Viemed Healthcare Inc Stock

Greetings. Welcome to the Viemed Healthcare Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Trae Fitzgerald, CFO. Thank you, Trae. You may begin.

Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements.

Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not produce undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements, except as required by law. The second quarter financial supplement and financial news release as well as the related financial statements are available on the SEC's website.

With that, I'll now turn the call over to our Chief Executive Officer, Casey Hoyt.

Okay. Thank you, Trae. Good morning, everyone, and thank you for joining us. I want to begin by recognizing the people responsible for our impressive Q2 results. As of June 30, we've got 1,453 employees that made up the Viemed team. Each day, our folks care for our patients, support our referral partners and improve how we operate. I appreciate their work, compassion and dedication they bring to serving our patients and our mission here at Viemed.

The second quarter combined renewed growth in ventilation with continued expansion across the broader business. We ended June with the highest active ventilator patient count in our history, set new records in other service lines and generated record quarterly revenue. Ventilation remains the clinical and economic foundation for Viemed. For investors who are newer to the company, our vent patients live with complex chronic respiratory conditions and benefit from receiving high acuity care in the home. We combined respiratory therapy, ongoing clinical engagement and connected technology to help physicians manage those patients outside the hospital while improving their quality of life.

We added 546 ventilator patients during the quarter and ended June with 12,635 active patients. The active patient count increased in each month of the quarter before accelerating in June, producing sequential growth of approximately 4.5%. Q2 produced the second highest quarterly ventilator setup volume in our history and usage compliance improved by more than 25% compared with last June. Higher setup activity brought more patients into the base and our compliance initiatives helped more patients remain on therapy.

The results reinforce what we have communicated through the implementation of the new CMS national coverage determination for home mechanical ventilation. The underlying clinical need and referral demand remains substantial. Our teams have adapted to the new qualification, documentation and utilization standards, and the second quarter results show that we can grow under the new coverage framework. Several quarters under the new framework have brought greater clarity across the care continuum. Physicians and referral sources better understand the documentation required to qualify a patient and patients and caregivers receive clear education about the utilization expectations associated with therapy.

We continue to refine our qualification, documentation support, patient education and compliance processes as the framework matures. The addressable clinical need for at-home ventilation remains much larger than the population receiving treatment today. Growth during the quarter extended well beyond ventilation. Q2 was a record quarter for PAP setups. Sleep therapy patients increased approximately 5% from the first quarter and 44% from the prior year. Resupply patients increased approximately 10% sequentially and 47% year-over-year. Each new PAP patient also expands the population that can develop into a recurring resupply relationship over time.

Maternal health also reached a new quarterly high for breast pump deliveries with activity through legacy Viemed markets increasing approximately 9% sequentially. The early expansion illustrates the strategy behind the Lehan acquisition, connect the proven capability to the payer relationships, referral channels and operating infrastructure already in place across the Viemed platform to accelerate growth. Our service lines reach different patient populations, but they rely on many of the same core capabilities, including payer relationships, intake, reimbursement expertise, clinical support and fulfillment.

During the quarter, we continued expanding the technology and fulfillment capacity supporting maternal health with the goal of extending those services into additional markets around the country. We also spent a lot of time during the quarter enhancing our sales organization. This effort led to defining and refining of more leadership roles, divisional expansion, market coverage and further clinical support. We took the time to reset on the Viemed culture and paint a clear picture of how folks advance through our organization. While these sales reorgs come with a heavy operational lift, they are always constantly evolving and necessary for setting the stage to achieve the next level of growth.

Developments across the broader industry continue to reinforce the value of secure and stable technology and scalable technology, disciplined payer relationships, a focused portfolio, prudent capital allocation and a balance sheet that preserves strategic flexibility. These have been long-standing priorities for Viemed, and they remain central to how we are building the company. At the midpoint of the year, Viemed is larger and more diversified than ever. Ventilation is growing under the new coverage framework, sleep and resupply continue to expand and maternal health is beginning to benefit from our broader platform. We are investing in the capabilities needed to support that demand with clear expectations for productivity and returns. We entered the second half with multiple sources of growth, a larger patient base and the financial capacity to continue investing in the business.

Todd will now review our financial performance, capital allocation and outlook for the balance of this year.

Thank you. All right. Thanks, Casey, and good morning, everyone. All figures today are in U.S. dollars, and our full results have been filed with the SEC. And I'll refer to information included in the quarterly financial supplement, which is also available on our Investor Relations website. The second quarter was another record quarter for Viemed. Revenue reached $78.1 million, increasing approximately 24% from the prior year and approximately 4% from the first quarter. Ventilator rental revenue was $36.4 million, an increase of approximately 8% from the prior year quarter. Other rental revenue increased approximately 19% to $16.4 million. Impressively, equipment sales nearly doubled to $19 million with growth across sleep resupply and the maternal health business lines and service revenue increased approximately 7% to $6.3 million.

Ventilator rental revenue represented approximately 47% of total revenue compared with approximately 54% in the prior year quarter. Total rental revenue represented approximately 68% of second quarter revenue compared with approximately 76% a year ago. The change reflects faster growth in resupply and maternal health, not a contraction of the rental base, which increased approximately 11% year-over-year. The growing contribution from product and service revenue creates a different margin and capital profile for the company. These offerings generally carry lower adjusted EBITDA margins than our rental business, but they also require substantially less capital. We evaluate that mix based on its combined contribution to the revenue growth, cash generation and capital efficiency.

Gross profit was $45 million or approximately 57.7% of revenue compared with 58.3% in the prior year quarter. Gross margin improved from 56.8% in the first quarter. The year-over-year comparison primarily reflected the revenue mix and temporary distribution and inventory costs in our maternal health business as we manage record volume and transition supply arrangements. Our team maintained service levels throughout that growth, and we expect the new arrangements to provide a more efficient foundation as the business scales.

SG&A increased as we added the capabilities required to support a substantially larger company. The primary drivers included compensation associated with higher patient setup activity, phantom stock revaluations resulting from the appreciation in our share price, technology and implementation work, additional operating capacity and temporary duplication as we bring portions of our sleep and resupply operations in-house. These were deliberate decisions to support continued organic growth, which remains our first priority for capital deployment. We are in a growth phase, and we are investing accordingly. We are expanding our product and service offerings and adding the technology, talent, operating capacity and sales capabilities needed to reach more patients and enter new markets. We are already seeing how these capabilities can increase productivity and support additional volume.

With the implementation of our new intake workflow partner, Tenor, we reduced the time from receipt of a PAP order to qualification review from days to less than an hour and shortened the time incomplete orders remain in the pipeline by several days. During the quarter, we increased PAP setups by approximately 16% sequentially without a corresponding increase in fulfillment infrastructure. These are early examples of how better systems can expand capacity and improve efficiency as volume grows. We have just completed the integration of this system into our complex respiratory business, which will have a positive impact on our ability to effectively onboard patients and also gives a meaningful ability to scale the business in the future.

Net income attributable to Viemed was $2.8 million or $0.07 per diluted share. Adjusted EBITDA was $13.7 million, representing a margin of approximately 17.6% compared with 22.7% in the prior year quarter. The year-over-year adjusted EBITDA comparison included an approximately $1.2 million swing in equipment disposal activity, driven primarily by the nonrecurring gains from the ventilator return program in the prior year's quarters. Excluding that prior year gain, adjusted EBITDA increased year-over-year.

For the quarter, operating cash flow was $15.9 million, free cash flow was $8.6 million and net CapEx was $7.3 million or approximately 9.3% of revenue. For the first 6 months of 2026, operating cash flow increased to $24 million from $15.1 million last year, and free cash flow increased to $11.2 million from $4.9 million. On a trailing 12-month basis, free cash flow was $34.4 million or approximately 11.4% of revenue.

Our capital allocation priorities remain consistent. Organic growth comes first. Acquisitions must fit the operating platform and meet our return requirements. Share repurchases remain an option when we believe the price warrants an attractive use of capital, and we will always have the ability to pay down the limited debt we carry on the balance sheet. During the quarter, we repaid approximately $2.2 million of debt and repurchased and canceled approximately 531,000 shares for $5.1 million. We ended June with $10.7 million of cash, more cash than total debt and substantial unused capacity under our credit facilities.

Turning to our outlook. First half performance and operating trends across the ventilation and broader platform increased our confidence in the full year revenue result. We are raising the low end of our net revenue guidance and now expect full year revenue of $314 million to $320 million compared with the previous range of $312 million to $320 million. The outlook contemplates continued sequential growth through the second half. We are also revising our full year adjusted EBITDA guidance to a range of $64 million to $68 million compared with the previous range of $65 million to $69 million. At the same time, we are lowering our net CapEx outlook to between 8.5% and 10% of revenue compared with the previous range of 9% to 10.5%.

The revised guidance reflects the growing contribution from less capital-intensive product and service revenue. Across the current guidance ranges, we expect to deliver a full year adjusted EBITDA margin of at least 20% while generating solid free cash flow and funding continued growth. We intend to sustain the renewed growth in ventilation, continue expanding sleep in the broader platform, complete the operation transitions already underway and generate greater productivity from the capabilities we have added. We feel very good about where the business is headed. Viemed has a strong financial foundation, a broader platform and a team that has demonstrated it can execute. We are proud of the growth our team is producing and confident in our ability to build on it.

That completes our prepared remarks, operator, and we would like to open it up for questions.

[Operator Instructions] Our first question comes from Dave Storms with Stonegate.

Just maybe I want to start at the top there. I think you mentioned that you've kind of done a revamp of the sales organization. I was hoping you spend maybe a little bit more time below the leadership roles, maybe the boots on the ground. What are you seeing in terms of getting people in the door, their time to ramp? I'm sure there's a learning curve once you guys get them in the door. Just anything of that nature?

Yes. So we -- the big change is that we added a fourth division. We had the way that we were currently structured before, we had 3 sales directors and underneath them, they have, just call it, roughly 12 managers spread out throughout different regions throughout the country. Those managers are responsible for leadership, coaching, mentoring, field rides, things of that nature. So we advanced one of our teams, as we call them into a sales directorship, and then that created a lot more room for growth, if you will, from a geographic standpoint for expansion into different markets and really all of the territories throughout the country. So we're setting up for growth is number one.

Number two, it becomes training the next level of leadership and making sure these folks are delivering the right message. A lot of these guys are also tasked with recruiting and finding talent throughout the country. So we want to make sure that they're finding the right folks and so on and so forth. But ultimately, at the end of the day, just take a step back, I mean we went through a big reorg last year. We intend to probably go through another one next year just because of the way that we're growing. It's something that's always happening and always evolving. And it also creates a corporate ladder for growth for our people down the bottom, so they can see that they can make it to different levels throughout the organization and advance within as we grow.

That's great commentary. I appreciate that. And then maybe just turning that into some of the strong growth that you've seen on a patient level. How much of that can be attributed to some of this revamp that you've done? Or is this all organic and we can maybe expect that to take another leg as this revamp really starts to take hold?

Yes. It's all organic in terms of the complex respiratory growth with NIV. I mean -- and really sleep as well. But it's twofold. It's finding new reps. It's making sure that these reps are trained properly and up to speed a whole lot sooner rather than later. We've got a heck of a training program that really works now, and it's been revamped over the last 2 years, but it's clicking on all cylinders. So we're getting a lot of newbies that are cranking up sooner rather than later. Then on the other piece of it is compliance. Our RTs out in the field have been heavily focused as a result of the new NCD and all the regulations to keep folks on therapy and make sure that they're using the therapy, and that really translates into the retention of patients. And so we keep patients billing for longer and so on and so forth.

So both of those things are contributing to our ventilator growth and will continue to contribute in the future. We're not done yet with our NCD overhaul and measuring compliance and getting better at what we do in the field, lots of our RT managers spending time with ride along and doing their coaching the same way that the sales managers are doing coaching with their people. So we still got some green shoots and passes to be even better. But we do know and we think we are best-in-class as it relates to keeping patients on therapy and finding them and so on and so forth. And there's a lot more room to even get better.

That's great commentary. If I could sneak maybe just one more in. You mentioned in your guidance, right, a lot of the adjustments seem to be largely driven by the growth in the sales and service revenue, right, and the margin profile that's associated with them. As we're thinking about that growth maybe between resupply versus maternal, do you see either one of them having more outsized growth that may be driving the guidance adjustment? Or I guess, how should we compare those 2 end markets for you?

Yes. Clearly, from a percentage basis, maternal is expected to grow at a faster percentage than the sleep resupply, but that's not discounting how much the resupply growth has outpaced the core ventilator rental revenue. We expect both of those lines to continue to grow. We don't have an exact percentage. I'm not sure if it's fair to give a product line growth yet. But the maternal business is new to us still. We're 1 year in. We're taking it throughout the country to other contracts where Viemed is set up, and we have good payer relationships.

And in the commentary, you will hear as we have really been setting the organization up to be able to scale that business. And that's everything from processes in the back office to how we fulfill these products around the country. So there's been a lot of, what I would call, disruption that is planned to get ready for the continued massive growth in that. And then just to dovetail into the sleep resupply, in the commentary you may have heard us, we brought the resupply call center in-house to where we now manage that day-to-day in our own offices, which was another big change, and we needed to do that to be able to continue to drive the scalability that we want to see in those business lines. So both of them will have significant growth. It's fair to say maternal likely outpaces, but we're extremely excited about growing both of those product lines and what that does to our financial profile.

Our next question comes from Ilya Zubkov with Freedom Brokers.

So my first is related to the ventilator patient count. I see that it has recovered in Q2 with more than 500 net additions during the quarter. I'm just wondering, was the increase partially related to the insurers approving patients who had previously been denied following the NCD changes?

Yes, that makes a part of it. Obviously, I would say if you think about how I like to rank these, just the new orders coming through makes up the largest piece. And undoubtedly, having formulary rules has given us the ability to onboard more patients within the MA plans or the private insurance companies now that we actually have those rules. So that definitely is a help. The new sales structure can obviously -- and just having salespeople be effective out there is a big part of it.

The compliance piece that Casey mentioned is a big part of it. And in the second quarter, we're coming through -- we're coming out of what we would call insurance change season. So we have more patients billing, less patients on billing holds. So all of those things combined give you the ability to have that growth. I would say that that's about as good of a quarter as we may have ever seen from an active patient growth count, and we're excited to keep that momentum going into the second half of the year.

Great. And one more question on the respiratory therapist headcount. It increased meaningfully in Q2 after declining through much of last year. And I assume this partially reflects the needs of a growing patient base. But could you elaborate on whether the revised NCD requirements have changed the effective capacity of your respiratory therapist workforce?

It's early to say that we're going to have a new patient per RT count. I would say right now, we're probably assuring -- throwing everything we can at it to make sure patients are properly educated, seen very often and give them all the opportunities to get the education from our RTs. I don't see a meaningful patient for RT change in the future. We'll probably have to look at it. Some of that could be as a result of the sleep business growing dramatically and the remote setup that some of the RTs use in that. So those aren't all ventilation RT service providers. But it's something we're definitely keeping an eye on. And if it flexes up to where we need a few more RTs to keep these patients compliant, that's our dedication to patient care, and we would be okay with that.

And I'll just add to that. I mean, anecdotally, some of our heavier patient count RTs are also some of the best performers in compliance. And so we are keeping a watchful eye on that, using them as champions, and they're also helping others kind of teach them what they're doing, how their systems are working and so on and so forth. So we just kind of stay tuned to that. But it's -- like Todd said, it's a little too early to tell if that's going to move too much.

Okay. And the last one on the EBITDA margin. It remains under pressure in the first half of 2026, while SG&A grew faster than revenue in Q2. Could you just discuss the main source of operating leverage you expect in the second half of the year that could move adjusted EBITDA margin towards the guided 20% level?

Yes. I mean just in general, what I would say is if you look at last year, the back half of the year carried probably 20%, 30% EBITDA margin. And if we're looking ahead, we would expect probably the back half of this year to be somewhat in line with that. The first half always carries a lower margin just due to the patient holds and just the cost structure, it's the way it works through.

With that said, we are clearly diversifying the company and changing the revenue composition of the company, and we are perfectly okay with that in that if it has a structurally lower EBITDA margin with no CapEx coming from sleep resupply and maternal business lines, net income margins are going to ultimately expand as a result of that. But as operating levers that we can pull, the distribution capabilities that I talked about earlier, we are signing -- we have signed up with a new national distributor for the maternal health business. It's going to translate into other business lines. That's a scalable process.

The new intake workflows is going to help us scale that process and ultimately not have to hire as many back-office personnel to increase the order count. We have the additional -- the ability that we've brought in the call center from the sleep resupply, which is going to be much more scalable to drive the revenue in that business line. And there are others that come along with it. So we're not concerned about the short-term pressure that we saw under EBITDA. And if you look at it first 6 months of this year versus 6 months of last year, excluding those Trilogy gains, we're really in line with where we need to be and truthfully just very excited about the diversification that we have proven out over the last few years. And you also had some duplicity with cost in Q2 while we were transitioning into these new investments, some of the old processes were still in place, and that led to some duplication of costs. So you'll see some of that kind of ease up in the back half of the year as well as we realize the investments that we made in Q2.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to management for closing comments.

Okay. Thanks, everyone, for your trust in Viemed. We appreciate all the new investors and look forward to continue to add value and make smart decisions over here. We're here if you need us. Take care.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Viemed Healthcare First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trae Fitzgerald, Chief Financial Officer. Thank you. You may begin.

Thank you, and good morning, everyone. Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements.

Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements, except as required by law.

The first quarter financial supplement and financial news release as well as the related financial statements are available on the SEC's website.

With that, I'll now turn over the call to our Chief Executive Officer, Casey Hoyt.

All right. Thank you, Trae, and good morning, everyone. We appreciate you joining us today. This past quarter demonstrated what consistent execution looks like across our entire platform. Our sleep business continues to scale and differentiate itself. Maternal health is performing ahead of plan. Our free cash flow profile has improved meaningfully year-over-year. Also in ventilation, we're starting to see the operational trends that we've been envisioning. In aggregate, these results exemplify a business that is growing, diversifying and becoming more capital efficient, and it's the direct result of the disciplined execution this team brings every single day.

First quarter revenue was $75.4 million, up 28% over the prior year. Following what was a record fourth quarter for Viemed, matching that performance level in Q1 is an achievement we are proud of and one that is consistent with exactly what we communicated as planned for the year. Q1 carries a predictable seasonal pattern and the business executed right in line with our internal plan. As we move into the second quarter and the balance of the year, we feel very good about the current -- future -- and the future quarters.

Sleep continues to be one of the strongest growth drivers in the business. PAP therapy patients grew 57% year-over-year and the set of activity we have driven over the past several quarters is translating into a larger and steadily expanding base of resupply patients. We now have nearly 36,000 PAP patients on the platform. As that base expands, it brings greater visibility into future revenue and a more stable growth profile.

Beyond those numbers are tens of thousands of patients who are sleeping better, feeling better and living healthier lives because of the care we are delivering. As sleep continues to scale, it provides increasing visibility into future revenue and becomes a more meaningful contributor to the overall growth profile of the business.

On resupply, quarterly patient counts were down modestly from the fourth quarter, which is consistent with the seasonal pattern we see every year. Activity typically moderates as deductibles reset coming out of Q4, and we saw that dynamic play out again this quarter. Importantly, the underlying trend remains intact with resupply patients up 47% year-over-year. The long-term demand picture for sleep remains very strong.

Obstructive sleep apnea continues to be significantly under-diagnosed and the broader focus on metabolic health, including increased adoption of GLP-1 therapies is driving more patients into diagnosis and treatment. The PAP base we are building today is what drives resupply growth over time, and we continue to feel very good about that pipeline. Sleep is not the only place where our platform leverage is being realized. On our last call, we talked about the potential that excited us most about maternal health, not just in terms of Lehan's offerings and capabilities, but what could do with them within the Viemed platform.

I want to update you all on that because the early results are exceeding our expectations. Lehan continues to perform well. The integration has been smooth and the business has been accretive since day 1. The more important development this quarter is what we're seeing outside of Lehan's original markets. During the first quarter, we serviced just under 4,000 new maternal health patients under the Viemed contracts in markets where Lehan previously had no presence. That is a critical early indicator of how the model can scale.

The payer relationships, intake and billing infrastructure and compliance capabilities already existed. We were able to extend that existing platform into a new product offering and the team delivered. This gives us confidence in our ability to continue expanding maternal health into additional Viemed markets as we move through 2026.

Turning to ventilation. We are seeing a couple of important dynamics play out at the same time. First is that new patient start-up momentum is building faster and stronger than we expected. Referral sources are getting more comfortable with the updated criteria. The documentation process is maturing and the setup pipeline is responding in a way that is genuinely encouraging. This is the inflection point we've been working towards, and it's arriving ahead of schedule.

March was a particularly strong month for ventilator setups with 759 starts compared to 692 a year ago. Our 100% ALJ success rate on Medicare Advantage denials continues to validate the appropriateness of the patients we serve, and we are seeing more of those denials resolved earlier in the process.

Second is that the patient setups under the new NCD criteria are now reaching required compliance evaluation points and the turnover rate for those patients is higher than pre-NCD. That has created some near-term pressure on the net patient census number, which ended the quarter at 12,089 patients. However, I want to be direct. This is not a demand issue. It is not a competitive issue. It is a compliance dynamic that is a requisite of a new system, and it is something we advocated for, anticipated and will become the industry best in these new compliance standards.

What gives us confidence that both trends are moving in the right direction? Compliance among active ventilator patients has improved by nearly 20% since the NCD went into effect. That is a meaningful development and reflects patients and physicians adapting to the new standards. It also supports our view that through our differentiated high-touch, high-tech model, compliance rates should continue to improve as the NCD matures.

I also want to address an area where we continue to advocate on behalf of our patients. Under the current NCD compliance framework, a patient who experienced a noncompliance episode can lose access to their ventilator. In practice, these are patients with serious chronic respiratory conditions who rely on ventilation as a prescribed life-sustaining therapy. When compliance is interrupted, whether due to illness, caregiver changes or clinical challenges, the current rules can result in a loss of access to that therapy. We believe that this is an area where the policy continues to evolve.

The clinical need does not change because of a temporary compliance interruption and the patient should have uninterrupted access to therapy when appropriate. While the compliance policy doesn't necessarily threaten our financial success as a company, it absolutely impacts the patients who are benefiting from care, and that's a problem that we will continue to lobby for in the name of our patients. More broadly, the regulatory environment outside the NCD is also moving in the direction that we support.

On competitive bidding, as a reminder, the categories identified by CMS for the upcoming round do not include any of the current -- any of our current product offerings. As a result, we do not expect a material impact to the business and continue to view the reimbursement foundation of our core services as stable.

On the enrollment moratorium announced by CMS earlier this year, I want to be clear that this has no impact on Viemed's operations whatsoever. We are fully enrolled, fully operational and continuing to grow in every market we serve. What the moratorium does do, it restricts new entrants from obtaining Medicare enrollment during this period. And for an established provider with our national infrastructure and existing payer relationships, that makes the competitive landscape more rational over time.

Across these regulatory developments, the direction is clear. The shift toward more objective criteria under the NCD, the absence of competitive bidding pressure on our core products and the barriers to entry that favor established providers, all reinforce the position we have built over time. These are the kind of conditions that support long-term sustainable growth. None of that happens without the team behind it. Managing the NCD transition, expanding maternal health into new markets and continuing to scale sleep, requires a high level of operational discipline and clinical focus.

Our team of 1,387 employees delivered on each of those priorities this quarter, and the results reflect that work. Those results are built on capabilities we've developed over time. A clinical model, a technology platform, a compliance infrastructure and a national network of payer relationships, all work together to support how we operate and scale. That combination allows us to expand sleep into new markets, extend maternal health through the existing infrastructure and manage the regulatory transition of ventilation with consistency. It is a foundation that supports continued growth.

With that, I'll turn the call over to Todd to walk through our financial results and capital allocation in more detail. I would draw your attention in particular to the free cash flow results and the capital return activity we executed during the quarter. Those numbers reflect the execution we have been describing, and I think they tell an important story about the financial trajectory of this business. Todd?

All right. Thank you, Casey, and good morning, everyone. In reviewing the financial results, all figures are in U.S. dollars and our full results have been filed with the SEC. I'll be referencing information available in our quarterly financial supplement, which can also be found on our Investor Relations website.

Starting with the top line. First quarter revenue totaled $75.4 million, representing growth of 28% over the prior year period. On a sequential basis, revenue was essentially flat compared with the $76.2 million we delivered in the fourth quarter of 2025, which is right in line with the seasonal pattern we outlined on our last call. As we discussed in March, Q1 typically runs flat to slightly down sequentially, and that's exactly how it played out. The quarter reflects strong execution against the plan.

Looking at the components of that revenue, ventilator rentals totaled $35.4 million for the quarter, up approximately 10% over prior year period. Our other home medical equipment rentals contributed $16.2 million, up 25% year-over-year, driven by continued patient growth across PAP, oxygen and airway clearance. Equipment and supply sales came in at $17.5 million, more than doubling from $7.5 million in the prior year period, driven by growth across both sleep resupply and our maternal health offerings.

On the sleep side, our PAP therapy patient count reached 35,938 at quarter end, up 57% year-over-year and 4% sequentially. As that PAP base grows, more patients move into long-term resupply relationships, which creates a recurring and predictable revenue stream that compounds over time. The maternal health contribution reflects both the continued performance of the Lehan business and the early expansion beyond its original footprint that Casey discussed.

From a mix standpoint, ventilator rentals represented approximately 47% of total revenue in the first quarter of 2026 compared to 54% in the first quarter of 2025. That shift matters for a few reasons. Sleep resupply and maternal health carry different capital requirements, payer profiles and growth characteristics in ventilation. And as those categories scale, they reduce our concentration risk, broaden our reimbursement base and improve the capital efficiency of the business.

The vent business itself continues to perform well, but the overall revenue base is becoming more balanced, which is by design. The continuation of this diversification should help bolster our impressive financial performance in the future.

On the payer side, Medicare represented 35% of the revenue in the quarter, down from 41% a year ago. As our sleep and maternal health businesses scale, a larger share of our revenue is coming from commercial payers, which reduces our concentration to any single payer and provides a more diversified reimbursement base.

Gross profit for the quarter was $42.8 million, representing a margin of 56.8%. That's a modest improvement compared to 56.3% in the first quarter of 2025 and roughly in line with what we delivered for the full year of '25. Sequentially, margins were down modestly from the 57.9% we reported in the fourth quarter, which is consistent with normal Q1 patterns. The sequential moderation from Q4 is largely a function of revenue volume. Q1 is our lowest revenue quarter of the year, and our labor costs and COGS carry some relatively fixed components. So lower sequential revenue naturally produces some margin compression at the gross profit line.

In evaluating year-over-year performance, it is important to consider that the first quarter of 2025 included a $2.7 million nonrecurring gain on disposals related to the ventilator buyback program with Philips, which has since concluded. That gain impacted both operating income and adjusted EBITDA in the prior period and creates a distortion in the year-over-year comparison. Adjusted EBITDA for the first quarter of 2026 was $14.3 million or 19% of revenue compared to $12.8 million or 21.6% of revenue in the first quarter of 2025. Excluding the prior year gain, adjusted EBITDA margin in the first quarter of '25 would have been approximately 17%.

On a comparable basis, adjusted EBITDA margin expanded by approximately 200 basis points year-over-year, which we believe better reflects the underlying operational progress of the business. As expected, the reported 19% margin is lower than our full year 2025 margin of approximately 22.7% given the seasonal nature in Q1. That quarterly cadence is consistent with prior years and doesn't change our full year view on margin. We continue to expect adjusted EBITDA margin to be in the range of approximately 21% to 22% for the full year '26, supported by operating leverage in SG&A as the revenue base grows.

SG&A as a percentage of revenue improved to 46.1% in the first quarter of 2026 from 48.1% in the first quarter of '25, a 200 basis point improvement year-over-year. That improvement reflects the operating leverage we continue to realize as we scale. In absolute dollars, SG&A increased by $6.4 million, driven primarily by employee-related costs to support our growth, including headcount added to the Lehan acquisition. We ended the quarter with 1,387 employees, up 14% from 1,222 a year ago.

Net income attributable to Viemed for the quarter was $2.6 million or $0.06 per diluted share, essentially flat with the $2.6 million reported in the first quarter of '25. As noted, the prior year period benefited from the Philips disposal gain that did not recur. On a normalized basis, the underlying earnings trajectory of the business continues to improve.

Free cash flow is an area I want to spend some time on because we think it's one of the most important indicators of where the business is headed. Free cash flow for the quarter was $2.6 million compared to negative $5.7 million in the first quarter of 2025. That's an $8.3 million improvement year-over-year, and it reflects progress on both sides of the equation. We're generating more cash from operations, and we're deploying less capital to do it.

On the operating side, cash flow from operations was $8.1 million in the quarter, up from $2.9 million a year ago. That's nearly a threefold improvement in a single year, and it's the most direct reflection of the earnings growth we're generating across the platform.

On the spend side, net CapEx was $5.5 million compared to $8.5 million in the first quarter of 2025. As sleep resupply, maternal health and staffing represent a growing share of our revenue, more of our growth is coming from service lines that require less capital per dollar of revenue than our ventilator business. This is an intentional and favorable structural shift in capital intensity of the business, and we expect it to continue as the mix evolves. The result is a business that's growing revenue at 28% year-over-year while simultaneously becoming more capital efficient. That combination is what produces durable free cash flow at scale, and it's what we're seeing in the numbers.

To put that in perspective, trailing 12-month free cash flow was $11.6 million at the end of 2024. It was $23.3 million through the third quarter of 2025, and it was $36.3 million as of today. We believe that as the market better understands the free cash flow profile of this business, it will be an increasingly important driver of how Viemed is valued.

We continue to fund our CapEx entirely from operating cash flow. Net CapEx as a percentage of revenue was approximately 7.3% in the first quarter. Based on that result and the continued evolution of our revenue mix towards less capital-intensive categories, we are updating our full year net CapEx outlook to a range of 9% to 10.5% of net revenue from our prior expectation of 10% to 11.5%. That update reflects the structural improvement in capital efficiency we are seeing as the business mix evolves, and we expect that trend to continue through the remainder of the year.

Turning to capital allocation and the balance sheet. During the first quarter, we repurchased and canceled 150,000 shares of common stock under our 2026 share repurchase program at an average price of $9.29 per share for a total cost of $1.4 million. We authorized this program in March and began executing immediately. Our share repurchases are accretive to per share value for continuing shareholders, and we believe that consistent execution on our buyback programs has been a contributing factor in the positive share performance we have seen over time.

We also made $3.2 million in principal payments on our long-term debt during the quarter, reducing long-term debt to $8.3 million at March 31, 2026. We ended the quarter with $9.8 million in cash and $46 million available under our credit facilities. Our balance sheet remains in excellent shape. We are effectively at net zero debt, and we have significant capacity available under our credit facilities should an attractive acquisition opportunity arise. We remain disciplined on that front.

Any acquisition would need to meet our return thresholds and fit within the strategic framework we've outlined but the financial position to act is there. The ability to simultaneously repurchase shares and pay down debt while continuing to invest in the business is a direct reflection of the free cash flow generation we just discussed. That is exactly what we said we would do when we laid out our capital allocation framework and the financial results this quarter reflect that execution.

Our capital allocation priorities remain the same: invest in organic growth first, evaluate disciplined acquisition second, and return capital to shareholders when appropriate. The share repurchase program reflects our confidence in the long-term value of the business at current levels, and we will continue to execute on it opportunistically.

Turning to our outlook. We are updating our full year 2026 guidance on 2 metrics. On net revenue, we are narrowing and raising the low end of our range to $312 million to $320 million from the range of $310 million to $320 million. That update reflects increased forecasting precision as we move through the year and the favorable new patient start trends Casey described. We are reaffirming adjusted EBITDA in the range of $65 million to $69 million. On net CapEx, as I mentioned a moment ago, we are updating our full year outlook to a range of 9% to 10.5% of net revenue from the prior expectation of 10% to 11.5%.

The first quarter came in strong as expected. Revenue was consistent with the seasonal pattern we described on our last call, and the underlying business performed well in line with our internal plan. As we move into the second quarter, we continue to expect sequential revenue growth in the range of 3% to 5% per quarter through the remainder of the year. The operational signals Casey described, including improving new patient starts, momentum in ventilation and the continued acceleration in maternal health, give us good visibility in that ramp as we move through the year. We feel good about where we sit relative to the full year plan.

Before we open up the line for questions, I want to end with a few key takeaways for the quarter. Revenue grew 28% year-over-year. Free cash flow improved $8.3 million compared to the first quarter of 2025, driven by stronger operating cash generation and a more capital-efficient business. We ended the quarter with effectively no net debt and $46 million of available credit capacity, and we returned capital to shareholders through active execution of our share repurchase program.

Each of those outcomes reflects deliberate execution against the plan we have laid out, and we entered the second quarter with good momentum across the platform. With that, operator, please open up the line for questions.

[Operator Instructions] And your first question comes from Dave Storms with Stonegate.

Maybe just want to start with your guidance. Great to see that you're increasing the low end of the range. And I know you mentioned new patient starts, continued acceleration of maternal and the likes that is driving that. Just trying to think about maybe where some of the leverage is in there that could put you on to the higher side of that guidance range? Is it going to be more vent patients driven? Is it maybe some of the unknowns as you continue to integrate Lehan? Maybe just any commentary there?

I would say that all of the product lines have the opportunity to push us towards the upside, Dave, and that's the great situation we're in. Vent, the new patient starts are exceeding what we originally thought. And the metrics that Casey talked about, about compliance are extremely important about keeping patients on and kind of getting that length of stay to where we want it to be. So they have upside.

The maternal health business is growing dramatically. And as we continue to operationalize and scale that, it probably has a very high likelihood of being a contributor to outperformance. And then the sleep side just continues to outperform what we ever thought it would do a few years ago. So -- I mean, not to say that the other business lines don't have the opportunities, but those 3 really have the ability to push us up towards that top end. And if everything works well, then who knows? We may be able to increase it later on. But right now, we're very comfortable with where we sit.

That's great. I appreciate that. Maybe just circling in on maternal a little bit. We've seen a lot of growth there. Just curious as to how you think about what are the limiters there? Is it headcount? Is it an education campaign? Is it new products? Is it geographies? What do you think could be some of the limiting factors there that you're going to focus on the most?

Yes. I mean I'll start with complex respiratory, which is the vent business. I mean the NCD rules and really just becoming the thought leader in it, having our clinical protocols that were laid out by the NCD already in place at Viemed gave us a leg up to really be the first ones inside of our referral sources offices to explain how the new world is going to work. And so we've been leveraging that and educating our referral sources and they understand what they're up against.

And so naturally, you -- we're seeing our referrals have a spike just as a result of kind of being an educator of the new landscape inside of those offices. But then, yes, all the above pretty much on what you just laid out. We continue to expand in new geographies. We've got some new sales reps that are clicking on all cylinders. We've got a handful of new profile of reps that we've been hiring that have been taking off as well. So lots of good things with momentum in training and coaching inventory and getting folks producing sooner rather than later. So those are really positive trends that we're excited about. And then yes, it just becomes a land grab getting into new markets with our program.

And I'll add, I think you were specifically talking about maternal. What I would say is people on the sales front is not the governor. It's really back office and fulfillment that we're staffing up on. We have contracts in place, and we have marketing abilities around the country. So it's really about getting the mid and the back office scaled up, and we've already increased that business dramatically. So we're hiring as fast as we can and fulfilling as fast as we can. It's not a problem with finding salespeople, although we have some that we've laid out there, it's really more digital marketing than anything.

Understood. That's great commentary. And maybe just one more for me. Just on the margin side of things. You mentioned a couple of times that you're seeing operational efficiencies in vent. You spent some time talking about the SG&A numbers. Just curious as to maybe your thoughts around what's next to be done here in the next 3 to 6 months. Is there a low-hanging fruit left? Or do you feel like you've got it cleaned up pretty well to where you'd like it to be?

No, there's always things that we continue to do. And we've been pretty transparent in the past that growth is going to come with some expenses, and we're going to continue to incur those. But we're extremely excited about efficiencies that we're seeing. If you want to talk about AI or machine-based learning or help on the intake side or the logistics side, we have a lot of things that we're implementing that should help with efficiencies. It should help with the cadence of setups. It should help with the labor per order that we're processing.

So all those things. And then as we just continue to build these other business lines, the corporate G&A isn't having to go up as a reflection of that. So we're going to see some efficiencies through that as well. I think the most telling thing is the 200 basis point improvement in G&A in 1 year. So we -- our goal is to continue to try to drive that number down and kind of improve margins over time. And as we've said, acknowledged them on the call, this free cash flow enhancement is real, and we're very excited about it.

And we have reached the end of the question-and-answer session. I'll now turn the call over to management for closing remarks.

Well, we appreciate everyone's trust in our business. We're going to continue to double down on all this growth and positive momentum and look forward to update you guys in the coming quarters. So thanks again for your trust, and have a good day.

Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.

Greetings, and welcome to the VieMed Healthcare Fourth Quarter Year-end Quarterly Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Trae Fitzgerald, CFO. Thank you. You may begin.

Thank you, and good morning, everyone. Please note that our remarks on this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements.

Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada.

Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements, except as required by law.

The fourth quarter financial supplement and financial news release as well as the related financial statements are available on the SEC's website. With that, I'll turn it over to our CEO, Casey Hoyt.

Thank you, Trae, and good morning, everyone. We appreciate you joining us. Today, we'll recap our 2025 performance, discuss the progress we achieved strengthening the platform and outline how we see the business evolving as we enter 2026. 2025 was a milestone year for us. We delivered record revenue and record adjusted EBITDA, generated significantly higher free cash flow and made real progress diversifying the business in ways you can clearly see in our results.

We are building VieMed into a cash-generating home care platform with multiple growth engines, and we continue to differentiate ourselves through our high-touch clinical model and technology-enabled approach as we scale.

As we move into 2026, we're doing it from a position of strength. We continue to execute well. We're seeing good early signals in the business, and we feel great about the long-term opportunity in front of us.

You can see that in the momentum we're continuing to build in sleep and resupply, the progress we're making in maternal health and the way our technology investments are helping us operate at a higher and more capable level across the platform.

None of it happens without our people. I want to thank our team for the compassion, professionalism and commitment they bring to patients every day. We continue to build our workforce in a disciplined way, including developing talent pipelines through VieMed Healthcare staffing and integrating new team members from acquisitions. We ended the year with 1,382 employees across the country, and I'm proud of how consistently they deliver high-quality care and execute with integrity. That level of commitment matters most when caring for chronically ill patients in the home, and it's at the core of our complex respiratory offerings.

In-home ventilation drives real and significant outcomes for patients, and we continue to see a meaningful long-term opportunity here given the underserved and underpenetrated population, coupled with the increasing clinical demand. During the fourth quarter, we did see some moderation in ventilator patient growth, and it's largely what we expected.

The industry is continuing to work through the updated national coverage determination and the changes are twofold. First, there is a natural operational effort when implementing new documentation and process requirements under the NCD. Our team and processes at VieMed were well ahead of the curve and proactively addressing the new requirements.

The Engage patient platform, which is our proprietary technology deployed in the homes of our patients has played an instrumental role in providing data that helps our therapists manage and report on real-time compliance metrics. We have also spent a ton of time in the field reeducating our physician referral sources and patients on how these new requirements affect qualification and ongoing care.

Second, the updated criteria means some patients who previously may have qualified under the prior framework may not qualify today. What's critical to understand is that the underlying demand and clinical need remains strong. This is primarily a coverage and execution transition.

And throughout 2025, we invested in the infrastructure to navigate it well. That includes strengthening our compliance capabilities, supporting physician education and tightening our internal workflows to align with the updated requirements so we can serve the right patients the right way under the current criteria.

More importantly, the move towards more objective criteria is something we've long supported. Our view is that over time, the new NCD changes will reduce uncertainty across the system and ultimately put scale providers like VieMed in a stronger position.

We're already seeing progress entering 2026. A number of patients who previously were denied coverage under more subjective Medicare Advantage criteria are now qualifying under the new NCD standards. Under the new NCD, we have had 100% success rate at the administrative law judge level on the Medicare Advantage denials we have appealed, which reinforces the appropriateness of the patients we serve and the strength of our documentation.

We are also seeing denials resolved earlier in the Medicare Advantage appeals process, which improves reimbursement timing and reduces uncertainty. January was one of the strongest new ventilator setup months in our history.

That gives us confidence that as the referral partners get more comfortable with the criteria and our execution continues to improve, we will establish a more consistent growth cadence. So in summary, on the NCD, while there's been some short-term friction as the industry adjusts, the work we've completed early positions us well going forward and supports a long runway for growth in our complex respiratory market.

More broadly, as we think about the regulatory environment, I also want to briefly address the recent CMS update regarding the next round of competitive bidding. Based on the categories identified by CMS, we do not expect the announced round of competitive bidding to apply to any of our current product offerings, including ventilators or to have a material impact on our business.

That said, the broader compliance and program integrity elements included in the update continue to favor scaled providers with strong documentation, operational controls and national infrastructure. Those are areas where we've invested for many years, and we know we are well positioned.

As regulatory clarity continues to improve, it creates a stable foundation for growth across the platform. That stability is allowing us to progressively move into areas that are scaling quickly, particularly sleep and resupply, which started as a complementary service has become a meaningful and accelerated growth driver for VieMed.

As of December 31, 2025, our PAP Therapy Patient count reached 34,528, which represents growth of 62% year-over-year. During 2025, new sleep patient setups increased 70% compared to the prior year. That growth reflects strong execution by our sales and operational teams and solid demand in the market.

And it also translates into a strong pipeline for future residual resupply sales. We ended the year serving 36,561 resupply patients, up 49% year-over-year. As the PAP base grows, more patients move into long-term resupply relationships, which creates recurring and predictable revenue over the life of the patient.

We're encouraged with the progress, and we still see room to improve conversion rates and deepen patient engagement, which gives us additional runway heading into 2026. We are also experiencing real tailwinds behind this category.

Obstructive sleep apnea remains significantly underdiagnosed. Clinical awareness continues to increase and broader conversations around metabolic health and GLP-1 therapies are bringing more patients into screening and treatment.

Sleep is and will continue to be an important pillar of our growth strategy. That progress in sleep is a good example of how our platform is evolving, and the Lehan acquisition is another strong example of that continued evolution in action as we expand into maternal health.

Since closing the acquisition of Lehan's Medical Equipment on July 1, the business has performed well and integrated smoothly. The transaction has been accretive out of the gate, generating positive net income contribution in both quarters since closing.

What excites us going forward is the ability to scale maternal health beyond Lehan's original footprint. Lehan brought deep expertise in the category and a strong operating team. VieMed brings a national infrastructure we've built over many years, including payer relationships, clinical operations, intake, billing and compliance.

Together, that allows us to take what Lehan does well and expand it through the VieMed platform to reach more patients in more places. We began billing our first maternal health claim outside the Lehan footprint late in the third quarter, and the early signs have been very encouraging.

In 2025, approximately $9 million of our revenue was associated with maternal health products across existing Lehan markets and new VieMed markets. Maternal health further strengthens our diversification. It broadens our payer mix, reduces our concentration in Medicare and adds another recurring DME category, making our overall revenue base more balanced and resilient.

As we continue to build payer relationships, referral pathways and operational capacity, we expect maternal health to become a more meaningful contributor as we expand in 2026. We view maternal health as a scalable extension of our platform and an important long-term growth opportunity for VieMed.

As we have scaled the business at a high growth rate, we are pleased with how well our forecasting process has performed. In particular, our adjusted EBITDA performance has consistently tracked in line with our expectations. The key driver has been the reliability of our highest margin offerings, which have continued to perform to plan and provide a stable earnings foundation.

While lower margin offerings such as staffing can move around from period to period, that variability is inherent in the model and does not change the underlying earnings profile of the business. Overall, we view our track record of delivering against our adjusted EBITDA outlook as a highly valuable strength as we continue to grow VieMed as an integrated platform.

Reflecting on our success, the reason we can grow and diversify the way we have is because of the processes we've built over time and the strength of our operations every day. For nearly 2 decades, we've proudly focused on execution, clinical quality and doing things the right way. At the center of that execution is our high-touch clinical model.

Our respiratory therapists and clinical teams stay closely connected to patients in the home through frequent touch points, education and monitoring. We support that with our proprietary clinical platform, which connects devices, clinicians and workflows, so we can improve patient adherence, clinical outcomes and efficiencies as we scale.

We also benefit from embedded relationships through our staffing business, which sustains relationships with hospitals and discharge pathways and supports a steady flow of opportunities across our service lines. And we've invested heavily in the capabilities that matter in this industry, especially documentation, compliance and reimbursement so that we can operate effectively as coverage criteria evolve and scale in new categories such as behavioral health with confidence.

The other critical piece is our payer platform. We built a national -- a nationwide network of payer relationships and reimbursement capabilities over many years, and that foundation is difficult to replicate. It's a big reason we can expand into areas like sleep and maternal health and scale them more efficiently because the contracting relationships, operational processes and reimbursement expertise are already in place.

Put all the pieces together, and we have a differentiated platform in home-based care. That's what gives us extreme confidence we can keep growing, keep diversifying and keep expanding cash flow over time.

With that, I'll turn the call over to Todd to walk through our financial performance and capital allocation priorities in more detail. Todd?

All right. Thank you, Casey. I'll begin with a review of our financial performance for the quarter and the full year and then provide additional context around margins, cash flow and capital allocation. In reviewing the financial results, all figures are in U.S. dollars, and our full results have been filed with the SEC. I'll be referencing information available in our quarterly financial supplement, which can also be found on our Investor Relations website.

For the fourth quarter, revenue was $76.2 million, an increase of 26% over the prior year. For the full year, revenue totaled $270.3 million, up approximately 21% compared to 2024. The growth was broad-based, reflecting continued organic expansion across our core service lines and the contribution from the Lehan acquisition during the third and fourth quarters.

Looking at the components of that growth, equipment and supply sales was the largest contributor, increasing by $19.4 million or approximately 63% year-over-year. That growth was driven primarily by continued expansion in sleep resupply and the addition of the maternal health following the Lehan acquisition.

Ventilator rentals increased $12.2 million or roughly 10%, reflecting higher patient volumes and solid demand. Our other non-vent HME rentals increased by $9.7 million or 20%, supported by growth in PAP, oxygen and airway clearance therapies.

Services revenue increased by $4.8 million or about 24%, driven mainly by continued growth in health care staffing. From a mix perspective, the diversification is clear. Ventilation moved from 56% of revenue in 2024 to 51% in 2025 as other categories scaled at a faster rate.

Sleep increased from 16% to 20% and maternal contributed approximately 3% of revenue in 2025. Outside of those areas, the mix was relatively stable. So while ventilation remains a significant component of the business, revenue is becoming more balanced across multiple service lines, consistent with our strategy.

For the fourth quarter, adjusted EBITDA totaled $18.2 million. For the full year, adjusted EBITDA was a record $61.4 million, representing a margin of approximately 22.7%, which has remained stable and is expected to remain at a similar level as we move into 2026.

Gross margin for the year was just under 58%. We are not seeing structural margin deterioration as the business diversifies. While sleep and maternal health have a different margin characteristic than ventilator rentals, those differences are being offset by operating efficiencies, scale benefits and disciplined expense management. We continue to see operating leverage within SG&A as revenue scales, even as we invest in technology and platform expansion.

Turning to cash flow. Performance improved meaningfully in 2025. Net cash provided by operating activities was $51.9 million for the year. After net CapEx of approximately $23.8 million, free cash flow totaled $28.1 million compared to $11.6 million in 2024, more than doubling year-over-year.

In the fourth quarter alone, free cash flow was $10.8 million. Net CapEx represented approximately 10% of revenue for the quarter, and we continue to expect net CapEx to be in the 10% to 11.5% range for the full year 2026. As the revenue base continues to diversify, a larger portion of growth is coming from categories that are less capital intensive.

Over time, that supports lower capital intensity and continued expansion in free cash flow as we scale. Turning to the balance sheet. We ended the year with $13.5 million in cash and approximately $46 million available under our existing credit facilities.

Long-term debt totaled $11.3 million at year-end. Net of cash on hand, we effectively had no net debt, which provides us with significant financial flexibility. Following the Lehan acquisition, we've already begun reducing the associated debt supported by ongoing cash generation.

The combination of low leverage, strong operating cash flow and manageable capital intensity provides us with meaningful financial flexibility as we allocate capital across growth initiatives and shareholder returns.

That brings me to capital allocation. As announced yesterday, our Board has authorized a new share repurchase program for 2026. This authorization reflects our confidence in the durability of our cash flows and our long-term outlook.

At current operating levels, we are generating meaningful free cash flow after capital expenditures, and we believe it is appropriate to return a portion of that capital to shareholders while maintaining flexibility for strategic investments.

Our approach remains balanced. First, we will continue to prioritize organic growth and investments that enhance our competitive position. Second, we will evaluate disciplined, accretive acquisition opportunities that expand our platform and meet our return thresholds.

And third, when appropriate, we will return capital to shareholders through share repurchases. We view share repurchases as an opportunistic and value-oriented component of our capital allocation framework. Given our cash generation profile and modest leverage, we believe we can execute this balanced strategy without compromising growth.

Current market dynamics present an attractive opportunity to execute on this buyback. Overall, we believe our capital structure and capital allocation priorities position us well to drive long-term shareholder value. Turning to our outlook for 2026. We are guiding to full year net revenue in the range of $310 million to $320 million. At the midpoint, that represents approximately 17% year-over-year growth, excluding any contribution from potential acquisitions.

We are guiding adjusted EBITDA in the range of $65 million to $69 million. While EBITDA growth is expected to trail revenue growth on a percentage basis, that largely reflects the fact that 2025 adjusted EBITDA benefited from nonrecurring items, including the $2.2 million gain from the Vent Buyback program. On a normalized basis, the 2026 outlook reflects healthy growth in core EBITDA dollars and continued margin stability within our recurring revenue base.

As we have discussed, we expect the quarterly cadence to be uneven. We anticipate the first quarter to be relatively flat to slightly down sequentially, reflecting the continued transition in complex respiratory documentation and the normal seasonality of the business.

Beginning in the second quarter, we expect to return to a more normalized quarterly growth pattern with sequential growth in the range of approximately 3% to 5% throughout the remainder of the year. Our guidance assumes continued investment in technology, compliance, infrastructure and platform expansion alongside disciplined expense management. We are not assuming a material change in our margin profile, and we are not building in aggressive operating leverage beyond what is supported by the current cost structure and our operating plan.

Overall, our 2026 outlook reflects solid growth, stable margins, continued improvement in free cash flow and disciplined capital allocation. With low leverage, strong liquidity and a scalable operating model, we are in a very strong financial position as we enter 2026.

While we don't currently guide to a free cash flow amount, we are comfortable saying that we expect to continue to generate a significant amount of free cash flow even after our aggressive growth that we are guiding. Before we open the line up for questions, I'll briefly summarize what 2025 represented financially and how we're positioned going forward.

We delivered record revenue and record adjusted EBITDA, maintained the margin stability through a shifting revenue mix and more than doubled free cash flow year-over-year. We ended the year in which we bought back 5% of the outstanding shares at an average price of $6.69 with effectively no net debt and significant liquidity, providing flexibility to invest in organic growth, pursue accretive opportunities and once again, return capital to shareholders.

As we look to 2026, the combination of diversified revenue streams, stable profitability, improving free cash flow conversion, regulatory stability and a strong balance sheet positions us well to continue executing our strategy.

With that, operator, please open the line for questions.

[Operator Instructions] The first question is from Dave Storms from Stonegate.

Just want to maybe start with -- you mentioned the expansion from the Lehan acquisition. I'm just curious as to what's the top of your to-do list there. Is that going to be expanding payers? Is that going to be improving the sales force? What do you think is your priority #1 to maintain that expansion?

Yes, I'll start that, and Todd, you can fill in wherever you want to. But the -- I mean, basically, both of those initiatives are important to us. I would say the payer initiative is more important, getting the Lehan network expanded into the VieMed network of payers is underway.

And so it's not as simple just turn on each individual payer. There's a lot of research that goes into reimbursement rates for certain states. And so we're strategically picking up the correct states to expand into. And then from there, it's just onboarding that into the technology piece, which executes the breast pump sales.

The second piece is, yes, we are going to train some boots on the ground sales folks. That's the VieMed way, if you will. And that is already underway, and we're kind of cross-training some of our sleep reps that are out and about and have the bandwidth to expand their referral sources. So we'll look to do that concurrently with building out the payer network.

Yes. And I would say the other thing that we're working on is this is a significant growth area. We're pretty confident on a percentage basis, it will be the fastest-growing product line for our company.

And we're just trying to make sure that the back office support from a fulfillment and onboarding of patients can keep up with the rapid growth that we're putting around the country. So there's a few different prongs, and we're proactively working on all that with the Lehan's management team who are really kind of guiding us around the country.

That's great commentary. I appreciate that. You mentioned in there just expanded boots on the ground and cross-training sleep folks. Just curious, zoom out a little bit, what your thoughts are around your overall sales force, comfortability with training? Are you going to need to expand that, do you think? Or just any commentary there around your current sales force?

Yes, that's correct. I mean we've already begun cross-training our sleep reps. So our sales force at VieMed is somewhat segmented into complex respiratory, which that sales rep would sell a VibraVest oxygen combination and would typically be called on case management, pulmonologists, whereas -- and then we have another sales force for sleep called on cardiologists and family practice, internal medicine, those types of contacts.

It's really easy to bolt on OBs while they're -- OB/GYNs while they're out and about to call on the breast pumps. Leads, if you will. And then once -- it's the type of business that once you turn it on, it doesn't require much management, ongoing management, just got to check in, make sure things are going good, make sure your customer service is in line and off you go.

So to circle back to your question, the training is underway. We've already got some reps out in the field in certain states where we're good to go with our payers, and we'll just continue to expand that.

Understood. Appreciate that. Last one for me. You mentioned that margins are expected to remain stable throughout the year. As your mix diversifies into some more diversified revenue stream, how many more margins -- excuse me, how many more levers do you think you have to pull -- have available to pull to keep margins stable?

Or do you believe that some of that margin stability is just going to come from increased volumes?

I think -- I mean, I think at a net level, we have the continued opportunity to push on scalability at G&A and the fix is on there, really probably more than anything from a technology standpoint. Obviously, volumes -- transactional volumes are going up dramatically with the evolution of diversifying this business. They don't have a per dollar amount like the revenue from a vent patient, but the volumes are going up. So we have to get more efficient from a technological standpoint, and that would really be through the G&A world.

On the gross margin, our intent is to just really try to reduce expenses at a labor level that will keep gross margins relatively flat. That's an uphill battle. As I stated in my comments, vent gross margins just carry a higher percentage amount, albeit a higher CapEx amount that goes with it.

So I think at the end of the day, what we're really looking at is EBITDA margins and net income margins, and our goal is to try to keep gross margin as close to flat as possible.

The next question is from Ilya Zubkov from Freedom Broker.

So my first question is related to the guidance. Could you just elaborate on the key assumptions underlying your current revenue guidance across the business segments?

Yes. I mean our -- overall, we're not forecasting rapid vent growth this year as we're working our way through the NCD. We're not saying that vents are going to grow at the historical level that they have. With that being said, like Casey said in his prepared remarks, we're seeing a significant, I guess, benefit in the first month to 2 months of new patient starts. So that's encouraging. But just with the uncertainty of the NCD, we're not forecasting an aggressive amount there.

We are forecasting a pretty aggressive amount when it comes to sleep, a notional amount that's probably even larger than we forecasted last year. And then like I said on the last question, maternal from a percentage standpoint is by far the largest, partially because we have a full year of the Lehan acquisition. So that's naturally going to give you a boost there. But we're also modeling pretty significant growth within the VieMed contracts around the country, like Casey talked about a little while ago.

So it's -- I would say kind of to summarize it, the growth is across all product lines. It's going to be split between organic and a little bit of acquisition just because Lehan is there for the full year.

And like we -- if we get back to our historical vent growth rates, then that's just upside for us.

And we don't have any net new acquisition.

No. And this assumes no acquisitions.

That's right.

This is helpful. And also I noticed a sequential decline in the number of respiratory therapies during 2025. Could you walk us through how you determine when to add or reduce RT capacity and how the reduction in the last quarter may affect service revenue in 2026?

Yes. RTs are really driven by patient volumes. And sometimes that number will ebb and flow depending on if we're going into new areas that don't carry as large of a patient per RT value. So I don't know exactly the sequential decline. It may be off a little bit, but that could be just because we had more of our RTs in areas that have significant volumes are established cities.

And then once again, vent patients were relatively flat quarter-over-quarter just with the adoption of the NCD. So once again, we would expect that number to continue to stay relatively in line on a patient per RT basis. And the hope is that those numbers both start growing again in 2026, and that's the plan.

There are no further questions at this time. I would like to turn the floor back over to Casey Hoyt, CEO, for closing comments.

Okay. Well, thanks, everyone, for joining us. Appreciate your trust in VieMed. We'll continue this positive momentum and look forward to a wonderful 2026. Everyone, have a good day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Viemed Healthcare Third Quarter 2025 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to our host, Trae Fitzgerald, Chief Financial Officer. Thank you. You may begin.

Thank you. Good morning, everyone, and thanks for joining us today. Please note that our remarks in this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company's current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements.

Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the security regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligations to update or revise any forward-looking statements, except as required by law. Third quarter financial supplement and financial news release as well as the related financial statements are available on the SEC's website.

I'll now turn it over to our CEO, Casey Hoyt, to get things started.

Okay. Thanks, Trae, and good morning, everyone. I'm excited to be here today to discuss another outstanding quarter for Viemed, a quarter where we continue to differentiate care, accelerate innovation and deliver strong results that set the stage for sustained long-term success. Our team continues to execute at a high level, driving growth across all of our core service lines while expanding the reach and impact of our patient care model.

As of quarter end, our team has grown to 1,386 dedicated employees across the country. This includes the new members of our Viemed family who joined us through the acquisition of Lehan's Medical Equipment. Because the Lehan's team onboarded early in the quarter, we were able to experience a full quarter of collaboration and integration, which has been incredibly rewarding to watch unfold. I'm proud of the dedication and teamwork shown by both our existing staff and our new colleagues as they work together to align systems, processes and culture.

Their focus and adaptability have ensured a seamless transition and strengthened our ability to serve patients with consistency and compassion. With our expanded team and broader service capabilities, we continue to deliver exceptional care to the patients, providers and partners who rely on us every day. That commitment to high-quality service and clinical excellence reinforces Viemed's reputation as a trusted leader in home-based health care.

With that foundation, let's turn to how our strategic execution this quarter reflects both our vision and our ability to translate strategy into measurable results. Our long-term vision remains clear to expand geographic access to high-quality home-based care, diversify our product service offerings and deliver operational excellence at scale. This quarter represents a meaningful milestone in that journey. While our core ventilation business continues to grow at impressive levels, it now accounts for less than half of our net revenue for the first time in over a decade.

This shift reflects both the enduring strength of our legacy services and the rapid expansion of new service lines, positioning Viemed for sustainable, diversified growth and long-term value creation. This diversification underscores the success of our strategy and the strong buy-in of our teams in expanding and strengthening our businesses. By broadening both our payer and referral base, we're creating a more resilient and balanced revenue stream that supports sustained growth through different market conditions.

Our disciplined execution continues to produce measurable results with each of our core home medical equipment lines delivering strong performance this quarter in alignment with our strategic priorities. Ventilation remains the cornerstone of our business, providing a strong and reliable foundation as we continue to expand and diversify our services.

For another consecutive quarter, ventilation revenue achieved double-digit year-over-year growth, demonstrating sustained demand for our differentiated clinical model. This quarter brought an important win for patients in the courts regarding Medicare Advantage coverage, which is expected to significantly improve access and streamline approvals. The regulatory process toward clear and objective qualifying criteria is something we've long advocated for, and we're pleased to see these efforts coming to fruition.

Looking ahead, we continue to execute on the implementation of the new national coverage determination requirements for at-home ventilation. While the policy took effect in June, many of its impacts will begin to materialize in the coming months. Our clinical teams are fully engaged to ensure readiness and compliance, positioning Viemed to capitalize on regulatory changes while maintaining the highest standards of patient care.

These initiatives are expected to improve payment flows through Medicare Advantage channels while preserving seamless patient experiences and strengthening our leadership in compliance and clinical outcomes. Sleep growth accelerated meaningfully this quarter, driven by record new patient starts and continued expansion of our long-term resupply base. New sleep patient starts grew 96% year-over-year, while our resupply population increased 51% year-over-year and 33% sequentially.

For the first time since disclosing our new sleep metrics, our resupply population surpassed our PAP therapy rental base, an important milestone that highlights the strength of our model in converting short-term therapy patients into lasting resupply relationships that generate recurring revenue. The addition of 2,465 patients from Lehan's further amplified this momentum and expanded our sleep footprint into new markets.

Together, these results reflect strong organic execution and seamless integration, positioning us to deliver another record quarter and reinforce sleep as a key driver of Viemed's diversified growth. Our Healthcare Staffing division continues to demonstrate remarkable resilience in an evolving marketplace. Anchored by our behavioral health staffing specialties, the division is delivering sustained growth and generating valuable operational synergies by providing in-house health care recruiting to support our broader patient care services.

This performance underscores the strategic value of our diversified service portfolio and reinforces our confidence in staffing as a reliable and growing contributor to Viemed's overall success. Maternity has now become an exciting part of our portfolio through the successful integration of Lehan's medical equipment. This quarter, we built our first maternity claims outside of the acquired Lehan network and made substantial progress toward a national rollout, establishing a scalable platform for this entirely new service offering.

Maternal Health is poised to be a significant growth driver in 2026, expanding our footprint beyond respiratory and sleep services while leveraging Viemed's national infrastructure, operational expertise and clinical excellence. These results underscore how the addition of this new service line, combined with disciplined execution across all segments continues to advance our strategic priorities and position Viemed for long-term sustainable growth, outpacing the performance of comparable peers in our sector.

Innovation continues to be a key driver of our long-term value. This quarter, we focused on deploying AI-powered revenue cycle management tools, initially targeting our rapidly growing sleep business. Early results are very promising with improved efficiency, accuracy and scalability in billing and collections. We plan to extend these tools across the other service lines in Q4 and into 2026, further leveraging operational efficiencies and improving the patient experience.

Through innovation, adaptability and disciplined execution, we remain confident in our ability to drive future growth and deliver lasting value for patients, partners and shareholders. Our strong operational performance continues to provide the flexibility to invest in growth while delivering meaningful value to shareholders. This quarter, we completed our 2025 share repurchase program and successfully integrated Lehan's Medical Equipment.

Both initiatives were immediately accretive and clearly reflect our disciplined approach to capital allocation. These actions enhance Viemed's ability to pursue strategic growth opportunities, including targeted acquisitions, technology investments and national service expansion. At the same time, we are broadening patient access and improving outcomes through the continued growth of our sleep and maternal health programs.

Combined with proactive preparation for upcoming regulatory changes, these efforts position Viemed to drive sustainable, differentiated growth while creating long-term value for shareholders. None of these achievements would be possible without the dedication and ability of our people. I want to recognize our clinical staff, operational teams and our new colleagues from Lehan's for their hard work and commitment to our patients. We also deeply appreciate our partners and referring providers whose collaboration drives growth and ensures that patients receive the best care possible.

It is this culture and teamwork and shared purpose that sets Viemed apart quarter after quarter. As we look ahead, our mission remains clear: to improve lives and deliver lasting value for all of our stakeholders. With a strong quarter behind us and our strategic initiatives well underway, I'll now turn the call over to Todd Zehnder, our Chief Operating Officer. Todd will provide a detailed review of our financial and operational results and guidance for the remainder of the year. Todd?

All right. Thank you, Casey, and good morning, everyone. In reviewing the financial results, all figures are in U.S. dollars and our full results have been filed with the SEC. I'll be referencing information available in our quarterly financial supplement, which can also be found on our Investor Relations website.

Starting with the top line, we delivered record revenue of $71.9 million, representing 24% growth year-over-year and 14% sequential growth from the second quarter. This strong performance reflects both solid organic growth and the immediate accretion from the Lehan's acquisition, which continues to diversify our business and strengthen our foundation for long-term expansion. Gross profit for the quarter was $41.3 million or a 57.5% gross margin.

Adjusted EBITDA reached $16.1 million, up 16% from the prior year, representing a 22.4% margin, a strong result given our continued investments in growth and diversification. Net income for the quarter was $3.5 million or $0.09 per diluted share. Operationally, we continue to see solid momentum across our diversifying patient base. In addition to steady growth in ventilation, PAP therapy patients increased 64% year-over-year and 21% sequentially in the third quarter.

Our portfolio is also expanding with the addition of maternal health products from Lehan's acquisition. This mix is broadening our reach, improving scalability and supporting an efficient growth model as we continue to scale. On the cost side, SG&A expenses were 44.4% of revenue, a 160 basis point improvement compared to last year and a 130 basis point improved sequentially. This progress reflects the benefit of our evolving product mix, where our newer offerings tend to carry lower gross margins, but also require less fixed infrastructure, resulting in lower SG&A.

Combined with our disciplined cost management and ongoing investments in technology, operations and people, these efficiencies are driving continued improvement in operating leverage as we scale. Gross capital expenditures were $7.6 million in the quarter, down from $11 million a year ago, as spending normalized following the completion of the Philips Vent Exchange program.

Including equipment sales, net CapEx totaled $6 million. We continue to fund our CapEx entirely from discretionary cash flow and maintain excellent cash flow conversion. I want to take a moment to talk about free cash flow, which we view as an important reflection of the strength and efficiency of our business model. Throughout our history, we funded our growth through internally generated cash flow and have done so profitably every year since becoming a public company.

Today, our scale and operating discipline are driving consistent, sustainable free cash flow generation that gives us tremendous flexibility to invest and grow. Because quarterly results can be influenced by timing of certain payments, we've also started highlighting trailing 12-month free cash flow as a more stable way to reflect the underlying trends in our cash generation.

As of quarter end, trailing 12-month free cash flow totaled $23.3 million, up significantly from the prior year, and we expect that positive momentum to remain strong through the fourth quarter and into next year. As long as we're growing organically and generating strong free cash flow, we'll keep putting our capital to work where it drives the most value. That means continuing to invest in profitable growth, pursuing smart acquisitions when the fit is right and returning capital to shareholders when it makes sense.

Along those lines, in September, we completed the share repurchase program authorized by our Board. This marks our third buyback program since becoming public. And this time, we repurchased nearly 2 million shares at an average price of approximately $6.69. Our balance sheet remains a key strength and gives us plenty of flexibility and liquidity to invest in growth. At quarter end, we had $11.1 million of cash, working capital of $5.8 million and long-term debt of only $19.6 million, which we've already paid down $5 million of that in October. We also had $38 million available on our credit facilities, plus another $30 million through the accordion feature if needed.

With this strong financial position, we are well prepared to execute quickly and decisively, should an attractive acquisition opportunity arise. We're updating our full year outlook to reflect better visibility and the continued shift in our product and service mix. We now expect net revenue between $271 million and $273 million compared to our prior range of $271 million to $277 million. Adjusted EBITDA is now expected to come in between $60 million and $62 million or roughly 22% of revenue versus our previous range of $59 million to $62 million.

The narrow range reflects greater visibility as we move throughout the year and our updated assumptions give us a clear view of product level growth. Some of our lower-margin ancillary services, including Staffing, are now expected to grow a little slower than we had projected, while higher-margin lines, especially sleep, are tracking ahead of expectations. Taken together, these trends should modestly improve our projected overall EBITDA margin with a relatively neutral impact to total revenue.

Looking ahead, we're confident in the strength of our business model and our ability to sustain solid margins while continuing to generate record levels of free cash flow. As we close out on the year, our focus stays on disciplined execution, integrating recent acquisitions and positioning the business for another year of profitable growth in 2026.

We want to thank you for joining us today. This concludes our prepared remarks, and we'll now open up the call for questions.

[Operator Instructions]

Your first question comes from Doug Cooper with Beacon Securities.

Congratulations on another good quarter. Just first of all, Todd, I just wanted to confirm, excluding the contribution from Lehan's, which I guess was a full quarter contribution, organic growth, I get around 13%, 14%. Is that in the ballpark?

14%, I believe, is on the revenue growth. It was -- yes, 14%.

Okay. What do you -- just on the sleep, obviously, tremendous numbers there. What do you attribute the growth to? You're certainly seeing much higher growth than anybody in the peer group. So are you gaining share there? Or what do you -- maybe just talk about that a little bit?

Yes. I mean we're gaining share everywhere we go. You got to keep in mind, Doug, that we really didn't start selling sleep until, I guess, right before COVID around the country. While it was a big part of our corporate upbringing in company history, we started in sleep over here in Louisiana back in '06 and kind of grew into ventilation. So we have a lot of experience with the product and the offering.

But we chose not to launch it until we had good insurance contracts and infrastructure set up throughout the country. So it's -- even though it's been around since our inception, we really haven't started pushing it until, call it, 5, 6 years ago. So what you're seeing is we're now hiring reps specific to selling sleep. They're not complex respiratory reps. They're heavily focused on sleep and we'll probably leverage them some breast pump sales for those reps as well throughout the country.

But everywhere they go, they're gaining market share in their prospective towns, clicking on all cylinders. We've really done a good job of training them up and getting them to be armed and dangerous and ready to hit new referral sources. we're able to hire a different type of rep than your traditional complex respiratory rep, just a young and hungry go-getter, fits the bill sometimes for the sales rep. And so we're seeing a lot of good success with just some good people -- spread out throughout the country.

Right. Well, congratulations on that. Just looking at -- I've been reading -- seeing competitive bid keep popping up in articles around, obviously, the government shutdown now, but just some comments around competitive bidding and do you think it comes back? And I'm assuming Lehan's, the breast pump just as, for instance, probably doesn't have any issue with that, but maybe just comment generally on the situation there.

Yes. I mean we fully anticipate competitive bidding coming back at some point. And I think like we said last time, if you're operationally sound and if you're larger, you probably tend to win more contracts. So we're not afraid of the bidding program. I think it was heavily commented on by public, and there's a lot of interest in making sure the program is designed correctly.

So we'll be paying attention to what the final rule looks like when and if it does come out. And we fully anticipate being a participant in virtually all of those CBAs. As it relates to the maternal side of the business, no, I mean, obviously, Medicare is not going to be paying for breast pumps as that's a 65-year-old generally. And so not going to be in that business market. So that's heavily commercial and Medicaid around the country.

So that program is rather insulated from any competitive bidding program. And the other thing I would say, just as a reminder for everyone is that we still generate a significant portion of our revenue stream in the competitive bid products, be it sleep and oxygen primarily from our rural areas. And so those have some impact, but not as dramatic as these large MSAs where the significant potential either consolidation or rates are existing.

Right. And just final one for me. Another good quarter, all the KPIs trending in the right direction. Stock is down 2.5%. The stock based on your guidance for this year, let alone next year, just on this year, I think it trades about 4x EBITDA.

And obviously, while you've been buying back a bunch of stock, the whole health care sector in general is underperforming. And a couple of years ago, all the focus on the Ozempics and GLP-1 drugs, Novo Nordisk I think is down 60% from its peak. What do you think is going to take to get investor interest and get this sector turned around? And I'll leave it there.

Yes. Thanks, Doug. And I'll tell you, it's one of the harder questions we get because we know we're not the market it is. But I'll tell you, the way that we are forecasting our free cash flow, I think a multiple reset is just going to have to happen because we're generating as much discretionary free cash flow as anybody in the industry or most health care providers.

So I don't know exactly how that will translate into the stock price. But as we've done in the past, we will monitor capital allocation very aggressively to the extent we see the best use of capital is returning that to shareholders virtually -- I mean, very likely through buybacks, we'll continuously analyze that. Right now, we're paying off the debt as fast as we ever thought we could. And once that runs out, we'll look at the acquisition landscape and be very in tune to additional buybacks if the stock warrants that.

Your next question comes from Robert Lynch with Stonegate.

Just dialing in here for Dave Storms. Congratulations on the quarter. I just have a few questions here. First one being around the payer mix this quarter. It looks like it shifted with lower Medicare exposure. So I guess what are you seeing on the authorization friction, realized rates and DSO as the mix tilts further for Medicare? And how should we think about audit risk into 2026?

Yes. I mean we're definitely seeing the payer mix shift pretty aggressively just as the product mix is shifting aggressively and the sales and rental shift is on. And all of that is in our supplement. And really, that's as a result of further diversification. Bringing on Lehan's is a -- they're virtually a 0% Medicare company. I mean they have some in their sleep and other DME. But all of that breast pump revenue, which you can see now makes up 6% of our company, that is a non-Medicare and a lot of that revenue would be in that wedge of sales, which is 30%.

I do want to comment, though, Medicare is a great payer. They don't -- they pay timely. They do audit. We all know that, but we welcome audits because we tend to do pretty well with it. And I think what you're seeing, and I don't have an updated DSO, but our AR is pretty low right now. And that means that our revenue cycle team is converting those bills into cash, and we're using that cash to pay down the debt or all those other capital allocation priorities that I just mentioned.

Great. I really appreciate the color there. I guess next one around just some operational levers -- excuse me, what levers do you think you can pull to protect mix and margin as sleep and resupply end up outgrowing vents and especially as the Chicago footprint scales under the Lehan's acquisition, I guess what does that look like?

Well, I think what you'll see is gross margin, if we grow sleep as fast as we're growing it, we'll always have some pressure. We are doing some things that, in Casey's prepared remarks, talked about some technology initiatives that we are using. Just on the sheer number of new patients, we're using some, if you want to call it, AI-based intake, and it's really streamlining the process, helping shave off days to get patients set up, which means that there should be better compliance.

All of those things are things that will help the sleep division operate efficiently and hopefully at a higher margin. But it's going to be hard to offset the difference in the gross margin between a vent patient and a sleep patient. With that said, I want to point out, we had a 160 basis point improvement in SG&A amongst the company at a total level, which we think that if we give up a little bit in the gross margin, we should be able to make that up on the SG&A line. And as long as our free cash flow, our net income margins continue to hang in there, we're entirely comfortable about how we're diversifying the company.

Sounds great. One last one for me around growth. So you guys had an emphasis on rural communities. So what geographies, I guess, do you have with like Tier 1 going into the new year, what's the focus?

Yes. I mean the focus is really to stay kind of close to where our next rep is, which does put us in the rural markets. I mean, we're not strong in New York City. We're not strong out West. But we have plenty of opportunity to just hop 60 miles away from the next rep, not run into each other and then be able to leverage a lot of our clinicians. So that's always the wisest way to grow. And we're constantly looking for that next market that makes good sense for us to go to.

Today, we have lots of just new data points and AI tools that are really teeing up the opportunity for us down the road. That's very interesting, and that's evolving every day. So we've got more ammunition than we've ever had before to making wiser decisions on when to go and how far to go and so on and so forth. But traditionally, we're just trying to just expand from where we exist today, which is the Deep South into the COPD prevalent areas of the coal miners' region in the hills of Kentucky and Tennessee and West Virginia and so on and so forth. It's not that we're ignoring rural, I mean, metropolitan zones, but that's just been our sweet spot. There's plenty of area to grow right down the road from where we're at.

Yes. And then I guess I would add too, Robert, on the maternity side, it's really nationwide, right? We don't provide -- we provide those in very limited areas right now outside of Lehan's, Illinois. We started doing some of that with our legacy business as well, but 2026 is going to be a nationwide approach to maternity across everywhere that we currently operate and don't have that offering.

Your next question comes from Ilya Zubkov with Freedom Broker.

I have a question related to the sleep therapy business. I've noticed that revenue per one patient in this segment has been declining sequentially this year. Could you please explain the main factors driving this trend?

Yes, I'll take this. This is Trae. Well, we don't disclose revenue just for the sleep side of the business. You're probably looking at the other sales, which does include some other products. So keep that in mind. But just in general, thinking about the evolution of the sleep business and going from -- you can see the metric for the first time this period where resupply overtook our therapy patients. They have a slightly different -- they have a slightly different revenue profile, right?

One, the therapy patient is on the rental side, that's separate. And then the resupply side is going to be in sales. And so that -- the actual realizations on the sleep side are extremely stable. If you think about a resupply patient, it's 2 orders per year, $200 an order, roughly 50% gross margin. And that's been stable from when this business was, 5% of our business up to 20% of our business as it stands now.

Okay. This is helpful. And you've mentioned the planned investments in technological development. So I'm just wondering what do you see as the priority areas of these advancements in midterm? Where do you plan to focus your investment there?

Right now, what we're doing -- I mean, the single largest one that we're making is like we've mentioned in the intake division because it's very manual and you're dealing with fax machines and so forth. So we're doing a lot in that, and it's live in at least the sleep division nationwide, and we're going to push it into our other products. We're not exactly sure what the next process that we're going to try to use AI in, but we have an entire team that is meeting regularly to see which processes could benefit the most.

And at the same time, our technology team is out there scouring the tools that are available. And so ultimately, we're not exactly sure what the next one is, but I can promise you there will be more AI/machine learning to help with the operational lift of our company over the next quarter, year, 2 years because they are coming at us very quickly, and it's all upside to our scalability, efficiencies and operational acumen.

And there are no further questions at this time. So I'll hand the floor back to management for closing remarks.

All right. Well, we want to thank everybody for listening in. If there's follow-up questions, please reach out to us, and have a good day.

Thank you. This concludes today's call. All parties may disconnect.