Viemed Q2 2025 Update - $VMD
Expectations were too low going into the quarter
*Disclosure: I own shares in VMD. I am not a professional. Please do your own due diligence.
Price: $6.97
MC: 286 million USD
EV: 299 million USD (with the purchase of Lehan’s included)
1 year performance: +6.8%
VMD reported last night and held a call this morning. Results were pretty much in line with of my expectations and the stock was up 8%.
*all numbers in USD unless stated otherwise
Quarter Recap
Reminder that they purchased Lehan’s on July 1 so they are not included in these results.
63.06 million revenue vs 54.97 million last year.
EBITDA at 14.3 million vs 12.8 million last year.
Gross profit margin at 58% vs 60% last year.
Vent patients up to 12,152 from 10,905 last year and 11,809 sequentially.
Up 11.4 % year over year and 2.9% sequentially.
PAP therapy patients up to 25,260 from 17,349.
Up 51% year over year and 14.7% sequentially.
Sleep Resupply up to 25,246 from 20,185.
Up 25% year over year and 10% sequentially.
They repurchased 270k shares during the quarter. Average price $6.79.
They upped full year guidance due to the addition of Lehan’s.
Upped to 271-277 million revenue and 59-62 million EBITDA.
Was 256-265 million revenue and 55-58 million EBITDA.
Increase of 13.5 million and 4 million at the midpoint.
This tracks a tad ahead of where I was thinking for Lehan’s. As on the acquisition they mentioned 25.7 million in revenue and 7.4 million EBITDA.
Call Notes
The tone on the call was quite bullish. Here are some specific points I found interesting
Staffing seen sequential decline. It sounds like this is a more normal level for that part of the business.
With Lehan’s they are now expanding into paternal care. This is a new revenue stream they feel is underserved.
The Philips vent exchange program is completed and their capex should be more moderate from here. This will help FCF conversion.
Regulatory
So far the supply of their equipment has not been affected by tariffs.
Gross margin less and less relevant as they move forward (especially after the inclusion of Lehan’s) and EBITDA margin coupled with absolute growth important.
They bought back shares already in Q3. This is nice to see them as the valuation is undemanding here.
Sleep is the fastest growing part of the business. They entered 8 new geographies this year.
Given the PAP therapy patient growth, they expect a strong H2 in this part of the business.
There is a 3-6 month delay from when they acquire a new PAP patient before this hits their resupply part of the business.
NCD – National Coverage Determinations
With it being finalized it provides some certainty to the business.
My understanding is a patient is more likely to be covered for a ventilator without having to prove other methods were tried and didn’t work.
Since all Mas will have to follow the NCD, the workflow processing burden should be lessened.
With the black and white requirements, VMD is in a good position with their Engage Care Monitor platform.
May push some mom and pop operators who are sub-scale to look at selling.
Competitive Bidding
Has been refreshed by Dr Oz.
He has put more resources towards Medicare Advantage Audits.
He is also focused on OPPS (Outpatient Prospective Payment Systems) which could reduce payment for hospital outpatient services.
The prior Trump administration went through with a change in reimbursement rates.
This time it sounds like they are taking more input from industry participants which is positive.
So far nothing has been formally announced. So something to monitor.
Organic growth of 5-9% sequentially in H2.
Valuation
They are trading at 5.4x EV/mid-point 2025 EBITDA. This doesn’t include Lehan’s for the full year. So looking ahead, I have them at 60-62 million EBITDA run rate here. That’s about 5.1x EV/EBITDA. This is at the lower end of the valuation range for the business.
Closing Thoughts
You wouldn’t know it based on the share price, but VMD is executing well. They are making moves several years in advance and taking advantage of the market’s lack of optimism in the business.
They have layered on additional services and it has led to the continued growth in the top line over the years. It’s nice to see as the vent business is so much larger and putting up high growth rates gets more challenging.
It’s no secret that there is quite a bit of pessimism from investors with healthcare companies. The underperformance of the index in the last two decades has been pretty incredible. The industry is facing some major changes with technology, GLP-1s and the new administration. How much of the concern is warranted? I have no idea.
I am confident in the team at VMD to navigate the uncertainty. I’m already overweight this company, otherwise I would add here.
Thanks for reading.
Dean
* long VMD