Q2 2020 InfuSystem Holdings Inc Earnings Call
Good morning, welcome to the Infusystem Holdings, Inc. second quarter fiscal year, 2000, <unk> financial results Conference call.
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Joining me this issue there's no call, whose specialist will push it starts you sold those zero.
After today's presentation, there will be an opportunity to ask questions.
To ask a question were closed stores and one on itself. So so.
It was sort of question is just starting to.
No this is being recorded.
Now, let's turn the conference over to go door.
[music].
Thanks, Rocco good morning, Thanks for joining us today to review the financial results of Infusystem Holdings Inc. for the second quarter of 2020 ended on June Thirtyth 2021.
Well that's today on the call our rich Diorio, President and Chief Executive Officer, and Barry Steele Chief Financial Officer.
After the conclusion of today's prepared remarks, well open the call for question and answer session. If anyone participating on today's call does not have a full text copy of the press release, you can't retreated from probably website at www Dot Infusystem dot com or numerous other financial websites.
Before you get what prepared remarks, I would like to remind everyone. Certain statements made by the management team of Infusystem. During this conference call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, except for the statements of historical fact this conference call may contain forward looking statements that involve risks.
And uncertainties summer, which are detailed under risk factors in documents filed by the company with the Securities and Exchange Commission.
Putting the annual report on form 10-K for the year ended December 31st 2018.
Forward looking statements speak only as of the date, if they've made the company can give no assurance that such forward looking sample proved to be correct. If you system does not undertake in specifically disclaims any obligation to update any forward looking statements whether as a result, the viewer information future events or otherwise now I'd like to turn the call.
Rich Diorio, President and Chief Executive Officer of Infusystem Rich.
Thanks, Joey and good morning, everyone and welcome to our second quarter 2020 earnings call.
Like the thank you all predicting the time to join US. This morning and will be their families are staying safe and we continue to deal with global banking.
Now onto our second quarter results weren't exciting time DFI system, we were able to follow up a strong first quarter with a second quarter that had record numbers for net revenue and adjusted EBITDA revenue in the quarter was $26 million, an increase of 31, 40% versus the second quarter of 2019.
Adjusted EBITDA quarter was $8.5 billion, an increase of 87.2%.
We continue to execute on our strategic plan growing the top and bottom lines as we carefully navigate through these unprecedented times the dealers that he has done a relentless in pursuing operational efficiencies as we continue to develop our two service platforms.
Oh platforms are seeing more opportunity than ever before we're making steady progress on our strategic land to grow each platform by layering on additional therapies.
As we discussed when they go but it is impacting their platforms and services in different ways.
Our core oncology service continue to grow in the second quarter is there can provide the gold standard and servicing safety to our 2100 oncology customers.
Just under 150000 treatments in the quarter.
Nice quarter in a row sequential growth.
They were three elements contributing to this growth first we have continued to win increased market share.
Second we have been increasing the number treatments performed by providers.
Third.
The third factor contributing to the increased oncology service revenue in the quarter is our improved revenue cycle management.
Every quarter, our remedies that go fishing seen groups, resulting in higher percentage of treatments, we provide delivering results to the bottom line in 2021 of our major initiatives is rolling out our case management service, which both improved the workload clinics in places infusystem in position to obtain the billion people or if we need more time, we've been more consistently you see that.
Positive impact such process improvements in both our top and bottom line.
Dnbi platform, specifically on sales and rentals has seen increased demand as many hospitals turned to us to help them prepare for the potential of treating large numbers of covert patients we shipped more pumps in the second quarter than in any other quarter in our history. As we continue to provide a service that as nimble and adaptable to the market.
We expect to see the rental portion of this demand remained strong for the next few quarters as coven doesn't seem to be going away clip as quickly as we also.
Our pain management service, so dramatically decreased a little quarter as the number of elective surgeries in the U.S. decline in order to redeploy hospital resources to treating cool that vision.
The decline began in late March and continued through June.
The good news is that as soon as states began to open in July our patient count saw an immediate rebound in fact in the first half of 2020 universe, but steady progress in winning adoption of additional surgery centers, we treated a similar number of patients as we treated during the same period in 2019.
I believe it's very positive sign regarding industry adoption of our pain offering that our team was able to overcome the decline in existing volume by adding a significant number of new facilities.
The future remained strong for our pain program is more and more positions are seen the value of doing their part to address the opioid crisis in U.S. by changing their practices to avoid the introduction of oil pain medications.
Well you partnership with Cardinal health and negative pressure wound therapy is off to a slow start than person, but is our access to hospitals are still limited. They're all however, many good design to the long term potential of this therapy burst you had been burn pent up demand is in the marketplace for the formidable I'm a combination of the cardinal device matched with the unparalleled service levels.
We provide via our Itps platform second on the revenue cycle side. This therapy, we are seeing very solid numbers across a good cross section of third party payers and in some cases, the reimbursements are higher than we initially expected.
And with that I'd like to turn it over to our CFO Barry Steele to provide a review of our financial results.
Thank you rich and thank you everyone for joining the call today.
As rich mentioned during the quarter, we Overachieved our expectation then about every financial metric.
A pandemic created increased demand.
Well our services due to the urgent need for infusion pumps and other services that we provide mainly to I'd any sort of just back.
This demand related to both actual and anticipated called imagine patient and a similar to what we experience at the end of the first quarter.
If you look through the Copenhagen, <unk> Cobot 19 related but however, you will see signed a solid growth in net revenues and profitability running throughout the entire organization.
Net revenues for the current year second quarter of 26 million represented an increase of 6.3 million or 32% over the prior year second quarter I.
Yes segment net revenue growth of 3.2 million or 26% was nearly matched by the net revenue growth of the smaller deals services segment, which increased by 3.3 point 1 million a whopping 42%.
I guess gross <unk>, well was mainly due to favorable market penetration in the ontology, but resulting from improved competitive landscape similar to that realized over the past year.
By the way the <unk> segment also grew by over 10% sequentially from the current years first quarter.
Hey management net revenues, which are part of the idea segment were flat during the current your second quarter as compared to prior year, usually continuing growth in the customer base being offset by reduced service by and caused by Copel 19 reductions in elective surgeries during the quarter.
Do you need services segment net revenue growth was led by increased sales of infusion pumps.
Which were higher by nearly 2 million and increased rental revenue, which increased by 1.2 million.
Most of the deal needs over the segment growth was the result, the covert 19 driven increase in market demand.
The higher revenue in both segments translated into both higher adjusted EBITDA, which increased by about 4 million or 87% to 8.5 million during the quarter and improved adjusted EBITDA margins, which grew to 32.6% during the current your quarter compared to 22.9.
The prior year, demonstrating the company's strong ability to convert net revenue growth to improved earnings.
These improvements were driven by both and improved sales mix favoring higher margin revenue and selling general and administrative costs coverage.
Offset partially by a higher provision was up for account.
The improvement next what associated with relatively higher net revenues for the better margin idea segment as well I ratios, a rental and pre owned equipment revenues and the DNS services segment.
Bad debt provision increase was mainly driven by an accrual adjustment, which are flat to slow and customer collections performance and an extraordinary difficult comparisons to prior year provision, which included income related to an accrual reversal during that period.
And the first quarter, we did not incur significant extra costs associated with Cowen 18.
During the years first half.
Operating cash flow totaled about 4.39, which was above the saying that the prior year.
The current year period was impacted by higher working capital associated with our covert 19 prepared as activity and a significant increase in that rapid yes.
The positive operating cash flow combined net borrowing from our bank facilities totaling two and a half million along with the use of 2.1 million in our cash on hand at the beginning of the year supported net capital expenditures of 8.5 million, which were 2 million higher than the prior year first half.
We think we think habits factors was primarily comprised of increases are and you know do them publicly.
And represented an acceleration of our current your capital plan timing due to the club a 19 preparedness and other market demand.
Our financial position once again improved during the twice my second quarter as of June Thirtyth 2020, a ratio of funded debt to adjusted EBITDA decreased to 1.77 times down from 2.07 times as of March 31st 2020, and two point.
One one times at the end of 2019.
Our total available liquidity at the end of the quarter, which totaled 11.7 million consisted of 5.5 million availability on our revolving line of credit.
And 5.7 million available under an open capital expenditure facility and 500000 in cash.
Not represented a decrease from a available liquidity a 14.5 million at the end of the years first quarter and 20.99 added December 30, Onest 2018.
This decrease which was expected was mainly due to the cobot 19 related capital expenditure acceleration working capital investments and amortization of our churn that.
We estimate that our liquidity position will improve and the second half of this year and our working capital position starts to level off.
Average hassle overtake our capital expenditures during the back half of the year.
With that I'll turn it back over to etch.
That's very our last call and they they said it was still too early to understand the financial impact go. The 19 would have on our business and I did not reiterate our regional 2020 guidance.
Although there are still variables in the marketplace, but outside of our control. We do feel that we have enough data in a better understanding of any possible impacts on our business to resume providing guidance for the remainder of 2020.
Our revised guidance ranges for 2020 are as follows.
Net revenue as a new target range of 94 million the $97 million. This is up from the previous targeted 89 million originally provided late last year.
Adjusted EBITDA.
As a new target range of 23 million to $26 million. This is up from the previous started up $22 million originally provided late last year.
Cash flow from operations, which had a previous target of $16.5 million being raised to a range of 60 million to $18 million.
As you can see our targets have been all raised from their original numbers as we believe our core oncology business will remain strong our Dms segment will continue to be higher than usual demand for sale in rentals in her pain program should fully recover as these continue reopening later this year.
The ranges are wider than we would normally but even though we're halfway through the year, but this is due to the continuing uncertainty created by crude that we believe the final number will be solidly in the middle but if the risks and opportunities break them all in one direction or another we just finished the year closer to either end of the ranges.
One final note, we will be participating in both the LD micro instability verso investor conferences in September and contact Gilger made for additional information and with that I'm happy to answer any questions.
Thank you we will not assuming success.
You asked the question regards sargen warmer touchtone phone.
If you're using the speaker so any less <unk>. Please go ahead. So we're pressing the keys to enjoy your question. Please go slogan to.
Today's first question Coast show books to deal with Lake Street Capital markets. Please go ahead.
Good morning, guys and congratulations I'm thinking.
There's a good possibility that you're going up or did they didn't the Lake Street virtual topic December two but well we might have to talk about that offline.
We can make that happen.
Right. So let's see I was curious obviously that goal <unk> go home and beauty segment related to the coal but.
You probably in your press release.
Like we do sustain.
How much Oh why didn't.
They.
I'm sort of Oh, we probably could you should go beyond me can you help laid that out a little bit so we get.
Got it get a better understanding of that.
Yeah, I'll take that one.
<unk> well indeed.
In the press release, it's about three to 4 million <unk> all year. So he had a little bit less than that about two and a half millions or a cobot related impacts for the earth or the first half.
And then failures that are three or 4 million <unk> as part of a range.
Great and Mr. Barry did you say or is there any sort of split in that or related to red dog, which may be said he thought the but a big which would remain strong for a couple more quarters <unk> <unk> <unk> the bulk well.
One did even though you into Poland guidance really the well below the low you might see some incremental equipment sales here bleak, you and or Q is well.
Yeah, there there could be some big orders for or a for sale, but Batman what we have thrived driving that the middle of the rain that target as Michael.
Gary Okay, good something.
Yeah.
Yep, Great and then can you just talk a little bit about the kids to build without <unk> Blue belt <unk> students superbly well above the club that.
From the market from some of your competitors what is your outlook for the cancer boost going forward do you think you could give me to grow that was going coal.
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Yes, so I think that you still have some growth opportunity is just by winning new business plus additional new therapies that.
Physicians are using our pumps for so I think that you'll see continued growth I don't think we're going to sustain 20% growth all called in the future, but there's there will be growth for years that kind of another though.
Normal people get diagnosed and a the baby boomers get a little bit older that he will drive some organic growth on its own.
Greg Greg and are you seeing I mean, it historically the CAD 2 billion says.
Somewhat concentrated in particular.
Cancer types are you seeing a broadening of the use of continuous infusion.
In all those types of cancer always at all so the growth in your India, who store good core market.
Yeah, So we need the absolute we've seen a change over the last I do years, probably so if you go back probably either 10 about 95% of or patients were colorectal patients.
That number drops to about two thirds. So there's definitely changed and that's just no new indications resisting gross new drugs and new protocols.
Kind of all that up and just change the mix.
Great.
And then maybe he can you talk a little bit above what do you feel the negative growth should be but that's an area that you Bob the builder has tremendous potential understand them globally, the disruption related be cold <unk> talk little bit about what respond to see when the market place then.
How you may be involved in the backlog was one of them into 21, beginning to be probably looks good business for you.
Sure. So one thing we see though is that it's a challenging.
Service to talk a little with customers over the phone or even go to meetings in doing so.
So for sure we need the access to kind of proposed board well, we've definitely seen kind of demand for both the cardinal device in a higher level of service in the marketplace and that's really where we feel you know by combining the two companies and lead to offer a European demand out there is some low hanging fruit that we should be able to get you. We ended this year next year.
As we grow that business, but we certainly think it's gonna be a growth driver you know.
21, 20 jewel beyond for sure.
Great and then just one last one then I appreciate all the pillar Oh My sense do you believe there's significant operating leverage you don't particularly.
And they get a breakthrough that there's really no need to add a lot of vintage drug Bluetooth to God that did this can you just help us to be sure we understand that they they're making how you see it going forward in.
And impacting the property in the business.
Sure. So that's what that's the whole basis in the platforms is that we already have the infrastructure built especially on the idea outside so we already have a revenue cycle team in place we already have a clinically team.
Biomet Dean logistics.
So to add some more patients and add some more devices to those teams you don't have to go and higher only team you can just supplement what you already have listened to new individuals and even on the sales side.
You know we can leverage between you already have in place they already understand the service. They understand what you know the level do we expect golden divide whether they fell into oncology or negative pressure really doesn't matter just the different customer. So we can leverage.
The staff that we already have in place in a larger players.
Great that's very well congratulations on.
Those gas and I'm looking forward the second half.
Thanks.
Oh, that's supposed to do it comes from Douglas was where do you have some investors. Please go ahead.
Hey, good morning Congrats.
Core.
Let's see.
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So I couldn't agree.
In a year the little stronger in the first up in the that's been case was couple of years.
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Excluding the code that affects you think that we continue to do the case isn't just because it's a different though.
Cadence, we didnt grow that.
So we definitely saw some coal would bump in the second quarter.
Not all of that boycott in the back half of the are especially the one time so that we had.
You know pain, we believe we'll come back in the second half of the year and historically, that's a busier time for that that business anyway. That's a patients have already met their deductibles and a more likely to have elective surgeries. So they wait till the year.
And then you know the flu season typically gets in the fall a there's some debate kinda nationally on what will happen with the flu season as more people wearing masks will there will be lower than normal or will be just involved with with the goal that at all.
All kind of balance, though so you know we wont wont have all the onetime sales necessarily because.
We're not counting on that necessarily as Barry said, it's mostly the windows of the <unk>.
So it's a little bit covered a tougher target, but that should be a pretty strong second half of the year.
<unk> okay.
And I realize <unk>.
Yeah, but just.
Got it.
You know conservative given that.
Your next could we do.
Six one button on good though this quarter.
Two if I just you know I assume that improved a little bit through the year.
You're sort of on the upper end your guidance.
Yeah, I would say that the extra over to work closer to a little below six.
Okay. So that could affect was entirely in this quarter I guess your skin.
Hey, guys there wasn't any.
Yeah the code.
Okay.
Then on.
Let's see.
So I didn't see.
Sort of in general the next.
It's early days, but.
He's saying thrombosis being something that could follow native.
A wound care.
We did you work with Cardinal also on the initiative or is it just through the soon.
Its possible they they have a you know I think there's a market leader in the sequential progression.
So that's one of the partners out there.
For sure, it's it's a fairly fragmented market, especially nerve.
The researchers centers are cardinal really thrown in the off the market the acute care side.
So it just depends on which which Murphy want to go into but that's certainly an option.
It is there anything that you could say at this point about the partnership with them in terms of.
I was going or.
Maybe you are more colors that I would go there.
Yeah. So so we didn't work with those as a lot even though you know negative pressure suppressed a little bit to the go live.
But I will say that they've been a tremendous partner from top to bottom everything from on the sale side and partnering with you know working in their game a even on the operation side.
We're going to logistics and kind of fine tuning the system between the two companies.
So we couldn't have asked for better partner a silver.
Okay.
They're kinda that an accounting question, but.
In terms of the cap that.
You know.
Previous to your sort of re segmenting your wording used to do that.
Capex included.
It wasn't really a true capex number because it had an operating element and that there was the sell through.
You know the equipment.
That's true is that part of it [laughter] Capex number where that's just sort of sit or.
We've invested in for multi year use.
Yeah that actually is true and where the Hugh and this quarter. If you look at the castle things you can see that within our investment that has a bit in that again.
Proceeds from sales of them at that sad, but doesn't hit the castle until they actually get paid so you'll see that pick up as we go through the year to pay for some of the Las Vegas.
And that and that's when they would do well we have product out of our rental fleet. So I haven't done.
That's the that's the cashing disposal.
And Doug <unk>.
But it really hasn't changed it's still that it's still the case that some of that Capex is really more transactional.
That's right Oh anything has changed is more of this quarter, but again the that delay to the timing actual cash collection.
I mean it is it is it possible to breed go sort of.
Rough numbers, how much of that Capex is.
Long term in nature, how does that is more transactional.
I would say that significant piece is there more transactional right.
Okay. Okay. Okay.
Congrats again.
Thanks.
And ladies and gentlemen, I was a reminder.
Yes. Good question. Please press Star then one.
That's western culture or more work with its capital. Please go ahead.
Hey, guys fantastic results congratulations on that your family well.
And.
One thing I want to local quite good and you'll.
Series businesses in the last.
The conference call, a global translate down as Aaron rocket.
And I thought that was funny so.
I thought about calling into that name today, but all although my actual name and logo.
On a serious no.
In may when we talked I said it look like.
You guys could do 95 million in revenue and 22 million adjusted EBITDA and you guys said that was <unk>.
Hi, and now in August stats on the low side of your guide. So I'm just wondering you know what changed.
We no in August it they did see these numbers now.
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Yeah and by the way I saw the the transcript and definitely good level. They so aaron's [laughter].
Is it imagine they booked or my name pretty pretty often do yeah.
And your question, Yeah, if you're lucky right. So.
You know at the time, we believe that go with them back and obviously would be because it is.
So were turned out to that opportunity was bigger than not and it will also lasted longer than we really thought or <unk> to be honest hope for a society. So that's really what drove the change between you know thing he would be I don't think we'll get 95 them at the middle of room.
I would go and add to that that could he managed the bounced back a little quicker than we thought as well.
Sure good and I'm glad you know, obviously, a bad situation for the country, but I'm glad that you're able to take advantage to help out in those situations and obviously, what you're saying they want to three to 4 million in the adjusted EBITDA due to cope with you know me make sense for me how to answer that question I guess.
The deal down a little bit more on that you know this pandemic is going on a longer than we hope that evening I would say you know broader than we hoped and so now we're starting to see.
Starting to go to some of the smaller cities and towns I know I talk to a health care provider in the town, it's probably I don't know about 40 or 50.
Sitting in the U.S. and not huge and they told me yesterday that.
The I see it was like a war zone, so I guess it as Cobra they've gotten through these smaller cities and towns where do you guys see and now with data. It is there's still opportunity or is that opportunity kind of slowed down a little bit as it moves out of those bigger markets. You already know were involved in like New York in Boston.
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Yes, I didn't get opportunity in smaller economy still there you know if I view, the phone awfully cold or getting <unk>.
Just obviously the smaller scale right a big problem he or she is going to my question My favorite other smaller hospitals. So.
The other day is still there there were some some good sized one good good sized one time sales and that's what drove the three or 4 million in adjusted EBITDA.
We may not be in future years, that's a macy's in the back up there from the from the more you know wall smaller huh.
On the negative pressure wound therapy, and your relationship with Cardinal everything sounds good there and I. Appreciate you know given that some context, but it's clear.
<unk>.
So it makes sense without your.
The ability to get into the hospitals and so I'm, assuming then in your guidance, even though you mentioned maybe pick up a little bit low hanging fruit you know I'm assuming number that's built into your guidance is that is at an accurate way to think about.
It's pretty small.
It's something that <unk>.
Yeah.
Okay.
Final question then stop.
Yes times about an idea side being on a different services. Besides the pain oncology now.
Outside the opportunity here post cogan negative pressure wound therapy.
What timeframe are you looking out right now to be adding another service you just in general how should we be thinking about that over the next 612 months.
Yes, I get asked me in January <unk>, we would have a new therapies in 2020 with everything going on closing the team really focused on you know the health and safety working still getting devices to patients who need it.
That's been pushed back a little bit not just get practically it's tougher to get done, but it's going to pretty much before we'll have a new therapy.
And you know the whole doesn't really move through consistent basis, when they make sense. When we think we can execute on them and read some revenue growth.
But I wouldn't I wouldn't necessarily expected this year, it's impossible, but it's more likely early next year.
Yeah.
Yeah, I want to tight too much of this but I mean, you said for sure.
2021, so that sounds like.
Perhaps you've got some.
Serious prospects, maybe in some talks with People's that that's good to see.
I didn't answer that.
Okay. Thank you guys I appreciate it Stacy.
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Ladies and gentlemen. This includes the question answer session <unk> broker was originally Oreo for any closing remarks.
Banking on do you happen to be higher than just the gene I'd like to thank you all for the continued support and for joining US today and look forward to talking with you again, we report our 21 third quarter results who'd be Dave. Thank you have agreed to.
Thank you Sir This concludes todays conference call will take you overcome today's presentation. You may now disconnect your lines, rather wonderful day.