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Thank you for standing by. This is the conference operator. Welcome to the Third Quarter Fiscal 2020 Earnings and Corporate Update Conference Call for Protech Home Medical. [Operator Instructions] The conference is being recorded. [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 as well as the MD&A, which you can find on the website and on SEDAR. The company's actual performance could differ materially from these statements.At this point, I'd like to turn the conference over to Chairman and Chief Executive Officer, 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 Protech Home Medical. Joining me today is Hardik Mehta, our Chief Financial Officer. A brief introduction on Protech Home Medical. Protech is a national leader in the home medical equipment industry, specializing in end-to-end respiratory care, power mobility, sleep, and other home health care solutions from 42 locations in 10 states across the Midwest and East Coast regions completing hundreds of thousands of deliveries each year to more than 85,000 long-standing patients.Before I begin discussing our record-breaking third quarter results, let me first take a moment to thank and applaud our incredibly talented and dedicated team members, many of which continue their heroic efforts on the front lines every day serving our patients with the highest level of care during these most challenging times.Since the beginning of the COVID-19 pandemic, we have prioritized the safety and well-being of our team members and our patients. It is this incredible efforts of these individuals that have enabled Protech to assist and relieving the strain placed on the traditional health care system by helping to move non-COVID-19 related patients out of the hospital system and into the home. I can unequivocally say that Protech would not be in the strongest position in the history of the company without these hard-working individuals, and most certainly, we would not be able to share with you these record-breaking results.On this call, I will outline our core business, which continues to be robust, review our continued organizational progress with a focus on our record-breaking quarter and provide you with our updated outlook for the remainder of 2020. As our results show, we have made tremendous progress in the third quarter including exceeding our previously stated objective of annualized run rate revenue of $100 million, reaching a 21% adjusted EBITDA margin level for the first time and bolstering our balance sheet dramatically with the closing of a $31.8 million bought deal capital raise, in which myself, an Independent Director, Mark Greenberg, added to our respective shareholdings. We are extremely pleased to join our fellow shareholders and believe this is a testament to how we feel about the future of Protech. The successful capital raise paves the way for us to accelerate our growth trajectory with the strongest balance sheet in our history. And as such, we are aggressively ramping up our M&A efforts and expect to be busy on this front over the near and medium-term as we look to further our long-term acquisition strategy.With the improving organic growth being derived from our first rate infrastructure and extraordinary financial flexibility, we are confident the future is very bright for Protech and we will not be stagnant in capitalizing on the tailwinds propelling our industry.With that background, I'd like to hand the call over to Hardik to discuss our third quarter fiscal 2020 financial results.
Thanks, Greg. Yesterday evening, we announced our third quarter financial results for fiscal 2020 for the 3 months and 9 months ended June 30, 2020. In reviewing the third quarter fiscal 2020 numbers, please note that all financial values are in Canadian dollars and the full results are available on SEDAR. Please note that all the numbers for 3 months and 9 months ended June 2019 have been adjusted for PHM Inc. divesture and are reported for continuing operations only.Here are some key highlights. In the third quarter fiscal 2020, Protech completed 57,551 setups or deliveries compared to 52,007 in the corresponding period last year, an increase of 11%. In the third quarter of fiscal 2020, Protech completed 14,436 respiratory resupply setups or deliveries compared to 11,034 in the corresponding period last year, an increase of 31%. The company generated revenue of $25.9 million in third quarter fiscal 2020, up 28% from third quarter fiscal 2019 and up 7.3% from second quarter fiscal 2020, majority of which was organic. During this quarter, we also reached $100 million annual revenue run rate.Gross profit for the third quarter of fiscal 2020 was approximately $18.4 million or 71% of revenue as compared to $14.1 million or 70% of revenue for the same period in 2019. The gross margin percentage improvement during the period was primarily due to better inventory management.SG&A for third quarter of fiscal 2020 was 49.8% compared to second quarter of fiscal 2020 of 52.9%, representing a 3.1% decrease quarter-over-quarter. This highlights our ability to deliver additional expanded margins on incremental revenue growth. Adjusted EBITDA for the third quarter of fiscal 2020 was $5.5 million compared to $3.8 million for the third quarter of fiscal 2019, representing a 47% increase year-over-year. Adjusted EBITDA margin for the third quarter of fiscal 2020 increased to 21.4% compared to 18.7% for the third quarter of 2019.At the end of third quarter of fiscal 2020, cash balance was $44.7 million compared to $12.8 million at fiscal year-end 2019. On June 29, 2020, the company closed a $31.8 million short from prospectus offering and concurrent private placements. Cash flow from operations for the 9 months ending June 2020 was $19.4 million compared to negative $1.7 million in the corresponding period ending June 2019. Current assets totaled more than $66.9 million compared to $30 million in net short-term liabilities, demonstrating continuing strength in our liquidity.On the heels of financing, our balance sheet is the strongest in the history of our company, and we are positioned to be aggressive with our organic and inorganic initiatives. Our focus remains on accelerating revenue growth, process improvement and cost rationalization. To that point, on August 11, we announced the execution of a nonbinding LOI to acquire a leader in the respiratory home care services industry in the Midwestern region of United States. The target will enhance our presence in the Midwest, including adding a new market and will increase our active patient count by over 3,000.The diversification that the target provides, along with their regional dominance will prove to be of significant value to our portfolio. The target focuses on all aspects of home respiratory equipment with a detailed focus on PAP, PAP resupply and noninvasive therapy with large ALS and COPD patient base. The target has great diversification amongst referral sources with no more than one referral source contributing 10%. It also has a very strong and diversified payer base with minimal Medicare exposure. Furthermore, the company has long recurring revenue cycle, which fits hand-in-hand with Protech's business model. Additionally, we are now in a position to go after larger accretive transactions as compared to the size of our recent acquisitions that are designed to significantly head to our presence in a market we serve or potentially even open a new market entirely.In closing, we continue to see ample tailwinds at the company level from increased demand across the business, and we are picking up on a significant acceleration in the need for in-home care. This presents us with an incredible opportunity to seize market share, and we have all the tools needed to do so aggressively on a go-forward basis.Thank you. And with that update, I will turn the call back to Greg.
Thanks, Hardik. I am very proud of the accomplishments of our team during the third quarter, who performed at an extremely high level, focused on superior patient care, first and foremost. We are honored to be on the front lines, helping to educate, assist, and passionately serve our current and future patients. The COVID-19 pandemic has magnified the point that in-home health care and telehealth are vital to our overall health care system and we are capturing this dramatic acceleration, which is represented by yet another record-breaking quarter with strong operating performance and solid organic growth.To that end, our revenue growth came in ahead of our internal projections. We had forecasted reaching $100 million annualized run rate revenue by the end of calendar year 2020. I am pleased that we were able to achieve the revenue milestone a couple of quarters earlier than forecasted.With our significantly enhanced balance sheet, we are exceptionally well equipped to continue scaling our business both organically and through acquisitions. As we look at the next $15 million to $20 million of organic revenue generation there will be a much higher contribution of EBITDA than the current revenue profile as we saw in Q2 and now in Q3. This is a true business of scale. And we are right at the inflection point where the next $15 million to $20 million of organic revenue will require much less marginal increase in SG&A versus each dollar of revenue.Now I want to take a moment to explain in a little more depth 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. We continue to successfully deploy a highly scalable growth model focused on organic sales generation, accretive acquisitions with efficient capital deployment, targeted margin expansion, and cash generation. 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.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 this equipment, which is a first for many of these patients. Given COVID-19 as a respiratory illness, companies like ours with the equipment and expertise as it relates to the treatment of respiratory illnesses are crucial. We continue to experience increased patient demand for respiratory equipment, including ventilators and oxygen equipment as well as our CPAP resupply and other supplies business, which remained extremely healthy into the fourth quarter.Our resupply model is built on proactively interacting with our patients to ensure we are refreshing our supplies as needed. We cannot predict the duration of the COVID-19 crisis, but we have ensured our inventory levels are well aligned with the increased demand and we are well prepared to seize on any future increase in demand should it occur. There are very few companies like Protech that have the balance sheet, scale, and competitive advantages that we possess including those from technology and logistics to benefit from such structural changes that have come from previous reimbursement cuts and now the COVID-19 pandemic.I would now like to review with you the 3 components of our growth strategy. 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 continue to achieve well more than double the industry growth rate by focusing on significantly increasing our market share in key target regions within the markets we serve.To execute on this, we are continuously hiring and training new sales representatives, and we'll continue to expand our product base. 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 being one of the only companies that can prosper from that given our relative size. These benefits will further magnify themselves 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 this 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 technological advantages over our competitors, providing exceptional service to our patients through technology will continue to separate us from our competitors who are simply unable to implement technology-based solutions due to their lack of scale and financial capabilities.The third component of our growth strategy is acquisitions. With our robust balance sheet, we now have the ability to pull the trigger when the right opportunity presents itself and expect to see a dramatic increase in our acquisition program with a focus on potentially larger acquisitions in both geographies where we currently operate as well as opening new markets. As Hardik noted, we executed a nonbinding LOI for a Midwest based respiratory care company. This acquisition target will be immediately accretive to EBITDA and net income and is expected to increase annual revenues by approximately $5 million.Leveraging our existing infrastructure, we expect to achieve additional revenue generated from organic growth, cross-selling and corporate synergies. Although we have a very robust pipeline of acquisition targets, we remain laser-focused on closing more material acquisitions on favorable deal terms and do not intend to waver on our acquisition target criteria and will only execute when it makes the absolute sense to do so. I'm very optimistic we have the ability to close impactful deals in the near to medium-term. Given the current landscape of the home health care industry, our well-defined 3-pronged strategy and strongest financial position in our history we will continue to propel our company towards sustained financial growth and continued profitability.On the capital markets front, I am thrilled to announce the addition of 2 new research analysts covering Protech, including Colliers International, our first U.S.-based analyst, and Canaccord Genuity. This brings our total to 7 analysts that will accelerate and assist us in engaging with new investors to share our continued success. We were very active during the third quarter closing an oversubscribed bought deal offering for $31.8 million as well as participating in multiple virtual investor roadshows in both the United States and Canada as well as virtually attending the Canaccord Genuity Growth Conference.We will also attend our first U.S.-based investor conference in the LD 500 early September, we expect to remain very active with the investor community through virtual meetings and virtual conferences throughout the remainder of the year.Furthermore, we are excited to have received DTC eligibility for our listing on the OTCQX. This represents a significant step forward for our current and future shareholders as it comes to building liquidity and is crucial in building a strong presence for our company within the U.S. capital markets realm. Since our initial OTCQX listing, we have had good conversations with U.S.-based market participants and with the final completion of the DTC eligibility. This will allow current and prospective Protech shareholders in the United States, a more reliable, cost-efficient and timely clearing and settlement for our common shares.Finally, as investors think about Protech Home Medical today, I would highlight to them our robust balance sheet, our record-breaking adjusted EBITDA margins, and our improving cash flows, all of which have put us in a position to quickly respond to organic growth initiatives and strategic acquisition opportunities.All of this, I believe, makes Protech, a truly dynamic home health care company operating in a compelling and growing industry, and therefore, a truly unique investment opportunity. I believe with continued execution of our stated growth strategy and consistent messaging to the investor community about the tremendous progress we are making. We will close the current valuation gap we have in the market relative to our peers.Once again, I would like to take a moment to thank the entire Protech team for its tireless efforts and its shareholders for all their continued support. 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 toward our goals.This concludes our prepared remarks, and we will now open for questions.
[Operator Instructions] Our first question is from Doug Cooper with Beacon Securities.
Let's start off with organic growth. I think, Greg or Hardik, you said most of the -- "most of the growth in the quarter was organic." I think Canadian dollar weakened during the quarter.Can you talk a little bit about what the organic growth was excluding FX and maybe break it down by segments, which segment performed better than the others? And what do you maybe expect going forward?
Sure. Our overall growth for the quarter-over-quarter was 7.3%, of which about 4% was from organic growth. So the rest 3%, 3.5% was related to foreign exchange.And on the segment-wise, I think our respiratory continues to be stronger. We've kind of gained some tailwinds from the pandemic, continue to capitalize on those opportunities. Our sale as a percent -- as it relates to rental was up only 1.4% as compared to our rental, which was up 5.6% quarter-over-quarter without any foreign exchange.So those are all -- those were the 2 segments that contributed towards the growth.
Okay. Maybe just -- is there any comment you have in the sleep business? I'm assuming most of the referring clinics were closed in the quarter. Maybe just to -- what the impact of that is and maybe what the demand could be coming out of that closures?
Yes. Sure, Doug. This is Greg. Yes, definitely, our sleep device referrals and that were down for the quarter and that they were probably down as far as the actual number of setups were down over 30%. But we started to see those pick back up going into our Q4 here, and we're very optimistic in that that, especially going into 2021 and that that we'll start to get the -- a tailwind of those labs opening back up and things like that.So we were still able to kind of deliver the great revenue numbers even with the headwinds of the sleep business being down.
Okay. I want to focus on cash flow for the next question. Obviously, very -- record EBITDA margin in the quarter. I did notice that your lease liabilities and particularly the monitor equipment leases were down $1.5 million or almost $1.5 million sequentially. The accounts payable was down, obviously, you generated enough cash flow to pay down some of these things.Can you just comment on how EBITDA translated to free cash flow in the quarter?
Sure. So if you look at our EBITDA, it's about $5.5 million and then the one-way to look at it would be to look at EBITDA less spend on monitoring equipment, which is about $1.2 million, which takes us to of $4.3 million.And then to reconcile that with the changes on the balance sheet, if -- there has been a $1 million increase in our operating cash net of all the bought deal and PPP money, the AP was paid down by $2.2 million, add to that about a $1 million to $1.5 million pay down lease finances. So if you reconcile, they will kind of right into that $4.3 million.
Okay. Perfect. My final one, Greg, as the balance sheet is $45 million. Obviously, you have the LOI for the company you indicated. Can you just give us an indication of how you expect to pay for the acquisitions obviously, you have a bunch of cash. And is there any potential for bank financings or debt from -- bank debt to fund even fuel that further?And maybe what do you think you can pay for the acquisitions?
Yes. Everything, Doug, we have right now and that we're -- really the -- is cash in that is -- are the current terms in that of all the contracts that we're working on.As far as a bank facility and that, I mean, that's something that we're actively pursuing in that. We were pretty close on something and that prior to the pandemic and that fell through when credit terms changed.And as far as multiples, we're seeing things in the 5x to 7x range, 5x to 7x EBITDA. And that -- those numbers would all kind of be based off of a pre-integration and synergies in that post acquisition.
The next question is from Justin Keywood with Stifel.
I was wondering if you could provide an update on the Medicare competitive round of bidding. I believe it was set to take place this summer for the sleep and oxygen therapy.
Justin, this is Greg. As of right now, and that we're expecting something to come through, say, in the next 30 to 60 days, if not sooner. We feel more confident now than ever that the program could be delayed in that recently, a few weeks ago, the public health emergency, and that was extended through the end of October. As industry leaders and along with some of the organizations and that within the U.S. have really been pushing and that for a delay in the program.So we expect something to come in the near-term here in the next 30 to 60 days one way or another.
Okay. That's helpful. And then one more, the Protech's sales exposure be to that process.
Yes. So our total sales in that right now, Medicare are approximately 38%, and that is overall Medicare. As far as what's going to be affected by the bid, now that the noninvasive ventilators are out. Is approximately about 20% to 22%.
Okay. That's helpful. And we'll be monitoring that update. And then just going back to the cash generation in the quarter, quite strong and at a record. I was just hoping to get some greater clarity if there's any onetime like items in the quarter. And do you anticipate working capital in -- working capital investment in the fiscal Q4 coming up?
No. So I mean, the -- as it relates to the cash flow and what I just explained to Doug Cooper, no, there were not any extraordinary cash flow elements on those topics. However, we did receive a PPP money and HHS money. Which is sitting on the deferred income on our balance sheet.And again, as I mentioned on my earlier point, those were not factored into the $4.3 million kind of free cash flow reconciliation we talked about previously.
Okay that's helpful.
From an operating point of view, really not anything as such.
Okay. And just one last question for the LOI for the respiratory business, any expected [Technical Difficulty] be announced seeding to the next step?
Could you repeat that, please?
The LOI to acquire the respiratory business, is there any expected timing on when that could close?
I mean we think within the next 2 to 3 weeks when we made the announcement on August 11, we kind of set a time line for ourselves of about 30 days. So we're very optimistic that something will get closed on that. We'll make an announcement.
[Operator Instructions] Our next question is from Dick Ryan with Colliers.
I'm not sure I caught your earlier comments, but what have you done with your sales force? The increase, I think you referenced, where you're at now and where do you need to be.
Dick, yes, we -- through the pandemic in that, there was a slight slowdown in that with the hiring and expanding of our sales force in that, but that has picked up going into our Q4 here. And actually, we're very pleased with the talent pool in that that has come with this. There's been a lot of layoffs around the industry and smaller-sized companies and banks. So we're very pleased in that with the way we're going to end the calendar year and that likely with the new hires for sales and expanding.
Okay. So looking at your -- obviously, impressive EBITDA margin progression over the last year or 2. You've mentioned contribution from a variety of different sources, if you will, consolidations, back-office improvement efficiencies.Has -- and I'm trying to tie this how you get to a goal of maybe 25% margins. Have you seen with your scale to date any purchasing volumes really contributing to EBITDA margins? Or is that kind of a go-forward impact that we should see more of?
So there's definitely contribution on increasing margins when it comes to acquisitions. Usually, we tend to have a better purchasing power than the acquisition, and that goes right into it. So that's always 1 contributing factor.But at the same -- the other would be when we meet a certain scale with -- as we deploy the money from bought deal, we should reach another peer with our suppliers, which should also allow us to get another slice of price cuts.
Are you at that scale level yet?
Not yet and that we're really close. We're right at this inflection point of that CAD 100 million revenue and as a percentage of our purchases with some of our major vendors and that were really, really close. And that to that next tier level of discounts or rebates and things like that.So we're very optimistic going into 2021 and that that we could see an overall reduction from some of our larger vendors as we renegotiate our 2021 agreements.
The next question is from Tania Gonsalves with Canaccord Genuity.
Just a couple for me. So I noticed like payroll expenses, facility expenses, CapEx, all as a percent of revenue came down quite meaningfully this quarter. Could you maybe touch on, does this have anything to do with the recognition of deferred income from that release fund in PPP loan?
No. We have not allocated PPP loan towards any of the expenses. Everything when that the PPP loan is sitting as a balance sheet item under deferred income. I mean you can see those numbers are pretty flat. And the reason they are down as a percentage of revenues because our revenue is pretty nice for the quarter. Compared to the...
Perfect. And then the CapEx being down a little bit. Is that -- could you maybe explain that and give us an idea of budgeted CapEx for monitoring equipment for the rest of the year?
Sure. So -- going back into Q2, we had buildup of some inventory, considering where COVID was, we saw some of that inventory was used in Q3.And overall, we are getting better utilization on our assets. And that's kind of the reason why our fixed asset for the quarter was down. I would feel comfortable from a guidance point of view to use year-to-date percentages for going forward.
Perfect. Now in terms of bad debt, has that ticked up a little bit as well. Is there -- what have you been seeing subsequent to quarter end, I suppose, is this all just COVID related?
No. I mean our bad debt is pretty much aligned to what our estimates have been. We always said it should be somewhere in that 8% to 10% range. Anything less than 12% is considered a good industry standard.So I think where our bad debt stands, we are comfortable. There's obviously rooms for improvement, but it's -- I think we fair on a scale of 1% to 10%, probably 7%, 8%.
Okay. Perfect. And then last one, you had this big war chest now to go out and be acquisitive. You talked a little bit about new markets that you could potentially enter. Could you maybe give us a little bit more color on new markets that like that you're not already in that you think are attractive and there are major players of scale that you could potentially acquire?
Sure. So we are looking at it from a couple of perspectives. One is, of course, going into a larger populous markets and adjacent to our existing territories. So those would be our favored targets.The thing we always keep in mind is going into a competitive bidding. We also want to be making sure that we are picking acquisitions with a pit that is making sure that there are some nonbid revenue heavy as well.So we manage our risk. So we are looking at it kind of from both perspective from going into a populous market, but then also going into the rural markets. Where we can enjoy higher reimbursements and not worry about competitive rates and its results. So we can -- we don't have to wait to deploy the capital until those results come up.
And could you provide any examples of those kind of markets?
Sure. Chicago would be a good market. We are already in Atlanta. So I wouldn't say that Cleveland would be a good market.Michigan is a nice state, a neighboring state to us. Pittsburgh, Pennsylvania. Those are all kind of live populous markets and which are also adjacent to one of our existing companies.
The next question is from Ed Sollbach with Spartan.
Yes. I'm glad that you're focusing -- I think you did the cross-listing in the U.S. I'm just wondering, given your all U.S. operations, why don't you do the financials in U.S. dollars?
Sure. Yes, going back to the history, we were -- we acquired this as part of the spin-off. And at the time the company was -- had been forecast -- has been providing financials in Canadian. And given the opportunity on the operations and the process improvements and increasing margins, we decided to focus on that and not -- and at this point, most of our investors are still Canadian.So despite of the operations be in U.S., our investor community is largely Canadian. So for those reasons we have continued to keep it in Canadian dollars.
Ed, this is Greg. We've really just started touching the U.S. market from an Investor Relations standpoint and have started making some inroads, but really not much. Once we just got that DTC listing in that, we're very optimistic in that that there's a lot of interest, and we're going to be very, very active ending 2020 and going into 2021 on the U.S. side.
Yes. I mean, my only comment is I know U.S. investors want to see U.S. dollars. And for Canadian investors, we -- we're used to seeing U.S. dollars too, right, especially for U.S. operations.So -- and it makes it easier to compare obviously quarter-to-quarter, so -- or year-to-year. Just on the financials, there's $600,000 -- there was a $600,000 expense called other? What does that refer to?
Well, I think page is here. Are you referring to…
In the notes, in the back of the financials, there was under SG&A, there was a $600,000 expense called other.
Yes. It is probably -- I mean everything that's, of course, not listed on the above, but lots of, yes. [Technical Difficulty] Sure. I mean I would have to get back to you on the details of what different accounts go into that.I don't know. I mean probably more than 20 different types of expenses.
Right. No, it's not just one thing. Okay.
No, no, no. If that's the question, absolutely not. It's basically everything that doesn't fall into the top major buckets.
Okay. Okay, yes. Yes, some color there would be great. And last question is again on the SG&A, if you break it out, there's $2.4 million bad debt. It seems to me that's a big target in terms of increasing margins. What's the company doing to reduce bad debt expense?
Well, as we've always kind of stated in that, is that we wanted to keep our bad debt expense under 10%, and we've been able to maintain that. Obviously, there's always room for improvement. So we're continuously and that looking to improve processes and things like that and workflow process is primarily in billing.But we're actually pretty pleased with where those numbers are right now.
Okay.
I just to follow up on the other expenses. I mean those would be education, membership, licenses, office expenses, IT, computers, those kind of -- I mean, those -- I mean, the list can go on, but others is truly others. No one account contributes for more than 30%, 40% of that account.
Okay. So you're not -- okay. That's great. You're not putting consulting in there something kind of more exploiter.
Well, I mean, no. That's under professional expenses.
The next question is from Doug Loe with Echelon Partners.
I think most of the financial issues have been hit on here. So just kind of have a tangential question just related to the ventilator component of your business. And as you may know, there was some churn in the medical literature on the utility of mechanical ventilators and COVID-19 patients based on -- it was a JAMA paper in April from New York hospitals and sort of questioned their utility.And that's just funded compounding variables that weren't properly considered there and the data is improving as more studies have come out. I was just sort of wondering if there are any sort of trends on the receptivity of mechanical ventilation in the home care space, specifically with that patient population. And if you might see any more data-driven trends that might increase the equipment distribution specifically in that part of your business.
Good question, Doug. So what we've seen on the home care side for ventilation is we've seen an uptick in our referrals and continue to see that into our Q4. And really, what we're seeing is the same demographic a patient in that it typically had multiple hospitalizations, has respiratory failure and is what we refer to as a frequent flyer on the COPD. But we are seeing more trends of those orders out of physicians' offices rather than the hospital setting. So we believe that we're getting these patients earlier in the onset of their disease stake, and that then we typically would if they were put into the hospital to maybe to be stabilized or something like that.So we're starting to see kind of those referrals to pivot even to some home health and that has gotten involved in some recommendations of ventilation of trying to treat patients at home rather than sending them to the hospital for an exacerbation. So we believe as long as COVID is here and that that we'll continue to have those tailwinds of those referrals. So we've really kind of pivoted the way we market those particular services.
Great. That's helpful. And then just -- actually just thought of one other thing that I'll ask while I'm on the phone here. As you may know, there are a number of inhalable therapies that are -- they are currently in development, including inhalable nitrous oxide that you and I have talked about before, and there's some inhalable interferon formulations that are performing well in clinical testing.Is that an element of the business that you could perhaps explore once some definitive therapies are actually FDA approved and thus available for distribution? Or does that just sort of impose some distinct regulatory elements to your business that you wouldn't want to take on?
I mean anything is a potential. We're always looking at the possibility of adding new products to the portfolio. We definitely have the sales channel in that to be able to provide products like that. So we would definitely want to know more about that when it becomes available.
This concludes the question-and-answer session. I'd now like to turn the conference back over to Greg Crawford for any closing remarks.
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 would 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.