during the three months ended March 31, 2024 were $0.3 million. Net cash provided by financing activities during the three months ended March 31, 2023 was nil. The Company acquired and cancelled 64,756 common shares at a cost of $0.5 million to satisfy employee income tax withholding associated with RSUs vesting during the three months ended March 31, 2023. Proceeds from the exercise of options during the three months ended March 31, 2023 were $0.5 million . Senior Credit Facilities On November 29, 2022, the Company refinanced its existing borrowings under the prior Commercial Business Loan Agreement with Hancock Whitney Bank and entered into a new credit agreement (the "2022 Senior Credit Facilities") with the lenders from time to time party thereto, and Regions Bank, as administrative agent and collateral agent, that provides for an up to $30.0 million revolving credit facility (the "2022 Revolving Credit Facility") and an up to $30.0 million delayed draw term loan facility (the "2022 Term Loan Facility"), both maturing in November 2027. The proceeds of the 2022 Revolving Credit Facility may be used to refinance existing indebtedness, for working capital purposes, capital expenditures and other general corporate purposes (including permitted acquisitions), and to pay transaction fees, costs and expenses related to the 2022 Senior Credit Facilities. The proceeds of the 2022 Term Loan Facility and any additional term loans established in accordance with the 2022 Senior Credit Facilities may be used to finance permitted acquisitions and to pay transaction fees, costs and expenses related to such acquisitions. Outstanding borrowings under the 2022 Term Loan Facility and 2022 Revolving Credit Facility were $4.8 million and $2.0 million , respectively, as of March 31, 2024. The interest rates per annum applicable to the 2022 Senior Credit Facilities are Term SOFR plus an applicable margin, which ranges from 2.625% to 3.375%, or, at the option of the Company, a Base Rate (as defined in the 2022 Senior Credit Facilities) plus an applicable margin, which ranges from 1.625% to 2.375%. The 2022 Senior Credit Facilities require the Company to comply with certain affirmative, as well as certain negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company to incur indebtedness, grant liens, make investments, engage in acquisitions, mergers or consolidations and pay dividends and other restricted payments. The 2022 Senior Credit Facilities also include certain financial covenants, which generally include, but are not limited to the following: • Consolidated Total Leverage Ratio ( defined generally as total indebtedness to adjusted EBITDA) of not greater than (i) for any fiscal quarter ending during the period from the closing date to and including December 31, 2024, 2.75 to 1.0 and (ii) for any fiscal quarter ending on and after March 31, 2025, 2.50 to 1.0, subject to certain adjustments following a material acquisition. • Consolidated Fixed Charge Coverage Ratio ( defined generally as (a) adjusted EBITDA minus capital expenditures minus cash taxes to (b) the sum of scheduled principal payments plus cash interest expense plus restricted payments) of not less than 1.25:1.0. The Company was in compliance with all covenants under the 2022 Senior Credit Facilities in effect at March 31, 2024. Page 33 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Sources of Funds Cash provided by operating activities during the three months ended March 31, 2024 was $1.2 million compared to $10.5 million during the three months ended March 31, 2023. Use of Funds Our principal uses of cash are funding the purchase of rental assets and other capital purchases, the repayment of debt, funding of acquisitions, operations, and other working capital requirements. Our contractual obligations primarily relate to the repayment of existing debt and contractual obligations for operating and finance leases. The following table presents our material contractual obligations and commitments to make future payments as of March 31, 2024: Within 12 Months Beyond 12 Months Debt Obligations, including interest $ 1,131 $ 7,668 Lease Obligations 1,116 2,436 Total $ 2,247 $ 10,104 Except for the funding of potential acquisitions and investments, we anticipate that our operating cash flows will satisfy our material cash requirements for the 12 months after March 31, 2024. In addition to our operating cash flows, we may need to raise additional funds to support our contractual obligations and investing activities beyond such 12 month period, and such funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders. Leases Leases under which we assume substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lesser of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. The associated lease liability is drawn down over the life of the lease by allocating a portion of each lease payment to the liability with the remainder being recognized as finance charges. Leases that do not transfer the risks and rewards of ownership to the Company are treated as operating leases and are expensed as incurred. Retirement Plan The Company maintains a 401(k) retirement plan for employees to which eligible employees can contribute a percentage of their pre-tax compensation. Matching employer contributions to the 401(k) plan totaled $535,000 and $409,000 for the three months ended March 31, 2024 and 2023, respectively. Off balance sheet arrangements The Company has no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its results of operations or financial condition. Accounting and Disclosure Matters Critical Accounting Estimates We are required to disclose “critical accounting estimates” which are estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and that have had or are reasonably likely to have a material impact on our financial condition or results of operations. We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States. The more significant of these policies are summarized in Note 2 to our consolidated financial statements included in Page 34 VIEMED HEALTHCARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS (Tabular amounts expressed in thousands of US Dollars, except per share amounts) March 31, 2024 and 2023 Part II, Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting estimate. Accounts Receivable Accounts receivable are presented at net realizable values that reflect the consideration we expect to receive which is inclusive of adjustments for price concessions. Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required in order to record revenues and accounts receivable at their net realizable values. Management’s evaluation takes into consideration such factors as historical realization data, including current and historical cash collections, accounts receivable aging trends, other operating trends and relevant business conditions. Inherent in these estimates is the risk that they may have to be revised or updated as additional information becomes available. It is possible that management’s estimates could change, which could have an impact on operations and cash flows. Specifically, the complexity of many third-party billing arrangements, patient qualification for medical necessity of equipment and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. If the payment amount received differs from the estimated net realizable amount, an adjustment is made to the net realizable amount in the period that these payment differences are determined. Recently Issued Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies of our 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 35 VIEMED HEALTHCARE, INC. March 31, 2024 and 2023