Q1 2021 InfuSystem Holdings Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to your Infuse system Holdings, Inc. Reports first quarter fiscal year 2021 financial results all lines have been placed in a listen only mode and the floor will be open for your questions and comments following the presentation.
As a reminder, today's call is being recorded.
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Would you detailed under risk factors in documents filed by the company with the Securities and Exchange Commission, including the annual report on form 10-K for the year end of December 31st 2020.
Forward looking statements speak only as of the date. The statements were made the company can give no assurance of such forward looking statements will prove to be correct. If your system does not undertake and specifically disclaims any obligation to update any forward looking statements whether as a as a result of new information future events or otherwise now I would like.
Turn the call of the Rich Diorio, Chief Executive officer of infused system rich.
Thank you and good morning, everyone and welcome to our first quarter of 2021 earnings call.
Thank you all for taking the time to join US This morning, and I Hope you and your families are staying safe.
And for the system is off to a solid start 2021 as our business continued to build momentum with strong financial performance of the first quarter are strong performance and the rising demand for our offerings as a direct result of our teams commitment to provide the highest levels of of service to ensure our medical devices were available to our patients for uninterrupted and more convenient treatments.
I want to thank the entire <unk> system team for the hard work and dedication and delivering another strong quarter.
We will review our financial results for the first quarter provide an update on a business for the balance of 2021.
And discuss our plans for 2021 guidance and the outlook for 2022 and beyond.
For the first quarter of 2021, we delivered net revenue of 25 $5 million $24 $5 million, an increase of 14% over 2020, adjusted EBITDA of $6 $2 million, an increase of 51% from the prior year.
And operating cash flow continue to grow at $2.7 million, an increase of 376% over 2020.
We also put in place of $75 million credit facility and expanded are the biomedical services with the acquisitions of filament and it'll be healthcare transactions I will touch on more later.
R Ics platforms grown 13% over the last year with a solid gross margin of $62 nine per cent driven primarily by the oncology business, which had one of its best operating quarters ever. This is despite the typical seasonality we experienced in the first quarter hour oncology team did an outstanding job of providing more patient treatments and adding new accounts.
Increased our market share.
Pain management perform better than are already aggressive plan for the quarter are painting or pain team did a great job and treated of record number of patients due to both of the big increase of new customers, an elective surgeries largely coming back on line given the progress we are making of pain. We continue to expect the double or pain revenue in 2021.
With the momentum will be health care Terry.
Thanks, Rich a warm welcome to everyone on the call today to start I am more than happy to discuss the great quarter. We saw in our oncology platform as rich pointed out we had our second best quarter ever not only are we seeing of post COVID-19 returned to normal treatment numbers in oncology, we continue to make significant workflow improvements.
Our customer service and revenue cycle teams are stronger than ever they are delivering continuous improvements and managing paperwork both of the customer level and within our own back end systems. We are submitting bills processing claims and getting paid faster than at any other time in the past.
We have completed the acquisition of Ob healthcare and are thrilled to have their team on board.
Then of Wonderful addition, and a perfect fit into our team and culture from an operations standpoint, I'm extremely pleased with how smooth the integration expense.
From the reporting structures of the teams and how will they of merge together to the lightning speed in which the Ob health care team has learned and adapted many of our system.
Just like occurred following the filament acquisition in February we saw immediate opportunities by combining our capabilities with our scale and the nationwide footprint.
We are excited with the synergies created by these two new additions with significantly expand our addressable markets and puts the company in a position of strength to aggressively grow MP systems market share in the acute care.
With that I will turn it over to Barry to go through our financials.
Thank you Carrie.
In our net debt, which was 29.7 million at the end of the quarter just for.
The increase a ratio of funding that day to adjusted EBITDA as of March 31st 2021 decreased to 1.04 times down from 111 times at December 31 2020.
Total available liquidity at the end of the quarter.
Which totaled 45 million more than doubled since the end of the fourth quarter, mainly due to the refinancing of our bank debt on February 5th and was higher than the actual outstanding debt, leaving ample resources to fund or continued growth.
With that I'll turn it back over to rich.
Thanks for <unk>.
For your system is building a strong foundation for long term success and facilitating industry, leading in home health care services. The services provided by our teams enable the continuity of care for patients between the hospitals and home based treatments.
As a result, we expect 2021 will be another record year for an fee system with strong double digit growth in net revenue and adjusted EBITDA driven by growth and growth in both of our I T S and D. M V platforms.
Our focus for the remainder of 2021 will be on one growing the the three therapy therapies currently on our Ics platform oncology pain management to negative pressure wound therapy.
Two launching of new for therapy on our Ips platform of the coming months for.
Three leveraging our recent acquisitions of filament and Obi healthcare and biomedical services to expand our market share an acute care and for identifying new strategic partnerships in small tuck in acquisitions that will enhance and expand our current capabilities and offerings.
At this time I am ready for reaffirming our annual full year of 2021 guidance net revenues to be within the range of of 107% of $110 million adjusted EBITDA to be within the range of $29 million for $30 million and operating cash flow to be within the range of $21 million for $23 million.
We're also forecasting adjusted EBITDA margin to be 27%. Additionally.
Additionally, we are projecting net revenues and our pain management of negative pressure businesses to be in the range of $8 million to $10 million combined in 2021 with us exiting the year on the $12 million run right.
Looking ahead, we're setting of new company goal of 30% adjusted EBITDA margins.
We're not setting of timeframe on when this will happen, but we do believe it's an achievable goal in the very near future.
Given the strength of our business activity plan for the second half of 2021, we plan on revisiting our full year 2021 guidance and anticipate increasing our guidance next quarter. When we have more visibility on the positive developments.
I am very excited for the future of of <unk> system is the companies entering the next phase of its corporate development and we have the right team in place to consistently deliver 15% year over year growth with strong gross margins. We have identified and are evaluating of number of excellent growth opportunities that we believe have the potential of the drive significant top <unk>.
Bottomline growth.
I am extremely confident that the team will continue to successfully execute our growth plans by adding new therapies and services and developing new strategic partnerships.
And for the system is highly committed and providing our customers with industry, leading service and improving patient outcomes.
And with that we're happy to answer any questions.
Thank you for the floor is now open for questions. If you do have the question. Please press Star then one of the on your telephone keypad to join the queue, if you're using a speaker phone. Please pick up your handset to provide the best sound quality again, the ladies and gentlemen, if you do have a question or comment. Please press Star then one on your telephone keypad at this time.
And first we go to Alex Novak with Craig Hallum. Please go ahead Sir.
The morning. This is the truck Mccarthy jumping on for Alex.
<unk> on pain management from you about some more color on the status of the pain business, how close our hospital clinics to being fully reopen and if you could remind us when you could see a potential C. P T code and for.
Just to clarify as well on the more than double commentary.
Is this the change at all from your previous double digit millions outlook or am I just over analyzing that.
Yes, good morning, Trent so as.
As far as how close the elective surgeries or to be being kind of of 100 per cent back online.
They are relatively close to that number I think what's happening is the hospitals and ambulatory surgery centers pretty much open at this point.
They understand how to deal with COVID-19 and resources and those sorts of things I think there's still a little bit there are a little bit of numbers wise, but I think that's more driven by patients that are just maybe don't want to go back in yet and they're a little hesitant because of COVID-19 and catching it if they walk into the hospital, but overall, where I don't know if I could put a number on it but when the when it dropped off of <unk>.
Here at this time, we were at 20% of the original numbers were much closer to of 100 per cent and with the new customers of the team is added.
We're growing every every week it seems like our patient census, so overall, we're we're in really good shape and I think of everything goes according to plan with the vaccine and.
Certain states opening back up again, I think it will be just a matter of of a couple of months before we fully back online.
As far as the CPT code.
We're dealing with the government and lobbying.
We're probably if I the guests 18 months away or so from getting of CPT go for the dogs to get paid I think it's a no brainer when you look at the.
The opioid abuse of this country and.
With the government rather pay a few hundred dollars for of pump and avoid the use of of narcotics or or write a prescription and have to treat the patient that gets addicted. So the financial certainly makes sense.
It's just kind of good common sense of this this should be covered by CMS. So I think it's just a matter of time before we get that code.
And then as far as doubling the business.
It hasn't changed we think will be in double digit millions by the end of 2022 and the good news is we're we're actually a little bit ahead of pace of this year. So that's all good news and like I mentioned were not fully open yet and when we do I think it's going to be really good news for the pain business, but they they are really hitting their stride now.
And I have of 100 per cent faith that they're gonna hit the the number of this year and even the role in the next year and that way.
Got it and the follow up is there anything you can tell us for the for therapy, what kind of punishment sort of exploring here and I know you mentioned the fifth therapy on the previous call.
Hey guess what.
What about the fifth therapy potential the other medical upon the still reaching out to you to make deals happen.
Yeah. So there there are a lot of manufacturers coming to us the partner.
It's just a matter of of us picking the right one of the right time.
As far as the for therapy.
We still believe it will happen by the by the Middle of this year. So of over the next couple of months, we'll have an announcement.
We're at the point now, where we're just kind of going through our credit Asian, and finalizing agreements, but really for competitive reasons I don't want to show our hand yet.
What's what's coming out but it'll be in the next couple of months, you'll see something.
It for therapy.
We really don't have a timeframe on.
It just depends on the opportunity and the partner and how quick we can get up and running.
Could it happen this year it could but by the end of the next year I would expect something new but it all depends on market conditions and how much we're growing our <unk> services business, how much of of growing in the therapy.
How much pain of negative pressure take off and to me, it's more important to execute on what we're doing today and what we're about to come out with than it is the kind of the launch the fifth therapy just to have a fifth one.
Yeah.
Okay. That's helpful and then the last one for me.
In college, he has been in a steady growth consistently now.
Is there anything you can do to Reaccelerate penetration hairs. All your focus now on pain in the wound and now the for therapy coming on a lot of.
And our core oncology of business. There is no way to kind of force growth there.
If a new drug comes out or new therapy for a different type of cancer. That's that's given via.
An ambulatory infusion pump that will obviously help but aside from that it's more just kind of the day to day sales guys going out and doing their job and growing at mid to high single digits for the next for the foreseeable future.
But there's no way to really kind of force more growth there.
Okay. Thanks for the questions.
Thank you for and we go.
Okay. This next week at the at the line of Frank attacking in with like Street. Please go ahead.
Hey, Thanks for taking my question and congrats for the corner.
First one for me the guidance heard of your comments about given the strength in the first quarter expectations of potentially increasing guidance with the next quarter, although I applaud the of conservatism completely I just wanted to ask directly what is keeping you a little bit more conservative.
At the beginning of portion of this year as many of your business lines of trending well it feels to me ahead of expectations.
Yeah, I think it's just that that it's early in the air Frank.
We're only five months in.
I wouldn't want to raise guidance today, and then readjusted in in a few months if we have some more good news.
So I think it's just the timing feels right to do it when we all talk next time, which will probably be early August.
We're working on our models now there's a lot of good opportunities out there and we don't want to raise it now and you have to raise it again, so I'd rather just give you guys better information when we have more visibility in a couple of months.
Okay, Perfect and then secondly on the wound business just wanted to ask a little bit more about that heard your comments about the <unk>.
Kind of landscape changing a little bit and potential to accelerate the growth to your market share goals can you just take us a little bit deeper into how you feel that's the of competitive landscape is going to change how that could ramp over the end of this year at the beginning of the next.
Yeah, so in wound care and specifically negative pressure, it's really of high touch service business very similar to our oncology business. It's not something you can put on a piece of paper in the catalog and sell it.
It's the conversation it's consulted of selling it takes a lot of time.
And we believe that the service levels of one of our competitors is about two and probably already is dropping off considerably.
So what we've decided is.
Only and probably a handful of times in any companies life do you see an opportunity like this where.
Someone else's decision fits right into your strength right in the wheelhouse and that's exactly what's happening now. The fact that we are as good as we are and probably better than anyone on the planet from the service standpoint, especially in oncology and we can take that and mirror in the negative pressure and and one of our competitors has decided to pull back their own sir.
Of us levels.
It's a perfect marriage of of the two things.
Things converging and an opportunity for us and we'd be crazy not the to try to capitalize on it so we're pushing and more chips.
Not not just more of of probably faster than we thought we would of just because the opportunities in front of us and we'd be crazy not to take it so does that mean that the.
The 10% market share it gets bigger the opportunities bigger maybe.
Time will tell but it's certainly accelerates how fast we get there from.
From the three to five years, I think I have talked about in the past.
Got it that sounds great and then the last one for me just talking to your newer longer range EBITDA 30 per cent goal can you explain to us the ball down what are the most important pieces to get into that margin and then is there an expectation of the recent acquisitions to help to get to that more specifically.
Just any update of thoughts around how you get that 40 per cent number.
Doesn't Barry that's really the combination of things as as we grow and increase of our volumes will be on the language are fixed costs more and more and secondly, as we have higher volumes will be able to be more productive.
Of those higher value of use different working to open things. So it will be of leverage the estimate of the line as we grow and this is asking the the main driver.
Perfect. Thanks for taking my questions.
That's right.
Should we go to the the line of Jim Sidoli with Sidoti and company. Please go ahead.
Hi, good morning, going to hear you're doing well a couple of questions first as you enter new markets, it's pretty clear how you can leverage reimbursement infrastructure your service infrastructure, but how about the sales team two center of new markets mean, you have to go out in the higher additional salespeople.
Or can use the approach you have and just some new doctors.
But I think it's it's probably both.
It depends on the partnership so if we're partnering with somebody that has a specialty sales team.
We might only have to add a couple of people if it's something that's already in the pain space at this point the negative pressure space or oncology. It's just the new therapy in those markets. Then we'll just leverage our existing team, there's really no need to add any but the other than maybe a specialist or two.
So it can be kind of any of the above it just depends on the opportunity in the market and that's really part of the decision making process too right. If we have to go and hire 50 people to even break into of market, that's probably less attractive than if we can get into oncology and leverage our existing 30 plus reps.
Just depend on the circumstance.
So should we assume that whatever the market you entered next.
Thank you you are pretty.
You have the the right number of people or at least the close to the right number of people to make that immediately.
Immediately profitable.
That's probably a good assumption.
Okay Alright.
Alright, and then the second for me if we do hit inflation. The end of the year are you do you have the pricing power of that you think you'd be able to the past the car song.
It depends on which side of the business. So on the side when it's reimbursement from the insurers. It's tough it's tough to go get more money from them right the rate of the rates.
On the <unk> side there's.
Potential if we need to pass it through we can.
It depends on how sensitive the the customer as of those sorts of things, but we have that potential in the D. M V side non necessarily in the Its's.
Alright, thank you.
Yeah, Thanks for Ya.
Next we go to the line of James.
The girl Northland Securities. Please go ahead.
Hey, guys can you hear me.
Yeah the morning, Jim.
Good morning, Uhm, a nice quarter to start the year of it.
First question for me is you know you're talking about the strength of the oncology could you could you go back and talk about since you're such a player in this business, but but.
Well I was that business sense of strong compared to your historical numbers.
So that business has been strong for the last couple of years.
But the sales team has done an exceptional job there's some new leadership there in the last couple of years of opening up some accounts that we didn't have there was some larger facilities that we've recently won whether it was the end of last year early this year.
And I also think the sales reps with Kerry's team and operations the revenue cycle teams and and the customer service teams or just doing a much better job.
Of processing paperwork faster better more efficiently getting paid more quickly those sorts of things of that all contributes to the revenue so kind of across the board. There's just been significant improvement in that team in the last 612 months.
Okay, Great and my second question, we're really quickly on those two acquisitions and then just.
Can you expand or comment any any more of the two acquisitions, maybe as it relates to the growth rates for their margin position or how they fit with within your company as a whole.
Yeah, So I'll I'll touch on Halloween. So filament brought some expertise that we didn't have they worked on device, where historically an infusion from company and that's that's really what we're able to repair and maintain.
Fulfillment team.
Is phenomenal at that piece, but they also work on other devices. So that coupled with all the health will be health is the skill set of understanding how to do onsite repair. So they go into the hospital and do it on site as opposed to having the customer of to ship something or ship thousands of devices to us.
So now you have filament, who can who gives us the capability to fix the more devices that are in the hospital and it will be healthy healthcare who.
Gives us access into those hospitals on site, that's a perfect combination and I think Harry mentioned, if you take those two skill sets and added to our footprint on the on a national basis in the thousands of hospitals that we already have as customers, we know of more products and services to sell under the existing customers and that's why I'm pretty bullish on the day.
In the services business.
Growing it of considerable right over the next few years of being a real player in our growth.
Over the next three to five years.
On the margin prospects of their accretive slightly to the day in the business, which is a little bit lower than our average gross margin, but from of EBITDA perspective. They don't have a lot of SG&A requirements. So they should be very helpful for our bottom line.
None of the nice thing about both of them as they don't require a lot of capital as the girl those businesses. So it helps the cash flow stream that doesn't require a lot of upfront investment.
Alright, fantastic, Thanks, guys I'll jump back into the thanks for taking my call. Thanks.
Thanks James.
Again, the ladies and gentlemen, if you do have a question or a comment. Please press. The start then one to signal at this time and now we go to the line of Douglas DSW investments. Please go ahead.
Hi, good morning.
Quick question on Capex Uhm.
Do you have a sense of of Capex will be this year and could you break it out between maintenance capital.
For your existing inventory and the capital for new in the new growth initiatives.
We haven't changed our outlook ethically style 12 to 15 and when we gave our guidance.
And I would suspect that we're still in that four to 5 million range in terms of maintenance for and that's in that number.
Okay, and then on the on the D M a.
Alright, so as I understand what you're saying is that.
Uhm service from repair, which historically.
I don't think it was a big part of your business is becoming unimportant part of that.
Segment of and I was curious if you're good.
Talk a little bit about that business in terms of how big of could become as of per cent of that segment sales.
And my.
For my census, the you know the repair business would have.
The higher margins over time I think.
You indicated that but if you could just sort of types of that a little more.
Yeah. So that business definitely is pretty high margins is very mentioned, there's almost no capital associated with it I think that.
Our focus there is an organization with regards to biomed is for the most part been in the weird looking and repairing our own devices of maintaining our fleet of of 100000 plus pumps.
And the team does the phenomenal job of that.
We generate a few million dollars an outside services over the over the years, but that was more opportunistic than anything else. What we see in the market is the need for another player to come in and be able to do onsite repair of multiple devices right. We don't want to be stuck in the corner with just in the fusion pumps Thats why filament.
It makes so much sense for us so going out into that market and we already have like I said thousands of customers that are hospital based on the acute care setting we already have the contacts there to be able to sell another service and makes sense of now we of the capabilities to serve as onsite with with new products. So the potential.
The <unk> services potential over the next three to five years could certainly match in new Ikea therapy.
So going from almost.
A couple million dollars a year in revenue to tens of millions of dollars in the future.
We can see the path of the.
Mhm and.
And do you think the on site portion would ultimately the bigger than the the off site.
Within the day on the line.
Yeah, it's tough it's tough to say I mean.
We have a lot of capabilities in the house to have devices shipped to us from a hospital some of the bigger ones. They don't want their hospitals. They don't want the the devices to leave their setting.
So we will really have the capability of do both of which is nice it gives us optionality based on what the customer wants.
Mhm.
And who who do you compete within that I mean, who will you be competing within that space.
There's a lot of players the.
The biggest one is probably uhf's, which is now agility.
Rebranded themselves.
They're the dominant player.
But there's there's a lot of people in the 5000 million dollar range that will be going in but I think with our relationships and our ability to repair devices and how good of our team is I think we can really take some market share.
Okay and last question is is it of.
A fragment of market, where you can continue is you know, there's there's sort of of roll-up aspect of this Margaret.
The certainly that peace.
There's multiple fill of meds and it will be held for out there.
They're not all going to be good fits.
First and foremost we want we want to make sure of the team fits our culture, but their work has to has to meet our standards and not everybody does we were familiar with both of these guys of filament it'll be so it made it a lot easier to make those decisions, but we're familiar with a lot of people in the market. So we will be very picky, but yeah. There's certainly other tuck in that we can roll in for.
For the time.
Okay, alright, thanks for the next quarter.
Thanks.
This time, we have no further questions, we returned to Mister diorio for closing remarks.
Thanks for Linda I want to thank everyone for participating on today's call I Hope everyone has a good day and I look forward to talking with you again when <unk>. When we report our second quarter of 2021 of the results. Please stay safe and thank you.
Thank you for this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time have a great day.
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