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Welcome to the Protech Home Medical First Quarter Fiscal 2019 Earnings and Corporate Update Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions].I would now like to turn the conference over to Greg Crawford, Chairman and CEO. Please go ahead.
Thank you, Ariel. And thank you all for joining us on the call today. 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 outlook for the rest of calendar 2019. I hope we will leave you with the resounding impression that Protech is in the best commercial position in its history, in respect of its financial performance, its operations, the balance sheet and organic and inorganic revenue opportunities. On February 26, 2019, we announced our Q1 fiscal 2019 financial results for the period ended December 31, 2018. At that time, it was decided to hold off on this call until our $15 million unsecured convertible debenture bought deal close, which occurred on March 7, 2019. With all that being said, we are excited to now discuss with you some of the excellent developments taking place at Protech. For those of you new to the 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, power mobility and Coumadin home monitoring. We operate in 12 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 improve healthcare 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 receive some level of in-person training. If the patient has trouble with the device, either someone drives to them or they are forced to come back to the location where they acquired the device. In contrast to that, Protech uses our technology to reduce or eliminate these points of friction, resulting in more successful treatment and management of these chronic conditions and non-unimportantly at a higher margin yield per patient. With that background, I'd like to hand the call over to Hardik to discuss the Q1 physical (sic) [ fiscal ] 2019 financial results.
Thanks, Greg.In reviewing the financial results for the first fiscal quarter ending December 31, 2018, please note that all financial values are in Canadian dollars and the full results are available on SEDAR. The company generated revenue of $21.7 million compared to first quarter 2018 revenue of $18.5 million, an increase of 17%. Our efforts to streamline our operations and standardize regional processes are bearing fruit. Most of the 17% year-over-year growth is organic with a small contribution from 2 small-sized recent acquisitions. Gross margin increased to 72% from 68% in Q1 of 2018. This reflects a slight change in our product mix as well as streamlining pricing standardization across the company.Adjusted EBITDA for Q1 was $4.35 million compared to $1.5 million for Q1 2018. EBITDA margin was 20%, up significantly from 8.2% in Q1 2018. Our balance sheet is the strongest in our history. At the end of the first quarter, we had $6.2 million in cash, having closed a $4.5 million equity bought deal on November 2, 2018. Subsequent to quarter-end, on March 7, 2019, we closed a $15 million unsecured convertible debenture bought deal offering. This will allow us to pay off all the old debenture that was due in December 2019 at the end of April 2019, and still leave us with enough surplus cash to do a large acquisition. We view both these successful transactions as a strong reflection of the capital markets' growing confidence in Protech. Our current assets totaled more than $29 million at December 31, 2018, representing 1.5x and $19 million in net short-term liabilities. Regarding equipment finance leasing, we continue to finance major equipment processes with leases from our major vendors. And we believe that we will be able to fund our future equipment growth using the same financial instruments. From a capital perspective, we are actively engaged with debt sources to establish a line of credit to support our growth. To summarize, our balance sheet has strengthened materially. We believe we have significant cash and capital markets' support to assess potential large acquisitions. Thank you. And with that update, I'll turn the call back to Greg.
Thanks, Hardik. We have been very happy with our performance over the last year and are pleased to report that the growth we saw through 2018 has continued into 2019. I want to take a moment to explain in a little more depth what we're doing differently and why we have been able to achieve the results we have since our management came on board 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 at around $60 billion market. 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. That is our core market. In the last 12 months, we have set up or delivered over a quarter of 1 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, treatable at home. Using streamlined logistics and distribution, Protech can offer home delivery and maintenance on this equipment, which is a first for many of these patients. The respiratory market, one of our key target markets, is interesting and the demand for the 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 and now 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% annually. However, we believe we can achieve more than double the growth rate of the industry. We are currently focusing on significantly increasing our market share in key target regions within the markets we serve. To execute on this, we have increased our sales force by over 100% since just last quarter. We continue to look for creative ways to grow our business through more unconventional methods, such as partnering with payer sources and/or healthcare systems in order to augment our traditional referral sources and significantly increase the rate of penetration in our current markets. It is important to remember that this is an industry of scale, and Protech is still at the early stages of reaping the full benefits of scale. The benefits of scale will further magnify as we continue to grow both organically and through acquisitions. Secondly, we lead the industry in technology deployment and the 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 these initiatives while being mindful of our G&A and bottom line. As we know, that revenue and margin growth is not the only things of importance. The third component of our growth strategy is acquisitions. Our key focus for acquisitions is to consolidate the distribution channels and drive efficiencies and profitability of the acquired companies by integrating them onto our world-class platform. While we continue to source and qualify targets, our approach continues to be disciplined in order to meet our very specific acquisition profile to maximize value. These features include positive cash flow, complementary product mix, certain operational processes, strategic geographic presence among other key attributes. To recall, we made 3 accretive acquisitions in the previous calendar year, which we have successfully integrated. Although, we have a very robust pipeline of acquisition targets, we remain focused on closing more material acquisitions, unfavorable deal terms and do not intend to waver on our acquisition-target criteria and will only execute when it makes absolute sense to do so. I am also very optimistic we have the ability to close impactful deals to be at a run rate of over $100 million in revenue before calendar year-end. In conclusion, I want to leave you with 3 clear messages: first, our core target market is growing and we continue to expand our market share therein; secondly, our exceptionally 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 as we truly believe at these share price values we're very undervalued in the marketplace compared to our peers; finally, engaging with capital markets is a top priority for us, we have recently reorganized our investor relation efforts and hired IR firm, Oak Hill Advisors, to assist in sharing our story with both institutional and retail investors. We look forward to continuing 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.
[Operator Instructions] Our first question comes from [ Jay Rapha ], a private investor.
It seems like your EBITDA margins is up strong over the last year. My question for you is, looking ahead, should we expect to see growth in margin over the next year?
Yes, thanks [ Jay ]. Yes, we certainly believe that the fiscal year '19 EBITDA margin should be better than fiscal year '18's EBITDA margin.
[Operator Instructions] This concludes the question-and-answer session. I'd like to turn the conference back over to Greg Crawford for any closing remarks.
Thank you, Ariel. 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.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.