Quipt Home Medical Corp. (NASDAQ:QIPT) Q3 2024 Earnings Call Transcript

Quipt Home Medical Corp. (NASDAQ:QIPT) Q3 2024 Earnings Call Transcript August 15, 2024

Operator: Thank you for standing by. This is the conference operator. Welcome to the Fiscal Third Quarter 2024 Results Conference Call for Quipt Home Medical Corp. As a reminder all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analyst to ask questions. [Operator Instructions] We remind you that the remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of the Company’s results news release. The Company’s actual performance could differ materially from these statements. At this point, I’d like to turn the call over to Chairman and Chief Executive Officer, Greg Crawford.

Greg Crawford: 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 Quipt Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. Quipt Home Medical is a diversified health care services company, providing a full spectrum of home medical equipment and services to patients in the home setting across the United States. At Quip, our unwavering commitment is to provide clinical excellence through our patient-centric ecosystem, leveraging technology-enabled equipment solutions in conjunction with our specialized clinical respiratory programs to effectively treat patients at home in a way that best suits their needs.

Our core go-to-market strategy drives market penetration through providing an end-to-end respiratory care solution with complementary durable medical equipment products to our key sales touch points serving as a one-stop shop in the marketplace. At this time, respiratory care accounts for approximately 80% of our product mix showcasing our ongoing commitment to serving the needs of patients with pulmonary and cardiovascular diseases. With our ongoing dedication to patient care and the scale we are achieving, we are poised to capitalize on the expanding need for respiratory care delivered in the home setting. This need for respiratory care is driven by an aging population significant COPD target patient group of over 16 million Americans and a significantly underpenetrated sleep apnea market with OSA impacting 80 million adults across the United States.

On this call, we will provide updates on our fiscal third quarter 2024 performance, provide strategic insights into our core business and our strategic growth road map. In fiscal Q3 2024, we reported revenue of $64 million, marking a 6.1% year-over-year increase and adjusted EBITDA margin of 22.3%. This resulted in adjusted EBITDA of $14.2 million, representing growth of 2.7%. We increased revenues to $193.3 million for the nine months ended June 30, 2024, an increase of 21.4% compared to the prior period and generated adjusted EBITDA of $44.5 million, representing 23% of revenue compared to 22.6% for the corresponding period. Our strategy focusing on generating economies of scale and effective cost management enabled the consistency in our margin profile.

We are very pleased with the progress made in the fiscal third quarter in the face of the challenges faced year-to-date. We saw year-over-year organic growth of 3% and flat sequential organic revenue growth in the quarter. This represented a solid sequential improvement from the 2% sequential decline seen in fiscal Q2. We are proud of the improvement given the absorbed impact of the end of the Medicare 75-25 for lease as of January 1, which had been providing rate relief for certain geographies that change health care cyberattack and the withdrawal of Medicare Advantage members due to a capitated agreement engaged on with other providers in the industry. We have observed strength in our referral patterns across our product offering in real time, which has helped to mitigate the impact, and we anticipate a return to historic levels of organic growth in time.

Turning to our sleep business. As it relates to the continued emphasis on GLP-1s, we have not seen any negative impact from GLP-1s whatsoever to date. We have seen referral patterns for new device setups remain consistent and replacement supply is very strong. In the quarter, we saw our resupply program performed very well with an increase of $2.2 million or 9%. Moreover, additional positive data shared from the leading sleep device manufacturer recently involving 811,000 patients showed 7% more likely to start PAP therapy compared to those not on GLP-1s, highlighting their impact on treatment adherence. Additionally, data showed more frequent resupply order rates for these patients over 12 and 24 months. The data shared demonstrates that GLP-1s are having a positive impact on patients, both seeking and adhering to positive airway pressure therapy.

We think that the availability of these medications for the treatment of obstructive sleep apnea will lead to a rise in the number of cases diagnosed with the illness and a rise in the market demand for PAP therapy. It is important to remember that 80 million adults in the U.S. have OSA, of whom over $20 million have moderate to severe OSA. Furthermore, it’s estimated that 85% of the cases of OSA remain undiagnosed and untreated. The total addressable market is extremely large for this segment of patients and allows for multiple treatment modalities. CPAP is also well tolerated with approximately 87% of patients meeting U.S. Medicare criteria for CPAP adherence using modern technology. We believe, based on early data our real-time performance and the positive developments of more motivated patients entering the health care system as they work towards their health goals, the introduction of GLP-1s will be complementary serving as a tailwind for our sleep business over time.

As it relates to the ongoing CID, known as the civil investigative demand, we continue to make progress, providing information and are working diligently to resolve this matter as quickly as possible. At this time, the government has not reached a conclusion that any wrong doing has occurred. We have effective internal controls around billing and compliance procedures in place and remain confident in our practices. In fiscal Q3, we were laser-focused on working through the short-term working capital impact of the Change Healthcare cyberattack, ensuring cash collections normalize and the processing of outstanding claims was prioritized. Now as we begin to move on to the other side of this impact, we continue to look at ways to allocate our capital to promote growth and create value.

To this effect, we have seen the M&A landscape evolve over recent months, with plenty of strategic opportunities in the marketplace that would fit our stringent mandate. Our pipeline is growing, and we are committed to economically building scale with the flexibility to deploy capital in a thoughtful manner as it relates to synergistic acquisitions at reasonable multiples. Moreover, as it relates to the M&A environment as a whole, we believe the recent sale of one of our larger peers, which is significantly higher than our current trading multiple underscores how undervalued our company is at this time. Additionally, we anticipate that dislocation will occur in the marketplace from the M&A activity and will lead to organic growth opportunities for us to take advantage of, and we are ready to pick up market share.

Finally, we will continue managing debt conservatively and leveraging our strong balance sheet, which stands at a conservative 1.5 net leverage enabling us to pursue strategic initiatives that drive long-term value for our shareholders. As we continue to implement our strategic growth strategy, we are confident in our ability to deliver exceptional patient care establish strong payer alliances and achieve consistent and sustained long-term growth. With that commentary, I’d like to hand the call over to Hardik to discuss our fiscal third quarter 2024 financial results.

Hardik Mehta: Thanks, Greg. On Wednesday evening, we announced our fiscal third quarter 2024 financial results, representing the three months ended June 30, 2024. Please note that all financial values are in U.S. dollars. Here are some key highlights. The Company’s customer base increased 9% year-over-year to 153,223 unique patients served in Q3 2024, up from 140,515 unique patients in Q3 2023. Compared to 547,038 unique setups or deliveries in Q3 2023, the Company completed 641,786 unique setups and deliveries in Q3 2024, an increase of 17.3%. This includes 120,118 respiratory resupply setups for the three months ended June 30, 2024, compared to 108,391 for the three months ended June 30, 2023, an increase of 10.8%, which the Company creates to its continued use of technology and centralized intake processes.

Revenue for fiscal Q3 2024 was $64 million compared to $60.3 million for fiscal Q3 2023, representing a 6.1% increase in revenue year-over-year. Organic growth contributed approximately 1.7% or 3% year-over-year. Revenues for the nine months ended June 30, 2024, increased to $193.3 million representing an increase of 21.4% from the nine months ended June 30, 2023. Organic growth contributed approximately $8.1 million or 5%. Recurring revenues as of fiscal Q3 2024 continues to be strong and is approximately 82.1% of the total revenue. Adjusted EBITDA for fiscal Q3 2024 was $14.2 million or a 22.3% margin compared to $13.9 million or a 23% margin for Q3 2023. The EBITDA grew by 2.7% year-over-year. The Company generated adjusted EBITDA of $44.5 million for the nine months ended June 30, 2024, a 23.7% increase from the nine months ended June 30, 2023.

This represents 23% of revenue for the nine months ended June 30, 2024, an increase from 22.6% for the nine months ended June 30, 2023. Cash flow from continuing operations was $28.6 million for the nine months ended June 30, 2024, compared to $27.3 million for the nine months ended June 30, 2023, an increase of 4.9%. For fiscal Q3 2024, bad debt expenses increased to 5% from 4% due to the direct and indirect effects of the changed health care cybersecurity incident, resulting in a diversion from normal collection efforts. CapEx defined as transfers of rental equipment from serialized inventory to fixed assets when we deploy the equipment on patients was 12.7% for the nine months ended June 30, 2024, in line with historical levels. We experienced higher CapEx for the three months period ending June 30, 2024, due to the purchase of new ventilators to replace the old trilogy model in our fleet.

Operating expenses for the three months ended June 30, 2024, was 47.8%, an increase from 45.4% in the three months ending June 30, 2023. Acquisitions accounted for approximately $900,000 of the increase and $723,000 of professional fees related to CID. Remaining increase was incurred to support organic revenue growth with payroll being the largest component. The Company reported $14.4 million of cash on hand on June 30, 2024, compared to $14.6 million as of March 31, 2024. The Company had total credit ability of $38.1 million as of June 30, 2024, with $17.1 million available on the revolving credit facility and $21 million available person to the delayed draw term loan facility. The Company maintains a conservative balance sheet with a net debt to adjusted EBITDA leverage of 1.5x.

We are pleased with the steady progress made throughout this quarter, and we are confident that our ongoing growth initiatives will translate into sustained long-term value for our shareholders. A key component of our strategy is our prudent approach to capital management as this allows us to economically scale our business while maintaining efficiency. Our focus is on ensuring that every investment we make is geared towards sustainable growth. Our long-term strategy is built on maximizing the resources we already have in place, including leveraging our strong balance sheet, operational strength sales capabilities and the infrastructure we have developed so far. By doing so, we are able to build a more resilient and stable foundation for future growth, margin acceleration and cash flow generation.

We are proud of the efforts of our team in growing our overall revenue year-over-year and mitigating the temporary headwinds we faced with continued volume growth to produce flat growth sequentially. An improvement from sequential 2.1% decline seen from fiscal Q1 to fiscal Q2. Our priority remains on achieving organic growth target of 8% to 10% on an annualized basis. Our conservative balance sheet featuring $31.5 million in cash and revolver availability positions us exceptionally well to navigate an environment of higher interest rates and strategically pursue both organic and inorganic growth opportunities with a prudent leverage ratio of 1.5x. We are strategically positioned to utilize the balanced mix of debt and cash demonstrating our commitment to disciplined growth.

As it relates to working capital, we generally do not have any significant seasonal working capital fluctuations. However, during the nine months ended June 30, 2024, the Change Healthcare cybersecurity incident created a reduction in our cash flow and increased our working capital needs. We estimate the working capital impact from Change Healthcare has been approximately $4 million. As we continue collecting outstanding claims, it should mitigate this impact and reduce our higher working capital that we currently have. On a go-forward basis, we continue to anticipate 6% to 8% free cash flow following CapEx and all lease payments, but prior to any payments relating to debt service and acquisitions price payable. We see this as our baseline scenario going forward with the long-term objective of improving on this as we continue to expand our business.

We are confident in our ability to grow our net cash flow inclusive of our CapEx needs. Maintaining our capital allocation discipline is crucial to our continued financial success, we will continue to adhere to our strict approach, focusing our investments on creating value by building scale within the business to drive operating leverage. This disciplined strategy ensures we maximize financial flexibility and long-term shareholder value. Lastly, a reminder, this is our last fiscal quarter reporting under International Financial Reporting Standards, also known as IFRS, starting with our full year fiscal 2024 results, we will transition to U.S. Generally Accepted Accounting Principles, also known as GAAP. This means starting from our fourth quarter of fiscal 2024 and our audited financials for year ending September 30, 2024, the financial statements will be prepared under U.S. GAAP.

It also means that effective October 1, 2024, the Company will be subject to the same reporting and disclosure requirements applicable to domestic U.S. companies. and the Company will be required to file periodic reports and financial statements with the SEC on Form 10-K and Form 10-Q as applicable as well as filing current reports on Form 8-K. We are looking forward to this transition as we believe it is important to align our accounting standards with the geography of our operations being all within the United States as well as improving comparability to our peers in the industry. Thank you. And with that update, I’ll turn the call back to Greg.

Greg Crawford: Thanks, Hardik. Our strategic focus on leveraging our existing infrastructure and economies of scale has yielded a consistent adjusted EBITDA margin. By demonstrating a sustained and solid margin profile across various operating environments, we have showcased our thoughtful and adaptable capital management approach. Our comprehensive range of end-to-end respiratory solutions, coupled with a diverse product mix is pivotal to our sustained success and market expansion. Concentrating on key sales channels such as hospital systems and physician offices, drives volume growth, which remains a primary catalyst for our organic growth. This strategy underpins our long-term expansion plan and solidifies our market position.

Our investment in creating operational efficiencies is central to our overall strategy by automating key processes and enhancing our operational infrastructure we aim to boost productivity, reduce costs and improve patient outcomes. This focus on efficiency not only supports our long-term organic growth objectives, but also ensures we remain competitive and agile in our markets nationwide. Looking at our strategic growth road map, we are focused on driving long-term organic growth, enhancing cash flow generation and margin as well as retaining financial flexibility to seize on emerging opportunities. We are committed to driving long-term organic growth by leveraging our unique market positioning in clinical respiratory care. Our goal of achieving 8% to 10% annualized growth is underpinned by the expanding demand for home-delivered respiratory services.

This demand is driven by an aging population significant prevalence of COPD and an underpenetrated sleep apnea market. To support this growth, we focus on market expansion and strategic sales initiatives. We continuously explore opportunities to broaden our product portfolio, cross-sell our comprehensive product solutions and penetrate new markets. Our targeted effort aims to drive volume-based growth through enhanced sales strategies stronger relationships with health care providers and payers and access to key geographic areas. Recently, we announced the rollout of an expanded offering to include the diabetes market segment, featuring continuous glucose monitors, also known as CGMs and related supplies. This initiative has shown promising early results and represents a significant opportunity to add value to our existing patient base without increasing SG&A expenses.

By addressing an unmet need, we can leverage our established relationships and deep understanding of patient needs to cross-sell new products effectively. This move enhances our product offering and strengthens our position as a comprehensive care provider in the home medical equipment ecosystem. The diabetes patient population complements our existing patient base well. Clinical research indicates that up to 48% of individuals diagnosed with type 2 diabetes also have sleep apnea, highlighting the synergistic potential of our expanded portfolio. Second, we are committed to achieving economies of scale and continuous margin improvement by streamlining our operations and optimizing our cost structure as we grow, we aim to enhance our margins and overall cash flow, enabling us to invest in growth initiatives and drive positive cash flow generation.

Furthermore, we are dedicated to promoting the long-term adoption of electronic prescribing also known as ePrescribe within our industry. Our commitment to the adoption of these technologies positions us well to benefit from its numerous advantages. Including increased productivity, reduced errors, improve compliance and better patient outcomes. Our automated resupply platform is another excellent illustration of how we use technology. It not only helps us achieve higher margin recurring revenue and organic growth, but it also offers us significant revenue synergies when we make strategic acquisitions. The resupply program also plays a crucial role in extending a patient lifecycle with us as well as driving compliance rates and long-term adherence to therapy, which all benefits the patient.

Lastly, we are committed to maintaining a conservative balance sheet to ensure ample flexibility, allowing us to allocate capital towards synergistic acquisition candidates that meet our stringent criteria. Since 2018, we have successfully integrated 19 acquisitions contributing more than $150 million in revenue. Our disciplined approach to debt management, coupled with strategic investments in our operating platform and market expansion will support our long-term objectives of positive net cash generation and modest leverage. This strategy enhances our capacity to invest in synergistic acquisition opportunities that bolster our go-to-market strategy centered around our comprehensive end-to-end respiratory offering. On the capital markets front, we are actively interacting with investors from the United States and Canada to discuss our long-term growth ambitions and ongoing disconnect in our valuation compared to our fundamentals.

This includes attending various investor conferences and investor roadshows throughout the remainder of 2024. As always, we will continue to work to build our investor audience and overall shareholder base. Importantly, I want to again note the recent announcement of the potential sale of a larger industry peer at a significantly higher multiple than our current market valuation, which we believe does not reflect our overall business fundamentals. Based on historical developments when large M&A take place, we anticipate dislocation to likely occur, and we are very confident in our ability to seize upon this opportunity to further our organic growth initiatives. Looking to the future, our methodical approach to synergistic acquisitions, along with our strategic focus on organic growth puts us in a strong position for long-term success.

Our dedication to developing a robust and scalable company strategy is demonstrated by our capacity to utilize internal resources and operational efficiencies. Our commitment to providing value to our shareholders will not waver as we manage the operational environment and stick to our flexible capital allocation strategy. In summary, while fiscal Q3 posed lingering challenges our sequential improvement from the decline in revenue seen in fiscal Q2 shows the improving trend and the underlying strength of our current market positioning, scaled operational platform and the resilience of our business model to mitigate the impact. We appreciate the continued support of our investors, and we are extremely well positioned to seize the opportunities for further expansion.

Finally, I want to take this chance to thank the entire Quip team once again for their tireless work. and our stakeholders for their continued support.

Q&A Session

Operator: We will now begin the analyst question-and-answer session. [Operator Instructions]. The first question is from Richard Close with Canaccord Genuity. Please go ahead.

Richard Close: Great. I’m just curious, how you’re thinking about fourth quarter, the opportunity for sequential growth given 75-25 in the capitation contracts that were signed last year by competitors?

Greg Crawford: Yes. Thanks, Richard, for the question. We anticipate and are diligently working in that to overcome the challenges in that we face with the decline in the 75-25 and then also the withdrawal of the Med Advantage plan. We are starting to see our volumes grow in that as we get into the back half of the year — calendar year here.

Richard Close: Okay. And maybe as a follow-up, obviously, good growth metrics on the patient service equipment setups and respiratory resupply, I think there was a slight improvement in growth from the second quarter and then what you put up here in the third quarter, just curious, if we look at the revenue, it was flat sequentially, but the number of the metrics increased. Is there anything on pricing? Or what would be the reason for that, the patient metrics and deliveries and all that goes up, but you don’t really see that sequential bump in revenue from second quarter.

Hardik Mehta: Yes. Yes, this is Hardik. And I guess you are seeing the impact of the 75-25 rate cut. You’re essentially delivering the same product but doing it at a lower rate. So that is definitely a cumulative impact of that. As far as decapitated insurance that we lost, I think there is — I would say there is a lot more depression due to that in terms of margins. But sometimes your cross-selling abilities gets backed when you lose a contract with the referral source. So — but I would say most likely — most — not most likely, it’s mostly contributed towards the fact that there was a rate cut on 75-25. And then at some point, the plans that point towards Medicare reimbursement would also have a similar impact. So that’s really the one.

Richard Close: Okay. So, it’s just maybe a little bit more from 70-25 than what occurred in the March quarter?

Hardik Mehta: The yes. I guess. That — I think the Change Healthcare and everything was happening at the same time. So, we kind of like trying to take a look at it at a six-month period rather than a three-month and a three-month we would have otherwise been taking it. But at this point, the management kind of looks at six months ending June as a more — there’s a more, I guess, as a period for operating results rather than quarters.

Richard Close: Okay. And then my final question, I appreciate the comments on the referral patterns and obviously, the metrics that I just cited seemed to back that up. Greg, as we think about the 8% to 10% organic growth sort of target out there that you’ve done well on the last, I guess, a couple of years. Is it just a matter of lapping 75-25 and then the Humana shift. And then, we can pop back up to that level?

Greg Crawford: Yes, absolutely. Most of it in that, that we’ve seen has been driven in that by those two factors in that the 75-25 and the withdrawal of the Humana. So, the sales team, and that has really had to kind of pivot in that and try to pick up other referrals in that to continue to drive the revenue forward, then we’ve also and that have been expanding into continuum areas in that with additional sales coverage in that throughout our territories.

Operator: [Operator Instructions]. The next question is from Richard Close with Canaccord Genuity. Please go ahead.

Richard Close: Okay. I’ll take another one here. With respect to the comments, Greg, in terms of picking up market share, with the dislocation that is likely to occur from Owens & Minor and the Rotech deal. Do you have any past experience that you can point to in terms of where this has occurred and you saw some meaningful pickup in certain geographic markets. Just curious there.

Greg Crawford: Yes, absolutely. And then I mean just historically, over the years, when we’ve seen M&A, we’ve seen dislocation, especially when there’s consolidation. And I’ll also in that say that we’ve been on the flip side of that and have lost business too and had to make up and that’s kind of post-acquisition. But we think that we stand to benefit with that dislocation and that when and if it does happen in the market.

Richard Close: Okay. That’s helpful. And then maybe on the bad debt, just going over that really quickly. I guess it’s attributed to change in terms of going up 100 basis points year-over-year and maybe up slightly here sequentially. What are your guys’ thoughts on bad debt because obviously, the trend was pretty favorable, moving down below the 5% level previously. So just thoughts on how we should think about bad debt.

Hardik Mehta: Yes. This is Hardik. I think it’s a fair risk given the way the integrity of the Change Healthcare. I mean part of us I mean we have to still see some data coming in over the next quarter or so. But we believe maybe we might see the elevated 5% for a quarter or so, but it or long-term goal would be to bring it back to where it was. There hasn’t been any material change in the overall operations of the business or any kind of reimbursement changes taking place. So hopefully, it’s just a matter of going through the next couple of quarters, let the data come in, in terms of how much we collect on the outstanding AR related to Change Healthcare hold up and go from there. But again, as far as the baseline processes and baseline RCM outcomes, we are not seeing any kind of deviations there.

Operator: The next question is from Justin Keywood with Stifel. Please go ahead.

Justin Keywood: Not sure if I missed it. Is this a good EBITDA margin level to assume going forward in the near term?

Hardik Mehta: I would say 10% or certainly very positively. I mean, if you kind of think about it, if all of our drop from the revenue kind of has flushed into our EBITDA for the most part. And I mean, despite of that, we have kind of maintained a 22-plus EBITDA margin. So, you have to appreciate what operations have done to support an EBITDA margin that we have. But having said that, if you kind of think about it, if you are able to bring back that revenue without having to increase the workforce and the fixed cost. This seems like a very good support for where the EBITDA margin should stay.

Justin Keywood: Okay. And then the comment on the free cash flow conversion target of 6% to 8%. Is that something that’s achievable in fiscal Q4? Or will it be more into next year?

Hardik Mehta: I mean, we did have a couple of quarters where we did hit that. I mean there’s quite a bit of moving parts with CID, the legal expenses that goes with it, which has impacted that the fact that Change is still — Change Healthcare is still affecting our cash flow a little bit, which will all get ironed out. So, I would say between the next two quarters, again, it will all level out, and then what we will see is more of a steady — that 6% to 8% that we’ve been hoping for it. Or actually, we have achieved in the last couple of quarters.

Justin Keywood: Okay. That’s clear. And then on the large acquisition in the industry of the peer. First, if you have any valuation metrics that you could point to there. And then also for Quipt, if there’s a target multiple level that is appropriate to acquire at, assuming that the targets are smaller in size.

Greg Crawford: Yes. So, I think that as it relates to that to the deal that we were referring to and that the multiple was 6.3% in that EBITDA, and that according to the press release there. So we don’t have any other further information or anything on that, but that’s where the multiple and that seemed to be. We think that we can still acquire in that company is in this 4% to 5% range prior to any synergies, which is where we’ve historically and that acquired companies will say in the 20 million under space, and that’s where we see a lot of opportunity for us in the future, and that will be those tuck-ins. And then, historically in that we’ve got one to two turns of synergies. So, we think ultimately, in that it’s all about building that long-term value in that. So even if we come out and that our stock right now is probably trading at less than 3.5x. So, we’re still going to end up creating long-term value in that, which is our goal.

Justin Keywood: What’s the potential timing for M&A? Is that something that could occur this calendar year?

Greg Crawford: Yes. We’re diligently working the pipeline, and we’ve actually are quite surprised in that with the pipeline and that we’ve been able to reinvigorate in that after pivoting around the challenges and that’s that we faced in the first part of the year in that. So, we’ll diligently be working on deals and closing them as quick as possible.

Justin Keywood: And then just one more question. There was a mention of a pretty good leverage on the balance sheet at $1.5 million. What’s the comfort range as far as bringing up that leverage rate still considering somewhat high interest rates?

Hardik Mehta: Yes. So, I mean, mathematically, the Company can still survive if we went up to two easily. So, I mean that is, with a blink of an eye, I think that comfort comes in, can it be stretch a little further? It can be, would we? Maybe, maybe not. So, I think there’s definitely availability from that perspective even though as part of our credit agreement, we can go up to three, but we don’t intend to do that. By the way, one clarification on the free cash flow that you had asked earlier, year-to-date, if you look at the free cash flow as defined by the Company, our it is around 7%. We’re still within that 6% to 8% range that we are seeking for right now the quarter will come out as strong. But for the year-to-date number, I think we are still in that range. So, I just wanted to clarify that.

Operator: [Operator Instructions]. The next question is from Stefan Quenneville with Venton Financial. Please go ahead.

Stefan Quenneville: I just have a question on the sort of GLP-1 impact. You said you’re not seeing any operational impact on your CPAP starts and all that. Given the GLP-1s are if they’re being prescribed for sleep apnea, it’s being prescribed off-label currently. Are you seeing anything on the insurance side that is requiring patients to start with CPAP first before GLP-1s are being prescribed just given the typically good results you get with CPAP. And it’s obviously a lot less expensive to keep someone on CPAP rather than GLP-1s? Or are they reimbursing for both? Just sort of — are you see any trends there from insurance perspective?

Greg Crawford: Yes. That’s actually a really good question in that. We’re not seeing that trend yet, but we’re not pharmacy-based either in that, but have been asking around the different peers and that’s not been presented yet. I think when you look out the most recent study that was released by the largest device manufacturer in that for CPAP, is that the study they had with that 800,000 recipients in it in that, that they have — they’ve seen a 10% increase. And PAP devices and that being prescribed and that for a patient that’s on GLP-1 versus one that is not. So, I think that kind of indicates that this is GLP-1 is really driving more people into the health care system. And ultimately, they’re not just going to take care of their weight problem. They’re going to take care of everything in that they need to get taken care of in order to live a healthier, happier life.

Operator: This concludes today’s question-and-answer session. I’d like to turn the conference back over to Mr. Crawford for any closing remarks.

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

Operator: This brings to a close of today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.