Welcome. Next up we have Casey Hoyt, the CEO, and Todd Zehnder, the COO of VieMed.
Thank you, ma'am. Okay, we got 25 minutes. I'm going to roll through as fast as possible, try to leave some time for questions. As she mentioned, my name is Casey Hoyt, CEO, original founder of VieMed. We are in our 20th year of business. Founded the business with my good friend, Mike Moore, who's our current President of Operations and a respiratory therapist. Getting into the business, the core of what we do basically represents 50% of the business, is what we call complex respiratory. If you think about the patients that we serve, we're serving an end-of-life COPD patient or some sort of patient struggling with neuromuscular. The average length of stay with this patient is 17 months before they expire.
Unfortunately, they're at the end of life, but it's also they get to us at a critical moment in time whenever they're burdening the payer with unnecessary hospital visits and ER visits. What we do is we have a nationwide reach. We're in all 50 states, and we've got about 200,000 patients under care, and we're putting these respiratory therapists in the homes to hold the hands of these patients towards the end of their life phase. That's 50%. We'll get into the rest of the makeup. We have other products, 24% sleep apnea-related, 10% oxygen. Got a staffing division and a maternal health division to talk about, but we'll get there. Our business in a nutshell is very high touch, high tech. We put technology in the home to couple with that human interaction and deliver a next level of care.
Our business, since public inception, has been on a 26% compounded annual growth rate. We've got $34 million of free cash flow at the end of the second quarter in 2026 and no net debt. Here's a look at our management team. As I mentioned, Mike and I started the company. We got 20 years experience. Todd, who's about to speak, is our COO. He's got 10 years. Randy Dobbs, Chairman of the Board. He's an understudy of Jack Welch at GE and has gotten lots of operating ability and skill sets in his tenure of running multiple businesses. Our Chief Medical Officer is Dr. William Frazier, pulmonologist for over 38 years, and he's got 10+ years with VieMed. Trae Fitzgerald, our CFO, who's also here with 10+ years. Together, 80+ combined years.
Our management team is very used to navigating the regulatory landscape that the durable medical equipment industry brings, and we're fully capable of handling what's thrown at us, which lots do. Lots gets thrown. The catalysts that are driving our growth is we're in a massively underserved population for getting to these COPD patients in the home. We've got 10% or less that are being treated in the home right now, but they're in lives. That blue ocean of opportunity to get to the other 90% and really treat them with the care that we know how to bring. Ultimately, we get all of our patients out of the hospital or from the physician clinic. We become that vital link between patients, providers, and payers, and then we got to be that company that can measure outcomes as well and report it back to the physician.
We have some technology that helps us do that. But the platform that we're building is broadening. We've always been a respiratory focused business. During COVID, we bolted on a staffing division, and as I mentioned, we got this maternal health play through by way of one of our acquisitions that I'll get into here in a little bit. Since I've been running the business, the regulatory tailwinds have never been more stable, if you will. The most recent thing that really happened to us, which is something that we were lobbying for, is an NCD, a national coverage determination, a rule on our ventilator product that happened a year and a half ago. It's an operational lift, but it's actually a good thing for us. It's a speed limit on the highway that our entire industry has to abide by.
It's become somewhat of a tailwind for us, and I'll dig into that in a little bit as well. As I mentioned, complex respiratory is the foundation of the business. The way the reimbursement works is it's $1,050, it's a rental rate per machine that goes out there. But inclusive of that is the respiratory therapist, the supplies, the mask, the tubing, the filters that comes with it. It's a bundled rate that we rent to the patient, and then once they expire, we go out, we pick it up, we clean it up, and we send it out again. It's got a 10-year useful life. To dig in just a little bit more deeper on the COPD population, COPD is the third largest killer in the U.S. behind cancer and congestive heart failure.
There's estimated about 25 million people struggling with COPD in the U.S., and as they get to stage four, which is the most severe level of the disease state, they become candidates for our therapy if you will. Half of them will actually reach chronic respiratory failure, which is where their lungs are functioning like a wet ball of newspaper, for lack of a better term. And we get the machine, and we noninvasively ventilate the lungs, meaning we don't have to intubate cut a hole in their neck, jam a tube down their throat. We could use a CPAP mask to non-invasively ventilate the lungs and get that gas exchange right, which is simply just getting the carbon dioxide out and letting the good gas, oxygen, in. We've only got 60,000 Medicare beneficiaries on this NIV service today.
That's a 5% market penetration number just for the Medicare population alone. And when you add on the private insurance candidates, that's where we get to our sub 10% market penetration number. We're the second largest provider for ventilation in the country, and 63% of the entire marketplace is held by 10 providers. There's really not that many folks out there doing what we do, and especially not well. Okay, so she's holding some technology that we also developed. It's a tablet that goes into the home. It's got a telehealth feature on it to where these very needy patients are suffering from anxiety or some sort of shortness of breath event. They can quickly pull up their respiratory therapist, we can diagnose their needs, and ultimately determine if it's justified to send them into the hospital.
Nine times out of 10, we can talk them off of a ledge, we can interact. What it also does, it Bluetooth connects into the device. We can see what's going on with the machine. We can understand the patient's struggles and sometimes make some quick shifts. It allows us to keep our overhead very efficient to where we know if the machine's just not plugged into the wall or if it really justifies a physical visit. The other thing that it's doing is it's capturing clinical outcomes and all the data that we need to report back to the payer, and oftentimes the physicians who now have a portal where they can look at their patients and see how they're doing. These are three studies that we completed over the last, call it six, seven years.
I'm not going to get into every little detail here, but this is on our website and it's in our investor deck. The recurring theme is that by way of reducing ER visits, by way of reducing hospitalizations, and having a 39% all-cause reduction in relative mortality, we can save $5,484 per year for the payer. The more you use this therapy, the more the payer saves and the better the patient outcome is. It's a win-win-win across the board. Digging in a little bit deeper to our operating model, we're not your traditional DME that's doing wheelchairs, walkers, beds, commodes, that has brick and mortar facilities all throughout the country. Our therapists are spread out across 38 states with good coverage, even though we have patients in all 50. Yet they operate out of their vehicles.
They've got inventory in the trunks of their car. They're trained to drop everything and go and just really ultimately respond faster than the competitor does. We have a mobile workforce. It's when we decide to go somewhere, we're looking at all the data. We look at COPD prevalence. We look at hospital admissions and readmissions, hospital beds. Are they at capacity? Do they have length of stay issues where we can help get folks out sooner rather than later and free up a bed for that hospital? There's a lot of data-driven decision-making that goes into where we're going. Ultimately, it's very lean and mean, and we can go faster than the competitor because we don't have all these investments in brick and mortar and all that unnecessary infrastructure.
The current national model doesn't just. I'm talking a lot about ventilation, but when we say complex respiratory, you have airway clearances involved, which are percussion vests. I know Electromed's here is one of the companies. We use the SmartVest, which is one of their products. We use other manufacturers as well. We're a distributor that is device agnostic, and we also let the physicians sort of lead the way on which products that they like to use. We're ultimately the ones who deliver the care in the home. I talked about PAP, and we'll get into breast pumps. I talked about all that stuff. I'm going to keep moving here. This is what we've done over the last six years, which these graphs kind of tell the story. We naturally expanded around the country in complex respiratory.
Back in 2019, you can see that ventilation made up 87% of our product mix, and the other slivers were pretty immaterial. Since then, we have done a pretty darn good job of diversifying the business, and this graph right here shows the different percentages. Probably the one that I will call out that is significant is the sleep business, which is a legacy DME product that has been around for the last 30- 40 years. We have been growing it pretty rapidly. I have got a slide coming up that I will dig into the numbers on how we have done that and why we have done that, but it is becoming more and more significant to our product mix.
Along the way, as you do those things, a sleep patient is a younger patient that sometimes can get diagnosed in their late 20s, and then they will stay with you for life. That is more of your private insurance patient, whereas your complex respiratory is your elderly patient that is heavily driven on Medicare. As we have diversified the product mix, we have diversified the payer mix along the way naturally. Here is the slide on sleep. We have grown it 44% year-over-year, and our resupply growth is at 47%. Resupply is really the masks, the tubing, the filters, the stuff that is a recurring revenue stream.
Every six months, you have to order new supplies, and that is the juice in the sleep business. You are trying to have a really good, repetitive client that is adhering to their therapy, benefiting from care, and ultimately is driving them to order more resupply. It is now representative of 22% of our overall net revenue, excuse me. This is just a deeper dive into some of the products that I have been talking about.
I am not going to get into the bullet points here, but you get a little visual all the way to the left at the bottom. That is a white portable oxygen concentrator. Another thing, because we do not have brick-and-mortar facilities, we have a unique oxygen offering where we do not do tanks, or we try not to do tanks across the country. Rather than dragging a cart through Walmart or something like that with a tank on it, we give them a portable oxygen concentrator, and that goes around their waist and their hip. It makes them a little bit more portable, more mobile.
It is more expensive, but ultimately, taking care of those stage one, two, and three, those earlier stage of COPD patients will lead you to the funnel of getting to more vent patients, which is the higher margin business and really the juice of what VieMed is really good at. This is a look at a percussion vest that just treats bronchiectasis, the stiffening of the lungs, patients that we will run into along the way. Our therapists are out in the homes uncovering all sorts of different needs. Getting into our growth strategy. I talked about the 26% CAGR. The majority of that has been all organic. We have made three acquisitions. In the next slide, I will dive into those. We are pretty darn picky about our M&A strategy and the companies that we bring into the fold.
We're looking for more of a springboard to our organic growth whenever we buy somebody. We're looking for somebody who has the respiratory experience, we can train and coach them up to get into the complex respiratory space. Ultimately, they have champion referral sources and hospital relationships that we need. When they check all these boxes, they're a good management team. We're not looking to come in and cut the middle of the P&L and just buy revenue. We're looking for good management teams that can embrace our mission, and we can coach up to organically grow themselves. As far as our operational leverage goes, AI has been changing the game in every facet of our business in terms of our departments getting more efficient.
We're not at the point of firing folks or letting people go, but we're certainly giving people an excavator to dig a hole versus a shovel, if you will. A lot of AI investments have been going on. They're driving efficiencies throughout our organization. We have a declining CapEx intensity. It's a capital-light mix shift. As I mentioned, favorable free cash flow margin mix, and then shared infrastructure reduces the incremental cost per service. This is a look at our three different acquisitions. In June of 2023, HMP, a company in Tennessee, North Mississippi. Frankly, it was a coverage gap for us. They were about 20% complex respiratory, 80% sleep. We were able to come in and really get them to about 50/50, and it's been a healthy fit for us.
Good management team with good chemistry, as I mentioned, and we've actually been helping their sleep business mature and grow as well. Because we're pretty strong in home sleep and our offering and bullish on that, and so we help those guys adapt to that. We always have some sort of strategy to leverage what we've already done, leverage good people, and teach them new things to where we can organically grow. East Alabama HomeMed was a smaller joint venture that we did with a hospital system over there in Opelika, Alabama, and it's been successful. Again, we've helped the hospital identify more complex respiratory patients and coached them up on how to treat them properly in the home.
Most recently, in July of 2025, Lehan's Medical Equipment, a company out of Chicago, and did a little bit of business in Wisconsin. They were 40% sleep and 60% maternal health. We expect maternal health to be one of our fastest-growing sectors next year. We like this business just because it's very similar to our sleep business in terms of fulfillment, logistics, and just mailing out equipment. They're finding expecting mothers through digital marketing platforms, and they're educating them that their private insurance can reimburse for their breast pumps and all of their consumables that go with it.
Again, a great management team. What we're doing is we're leveraging those guys, or they're leveraging our VieMed insurance contracts to bring that offering throughout the country. We've already added Texas, Indiana, and Ohio so far, and that expansion is ongoing. We're really, really excited about that product. It is a purchase product. It's not a rental product. It's a sale item, if you will.
I have talked a little bit about all this stuff. The CMS is really pushing to the home. That is the cheapest way that we can really treat a patient in the future. Folks like to be treated in their home, and you are seeing all sorts of different policies that are pushing more folks to the home as they age. The hospital cost pressure is real throughout the country. Hospitals are struggling to make money, and the only way that they can really get back on track, in my opinion, is to create operational efficiencies, and that is freeing up beds sooner and managing their length of stay. You need to have a post-continuum care program or collaboration with companies like ours in order to do that efficiently.
We are seeing a lot of folks that are calling us now and saying, "Hey, let us build out a collaboration program together." So that is another opportunity for us that we are focused on capitalizing. Then the stable regulatory environment, I will talk a little bit more detail about that because as far as reimbursement risk goes, we are going to get a 2%- 2.8% bump through natural CPI inflation rates that are shifting on us.
Lots of investors in the past have been worried about a program called competitive bidding. Competitive bidding is designed for us to all submit bids, and then we get a fair market value on certain products that we sell. We found out that we were out of the round through 2028 of competitive bidding for all the products that we service. So that is one less distraction that VieMed has to deal with.
Competitive bidding could come back around. It will probably be about 2031 until something like that happens. So that is pretty stable. Then the biggest win is this national coverage determination. We had been fighting tooth and nail really to get more clear guidelines in our space. The reason for that is that when you have arbitrary auditors that are making their own decisions on whether a patient qualifies for a vent or not, you really need clear defined rules so that you can build your business and you can grow it the right way. So that is what this NCD did for us. There are some operational lifts with it. We have to make sure that our patients are compliant, meaning using it for 70% of the days for four hours a day.
There are some things like that frankly, we were already kind of skating towards where that puck was going to be. So it was not much of a shift for us once the new rules came out. But I can tell you a lot of our competitors are really struggling with these new regulations. So therein lies another tailwind or an opportunity for us to continue to go around the country and capture market share as a result of these new rules. I am going to let our COO, Todd Zehnder, come up and handle the financial side of the presentation.
All right. Good afternoon, everyone. I will not spend too much time on 2025 because we have some 2026 numbers as well. I think one of the major themes is as we have changed the business over the last few years and diversified away from ventilation, although we have more than 4X grown that business, we are not having to spend as much money in capital and expenditures. The green number you see is that we are a company that is now generating pretty substantial free cash flow on a sustainable basis. We continue to have this 25% annual growth rate. We still fund all of that with internally generated cash flows and are still spinning off that. We completed our third buyback last year, so we are not a typical small cap company. We are net income positive. We are cash flow generators.
We are high growth like a lot of small cap companies, but we are buying the stock back opportunistically. More of the same in 2026. Revenues are on their way up to increase. I think it is 24% this year is the forecast. We will look at it in a second, but top line guidance is roughly $315 million- $320 million with EBITDA in the mid-60s. Once again, still generating a ton of free cash flow. We went ahead and implemented our fourth buyback. We have pulled down about 700,000 shares of that through the last quarter, continuing to buy. We run here with no net debt. We do put cash on the balance sheet to get ready for acquisitions. As Casey mentioned, we did three of those over the last, I guess, four years and have an active M&A team. Very patient.
We are not out there, like we said, just buying revenue. We are buying teams, and we are buying good business operations. I guess the way to think about it, a very patient and disciplined M&A program because the organic growth is going to be there. We are just very confident of that. This just shows those numbers on a full year basis. I mentioned it, $317 million midpoint, $66 million midpoint on the adjusted EBITDA. Margins are coming down some over time as we expand away from the ventilator market into these sale type items. Once again, lower CapEx intensity shows that the CapEx is coming down. I think our guidance is somewhere like 8.5%- 9% of revenue. So you are seeing maybe a slightly depressed EBITDA margin. But when it looks at free cash flow and net income margins, everything is accretive that we are doing.
Longer term view, since we have spun out, we have had the 26% CAGR, about $50 million- $55 million of that is acquired revenue through the three acquisitions that we have done. The rest of it is just kind of waking up every day, hiring good salespeople, and growing around the country. I think this has pretty much been talked about, the 8.5%-10%. We do have seasonal variability in the business. The second half is always stronger. In the first half, people are changing insurance programs. We are having to do a little bit more administrative work to keep our revenues where they are. But the second half, we typically make up for that. If you look at everything on an annualized basis, we are very comfortable with where the guidance is right now.
So we are always going to wake up and invest in organic growth first. It is what we are. We wake up and we hire salespeople. We just try to find new areas of opportunity around the country, new states, new good salespeople. It is what drives us. To us, if we could spend every dollar of free cash flow buying equipment and servicing more patients, it is a good day. Number two is execute on the M&A, and number three is to pay off any debt, which we have very little, or return capital to shareholders through the buybacks that I talked about.
In summary, we have a proven program that has been around for 20 years. We are net income positive. We are cash flow positive, clean balance sheet, young, energetic management team with plenty of patients to serve out there. You have to treat patients in the home. It is not sustainable to keep these patients going in and out of the hospital to be treated with expensive facilities, with expensive clinicians. There is just a blue ocean of opportunity for us. With that, I think we are out of time, so we will have to take any Q&As in the room. Thank you.