Quipt Home Medical - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $61.3M, up 3% YoY; Adjusted EBITDA was $13.4M (21.8% margin), down 8.8% YoY as margins compressed versus Q4 2023’s 24.6% despite a return to positive sequential organic growth of ~1%.
• Fiscal 2024 revenue reached a record $245.9M (+16.2% YoY) with Adjusted EBITDA of $57.9M (23.5% margin); recurring revenue was ~78%, supported by scale in resupply programs.
• Management emphasized confidence in returning to “consistent, historical organic growth” in calendar 2025; demand/referral trends have strengthened and the recurring resupply base expanded to ~172,000 patients as of 9/30/2024.
• External headwinds reduced FY2024 revenue by ~$5M (Medicare 75/25 relief pause and Medicare Advantage changes) and ~$3M impacted cash collections tied to the Change Healthcare cyberattack—issues largely quantified and navigated by year-end.

What Went Well and What Went Wrong

What Went Well

• Positive sequential organic revenue growth (~1%) in Q4 2024 signaled momentum recovery; recurring revenue base remained strong (~78% in FY2024), with resupply patients at ~172,000 as of 9/30/2024.
• Scale and diversification supported record FY revenue and sustained EBITDA margins; CFO highlighted strengthening trends across major product categories entering 2025.
• CEO underscored a resilient operating model and disciplined approach to inorganic growth, targeting sustained expansion and profitability: “We have a high confidence level in our ability to return to consistent, historical organic growth levels”.

What Went Wrong

• Q4 EBITDA margin compressed to 21.8% (vs 24.6% in Q4 2023); Adjusted EBITDA fell to $13.4M from $14.7M YoY.
• FY2024 revenue headwinds totaled ~$8M: ~$5M from Medicare reimbursement changes and capitated MA withdrawals, plus ~$3M impact to cash collections from Change Healthcare cyberattack.
• Quarterly EPS was not disclosed in Q4 materials; net loss was $3.2M in Q4, and FY net loss was $6.8M (–$0.16 per diluted share), limiting per-share comparability on a quarterly basis.

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the fiscal Q4 and audited full year 2024 earnings results conference call for Quipt Home Medical Corp. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity for analysts to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal the operator by pressing star then zero. We remind you that the remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of the company's results news release. The company's actual performance could differ materially from these statements.

At this point, I'd like to turn the call over to Chairman and Chief Executive Officer Greg Crawford.

Gregory J. Crawford (Chairman and CEO)

Thank you, operator, and thank you to everyone joining us today. I'm Greg Crawford, Chairman and CEO of Quipt Home Medical. I'm pleased to have Hardik Mehta, our Chief Financial Officer, and Tom Rurik, our Chief Accounting Officer, also joining me today. Quipt Home Medical is a diversified healthcare services company delivering a comprehensive range of home medical equipment and services to patients across the United States. Our commitment is to clinical excellence powered by a patient-centric model and advanced technology-enabled solutions. These, combined with our specialized respiratory programs, allow us to effectively meet patient needs in the comfort of their own homes. At present, Quipt has expanded to over 135 locations across 26 states with over 314,000 active patients, which has enabled us to strengthen our coast-to-coast reach.

Our go-to-market strategy is anchored in delivering an end-to-end respiratory care solution supported by a diverse portfolio of durable medical equipment offerings. By operating as a one-stop solution for patients and healthcare providers, we've built a scalable model designed to meet the complex and evolving needs of the DME ecosystem. Respiratory care represents approximately 80% of our product mix, highlighting our commitment to serving the patients with pulmonary and cardiovascular conditions. This focus aligns with powerful macro trends, including the aging population, the increased prevalence of COPD, and the significant untapped potential in the sleep apnea market. These factors, combined with our expertise and scale, position us to meet the rising demand for high-quality in-home respiratory care solutions.

On today's call, we will review our fiscal Q4 and full year 2024 results, as well as provide insights into emerging demand trends, operational highlights, and the strategic initiatives shaping our growth trajectory into fiscal 2025. For fiscal 2024, we achieved record revenue of $245.9 million, representing 16% year-over-year growth alongside a consistent adjusted EBITDA margin of 23.5%, leading to adjusted EBITDA of $57.9 million, an increase of 14% over last year. In real time, we are experiencing consistent demand across all major product categories with notable gains in our primary sales channels. We are pleased with the progress achieved in fiscal Q4, particularly as we continue to navigate through several unique industry-wide challenges. In Q4, we returned to positive sequential organic growth of 1%, a meaningful improvement that reflects the resilience of our business.

As discussed on previous conference calls, we have officially transitioned from IFRS to GAAP reporting standards, aligning us with our U.S. peers. As part of this change, bad debt expense is now reported within the revenue line, which inherently reduces the reported revenue figure. It's important to emphasize that this adjustment represents a change in presentation and does not represent a sudden loss of revenue. Bad debt expense has always previously been reported as a separate line item, and this adjustment simply reflects its inclusion within the revenue under GAAP. As mentioned, we returned to positive sequential revenue growth. Year-over-year organic growth was approximately 3%. Real-time strength in referral activity across our product offerings has us well positioned to achieve sustained consistent organic growth in calendar 2025. Turning to our sleep business, we are pleased to report that GLP-1 medications continue to have no negative impact on demand.

Referral activity for new device setups remains steady while replacement supply volumes have been strong. Recent real-world data shared by the leading sleep device manufacturer involving 989,000 patients underscores the positive effects of GLP-1 on treatment adherence. The study found that individuals with an obstructive sleep apnea (OSA) diagnosis who were prescribed a GLP-1 were 10.8% more likely to start CPAP therapy compared to those not on GLP-1s. Additionally, these patients exhibited higher resupply order rates over both 12 and 24-month periods. We believe GLP-1 medications will serve as a long-term tailwind for our sleep business, introducing more motivated patients into the healthcare system as they focus on improving their overall health.

Moving to the ongoing Civil Investigative Demand known as the CID, we continue working diligently to resolve this matter as quickly as possible and want to again make the point that the government has not determined that any wrongdoing has occurred at this time. We remain committed to transparency and will provide updates as appropriate. As it relates to the regulatory environment, late last week, the Centers for Medicare & Medicaid Services announced positive CPI adjustments for 2025 fee schedules, ranging from 2.4%-3% depending on the item and the location. Competitive bidding program items in former competitive bidding areas will see a 2.9% increase, while competitive bidding program items in non-CBA areas will receive a 3% increase. In rural areas, the 50/50 blended rate will continue with the 3% increase applied to the adjusted portion of the rate.

This positive CPI adjustment will provide further support to our organic growth objectives for calendar 2025. During fiscal Q4, we prioritized creating additional efficiencies within our core operations, ensuring our organic growth ambitions for calendar 2025 are met. As we emerge from the industry-wide challenges faced in 2024, we are actively exploring opportunities to allocate capital for further growth and value creation. As we head into calendar year 2025, we expect to see a return to our historical organic growth rate. Moving to the M&A landscape, it remains highly dynamic with numerous opportunities aligning with our disciplined acquisition criteria. Our pipeline is expanding, and we remain focused on executing synergistic acquisitions at attractive multiples to enhance our scale. We are managing our debt conservatively with net leverage at 1.6 times, which gives us the flexibility to invest in strategic initiatives.

As we move forward, we are confident in our ability to deliver exceptional patient care, strengthen relationships with payers, and execute a disciplined, scalable growth strategy. Through these efforts, we are well positioned to drive consistent long-term value for our shareholders. With that commentary, I'd like to hand the call over to Hardik to discuss our fiscal Q4 and full year 2024 financial results.

Hardik Mehta (CFO)

Thanks, Greg. On Monday evening, we announced our fiscal Q4 and full year 2024 financial results, representing the three months and 12 months ended September 30, 2024. Please note that all financial values are in U.S. dollars and are now reported under GAAP accounting principles, with the comparison periods also reported in GAAP for consistency. Here are some key highlights. Respiratory resupply setups and deliveries increased to 480,000 for the year ended September 30, 2024, compared to 396,000 for the year ended September 30, 2023, reflecting a growth of 21% driven by our use of technology and centralized intake processes. The customer base grew 10% year-over-year, serving 314,000 unique patients in fiscal year 2024, compared to 286,000 unique patients in fiscal year 2023. We completed 854,000 unique setups/deliveries in fiscal year 2024, an increase of 13% from 754,000 unique setups/deliveries in fiscal year 2023.

Revenue for fiscal year 2024 was $245.9 million compared to $211.7 million in fiscal year 2023, representing a 16.2% year-over-year increase. Approximately $7.1 million, or 3%, was driven by organic growth. As part of GAAP, revenue is now inclusive of our bad debt expense. This change does not represent a sudden loss in revenue but a different way of presenting bad debt in our financials. It's important to emphasize that bad debt expense has always existed and been reported separately from revenue. The difference now is its inclusion within revenue figure under GAAP. All comparison periods reflect this change. Recurring revenue remains strong, exceeding 78% of total revenue in fiscal year 2024. Adjusted EBITDA for fiscal year 2024 was $57.9 million, with a 23.5% margin compared to $50.6 million and a 23.9% margin in fiscal year 2023. It represents a 14% increase year-over-year.

For fiscal Q4 2024, revenue was $61.3 million, up 3% from $59.6 million in fiscal Q4 2023. We returned to positive sequential organic growth of 1%. Adjusted EBITDA for fiscal Q4 2024 was $13.4 million, reflecting a 21.8% margin compared to $14.7 million at 24.6% margin in fiscal Q4 2023. This represents an 8.8% decrease year-over-year. Cash flow from continuing operations was $35.7 million for the 12 months ended September 30, 2024, compared to $37 million in the prior year. Excluding the impact of these reporting adjustments, Quipt achieved positive sequential revenue growth of 1%, signaling that our underlying business fundamentals are improving. We expect that calendar year 2025, which begins with fiscal Q2 2025, will see a return to our historical organic growth rate. Operating expenses, as a percentage of revenue, came in at 49.8% in fiscal year 2024 compared to 48.7% the corresponding period in 2023.

Acquisitions contributed approximately $8.6 million of the increase. Professional fees related to the CID and the loss in foreign private issuer status contributed approximately $3.3 million to the increase in fiscal 2024. For fiscal 2025, we anticipate lower CID professional fees with the objective to find resolution. Medical equipment CapEx, also known as rental equipment transfers from inventory during the years ended September 30, 2024, and 2023, was $33,566,000 and $29,279,000. As of September 30, 2024, the company reported $16.2 million in cash on hand compared to $14.4 million in cash on hand as of June 30, 2024. The company has total credit availability of $34.7 million, including $13.7 million available on the revolving credit facility and $21 million on the delayed draw term loan facility. We maintain a conservative balance sheet with the net debt to adjusted EBITDA leverage ratio of 1.6x.

Fiscal 2024 marked a year of resilience for our business in the face of multiple industry-wide challenges that we observed, which negatively impacted our financial performance and prevented us from achieving our target of 8%-10% annualized organic growth. The pause of the Medicare 75/25 relief as of January 1, 2024, and the withdrawal of Medicare Advantage members due to the capitated agreement engaged with other providers in the industry impacted revenue by approximately $5 million for the year ended September 30, 2024. Moreover, the estimated impact on collections on accounts receivable from the Change Healthcare cyber attack is estimated at approximately $3 million. Despite the headwinds, we achieved record-breaking results of $245.9 million in revenue and achieved an adjusted EBITDA margin of 23.5%, which reflects our ability to drive operational efficiencies and scale.

These results demonstrate the consistency of our performance even in periods of uncertainty and our ability to adapt to changing market dynamics. Our operating metrics remain strong, supported by consistent demand trends and referral patterns across our diversified product and service mix. Importantly, the strength in these referral patterns offsets the majority of the loss of Humana Medicare Advantage patients, highlighting the resilience of our business model. As we transition into calendar 2025, we are optimistic about our ability to sustain these underlying positive trends, supported by strong referral activity and demand for our end-to-end respiratory solutions. Fiscal 2024 showcased the stability and resilience of the business, and we are well positioned for sustained growth and long-term success.

We expect consistent organic growth in calendar 2025 to return and that it will persist as we continue to drive volume through our organic sales team, the cross-selling of products, and continued expansion of the continuum of care in adjacent market. For fiscal 2025, our guidance continues to be for 6%-8% free cash flow, a non-GAAP measure. The company defines free cash flow as Adjusted EBITDA less capital expenditures, both in cash and those financed with group and loans, and repayments of leases. The company believes free cash flow is a useful supplemental financial measure for it and investors in assessing the company's ability to pay interest, repay the senior credit facility, and pursue business opportunities and investments, including making acquisitions. For fiscal 2024, the company reported $16.2 million, or 6.6% of revenue, in free cash flow.

The continued consistency of our revenue base is driven by our highly recurring revenue model, which accounts for more than 51% of our total revenue mix. Our resupply program is a major proponent of this recurring revenue base, as we have significantly scaled, now consisting of 172,000 patients as of September 30, 2024. The resupply program represents an amazing growth area for us, extending our patient's lifecycle with us. Our healthy balance sheet with $50.9 million of liquidity provides ample flexibility to execute both our organic growth initiatives and strategic acquisition pipeline. With a modest net leverage of 1.6 times, we are well positioned to deploy a balanced mix of debt and cash to scale our business thoughtfully. With the expectation that the cost of capital environment will improve over time, we are confident in our ability to capitalize on strategic opportunities while maintaining financial discipline.

The combination of our operational scale, financial strength, and disciplined growth strategy positions us to deliver enhanced value for our shareholders in 2025 and beyond. As we continue to scale, the inherent operating efficiencies in our model will drive margin enhancement and long-term value creation. Scale is a critical component of our strategy as it enhances our ability to meet increasing demand, deepens our market penetration, and creates durable competitive advantages across our platform. Thank you, and with that update, I'll turn the call back to Greg.

Gregory J. Crawford (Chairman and CEO)

Thank you, Hardik, for that comprehensive overview of our financial performance and operational highlights. As Hardik outlined, fiscal 2024 was a resilient year for Quipt, and we've entered into fiscal 2025 with regained momentum across our core business in light of the industry-wide challenges that we faced. As we think about the opportunities ahead, I want to emphasize how we're positioning Quipt for sustained success by continuing to execute on our growth roadmap. Delivering exceptional patient care is the foundation of our strategy. Our focus remains on addressing chronic respiratory conditions such as sleep apnea, COPD, and other pulmonary diseases, ensuring that patients receive high-quality care in the comfort of their homes. As we look to the future, we are constantly exploring ways to expand our reach and serve more patients by entering new markets and performing strategic partnerships with payers, referral sources, and other healthcare providers.

Our competitive edge lies in the combination of growing our market share, coast-to-coast footprint we have built, and our robust clinical expertise. These strengths allow us to leverage economies of scale and deliver a seamless patient-centric experience that meets the rising demand for home-based care solutions. Looking at our growth roadmap, driving organic growth is our top priority, with the target of returning to historical organic growth levels in 2025. We're leveraging demographic tailwinds such as the aging population and the increasing prevalence of chronic conditions to meet the growing demand for home-based medical solutions. Our expanded sales force is focused on deepening connections with hospitals, networks, physicians, and other referral partners, which is continuing to drive increase in referral activity. We also continue to make strategic investments in technologies to streamline workflows, reduce inefficiencies, and improve patient outcomes.

These tools not only support operational excellence but also enhance our recurring revenue streams. As it relates to the execution of our growth strategy, we are committed to leveraging technology in every way we can to consistently improve our operational performance. We focus on enhancing our workflow processes, which creates real value and removes friction points. To this end, we are working to expand our operating scale by making smart, synergistic acquisitions in conjunction with our tried-and-true integration approach, which since 2018 effectively integrated 19 acquisitions, representing over $150 million of annualized revenue. Our intention is to focus on heavily weighted respiratory businesses, which can be successfully incorporated into our scalable infrastructure. Our overall objective continues to be to increase our payer base and geographic reach into advantageous geographies with a high prevalence of COPD.

Given our sound fundamentals and our clear goals for calendar 2025, which includes returning to consistent organic growth, we will continue to actively engage with investors on both sides of the border and participate at conferences and roadshows to share our ongoing financial and operating achievements and our long-term growth objectives. As we look ahead to fiscal 2025, we've remained focused on driving sustainable organic growth, expanding our Adjusted EBITDA margins, and further strengthening our nationwide healthcare network. Our flexible capital structure and disciplined approach to financial management provide a solid foundation for executing our strategic initiatives, while our 1.6x leverage balance sheet ensures that we have the resources to capitalize on growth opportunities as they arise. Importantly, we are seeing consistent demand across our product portfolio in real time during fiscal Q1 2025, reinforcing our confidence in the momentum we are building going into calendar 2025.

We are excited about the opportunities ahead and look forward to sharing our fiscal Q1 results with you in February. In closing, I would like to take this chance to thank the entire Quipt team for their tireless work and our stakeholders for their continued support.

Operator (participant)

We will now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Richard Close with Canaccord Genuity. Please go ahead.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Yeah, thanks for the questions. You guys called out the headwinds, the 75/25 expiration, Humana capitation agreement. So as I think about those, I think those you'll be lapping in the, I guess, in January. So should we think about the organic growth in here the December quarter as being somewhat similar to the 1% you just posted in four Q? And then, you know, as the second quarter, Q3, and Q4 of fiscal 25 come, you're more in that 8%-10% annual range?

Gregory J. Crawford (Chairman and CEO)

Yeah, I think that would be accurate. I think we are saying that as we go into calendar 2025, we should, you know, start hopefully seeing organic growth rates that are kind of consistent with what we have been able to deliver in the past.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay. And then with respect to, I guess, CID and the foreign issuer, the foreign issuer sort of goes away, right? If those two were, I think you said $3 million in costs last fiscal year, what would you expect CID costs to be running this year in fiscal 2025?

Gregory J. Crawford (Chairman and CEO)

That is extremely difficult for us to handicap. It really comes down to the underlying activity. We believe at this point we have gone through a lot of the questions that have been asked, and we hope that at this point we start trying to see what the resolution is versus all the discovery costs and stuff like that. So having said that, we have no idea what the government is on the other side of it. So it's really hard to project or even estimate.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay. And then, Hardik, maybe just on cash from operations, you know, going from the previous reporting now to GAAP reporting. I guess last year cash from operations was like $40.5 million in this 10-K filing. 2023 was $37 million cash. What exactly on the treatment did change there? Can you call that out?

Gregory J. Crawford (Chairman and CEO)

Yeah. Yeah, it's really related to the classification of the real estate leases that went from operating to finance to operating. So if you look at, it's literally the exact same dollar amount that the leases from financing activity would change.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay.

Gregory J. Crawford (Chairman and CEO)

It's really a lot of a dollar.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay, great. And then just, you know, since you're focusing in on organic growth in fiscal 2025, you called that out, you know, a couple of times. It doesn't sound like acquisitions are necessarily imminent right now. With free cash flow that you generate in the business, do you expect to pay down some of the credit facility, or how are you thinking about that?

Gregory J. Crawford (Chairman and CEO)

Yeah, I mean, we will definitely continue to pay down the credit facility as per the schedule. We do, again, while acquisition is not something we necessarily called out, but it's still a part of our strategy, and it's still something that we continue to look and evaluate consistently for the right opportunity to come along that will yield us the returns that we have always strived to achieve. So I wouldn't call that acquisitions not part of the strategy or anything like that. It's just, yeah, so that's that. But yeah, we will continue to pay down the debt facility as per the schedule and continue to make sure we make the best decision so that our borrowing costs are as minimal as possible.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay, I'll jump back in the queue. Thanks.

Gregory J. Crawford (Chairman and CEO)

Thanks.

Operator (participant)

The next question is from Bill Sutherland with The Benchmark Company. Please go ahead.

Bill Sutherland (Director of Research)

Oh, thanks. Hey, good morning, guys. So on the M&A question, you know, nothing done in fiscal 2024, what are the factors looking ahead that might make M&A activity more active? Is it cost of capital or because it seems like there's no shortage of targets?

Gregory J. Crawford (Chairman and CEO)

Yeah, there's certainly no shortage of targets out there. I think for us, it'll be the right target and the right geography and that for the right price. And, you know, we feel pretty confident that we've got some things in the pipeline and that it, you know, will work out for us at some point in calendar 2025. Yeah, 2024 had a lot of other considerations going on in the background, which are either, I don't want to say settled, but there are certainly a lot more visibility on the CID, which was a perfect example. So going into 2025, I think we have a better understanding, better visibility, and then the cost of capital was also something that we were watching in the inflationary environment. We're now all those things are kind of going in the direction that we were hoping they would.

So it just provides us a lot more visibility to take informed decisions.

Bill Sutherland (Director of Research)

Okay, that's helpful. And then just one quick number question on fiscal, on your just completed fiscal Q4. What was the revenue growth when you adjust for the 75/25 and the Humana impact?

Gregory J. Crawford (Chairman and CEO)

I'm not sure I completely followed the question as asked.

Bill Sutherland (Director of Research)

So you had, I forget what the year-over-year growth was for fiscal Q4, but the sequential was 1%, I guess.

Gregory J. Crawford (Chairman and CEO)

Right.

Bill Sutherland (Director of Research)

And so if you eliminate the impact of the 75/25 and the Humana capitation impact, what would the growth have been?

Gregory J. Crawford (Chairman and CEO)

What would the growth be? Should we keep the Humana? Is that what you're asking?

Bill Sutherland (Director of Research)

If you year-over-year, you know, you have those two impacts limit your growth.

Gregory J. Crawford (Chairman and CEO)

Right.

Bill Sutherland (Director of Research)

Or, you know, so just kind of curious what the op, because I think I ballparked it, but I'm just wondering if it's, if I'm in the right ballpark.

Gregory J. Crawford (Chairman and CEO)

Right. So if you, yeah, I think we just called that out that we were approximately about $5-ish million in delta. So if you take that divide by kind of four, that would put us another million dollars on top of what we reported in terms of the impact for 75/25 and Humana.

Bill Sutherland (Director of Research)

So that captures the $5 million would capture both of those impacts?

Gregory J. Crawford (Chairman and CEO)

Yeah.

Bill Sutherland (Director of Research)

Okay. That's clarification I didn't have. Okay, appreciate it. Okay, thanks, everybody.

Gregory J. Crawford (Chairman and CEO)

Thank you.

Operator (participant)

The next question is from Julian Hung with Stifel. Please go ahead.

Julian Hung (Member - Diversity, Equity and Inclusion Committee)

Hi, this is Julian sitting in for Justin today. My first question is just a clarification on the DOJ investigation. Reading the MD&A, from my understanding, the SEC concluded last month that they found no evidence of any wrongdoing, but the investigation overall still hasn't concluded. Is that right?

Gregory J. Crawford (Chairman and CEO)

That is correct. The SEC declined any further investigation, but the DOJ as it relates to the CID is still open.

Julian Hung (Member - Diversity, Equity and Inclusion Committee)

So like what else is there left for them to look through or sort through?

Gregory J. Crawford (Chairman and CEO)

Yeah, I mean, at this point, we feel like that, you know, the heavy lift is there. We've given them everything, and we're kind of waiting on them to decide whether or not there was any wrongdoing or anything. So we haven't been notified of anything. Once again, we feel pretty strong in that about our billing practices and everything like that. So we're pretty confident in that, that, you know, we end up on the right side of this at some point.

Julian Hung (Member - Diversity, Equity and Inclusion Committee)

Okay, and then I believe a couple of quarters ago, the company launched the diabetes business. Can you just provide an update on that and how's uptake?

Gregory J. Crawford (Chairman and CEO)

Yeah, sure. So that's going along well in that. We're continuing to see growth in that. And in fact, in that, you know, surprisingly this didn't come up in that maybe earlier, or we kind of thought this may come up is that, you know, we feel like that's maybe some effect on our margin because it does have a lower margin in that historically than what our respiratory products have had.

Julian Hung (Member - Diversity, Equity and Inclusion Committee)

Okay. Thank you so much for taking my questions today.

Gregory J. Crawford (Chairman and CEO)

Sure. Thank you.

Operator (participant)

Once again, if you have a question and you're an analyst, please press star then one. The next question is from Doug Cooper with Beacon Securities. Please go ahead.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Hi, good morning, guys. I just had a question on EBITDA margins and I guess the sustainability going forward. So if I, you know, adjust your revenue on a quarterly basis to subtract bad debt expenses and just go with the EBITDA that you actually reported in those periods, I got EBITDA margin dropping from 24.5% in Q1 to 24.3% in Q2, 23% in Q3, and now 21.9%. So that gets a blended for the year of 2023-2025. What is your expectations for fiscal 2025 in the margin front?

Gregory J. Crawford (Chairman and CEO)

Yeah, we think for fiscal 2025, in that primarily fiscal 2025-2027, that there are changes that need to be made in the business, and that we're actively doing right now, Doug. And frankly, we thought we would grow our way out of the 75/25 and the loss of Humana. So we've carried a lot of additional cost structure through the year that we just weren't able to outgrow, so now we have to make those changes.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay. And then moving on to the resupply business, I have in my notes and, you know, I guess this could be wrong, that you had 172,000 patients on the resupply program in Q1, and you just said you ended the year at 172. So that doesn't look like it's growing at all this year.

Gregory J. Crawford (Chairman and CEO)

Yeah. I mean, it's, I would, we wouldn't call it, it's not growing. I think, again, it is not growing despite losing some of the patients. So it's really not that, but also the underlying some of the metrics that we go in our resupply program in terms of, you know, how many boxes is going in an order and what's the average size of that box in terms of allowable and stuff like that. So those underlying operating metrics have performed in the right direction throughout the year. So we do see some improvements on that side. Again, while the patient count looks flat, we have to keep in mind that that was despite of the underlying loss of the patient count.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay. Just in terms of a broader question, you guys returned a bit of growth sequentially, but still looks like underperforming the market and certainly underperforming some of your peer groups. So, you know, what do you need to do to get back to that historical? You just noted 8% to 10% growth. What needs to happen in the business to make that happen? Because obviously you underperformed in 2024.

Gregory J. Crawford (Chairman and CEO)

Yeah, Doug, good question in that. I mean, we really have to expand, continue to expand our sales team and really make a lot of pushes there in that to bring back that organic growth that we've historically seen. I think another piece of it for us too has been the acquisitions in that we've been able to historically in that buy a lot of these smaller companies and really watch them grow, so that's really helped in that with the organic growth along the way, and I think when we didn't make any acquisitions in 2024, you know, that was probably one of the levers there in that that we weren't able to pull, especially on the resupply program, because we usually see a really big bump in that kind of post-integration on that side.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

But I guess with your stock trading, where it is at about three times EBITDA, it's got to make M&A quite difficult. What kind of prices are you seeing out there from the M&A perspective?

Gregory J. Crawford (Chairman and CEO)

I think the pricing are certainly more favorable than they have been in the past. There are quite a bit of opportunities, I think from, I think less on the smaller side, more on the higher, the larger size DMEs. There's a lot of hospital-based DMEs that are kind of coming out in the market. They have a very different dynamics to it than a straight-up DME. But I think overall, slightly better favorable valuations for sure. Maybe slightly lesser competition as well, given some of the other players are also involved in their own stuff. So, I mean, as far as the acquisition landscape goes, that's kind of what we are seeing right now.

Richard Close (Managing Director Digital and Tech-Enabled Health Equity Research)

Okay. Okay, that's it for me. Thanks.

Gregory J. Crawford (Chairman and CEO)

Thank you.

Operator (participant)

This concludes the question and answer session. I'd like to turn the conference back over to Mr. Crawford for any closing remarks.

Gregory J. Crawford (Chairman and CEO)

Thank you, operator, and thank you all for your participation today. As always, you can find us on the web at quipthomemedical.com, where we will be posting a transcript of this call and also our updated investor deck on the site for some of the exciting products and developments discussed on this call. Happy holidays and goodbye.

Operator (participant)

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.