Viemed Healthcare Inc

TSX:VMD

Earnings Call Transcript 2019-Q4

[Operator]

Good day, everyone, and welcome to today's Viemed Fourth Quarter and Year-end 2019 Earnings Call. Just as a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Todd Zehnder, Chief Operating Officer. Please go ahead.

[William Todd Zehnder, COO & Director]

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 the actual results or events to vary from those indicated in our forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the securities regulatory authorities with 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 the date hereof, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The year-end financial results news release, including the related financial statements, is available on the SEC's website. Now I'll turn it over to Casey to get things started.

[Casey Hoyt, CEO & Director]

Good morning, everyone, and thank you for joining our call today. I'm thrilled to have the opportunity to report on yet another record quarter and overall year for Viemed. Our team was able to achieve a 38% growth rate in 2019, which is an amazing number. However, as most who are familiar with our story are aware, we were a very patient-centric organization who prides itself on its people, partnerships and performance. The vast majority of our patients come to us at the end-of-life phase with only 17 months to live. We help these folks stay comfortable within their home environment and provide more opportunities for them to live their lives a little longer and healthier. While 38% is impressive, the number in 2019 that we are most proud of is that we set up over 5,700 vent patients during the year. Our metrics from KPMG and PRECISION Harvard Medical School study show that for every 6 to 8 patients placed on therapy, we save a life, which means our folks at Viemed save somewhere between 700 and 1,000 lives this past year. These are the metrics that are a testament to our people's hard work, dedication and commitment to the patients within their local communities that they serve. Because of the decisions that our clinicians make on a daily basis to be on call 24/7, drive longer distances, wake up early and work late, go the extra mile, so many people around our nation are cared for, educated, loved and overall have a better quality of life. I appreciate each and every one of our employees and recognize that we cannot achieve these financial milestones without the continued passion for our mission. Moving on to the fourth quarter. I'd like to begin with our movement into the VA. Earlier in the year, the Trump administration passed the MISSION Act, a program designed to address the compounding need to treat veterans in rural areas of our country. Our VA team was strategically in place to create a clinical pathway of bringing our service to these many veterans in need. Last quarter, I referenced a contract we received in New Mexico. Well, that contract has led us down the path of executing on a national contract signed with the VA to provide service over the next 3 years. Our focus has now turned to getting our folks trained on the VA's administrative and sales processes, so that we can help as many veterans as we can. I'm extremely pleased with the work our government relations team has accomplished as we have executed on a vision formed over 2 years ago of bringing Viemed's services to veterans suffering with COPD. Next, I'd like to review the progress of our patient engagement portal, which we call PEP. The PEP platform was created last year to remotely monitor our patients and put us in a position to react on a real-time basis. Our RT and patient app is complete and tablets have gone out into the hands of over 100 patients across the country. Our data shows that we lose 8% of our patients in month 1, 6% in month 2 and another 6% in month 3. We aim to analyze how much we can improve our length of stay within the first 3 months of care, all while testing for general usability and functionality issues along the way. Once completed, Phase 2 will include a rollout into the rest of our patients and we will begin the process of gathering data and sharing it with the physicians and payers to provide real-time outcomes. Our rollout of PEP cannot be coming in at a better time, as CMS has released new codes on remote patient monitoring as of 2020, which stand to be another revenue generator for business. Speaking of revenue generation, our organic model finished the year strong, with bringing on 8 new areas and hiring 8 new sales rep during the fourth quarter. We are also off to a rapid start in 2020, with 12 new reps coming on board in the first 2 months of the quarter. We continue to evolve our recruiting and training tactics, which are allowing us to find more qualified candidates and get them productive at faster rates. In our underserved market, our expansion of sales reps into new territories continues to be the main focus and has always provided the most value to our organization. We have added multiple sales trainers and managers to accommodate the explosive growth rate that we are experiencing. With the addition of Wyoming and Wisconsin, we are now conducting business in 34 states, Medicare approved in 46 and licensed in 47. Another main contributing to our growth -- main factor contributing to our growth is our ability to do business with more private payers. Our network development team added another 24 new contracts in the fourth quarter and finished 2019 landing 6 national contracts. This deployment continues to gain momentum and resources as they are executing on many strategic initiatives set in place to get payers more access to our care. A contributor landing more national contracts is the ability to offer more of our ancillary products and services, such as oxygen, sleep, lymphedema, vest, the multifunction vent, et cetera. These ancillary products have opened up the market of treating folks suffering earlier in their chronic disease states. These patients are more accustomed to cash paid transactions. Therefore, we have many models being developed to collect cash payments upon delivery. At the beginning of 2019, we set a goal to diversify our product mix, as vents were dominating at 91% during the fourth quarter of 2018. We did a real good job of executing on that initiative as our ancillary products represented 16% of our revenue during the fourth quarter of 2019 and vents made up 84%. Our vent growth rate is a hard one to keep up with. But that being said, our executive team does not stop looking for unique products and underpenetrated markets that improve life for our patients and are easily administered by our network of clinicians. On the clinical study front, we expect to have our PRECISION and Harvard Medical Study officially published in Q2 of this year. Of course, this has not stopped us from marketing the results as they were presented at CHEST last October. Another meta-analysis study recently published in the 2020 issue of JAMA Net also concluded that noninvasive positive pressure ventilation was associated with improvement in mortality and hospital admissions for chronic respiratory failure patients consequent to COPD. Bottom line is we're seeing more clinical data coming out of the industry supporting mortality reduction from our service, which is refreshing and exciting. At CMS, we have had no further movement on the competitive bidding front. Should competitive bidding move forward, then we should expect to hear about bid-winning areas, hopefully by summertime or before Q3. However, we have no way of knowing when CMS will complete their process. Our position on competitive bidding remains that this will be an opportunity to scale our business into areas where we are currently not located. We might also see consolidation in the industry for mom-and-pop cash-strapped type of companies struggling to adjust to rate pressures. There is a bill on the Hill, H.R.4945, written and designed to push competitive bidding up for ventilators until we have clear medical guidelines in place. These guidelines are needed to describe how often we should service and qualify patients. Our company supports the need for clear guidelines and has been in multiple discussions with regulators, industry associations, competitors and our manufacturers across the country. A unified message from our industry is what CMS will need to write the appropriate rules of the game. Todd and I have also been receiving a number of different inquiries from investors on how our company could possibly help with the coronavirus virus epidemic. Our short answer is it's just too early to tell how we can help. We recognize that coronavirus is an influenza-type disease that ultimately affects the respiratory system. We very well could be called upon at a later date to help either test or treat these patients. For now, we will continue to keep an eye for any needs that the country might have that our network of clinicians might be able to administer. On the capital markets front, Todd and I continue to be busy staying in front of investors as we had trips to Milwaukee, Boston and New York, with road shows alongside of Lake Street Capital, William Blair and Piper Jaffray. We also presented at the Piper Jaffray Healthcare Conference in New York. For more of the financial and operational results of the fourth quarter, I'll turn the call over to our Chief Operating Officer, Todd Zehnder.

[William Todd Zehnder, COO & Director]

Okay. Thank you, Casey. In reviewing the financial results, all figures are in U.S. dollars and the full results will be made available on the SEC website as well as SEDAR. We generated net revenue of $21.4 million during the fourth quarter of 2019 as compared to net revenues of $16.6 million in the fourth quarter of 2018, which equates to a 30% increase. During this quarter, we begun to show our revenue net of any expected bad debt expense, whereas the bad debt piece was previously recorded in SG&A. All of the prior year figures that I'll be citing have been adjusted for that netting. Additionally, we have began to record a piece of our rental revenue as deferred revenue. We have actually recast our prior results as this change in accounting would impact the numbers from the inception of the company. I want to point out that this entry, in no way, changes the collectability of the revenue, and in many cases, we have already received the cash for the revenue that we are deferring. This is just a change that our new accounting firm presented to us. And when looking at our U.S. peers, it appears this is very common to show on the balance sheet. Additionally, it is important to note that this is a noncash entry and had 0 impact on the economics of our business. It is nearly a method of accounting that we have adopted. Revenue for the year came in at $80.3 million, which is a 38% increase over the 2018 amount. This marks another year of roughly 40% organic growth. Our vent patient growth was once again strong as we grew approximately 5% during the sequential quarter and 30% year-over-year. Just a reminder that all this growth has been organic as we continue to employ our model around the country. While our vent patient growth remains on track, we are also excited about the continued progression of our ancillary product lines, which, as Casey pointed out, are continuously driving a larger share of our revenue. Our current year margins have been slightly lower as our growth has been more focused in areas -- new areas that don't have the economies of scale of growing an existing area, but they are positioning us for more expansion, especially with the competitive bidding program forthcoming. Adjusted EBITDA hit an all-time high, totaling $5.6 million for the quarter, which is a 26% margin. Adjusted EBITDA for the year came in slightly above $19 million. It would have been approximately $725,000 higher if we hadn't started booking deferred revenue. Once again, that is in no way, shape or form contingent on anything except time, but we are not adding it back to EBITDA. As we have stated several times this year, we are continuing to make investments in our new areas of technology, marketing, inside sales, as well as new teams around the country. And while they have suppressed current year profitability, we've expanded our platform to accommodate future rapid growth. We have funded our growth by redeploying our adjusted EBITDA during the current quarter, as our medical CapEx totaled $4.4 million during the fourth quarter of 2019, primarily driven by new vent purchases and growth from our newer products like vest, oxygen and pumps that we have begun to sell in higher quantities. Our CapEx came in below our quarterly adjusted EBITDA, which is another good sign that we are funding this rapid growth out of cash flow. Our SG&A totaled approximately $41.4 million as compared to $28.1 million during the prior year. Once again, both numbers don't include bad debt. As in prior quarters, we have continued to make investments into the growth of our company around the country as well as our home office in Lafayette. Our investments into the future growth of the company continues, and we're excited about the platform that we've developed at Viemed. Our technology investments are showing benefits in our workflow system as well as our pending patient engagement platform pilot. We are extremely excited about the future and what our marketing and technology investments will do for the company. Additionally, the company has made a concerted effort to establish a presence in more of the metropolitan areas around the country to prepare for the 2021 competitive bidding program. It [ has ] grown a little differently in the past when we would attempt to grow 60 miles down the road from an existing region to leverage economies of scale. In the long run, this will definitely pay off for the company. As it relates to competitive bidding, there has not been any more formal communication from the CBIC as to the timing of when we will learn bid winners or bid rates. We expect to hear something later in the summer. As a reminder, roughly 20% of our vent patients are Medicare patients within the CBA. As in prior quarters, we have once again had a very solid balance sheet with approximately $13.4 million in cash at year-end, $11.5 million of AR and an overall working capital balance of roughly $1.9 million, net of the deferred cash revenue -- or deferred revenue entry that we've discussed. We reduced our AR during the fourth quarter as cash collections were very strong, and the first quarter has started out very strong as well. We feel that our new workflow system is now operating efficiently and our ability to have real-time access to data is better than it has ever been. Our long-term debt is approximately $10.7 million and being serviced with operating cash flow. As we previously mentioned, the majority of this balance is due to the headquarters purchase, the equipment leasing that we do and the term loans taken out with our product diversification driving more CapEx this year. We have once again had another rapid organic growth year, all while maintaining our profitability and healthy balance sheet. Moving on to the first quarter. We've provided net revenue guidance in the $21.8 million to $22.8 million range. We feel that our margins will be materially similar to 2019 rates depending on variable compensation plan and the level of growth around the country versus existing areas. We once again expect all this growth to be organic, and we are very excited to see the multiple product lines contribute to the significant growth that we are experiencing. As in prior quarters, we expect to reinvest most of our adjusted EBITDA into CapEx. As we conclude another record year for the company, I feel it's important to note the tremendous accomplishments from the team. We are very proud of our numbers posted. However, the progress made in the infrastructure and platform of the company is hard for outsiders to appreciate. I feel very confident in saying there's more greatness ahead for Viemed shareholders, employees, and most importantly, our patients. At this time, I'm going to turn it back over to Casey to wrap things up.

[Casey Hoyt, CEO & Director]

Thank you, Todd. For those of you that have followed us for the past 3 years, you've seen us grow almost 40% in 3 consecutive years and expanded to 34 states. As I reflect on the future potential for growth in 2020, 2021 and beyond, I view it will come to us through many different channels. Certainly, our organic growth strategy of placing more people in underserved areas, but also in the form of treating earlier-stage patients with our vast network of clinicians inside of new health systems such as the VA. We will be working with many different payer source and conducting more cash transactions. We will continue to form and develop all sorts of strategic partnerships with ACOs, managed care groups and hospital systems struggling to accommodate the patients that are headed their way. We remain nimble so that we can quickly capitalize on any short or long-term regulatory shift opportunities. We will keep our war chest full and ready for any strategic acquisitions that might pop up along the way. Our unique company culture of helping people living better lives, all while living ours, will be at our core. Our network of clinicians will be our greatest asset and they will always be forever expanding. We are only scratching the surface of what Viemed aspires to become: the largest home respiratory company in the country. Thanks to all of our investors who have chosen to join us on this ever-so-important mission of saving lives. This concludes our prepared remarks. We will now open up the floor for questions.

[Operator]

[Operator Instructions] We'll go first to George Brooks O'Neil (sic) [ Brooks Gregory O'Neil ] of Lake Street Capital Markets.

[Brooks Gregory O'Neil, Senior Research Analyst]

Congratulations on another great year. So I'm particularly excited about the VA opportunity. I know you've been working on that for quite a while. So can you give us any color at all on the 3-year contract -- national contract you signed?

[Casey Hoyt, CEO & Director]

Yes. I mean it's a national contract. And it's a separate -- coming from a separate bucket of money that really the MISSION Act inspired, Brooks. Right now, where we're at, we have lots of physicians inside of the VA that are sending us patients. What's unfortunate is that we've got a backlog inside of this new bucket of money, if you will, coming from the VA on how they're processing it. So we -- we're very excited about the national contract. We have a lot of opportunity that's headed our way. Now it just becomes about processing this -- the administrative hurdles of getting paid basically for the patient that are headed our way.

[Brooks Gregory O'Neil, Senior Research Analyst]

Sure, sure. That sounds great. Let me ask you about a different topic. So obviously, you continue to expand geographically, and you've said your focus had shifted a little bit towards the larger metropolitan areas' physician for competitive bidding. Can you just talk a little bit about what you're finding in those markets? Obviously, you get a little less operating leverage because there's no infrastructure to take advantage of. But how has the response been? Is there any difference in terms of the response from physicians in those areas? And just how is that all going for you?

[Casey Hoyt, CEO & Director]

Yes. I mean I'll start and I'll let Todd comment maybe at the end. We spent a lot of last year, as you know, Brooks, getting ready for competitive bidding, getting set up in these metropolitan areas. We've accomplished that and submitted our bid. We -- by default, started placing folks inside of the metropolitan areas in the first, let's call it, 3 quarters of 2019. We found we had a little bit of a slower growth rate in those areas. But -- so we started to say, hey, let's go ahead and step back out of the metropolitan zone into the rural spots where we have been so successful in the past. That's why you saw our growth rate, I think, in Q4 go up about 5% from where it was in Q3. We're going to -- we're in position for competitive bidding. We've got the states highlighted. We've done all the regulatory work. The bids are submitted. Now it's just we're going to wait and see which ones that we win. And we'll split into those areas as we uncover what the rates are [ and contents ]. For now, we're just going to continue growing as we always have in the past and stay on track for these growth rates that we've historically gained.

[Brooks Gregory O'Neil, Senior Research Analyst]

Yes. I mean I don't mean to cut off Todd if your comments, but you highlighted the 40% growth over the last couple of years. Do you guys think you can continue to grow at 40% in the current environment? Or what would be your goal for 2020 and beyond?

[William Todd Zehnder, COO & Director]

I'll say this, our goal is to continue that growth rate. While, if you look at first quarter guidance, we haven't guided to that, it is continuing to be our goal. I would say that we have a lot of things that haven't started impacting revenue in a material way. The VA is a prime example of what our patient engagement platform could do from a major ACO contract or a payer contract. There's just a lot of things that could have a big impact on revenue that we know we've been investing in for years. And sometimes, investors get frustrated that we're putting the cost into the middle part of the P&L, we're not seeing the revenue growth. But that's what we would consider part of our long sales cycle processes, and we're seeing some green shoots come from that. So while no formal guidance that says 40%, there's no reason that this team can't continue to do that. We just -- we know that the numbers are getting bigger and so the challenge gets harder and harder every year. But that's why we show up every day to keep trying to save that many lives.

[Brooks Gregory O'Neil, Senior Research Analyst]

Absolutely. Let me ask one last question, I appreciate all the color, guys, is can you just tell us a little bit more about the successes or issues you're having with the product line expansions, particularly curious about whether you see them being complementary, whether you're having any issues, whether you view them as real growth accelerators? Or just sort of what's going on with the new product additions that have been brought out in the last year or 2?

[William Todd Zehnder, COO & Director]

I think they've all -- I mean, I wouldn't say there's any major challenges, Brooks, other than we're just doing so much we're growing so fast, and that gives us challenges. But that's what we're -- that's what we structured the company for. They've all been complementary in their own way. I mean the vest product line has been our largest, our fastest-growing from a notional amount, and it's just such a good product to offer because so many of our COPD patients fight bronchiectasis, and so that disease state has been a very good one to come in and offer to our referring physicians and to our patients. The O2, obviously, as you guys -- as we talked about earlier in the year, it's more of a precursor because our patients are ultimately going to end up -- our patients end up on O2 before they end up on vents. And so that's just been another good one that we've rolled out around the country. I mean that technology has changed so much over the last few years, and we see that being a really good growth. And then looking back, I mean, we've got a lot of things going on within our sleep business, our resupply program. We're doing e-commerce work now. So there's a lot of good that's going to diversify the company. We're still a vent-centric business because that's our specialty, but these ancillary product lines have really good margin enhancement when it's all looked at in total. Our existing sales force can go out there and sell them. And it's really having a big impact as you could -- you heard from Casey's prepared remarks, I think we're up to 15% or 16% of our revenue is coming from these other product lines, which is a major move over a 12- to 18-month period.

[Operator]

[Operator Instructions] We'll go next to Nick Corcoran of Acumen Capital.

[Nick Corcoran, Equity Research Analyst]

I think most of my questions have been answered. But in terms of bad debt expense, can you maybe just give a little bit of color on how you felt about bad debt expense in the quarter and how you see it trending going forward?

[William Todd Zehnder, COO & Director]

Yes. Bad debt came back down to probably a more reasonable amount. It was 11.8% for the fourth quarter. We're obviously netting that out, but we still disclose what it is. And for the year, it came in at 10.9%. If you guys remember, I talked about this year was a little lumpy because of the billing workflow integration, and I feel like we're in really good shape from that standpoint now. Our system is up and running. I mean the visibility that we have from the field in a real-time basis now is -- it's second to none. I mean it took us a while to get there, but we -- and at the same time, we were growing 40%. So it was a little lumpy last year. But I feel good about where we ended up, 10.9% for the year. And that's at sort of the middle of the range of what we've always said as a company. We're sort of a 9% to 13% bad debt, if you look at it over the history. And if you look at DMEs around, that's sort of in line with people. So I feel like we're back at a good state. I feel like it's going to be more stable going forward now that we've integrated the system. And once again, it's hard for people to recognize the investment that was made. But now we have virtually a paperless model for our RTs in the home. And when they finish setting up a patient, it's all tablet-based and it comes directly into our workflow system and it can be built out. There's just so many efficiencies that are hard for us to explain to every investor. But it's been a major accomplishment to all the different departments. It starts with our technology team, then pushes all the way out through the therapists in the field, and then ultimately, our billing group here in the home office.

[Nick Corcoran, Equity Research Analyst]

Great. And then maybe just going to patient growth. Historically, you've been kind of targeting the 6% to 8% range. Just looking at your guidance, it seems to be below that. Can you maybe give a comment on what you expect going forward?

[William Todd Zehnder, COO & Director]

Yes. I mean that kind of goes back to Brooks' question. I mean we ended this year at 31%. It was a little -- it was front-end loaded last year, we recognize that. I think we're going to be a little bit more consistent this year. If I had to guess, I think we can clearly get to those levels. And there are so many factors that go into that, new salespeople, attrition rates, flu seasons, all those type of things. And so we're cognizant of making sure we guide appropriately. But I would like to say that, once again, these don't include the big impacts that we're talking about that we see -- we're starting to feel some momentum come through some of these bigger projects that we've been working on. We can't guide to that yet because nothing is in the bag, but we're starting to, once again, see some real good green shoots.

[Operator]

Up next from Beacon Securities, we'll hear from Doug Cooper.

[Doug Cooper, Managing Director and Head of Research]

Just back on the VA, can you just give us an idea of how many patients you think will be applicable for the therapy and when you might start the first onboarding, after the paperwork all gets done?

[Casey Hoyt, CEO & Director]

I can start at a very high level on that. I mean we had 9 million patients inside of the VA. We've always estimated, Doug, that we've had about 300,000 to 600,000 Stage IV COPD-ers in there because they're 3x more likely to have COPD. That's a company guesstimate, if you will. But what I can tell you that's different about the VA opportunity than the way that we do business now is they're asking us to get in on the front end of the disease state. They want to lean on our network of clinicians to go out into these rural areas, make assessments, make recommendations on what types of equipment or what type of equipment needs they have from Stage I, II and III COPD. So that's really exciting to us. That could bring the number up substantially. But I wish I had a number for you to give you on how many patients. We know it's a ton and it's a major opportunity because it's underserved, but I just don't have anything concrete for you.

[Doug Cooper, Managing Director and Head of Research]

When you say you got a national contract, it's not a sole source contract? Is there other companies in there or you basically got the VA to yourself?

[William Todd Zehnder, COO & Director]

No, there's other companies. But this is just so new that we have the ability to be a leader in this movement is what we would say. Because like Casey said, there are so many just back-office things that had to be done. I feel like we're in pretty good shape to be a fast capturer of this business.

[Doug Cooper, Managing Director and Head of Research]

Moving on to ancillary revenues. Casey, you said it was, I think, 16% of revenue in Q4, I think is what you said. What do you think will be a realistic goal as you continue to grow your vent business? Obviously, that will continue to grow. But what would you like other revenues to be as a percentage of maybe, say, 24 months out?

[William Todd Zehnder, COO & Director]

Doug, if we could move at that same level again this year, I would be very pleased with that. Because the whole point is this, we're growing vents fast, you know that. And in order to move that percentage, you've got to outgrow that growth rate. And I feel that that's doable. We have a variety of different services that are growing exponentially. And truthfully, if we -- one of the things we're really working, and it encompasses the VA and it encompasses other payers as well, is being paid for our services. I mean Casey mentioned it. Our RT are the largest asset this company has. Our clinicians are second to none. And so while our property -- or vent property is a huge asset, we're striving to diversify the company to where our labor force is as valuable as those vents, and I think we're on the cusp of doing that. So when you think of that as well, we can make a real material impact. But just on products alone, if we can move that number another 4 to 5 points or whatever we did this year during 2020, I'd be extremely excited because it's just diversifying the company from being a vent-only company, if you will.

[Doug Cooper, Managing Director and Head of Research]

Yes. I guess I look -- just looked on SEDAR, the stuff is still not here. The financials still aren't filed. Is it on the SEC now? Or when do you expect it to be on SEDAR?

[Casey Hoyt, CEO & Director]

No, the 4K should be filed sometime today.

[Doug Cooper, Managing Director and Head of Research]

The stock has been pretty weak, obviously, the last few months. It seems to certainly not be reflecting the growth numbers you just posted. Do you think this has continued to be a concern about what the competitive bidding and what it might do for margins in 2021? And maybe you can even give us a base case or a worst case or upside of what -- if competitive bidding comes in, what it could do to your margins.

[William Todd Zehnder, COO & Director]

Yes. Okay. So on the first point, is the stock weak because of that? We -- it's hard for us to say. There's 1,000 things that move stock markets. But I'm sure that uncertainty is one of the things that has people concerned and we understand that. We've always said competitive bidding, while an uncertainty in the short term, will give us the ability to grow faster in the long term. We've had to split around and get ready for the competitive bidding in 2021, and we've done that and we got our bid advantage. So we are positioned to outgrow any rate compression that comes at us with -- as long as it's reasonable. We don't want to speculate on winning bids and rates because we're as knowledgeable as anybody. We just know that we bid a certain rate everywhere. We don't know if we'll win all 120-something at the rates we bid or if we'll win some, lose some. We got ourselves in position to continue to grow the company. And in these types of situations, we're firm believers that scale matters. And being the third largest vent company in the country, we think that, ultimately, we're a winner in that business.

[Doug Cooper, Managing Director and Head of Research]

Okay. And down here, would you give any thought to purchasing stock, to put an idea in place?

[William Todd Zehnder, COO & Director]

Obviously, that would be a public disclosure that we will make. But right now, with the competitive bidding program coming up. I can tell you that we're trying to leave ourselves very nimble to be acquisitive if it needs to happen or could happen. Nothing is out of the question. But things are a little different than 1.5 years ago when we put that in place.

[Operator]

Moving on to [ Michael Eisner ].

[Unknown Analyst]

What are you hearing from your respiratory therapists out in the field, from your patients, about how they feel if they have to go to a hospital instead of getting in-home care? Have you gotten any feedback?

[Casey Hoyt, CEO & Director]

In reference to the coronavirus, Michael, is what you're asking?

[Unknown Analyst]

Yes, yes. I'm sorry, yes, the coronavirus. Yes.

[Casey Hoyt, CEO & Director]

Right. We don't hear any feedback from our RTs. I mean we've sent out notifications that, guys, were just -- this is a respiratory disease, and we remain ready to go in the event that we are called upon by the government or the VA for that matter. But it's just -- it's really too early to tell. As I mentioned in my comments, in my prepared remarks, I mean, we just kind of stand ready at this point. I mean there's so few cases in the U.S. and it's just a CDP issue at this point. But we don't have any feedback from the RTs that they're worried about running into this or anything like that.

[William Todd Zehnder, COO & Director]

I think one thing to add, Michael, is if your question was poised at this, is that our service by treating patients in the home is so valuable because they're not going to public facilities. Our patients, in many cases, are homebound and that gives you an insulation from not having diseases spread as long as it doesn't come into your home. So we, once again, think that the home-based model for all the different reasons is so much more valuable. And that leaves the facilities to deal with this -- the coronavirus or any other things that need to be treated in the facility.

[Unknown Analyst]

Yes. I agree with you. I was just wondering what you were hearing from people, from your patients, if they had any comments about that. And do you have enough vents in stock?

[William Todd Zehnder, COO & Director]

Yes. To start with our patients, we do. We have no issues as far as the growth that we're expecting or we've got a great vent supply. None of our manufacturers have told us that they're running into any issues from the whole -- the China slowdown, and we will be monitoring that very real time.

[Unknown Analyst]

And any idea when the new VA study will start?

[Casey Hoyt, CEO & Director]

We don't have a start date, but we've already submitted the -- it's in the early phase of the pilot program right now, and the ball is in their court. These things take a lot of time.

[Unknown Analyst]

Yes. And you don't really know how many patients yet?

[Casey Hoyt, CEO & Director]

Not yet. But in the pilot program, we'll have around, what, probably less than 50. And then that, we are being told, we'll take, call it, a quarter, 3 months. And then from there, we'll launch the official study.

[Unknown Analyst]

All right. And I think you went up from a patient count from 3% to 5% in the last 2 quarters. Any comment next quarter or anything?

[William Todd Zehnder, COO & Director]

Yes. I mean, look, like I told, I think, maybe Nick earlier, the growth in the first half was a lot faster last year than the back half. And that has a variety of different reasons. I would expect our growth to be more progressive during the current year. Our guidance has us a little bit less than the 40% if you annualize it right now. But like I told maybe Brooks earlier, our goal is to continue this growth rate. We just got to continue to drive that business every day and keep expanding our clinical protocols, keep our patients alive, try to reduce our first 3-month pickup. That's where we're dealing with very sick patients. And so there's a lot of things that are going to move this around, and we're just driving and trying to keep that historical growth rate going.

[Unknown Analyst]

And one final question. What's the life expectancy when you pick up new patients at this point? Has it changed on average?

[William Todd Zehnder, COO & Director]

No. On average, we're still around that 17-month period. And that's a lot of what we're trying to invest in this technology for so that we can try to slow down the first few months pickup and drive that overall length of stay up to 18 months or 19 months. That's our goal, is to keep these patients alive longer, and importantly, not having to revisit the hospital during those 17, 18, 19 months.

[Unknown Analyst]

Yes, that's why I was going back to the coronavirus because no one wants to go back to any hospital at this point.

[William Todd Zehnder, COO & Director]

Yes.

[Operator]

[Operator Instructions] And actually, it does appear that there are no additional time for questions at this point. Just one moment here, and I will turn the conference back over to our speakers for any additional or closing remarks.

[William Todd Zehnder, COO & Director]

All right. We want to thank everybody for listening in, and obviously, follow-up with us through e-mails or calls if you need to reach us. And we look forward to seeing you guys out on the road.

[Operator]

And again, ladies and gentlemen, that does conclude today's conference. We thank you all for joining.