Lake Street Raises Guidance to $15 USViemed Healthcare, Inc. BUY (VMD – $10.52) Price Target: $15 VMD Capitalizing On Short- And Long-term Opportunities. Affirm Buy, Raising PT From $12 To $15. As has been true for many healthcare providers, there have been both headwinds and tailwinds to VMD’s business related to the impact of COVID-19. On the positive side, the opportunity to rent and sell ventilation equipment and supplies contributed >$22M to revenue this quarter and allowed the Company to generate significant free cash (>$10M) which will be used to fund accelerated organic growth going forward. On the negative side, reduced access to patients, doctors, and healthcare facilities is clearly impacting new patient starts right now. In this environment, Viemed has nimbly pivoted to assist in the response to the pandemic around the country. The Company has capitalized on the accelerated adoption of telemedicine and has leveraged investments in technologies for remote patient monitoring and engagement. Patients on service this quarter (Q2) actually declined (7965 in Q1 to 7705 in Q2) because VMD reclaimed and recycled ventilators from non-compliant patients (for whom they were not getting paid) to sell or rent them to customers who desperately needed them. We consider this positive and proactive. Reported EPS was a record $0.48, but excluding a $3.5 contribution from the CARES Act and a $6.6M benefit from the release of valuation allowance related to taxes. Adj. EPS was $0.23 which was in line with our most recent forecast. We are adjusting our estimates as highlighted in the table at right. As was true in Q2, we are bumping our Q3 revenues primarily to reflect incremental equipment sales and are taking a few million from our estimate of core revenues to reflect ongoing COVID-19 disruptions. We remain confident when the dust settles, VMD will be flying down the runway to attack the attractive non-invasive ventilation market in the home, which we currently estimate is ~5.0% penetrated. HIGHLIGHTS • Results – Q2’20 revenue was $42.9M which was above our $42.0M forecast and inside management’s $42M-$44M guided range. Adjusted EBITDA and EPS were record highs at $16.3M and $0.48, respectively. Q2 results benefited from $19.7M in COVID-related equipment sales and VMD also recognized $1.5M in sales proceeds in gain/loss on sale of equipment. This represents another contribution from equipment sales related to the pandemic. Q2’20 GM was 60.5% vs. 65.3% LQ and 72.0% LY as COVID sales carried a 53.4% gross margin. AEPS of $0.23 was in-line with our estimate
.HIGHLIGHTS • Results – Q2’20 revenue was $42.9M which was above our $42.0M forecast and inside management’s $42M-$44M guided range. Adjusted EBITDA and EPS were record highs at $16.3M and $0.48, respectively. Q2 results benefited from $19.7M in COVID-related equipment sales and VMD also recognized $1.5M in sales proceeds in gain/loss on sale of equipment. This represents another contribution from equipment sales related to the pandemic. Q2’20 GM was 60.5% vs. 65.3% LQ and 72.0% LY as COVID sales carried a 53.4% gross margin. AEPS of $0.23 was in-line with our estimate.
Q2'20 LSCM Q3'20 Q3'20 Q3'20 Result Estimate Prev. LSCM New LSCM Guidance Revenue (M) $42.9 $42.0 $26.0 $31.0 $31-$35 Adj. EBITDA (M) $16.3 $13.2 $6.3 $7.9 - Adj. EPS $0.23 $0.23 $0.06 $0.10
• Q3’20 Outlook – Q3’20 sales guidance of $31M-$35M includes ~$6.8M to $9.8M from product sales related to COVID-19. • Model Adjustments Explained – We are revising our FY20 revenue estimate to $123.5M from our previous $118.5M, a function of the additional $6.8M (low end of guidance) Q3 COVID related sales slightly offset by modest core business