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Edited Transcript of PTQ.V earnings conference call or presentation 20-Aug-19 2:00pm GMT

Q3 2019 Protech Home Medical Corp Earnings Call

Sep 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Protech Home Medical Corp earnings conference call or presentation Tuesday, August 20, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gregory J. Crawford

Protech Home Medical Corp. - Chairman, President & CEO

* Hardik Mehta

Protech Home Medical Corp. - CFO

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Conference Call Participants

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* Andrew Hood

M Partners Inc., Research Division - Research Analyst

* Doug Cooper

Beacon Securities Limited, Research Division - MD and Head of Research

* Edward Sollbach

Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Protech Home Medical Third Quarter Fiscal 2019 Earnings and Corporate Update Conference Call. (Operator Instructions)

I would now like to turn the conference over to Mr. Greg Crawford, Chairman and CEO. Please go ahead, sir.

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [2]

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Thank you, operator, and thank you all for joining us today on the call. My name is Greg Crawford, and I'm the Chairman and Chief Executive Officer of Protech Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. On this call, I would like to outline our core business, review our progress over the past year with a focus on the last quarter and provide you with our updated outlook for the rest of calendar 2019.

I hope we will leave you with a resounding impression that Protech is in a strong position in respect of its financial performance, its operations, the balance sheet and organic and inorganic revenue opportunities. We remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of our result news release as well as our MD&A. You can find these on our website and on SEDAR. The company's actual performance could differ materially from these statements. On August 19, 2019, we announced our Q3 fiscal 2019 financial results for the period ended June 30, 2019.

For more on those results in a moment, but first, a brief background on our story. Protech Home Medical provides a diverse offering of home medical equipment and services for treating patients with chronic disease in the United States. The company provides a range of products, including respiratory, oxygen, various medical supplies and custom power mobility devices. We operate in 13 states across the Midwest and East Coast regions, completing hundreds of thousands of deliveries each year to more than 80,000 active patient customers.

Our growth strategy is focused on utilizing technology to make life easier for the patient, the physician and to improve our overall health care experiences and outcomes. Today, for example, if a patient needs respiratory equipment, he or she would typically have to drive to a location to pick up the equipment and see some level of in-person training. If a patient has any difficulty with the device, either someone must drive to them or they are forced to come back to the location where the device was purchased. In contrast to that, Protech uses technology to reduce or eliminate these points of friction, resulting in more successful treatment and managing of chronic conditions and, not unimportantly, at a higher margin yield per patient.

With that background, I'd like to hand the call over to Hardik to discuss our Q3 fiscal 2019 financial results.

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Hardik Mehta, Protech Home Medical Corp. - CFO [3]

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Thanks, Greg. In reviewing the financial results for the third fiscal quarter ending June 30, 2019, please note that all financial values are in Canadian dollars and the full results are available on SEDAR.

In the third fiscal quarter of 2019, Protech completed 11,034 setups or deliveries, compared to 10,245 in the corresponding period last year, an increase of 7.7%. The company generated revenue of $21.1 million, up 7.1% from Q3 of 2018. Our efforts to streamline operations and standardize regional processes continue to bear fruits. Most of the 7.1% year-over-year growth is organic with a small contribution from 2 smaller recent acquisitions.

Though we were up 7.1% year-over-year, the reported net revenue was down 5% quarter-over-quarter. I want to take a moment to explain why. It is important to clarify that our baseline gross revenue actually increased marginally by 0.6% quarter-over-quarter. Despite of this increase, our reported net revenue was down 5% for, primarily, 2 reseasons: one, change in accrual. The change in accrual quarter-over-quarter was close to negative $600,000. It was primarily because we witnessed a temporary slowdown in the processing of CPAP intake and (inaudible) orders because we were in the middle of establishing a new process with a new global partner with the aim to reduce our SG&A in the long run. At this time, all the [peaking] issues have been resolved and we are back on track.

The second reason is because this quarter, we took additional results of previously recorded revenue against our gross revenue for the quarter, which resulted in current period reduction in net revenue. One of our businesses, which is also a noncore assets and represents less than 5% of the revenue had product recall earlier in the fiscal year, which was followed by a 20% reimbursement cut by Medicare. This quarter, we took additional reserve against previously recorded revenue for this entity to accommodate for these changes.

Moving on. Adjusted EBITDA for Q3 fiscal year 2019 was $3.9 million, up 7.8% from the corresponding period last year. Adjusted EBITDA margin was 18.4%, up slightly from 18.3% in Q3 2018.

At the end of third quarter, we had $4.2 million in cash. Our net loss for the quarter was $12.5 million, compared to a net loss of $1.4 million in Q3 2018. This decline was almost entirely a result of the cyber attack that the company suffered. As Greg will discuss in a moment, we have reasons to be optimistic that this charge of $9.2 million will be reversed. Current assets totaled more than $27.2 million at June 30, 2019, compared to $19.1 million in net short-term liabilities. To summarize, our balance sheet remains solid, our operational base continues to grow and we continue to post industry-leading margins. Thank you.

And with that update, I'll turn the call back to Greg.

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [4]

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Thanks, Hardik. We have been satisfied with our operating performance over the last year and are pleased to report that solid organic growth continues through 2019. I want to take a moment to explain a little more in depth of what we are doing differently and why we have been able to achieve the results we have and why we continue to be so excited about the future.

Protech uses unique efficient delivery cost models and technology to change the way in which home medical equipment is delivered to a growing aging U.S. population. This segment of the market, known as the durable medical equipment, or DME providers, is estimated to approximately $60 billion. This is underlined by the fact that over 10,000 people in the U.S. will turn 65 every day for the next 15 years. This is our core market. In the last 12 months, we have set up or delivered over 0.25 million pieces of equipment to over 80,000 patients. We operate out of 33 locations in 12 states and now have over 13,000 referring physicians.

Our core product offering is for chronic illnesses that are treatable at home using streamlined logistics and distribution. Protech can offer home delivery and maintenance on these equipment, which is the first for many of these patients. The respiratory market, one of our key target markets, is interesting in that the demand for services continues to rise but the supply side is fragmented and shrinking as significant reimbursement cuts have reduced the number of providers in this segment.

There are very few companies like Protech that have the scale and competitive advantages, including those from technology and logistics, to benefit from such structural changes in the balance sheet to seize upon these opportunities. I would now like to review with you the 3 components of our growth strategy that we implemented upon taking the reins of the company in late 2017.

First, we are laser-focused on capturing market share economically and profitably. Our industry growth rate is about 3% to 5% per year. However, we believe we can achieve more than double the growth rate of our industry as we continue to focus on significantly increasing our market share in key target regions within the markets we serve. We continue to seek opportunistic ways to grow our business through more strategic methods and/or additional product lines within our existing locations.

It is important to remember that this is an industry at scale and Protech is still at the early stages of reaping the full benefits of being one of the only companies that can benefit that given our relative size. These benefits will further magnify as we continue to grow, both organically and through acquisitions.

Secondly, we continue to lead the industry in technology deployment and in our use of data mining tools to drive efficiencies and profitability. A patient's ability to order a piece of equipment, a service call or other ancillary option via the touch of a button is where the industry is headed. We have made significant investments in developing these tools and we'll continue to invest in them to continue to maintain our technicological advantages over our competitors.

The third component of our growth strategy is acquisitions. Our key focus for our acquisition program is to focus on geographies where we are -- where we already operate so that we are best able to integrate acquisition targets onto our platform by consolidating distribution channels, driving efficiencies and substantially improving the overall profitability.

We are actively working to bolster our M&A program with new hires that will focus on driving more deal flow and enhancing our process. By building up our M&A team, we believe we can improve our acquisition pace and find the most accretive pricing for deals. We will keep our shareholders up-to-date on our progress. Overall, I sincerely believe that our three-pronged strategy will continue to propel our company towards sustained financial growth and profitability. Finally, I want to address the cyber attack of which most of you are aware and in which we press released on May 6, 2019.

To recap, Protech was a subject of a sophisticated breach of our e-mail system that ultimately led to the theft of approximately CAD 9.2 million. On August 16, 2019, we announced that we have completed the final legal hurdle in Hong Kong to recover the majority of the stolen funds with accrued interest. As such, we expect the funds to be back in our bank account within the next several weeks. In addition, we have filed a claim under our cyber insurance policy for cost associated with the recovery of the funds.

The process of recovery has been both time-consuming and distracting for management this quarter. In addition to the recovery itself, we have spent significant time strengthening our internal systems and processes to reduce any risk of reoccurrence. I am pleased to note that, despite the distraction, Protech posted solid growth this quarter, demonstrating the quality and fortitude of our core business.

With the cash recovery now in its final phase, we are pleased to report that certain M&A-related discussions that were ongoing at the time of the theft have now been reenergized and new targets are constantly being identified.

Of course, although there is no guarantee that any of these discussions will lead to a transaction, I believe our track record speaks for itself, namely, that we are highly adept at identifying, closing and integrating attractive acquisition opportunities in a highly accretive manner.

In conclusion, I want to leave you with 3 clear messages: first, our core market is growing and we continue to expand our market share therein; secondly, our strong balance sheet, expanding margins and cash flows allows us to speedily respond to strategic opportunities, creating a dynamic and, we believe, highly attractive investment opportunity; finally, engaging with capital markets is a top priority for us.

We truly believe that at our current share price, Protech is highly undervalued compared to its peers. We will continue to tirelessly share and promote our story to the markets to rid ourselves of that discount. We look forward to continue to demonstrate strong financial results and we'll continue to communicate with our retail and institutional shareholders the progress we're making towards our goals. This concludes our prepared remarks and we will now open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Doug Cooper of Beacon Securities.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [2]

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Congratulations on the solid quarter. Hardik, a couple things for you. I just wanted to confirm what you said. I guess with the respiratory resupply setup business, did you say the changes that you undertook in the quarter caused the temporary slowdown? And I think you said that sort of the opportunity cost, $600,000, was that what you said, in the quarter?

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Hardik Mehta, Protech Home Medical Corp. - CFO [3]

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Yes. What I said was, as far as IFRS accounting, there's accruals and the changes in accrual was a big portion for the drop in revenue. And the reason for this change in accrual is because, towards the end of the quarter, we had a slowdown in our intake process and our confirmation process, which -- because we were establishing a global partner to reduce our overall SG&A associated with the process. So there were some [peaking] issues that resulted in slowdown of recording the revenue. I mean it did not result in the drop of revenue, it just resulted in the slowness when the revenue was built on our side because this order went out into Q4, basically, instead of going into Q3.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [4]

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Right. So yes...

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Hardik Mehta, Protech Home Medical Corp. - CFO [5]

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So the quarter resulted in a drop.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [6]

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Okay. So in other words, if this process was already done, just for example, you think you could have generated an incremental $500,000 of revenue. Is that how we should think about it?

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Hardik Mehta, Protech Home Medical Corp. - CFO [7]

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Yes. I mean we could have recovered -- I mean there are 2 reasons for the change in the quarter. One was the CPAP and then the other, as I said, we had another company, a small noncore asset that had seen some drop. So you would see a little bit of drop from that and from the CPAP. So I wouldn't entirely contribute $500,000, but a big portion of the $600,000 gets contributed through the CPAP program.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [8]

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Okay. So that's the 2 -- that was the sort of the impact between those 2 issues that you itemized?

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Hardik Mehta, Protech Home Medical Corp. - CFO [9]

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Right.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [10]

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Okay. And just on the second point. You talked about that other company or other segment of your business being a noncore asset. Does that mean that we should think about you potentially looking to sell that asset? Or when we hear noncore, I'm assuming that you might look to sell that asset. Is that how should we be thinking about the definition of noncore?

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Hardik Mehta, Protech Home Medical Corp. - CFO [11]

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We are obviously always looking to bring efficiencies and take steps towards increasing our EBITDA margins for the overall company. And if that evaluation leads to a potential divestiture then we are absolutely going to consider that as an option. So hoping that answers your question.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [12]

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Okay. And can you give us the size of what that sort of noncore asset does revenue-wise on an annual basis?

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Hardik Mehta, Protech Home Medical Corp. - CFO [13]

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I mean it's less than 5%. Fiscal year 2018, it was close to CAD 4 million.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [14]

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Okay. And second of all, Greg, you referred to in your speech, 13,000 referring physicians. Can you give us an idea how that has grown over the past year and the ability of those 13,000 physicians to drive more business to you? Like what is the sort of underutilized referring power, if I can call it that, out of those 13,000 physicians?

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [15]

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Yes. Good question. It allows us to be able to add more physicians, obviously, into the network. And that -- and they learn about our services and things, and we're able to sell our different programs that we have. So some of those particular physicians and that may have been referring one type of device to us and then we were able to tell them about another service that we provide. So that's really kind of been key to some of our growth of the high-margin respiratory products that we've been expanding on for the past couple of years within the company.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [16]

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So when you talk about your goal, one of your strategic growth strategies is to drive sort of double industry growth rates. I'm assuming, part of that is the leverage that you can get from those 13,000 referring physicians.

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [17]

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Yes. Absolutely. And it's leveraging multiple products in that, particularly on the side of the respiratory category.

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Doug Cooper, Beacon Securities Limited, Research Division - MD and Head of Research [18]

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And I guess my final question. Well, sort of a twofold question. Assuming you've got the -- all goes smoothly from here on out to get the cash back from the cyber theft. And -- well, we will just leave it there. On a pro forma basis, maybe Hardik, can you talk to us about what your cash position would be pro forma? Should we just assume the $4 million plus the $8.6 million? And when you talk about reenergizing the M&A program, what kind -- can you give us a bit more color on what kind of size companies you're looking at? And what do you think you'd pay in terms of whether cash and stock and what kind of size company it is?

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Hardik Mehta, Protech Home Medical Corp. - CFO [19]

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Right. So I'm just doing the math of $8.6 million plus $4.2 million that we currently have. That leads to about 12.8% -- $12.8 million. As we all know, there was a loan that was provided by Greg to us to honor the debentures that were due for December. And so after that, I think the money that will be left with it we should be able to at least by close to $10 million of revenue if not more. And then we have some other things in works that were -- it's premature for us to disclose at this point, but I think there's some other stuff that we are working on that will allow us to do more acquisitions.

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Operator [20]

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Our next question comes from Andrew Hood of M Partners.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [21]

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So my first question was kind of the same as Doug, and I guess maybe you've kind of answered it there. I was wondering if you were comfortable with your cash balance to pursue your acquisition strategy. And really, are you expecting to be cash flow positive next year?

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Hardik Mehta, Protech Home Medical Corp. - CFO [22]

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I think, operationally, we're definitely cash flow positive as of today. So yes, I mean I think we are cash flow positive operationally today and we will continue to do that in the next year, too.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [23]

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But yes, even considering, let's say, payment of interest, that type of thing, would you still expect to be cash flow positive at the bottom line of your cash flow statement?

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Hardik Mehta, Protech Home Medical Corp. - CFO [24]

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Yes. I think, yes. We are very -- I think, yes, right. So simple answer to that question will be, yes.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [25]

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Okay. So what's your total pipeline of acquisitions, let's say, over the next year or 2, as of now, dollar-value-wise?

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Hardik Mehta, Protech Home Medical Corp. - CFO [26]

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I mean we have -- we are actively engaging about $20-plus million in revenue, some of them are actually more closer, some of them are a little bit far-fetched and some of them are on the introduction phase. But a big portion of that $20-plus million is we are actively talking to the management and there has been indication of interest, if not signed, at least negotiated.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [27]

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Okay. Would it be fair to say that, that LOI signed in April would likely be the first one to close?

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Hardik Mehta, Protech Home Medical Corp. - CFO [28]

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I mean we are still actively talking to the seller. I don't know if that would be the [course] to go or there will be something else that can go first. There are a couple other opportunities that are a little bit better and probably more time-pressing from a closing perspective. So I think there could be a lot of opportunity that can go first, just depending on where the sellers are in their own processes.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [29]

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Okay. But you're still definitely considering that April LOI target then?

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Hardik Mehta, Protech Home Medical Corp. - CFO [30]

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That is absolutely correct. We are in active conversations with those clients.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [31]

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Okay. As you mentioned that $3.4 million loan from Greg. So once you get that cash back, let's say, in September, are you intending on paying back that loan immediately? Or is that going to remain on the balance sheet?

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [32]

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Ultimately, I believe that's what the Board would like to do, yes.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [33]

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Paying it off?

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [34]

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Yes.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [35]

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Okay. Quick question. What proportion is recurring revenues now? Still 65%, roughly?

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Hardik Mehta, Protech Home Medical Corp. - CFO [36]

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Yes. No, Andy, we may or may not be part of some of the other conversations in the past. But a lot of our resupply program, even though that is characterized as sales as per IFRS, the nature of that business is recurring in nature. So a person who is on a CPAP program, the CPAP resupply program, we'll buy products on a recurring basis. It's like, for lack of a better comparison, but if somebody is on a diabetic resupply program, that person needs strips to test for their blood sugar on a daily, monthly, whatever the schedule is.

Now those kind of transactions, on an IFRS accounting basis, are considered as a sale item and not a revenue item. So I think characterization-wise, there's much more percentage of our revenue is recurring in nature. It may not be rental, but it is recurring in nature.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [37]

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Yes. I know it's a noncore business, but could you just talk about that? You mentioned a supplier recall.

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Hardik Mehta, Protech Home Medical Corp. - CFO [38]

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Yes.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [39]

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Would the business still be affected by that going forward? Or it that -- has that been resolved?

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Hardik Mehta, Protech Home Medical Corp. - CFO [40]

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So the business will not be affected by that going forward, but it did affect us for a significant amount of time, almost more than 2 to 3 months. And we are the only providers that supply the whole industry that affected by it because this was like a single-supplier industry.

And what I meant by about the reserves associated with this was we had booked revenue based on our estimation on what our collection efforts would be and then do we collect from those recall. And I think that the -- that particular segment performed a little bit lesser than our expectations were. And so in anticipation of that, we targeted -- prudent for us to take some reserves against those previously booked at revenue. So -- but at this point, no, that recall, it doesn't affect us going forward.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [41]

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Right. So it affected the whole industry as well. So you don't think you lost -- I mean, obviously, it's a recurring business likely, but you don't think you lost market share at all?

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Hardik Mehta, Protech Home Medical Corp. - CFO [42]

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No. No, definitely not. It didn't affect our market share. What it did affect was that during the few months that there was no product supply, we were not able to own the new patients, so that does affect our -- the revenue stream from that business. And we had a pipeline of patients who were waiting to be setup or waiting for the products or we were able to supply them nonrecall products to get through the phase, but that did impact our overall performance. And we were not the only one, everybody went through the exact same cycle.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [43]

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Right. Okay. My last question...

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Hardik Mehta, Protech Home Medical Corp. - CFO [44]

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There was no other opportunity for a patient to go. It's not like you have gone from us to a different provider.

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Andrew Hood, M Partners Inc., Research Division - Research Analyst [45]

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Okay. Okay. My last question. I'm just wondering, I know it's a longer-term strategy, but is there any update on the warehouse consolidation strategy at all?

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [46]

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No real update. No, I mean we continuously evaluate the operation and look at consolidating distribution channels and warehouses and things on a regular basis. But at the same time, we're also expanding into areas, so the number may not necessarily change at different locations, and that could be added and some could be retired.

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Hardik Mehta, Protech Home Medical Corp. - CFO [47]

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Yes. Just to add more as to what's happened is as some of these leases are coming due, we are exiting those or we might have already exited and the leases have just been paid the new course. But at the same time, since we are expanding into some new geographies, the financials, we may not -- may or may not see a net impact. But it is definitely a more efficient way of using our capital.

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Operator [48]

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The next question comes from Ed Sollbach of Spartan.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [49]

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I noticed the SG&A went up year-over-year. Can you talk about what happened there?

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Hardik Mehta, Protech Home Medical Corp. - CFO [50]

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Sure. A big portion of that SG&A is associated with the investment in personnel. As we have discussed in Q2 and 1 that we have hired a significant amount of sales rep and some senior management to support the growth that we want to plan for, especially back in Q2 before the cyber attack took place. We are positioning ourself to capitalize on the capital raise and just following most acquisition strategy. And so we have kind of bolstered our personnel to support that. And since we are very positive on our ability to recover most of the funds, we have made the decision to kind of continue to sit on that investment and then rightsize our supply soon after the attack took place.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [51]

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Okay. So I guess we look forward to that paying off in the future. Where are you at in terms of personnel now versus last year?

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Hardik Mehta, Protech Home Medical Corp. - CFO [52]

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I think, yes, about 10% more than last year. And again, just some investment in high-dollar management people, along with some folks on the ground. So we do believe that acquisition is getting back on track. Our marginal contribution would be much better on a dollar basis. And we don't expect our SG&A to grow proportionally to the revenue.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [53]

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Okay. So you expect margins or economies of scale at some point?

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Hardik Mehta, Protech Home Medical Corp. - CFO [54]

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Yes, we do. Exactly, we do expect economies of scale through that. And so as I said, some of them were just -- as we described this in fiscal year 2018, it was time for us to kind of bring some senior people in the team to support where we were heading to go.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [55]

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Okay. So that makes sense. One thing that was worrisome was the bad debt. I mean it's already sizable and I noticed it went up this quarter again versus last year. What happened there and what are you doing there?

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Hardik Mehta, Protech Home Medical Corp. - CFO [56]

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It's the -- again, because partly the reason for that was this noncore asset that we had booked revenue against and we thought looking back and looking at some of the performances associated with the previously booked revenues, we thought it was prudent for us to rightsize the revenue from those assets and that's exactly what we're doing this quarter. I think, overall, it will still align to last year on a year-to-date basis, it's just probably slightly up.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [57]

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So the bad debt came from the noncore asset? Or is it...

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Hardik Mehta, Protech Home Medical Corp. - CFO [58]

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Yes, a bit. Yes, a decent portion of that did come from that noncore asset.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [59]

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Okay. What -- how much of the bad debt was associated with the noncore asset?

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Hardik Mehta, Protech Home Medical Corp. - CFO [60]

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I would say about 80% of the delta of the normalized bad debt versus this year was probably associated in that, the noncore.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [61]

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Okay. Could you put a number on it?

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Hardik Mehta, Protech Home Medical Corp. - CFO [62]

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About -- I don't know. I don't have it in front of me right now. So sorry.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [63]

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Okay. So sorry, I was trying to understand what you said. 80% of the...

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Hardik Mehta, Protech Home Medical Corp. - CFO [64]

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The additional bad debt than what a normalized bad debt ratio as well.

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Edward Sollbach, Spartan Fund Management Inc. - Associate Portfolio Manager MM Fund [65]

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All right. So 80% of the increase came from the noncore asset?

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Hardik Mehta, Protech Home Medical Corp. - CFO [66]

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Yes. Yes.

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Operator [67]

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This concludes the question-and-answer session. I would now like to turn the conference back over to Mr. Greg Crawford for any closing remarks.

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Gregory J. Crawford, Protech Home Medical Corp. - Chairman, President & CEO [68]

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

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Operator [69]

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