Buy and Hold Quality Forever? Viemed $VMD.to

Congrats. You did it. You found a company (thanks to Chip for pointing it out) that no one was really looking at and put a decent amount of money to work when it mattered. You held onto it through ups and downs all along the way there were doubters to the story. You may have trimmed along the way, but it’s still a larger part of your portfolio than you would like and no longer a cheap company.

We will take a look at my real life example in Viemed – $VMD.to.  It’s less a profile of a company and more of a place to store my thoughts and look for feedback from others. This will be a quick one.

Backstory

Viemed was originally split from a Healthcare roll-up darling in Canada Patient Home Monitoring. It was purchased by Patient Home Monitoring in 2015 and eventually traded on the Venture in Dec 2017 after the split. PHM has a colorful history that was part of the reason the opportunity presented itself.

Viemed Healthcare, Inc., through its subsidiaries, provides in-home durable medical equipment and health care solutions to patients in the United States. The company offers respiratory services and related equipment, including non-invasive ventilators; bi-level, continuous, and automatic continuous positive airway pressure (PAP) machines; and oxygen units, as well as services of respiratory therapists; and respiratory disease management, neuromuscular care, and oxygen therapy services. It also provides in-home sleep apnea testing services to determine the existence of sleep apnea at home. In addition, the company leases non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units, and respiratory equipment, as well as sells medical equipment and/or patient medical services. Further, it provides therapy and counseling to patients in their homes using its technology. The company was founded in 2006 and is headquartered in Lafayette, Louisiana.

The company has a high touch service model that send Respiratory Therapists into the home, mostly for the proper use and monitoring of non-invasive ventilators (NIVs). This high service model helps the company separate itself from local and larger competitors.

Their service of treating patients in the home has proven to extent life and reduce hospital re-admission. This is a win for the patient’s quality of life as well as reducing costs to treat patients.

High Growth with lots of TAM

They have been specifically focused on stage 4 COPD that are candidates for their therapy. We all know the demographic profile of the US is a tailwind for this type of service. Despite the growth in recent years, they estimate to have about a 5% NIV market penetration.

There are opportunities to increase presence in existing states, expand into new states, expand product offerings, as well support patients that aren’t quite as severe as stage 4 COPD.

Management & Execution

Casey Hoyt (CEO) and Todd Zehnder (CFO) stayed on after the split from Patient Home to run the business. Both have proven to be excellent operators. Below is a list of accomplishments since early 2018.

  • surveys to educate their stakeholders on the value of their service – I’m refering to a KPMG and Harvard Medical School study
  • investor calls early on to tell the story
  • investing heavily to support patients remotely
  • Veterans Affairs contract win
  • growing in existing states and expanding into new ones
  • have growth in other products
  • providing PPE products during pandemic – this shows how quickly they can respond and is a nice bonus for shareholders
  • actively diversifying payor base and reducing their risk from a Medicare reimbursement cut
  • US listing

You can see they have been busy in just a few years.

Conclusion

This is all great, but with a market cap of over 500 mil and many institutional eyes on this, my edge of dealing with small illiquid companies has eroded. I will have to pivot my thinking if I continue to hold shares.

For me, VMD still warrants a position, albeit smaller. I have trimmed to where it is a less meaningful part of my portfolio. They want to be the largest respirator company in the US long term. That’s quite ambitious, but does provide some context to the long term plan for the business. They seem to have the runway and the strong leadership. I will be curious to see how they manage acquisitions if they do go down that road. There are risks to the business for sure.

In the past I have tried to model out the future with a couple of different scenarios. Those models never seem to work for me. I’ve posted it below for entertainment purposes. This model doesn’t include any (temporary) sales of PPE made during the pandemic.

At the end of the day, this is a business with a long runway and a solid management team. Valuation is not cheap, but I think with a long enough time horizon it’s worth having a position.

Anyone else own Viemed?

Thanks,

Dean

*the author is long shares of Viemed at time of writing

1 Comment

Filed under Company Analysis, Random Thoughts

One response to “Buy and Hold Quality Forever? Viemed $VMD.to

  1. Jeff

    Great article Dean, THX!

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