Pleasure to introduce to you Trae Fitzgerald, the Chief Financial Officer of Viemed Healthcare.
All right. Thank you. Thanks, everybody, for joining us today. Trae Fitzgerald, Chief Financial Officer of Viemed. I have been with Viemed since the entirety of our public corporate history. It's been 10 years now. We spun out of another entity in 2017, listed on the Toronto Stock Exchange before dual listing here in the U.S. on the NASDAQ, and then delisting from the Toronto Stock Exchange and full U.S. company now. I'm excited to share the story. Boring housekeeping before we get started. Forward-looking statements during this discussion. Non-GAAP measures, you can look at definitions here in our appendix. We have some reconciliations. You can refer to our SEC filings for risk factors and further reconciliations. Okay. With that out of the way, let's get started on who Viemed is. Viemed is based out of Lafayette, Louisiana. Our 1,200 employees now service approximately 150,000 patients across all 50 states.
We have a market presence more broadly in, call it, 35, 36 states where we have respiratory therapists and sales reps. We are a home medical equipment supply and services company. In our space, we're non-traditional. The traditional HME company is more akin to a large retail floor space, a delivery van in the parking lot of the hospital, maybe a DME closet inside the hospital, that sort of thing. We're different in two factors: one, product diversification and our product mix and sort of our operating model. From a product perspective, a traditional HME company is going to more broadly base do all equipment. They're going to do the bent metal, wheelchairs, walkers, commodes. They're going to do some of the respiratory space. They're going to do it all.
Like I said, they're going to have that retail floor space versus we're a lot more focused, complex respiratory, as we call it, more specifically non-invasive ventilation, and then sleep respiratory. We'll talk about some other products. We're more narrowly focused. We operate in a largely remote environment. We focus where there's more therapy than just device that's being delivered. That lends it to quite a different operating model than what would traditionally be seen in the industry. Really, the catalyst for Viemed is really the catalyst for most healthcare companies these days. The U.S. is getting older and sicker. Most folks over the age of 60 have at least one chronic disease, and a large portion of those have multiple chronic diseases, sadly. Those folks are, as we get older, as we get sicker, there's more of a cost burden to the system, to the healthcare system.
You have Medicare and your traditional commercial insurances looking for ways to bend the cost curve. That really benefits Viemed Healthcare because what we do is we try to keep patients in the home. It's the setting the patients want to be in. It's the lowest cost of care setting. The regulatory developments, innovation, especially post-COVID, are really pushing that modality into the home. That's really been at the core of everything we do. The anchor of our business and our organic growth model and our organic growth engine has been ventilation. In early 2012, new technology came out for ventilation to be taken outside of the traditional hospital and be done in the home. Viemed Healthcare set up their first patient in March of 2012 and really benefited from being an early adopter of that technology and sort of a first mover.
That's a little bit why a company, a small homegrown company out of Lafayette, Louisiana, became the third largest ventilation provider in the country. We've scaled that and leveraged that business to a broader business, which we'll talk about in a little bit. The core ventilation business is covered by all commercial payers, Medicare. It's roughly $1,000 fee for service a month for the life of the patient, which for us is a 17-month length of stay on average. It has attractive economics. In the HME space, it probably has the most attractive economics. It's got gross margins in the upper 60s, low 70s. The challenge with it is it is the most complex piece of equipment inside of that HME space. It's a bundled payment. For that bundled payment, that monthly rental, we provide the necessary supplies, the clinical support, the respiratory therapists.
We also have clinical social workers that help with their mental state and the maintenance of that equipment, all of that. We have to invest in a piece of equipment, a property that lasts 10 years. It's capital intensive. It's still attractive from the financial standpoint. If you can pull it off and do it well, which we have, there's really a lot of rewards in it. You can see, if I were to pull out this graph a little bit further back to 2012, it'll look the same. It's just up and to the right. The growth of our active patients has been extremely consistent. We're very proud of that. We like to think, oh, we're phenomenal at doing home ventilation, and we are. The truth is that we're also in a blue ocean. It's a meaningfully underpenetrated market.
By all accounts and by claims, it's less than 10% of patients that really need this therapy are on service. That number looked like 4% or 5% a few years ago, and it's only at 6% now. Unfortunately, these late-stage COPD patients are more often than not boomeranging frequent flyers back in and out of the hospital, burning the system and healthcare. We think we have a large runway for us to continue that organic growth and the active patient growth. We're better positioned, we feel, to capture that runway than our competitors because we are differentiated in the way that we deliver care. For a lot of folks, they do a little bit of ventilation. Ventilation is something they do. Ventilation is what we do. Our 300 respiratory therapists, our dozens of licensed clinical social workers, we go above and beyond what we're reimbursed for.
We don't get reimbursed for LCSW. That's just what gets therapy adoption from the patient, keeps them out of the hospital, keeps our referral partners happy. When they tend to see that benefit, they tend to become a sticky referral source. That really beats out the competition time and time again. This is backed by our studies. Our Chief Medical Officer co-authored three studies. Our latest one in 2022 was a retrospective analysis of 500,000 patients that showed if you set up a patient early initiation within the first seven days of chronic respiratory failure, you're going to reduce mortality by 40%. You're going to save $5,500 to the system. $1,000 a month, $12,000 a year for a vent. If you can save one hospital readmission, then obviously you can pay for that piece of equipment. That's the education to the physicians. That's what we're out there.
That's the flyer we're bringing to the hospital saying we need to get these folks on service earlier, not that last six months where we can still be of benefit and extend their life. We may not be able to stop those hospital readmissions. The way that in our industry, we're proud of the growth, obviously. What we're also proud of is we've been profitable every year of our public existence. That's pretty odd in our industry, especially our industry that tends to be a little bit more consolidated roll-ups at the national level. We do that because of our lean operating model. We employ what I would call sort of a crawl, walk, run model. When we go into a new market, because we don't need a physical footprint, we can get a dual role respiratory therapist who also can sell.
Until there's enough of a patient base to need a full-time clinician in that area, we don't need to add another body. That allows us to scale an outperforming market with add an RT, let the sales go 100% sales. It allows us to pull back on an underperforming market for whatever reason, network access or something else, because we don't have a whole lot invested in that. When we have a strong performing market, obviously we densify it as much as possible. Even the location of where we're going to enter new markets, we're very scientific about it. We're looking for where there's high rates of COPD, there's low claims, implying that there's an underserved population that Viemed Healthcare can help with. If you think about ventilation, these are later-in-life individuals. They tend to trend more towards Medicare, and expanding into that market is somewhat easier.
You go into a new state, you get accredited for Medicare in that state. That comes with some work, but it's not insurmountable versus going out and getting 100 commercial contracts in an area so that you have all the covered lives. Naturally, that has been a large sort of tailwind for us to go across the states and take our model and drop it in those places. What that has done is that's become a springboard for other lines of business. As we've sprawled across and been able to expand just via Medicare lives, we've filled in those Medicare lives with proper network adequacy, commercial payers, Medicare Advantage payers, which open the door again for our ventilation, but also for these other product lines that are much heavier in commercial. What you'll see is the evolution of the business. Ventilation continues to grow at double-digit rates.
This isn't a view of us doing less ventilation. Ventilation is growing as fast as we possibly can. This is really the ability to provide other products, adjacent products, and what we call complex respiratory, which would be supplemental oxygen, airway clearance devices, those sort of things, and then lean in harder to sleep. Inside of COVID, we actually set up a healthcare staffing agency because not only did we need internal staffing, but our hospital partners were struggling with staffing. That business is a de novo business. We started from scratch in 2021 that will likely do something like $20 million of revenue this year. It's just another augment of what we do and can provide to our referral partners and hospital partnerships. What you see is at the end, you see a more resilient revenue mix and a more resilient payer mix.
The fastest growing segment in there, like maybe a lot of folks that you've been hearing, is our sleep therapy side, our sleep apnea side, CPAPs and CPAP resupply. We most recently added two new metrics to show that. We're extremely proud of how fast that is growing. I think 2Q setups year over year were up 70%. Resupply patients were up 25%. That continues to grow. It's a CapEx-light business model. You set them up on a CPAP. Three, six months later, nine months later for the next few years, while they use their CPAP, they're going to need resupply, which obviously comes with no CapEx. Our other products, folks often ask about our other products. They're different from ventilation. Ventilation is an uncapped rental. We keep ownership of that ventilator for the 10 years. We keep it in service. We have some actually operating longer than 10 years.
The other products are typically a capped product. They'll transfer to the patient after they hit their cap. In the case of oxygen, it's 36 months. In the case of all other products, it's typically 10 - 13 months. With that evolution of the business, what has drastically changed for us? Again, I said we've always been profitable. What we haven't always traditionally done is spit off a ton of free cash flow. That's just the nature of how much growth CapEx we had. When we were growing 35% annually, we were happy to spend that money on a new vent. I mean, the economics are great. We know that there'll be an inflection point where the revenue stream is large enough that it even overcomes some of the growth CapEx. That's really what you're seeing now. This is sort of the capital allocation slide.
As we think about capital allocation, it's one organic growth engine. That is who we are. We grow organically. We're always going to invest back into the business. For a long time, that's where every single dollar went with our growth CapEx. We're still growing vent patients, call it 1,100 to 1,500 a year. Obviously, when you have 13,000 active patients, that's different than when we had 3,000 active patients. We're at this inflection point with the additional product lines that I just mentioned and everything else that we have to go to step two. Step one is checked pretty early in the year. Step two really is, okay, do we have any debt? No, we don't have any debt. Okay, that one's done too. We're going to look at inorganic opportunities for us to organically grow. We see acquisitions through a different lens. It's not a roll-up.
It's sort of, hey, can they cover a geographical coverage gap for us? Do they introduce us maybe into another product line that can leverage our network adequacy? We're going to look for accretive multiples for us. It's a very measured approach. We've done three transactions, two meaningful ones, the last one on July 1. In June 2023, we acquired H&P Home Medical Products out of Tennessee. We did a hospital JV in April of 2024. We just did the Lehan's acquisition right outside of the Chicagoland area on July 1, 2025. It's been a very measured approach. Outside of that, we're always going to look for inorganic opportunities. After that, if we can't find an attractive opportunity in the M&A space while we wait for one to come, we're spending off free cash flow. We're going to return cash to the shareholders via a stock buyback.
We just finished our third one. We spent, in the end of September, we bought back 5% of our stock for approximately $13.2 million, a little over $13 million. All that to say, consistent organic growth. Like I was just saying, in 2017, we were a $40 million company. This year, we're going to be a $270 million, $60 million EBITDA company and are starting to generate meaningful free cash flow given our product mix. Our growth continues. 2Q was another phenomenal quarter for us, if not a little boring, I guess, with sequential growth in every category. Like I said, on the sleep therapy side, 72% setups year over year kind of jumps off the page. Resupply patients up 25%. At the time, we had no net debt, $20 million of cash on the balance sheet, and untapped $55 million of our $60 million credit facility. We had finished the buyback.
We did acquire Lehan's July 1. A third of the acquisition we utilized with cash on hand. We utilized a little less than $20 million to effectuate that transaction. We'll start to pay that off in the fourth quarter and the beginning of next year. We'll likely be in the same position if nothing else changes. With the addition of Lehan's , we updated our annual guidance at the end of 2Q, putting us at a milestone, over $270 million and $60 million of EBITDA, likely putting us on a run rate over a $300 million company, which we're excited about. We are formalizing the 2026 plan now and sort of excited on what that looks like. What does the near-term future look like? It looks like a lot more of the same.
It looks like a lot of finding new sales reps, taking our 125 sales reps higher than what it is today, getting into new markets, densifying the markets that we're really strong in, continuing to lean in and invest that free cash flow into these new and growing product lines. The integration of Lehan's brings a new product line. What's exciting about them is we ran into them because they have a good sleep operation, about 25% of their business, 30% of their business. They have a little bit more, maybe 10% of their respiratory and other kind of home medical equipment products. They're 60% maternity, which isn't something that was necessarily on our radar. The more we learned about them through due diligence and the sleep business, we realized they do it even better on the technology side. It's a lot better.
It's a lot like our sleep resupply program. They're stuck in just the state of Illinois, but we have contracts across the country to be able to provide a broad host of home medical equipment. We think, as excited as we are about sleep growth in 2026, there is an opportunity that maternity could start nipping at its heels. Excited to see where that takes us. We're getting to a point now with 1,200 employees that there's some real operational scale that we can do. We're already seeing technology poke its head out, mostly in rev cycle. The administrative burden on that side is heavy. We're seeing some of the benefits of these AI referral workflows, e-prescription sort of things. The next phase of that would be all the things that benefit our sales reps and our respiratory therapists.
We want our respiratory therapists to be clinicians, and we don't want them to do anything other than care for the patients. We want our sales reps to be sales reps, and we don't want them to do anything that's not selling. The more we can lift those burdens off of them, the more efficient our workforce can be. I think that's it. In closing, inside ownership is 20% of the company. We're fully aligned with shareholders. We're happy about where the story is. We want the stock to be higher, certainly. We get that question a lot. We are proud that we've grown the company organically 27% year- over- year. We've never issued a share of equity. We've done three buybacks over the course of that time and spun out a little over $1.
All of those metrics, revenue, free cash flow per share, all of them are 5x what they were when we first spun out. It's a very interesting story. I think it's a very interesting time. The market's kind of taken a little bit of a hit. We're confident we continue to execute, and the share price and the market will wake up to the story. I have some slides in the appendix that talk about some of the industry-related things, GOP ones and competitive bidding and those sort of things. I'm happy to open up for questions if anybody has any. Yeah.
What's the rate in reimbursements in non-invasive ventilators compared to other brands?
Ventilation maybe up until from 2012 to 2015 was something like $1,500. It went down to $1,000 in January of 2016 as utilization kind of increased. It's been stable since then. It's only been CPI bumps since then. That $1,000 is probably $1,200 now on Medicare on average across the country.
What's the average length of stay?
Seventeen months. We've got folks, obviously, especially in the invasive side of the business, ALS and neuromuscular diseases stay on it really long. On the non-invasive side, seventeen months is our average length of stay. We lose probably 30% of our patients in the first, call it, ninety days. If we can get them at the right time and keep them on service, they have a better chance of making it to two, three years. You lose a lot early on if you get them late. That's what kind of effectuates that average length of stay.
Are some of the diseases you're treating or basically their life depends on the ventilation? Like you have battery backup systems.
That's right. Yeah. In the case of an invasive, they actually have a backup vent. They have two vents in case one malfunctions because it is life-sustaining for them. In the case of non-invasive ventilation, it's not life-sustaining in that if they don't have it on the second, they're in real trouble. It's if they don't utilize it on a consistent basis, they're in real trouble. They're going to get CO2 trapped in their lungs, and then they're going to have an exacerbation and have to go into the hospital to get ventilation support there to help them breathe.
Is your equipment leased at all, or do you purchase it outright?
We purchase all of our equipment. We're strong fans of owning our equipment. I think that's all our time. I'll stick around after if anybody has any additional questions. Thank you.