Q1 2022 InfuSystem Holdings Inc Earnings Call
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Ladies and gentlemen, good day and thank you all for joining this interview systems Holdings Q1 fiscal year 2022 financial results Conference call.
As a reminder, all participants are in a listen only mode. But later you will have the opportunity to ask questions. During our question and answer session. Also please be aware today's session is being recorded to get US started with opening remarks and introductions I am pleased to turn the floor over to managing partner with Lytham partners, Mr. Joe Dorm a welcome Sir.
Sure.
Thank you, Jeff and good morning, and thank you for joining us today to review the financial results of NP System Holdings, Inc. For the first quarter of 2022 ended March 31 2022.
With us today on the call are rich Dilorio, Chief Executive Officer, Barry Steele, Chief Financial Officer, and Kerry with Champs, President and Chief operating Officer.
After the conclusion of today's prepared remarks, we will open the call for questions. If anyone participating on today's call does not have a full text copy of the press release, you can retrieve it from the Companys website ecosystem dot com or numerous other financial web sites.
Before we begin with prepared remarks, I would like to remind everyone. Certain statements made by the management team of <unk> system. During this conference call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 95.
Welcome to the statements of historical fact this conference call may contain forward looking statements that involve risks and uncertainties. Some of which are 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 ended December 31 2021.
Forward looking statements speak only as of the date. The statements were made with company can give no assurance that such forward looking statements will prove to be correct.
Systems does not undertake and specifically disclaims any obligation to update any forward looking statements, whether as a result of new information future events or otherwise.
Now I'd like to turn call over to rich Diiorio, Chief Executive Officer of <unk> system Rich.
Thanks, Joe and good morning, everyone and welcome to our first quarter 2022 earnings call. Thank you all for taking the time to join US. This morning, I am pleased to be here today reporting on the strong start to the year revenue for the first quarter was on plan, even with some rather frustrating delays to important new businesses that we will discuss in a moment.
Top line grew by 9% over the prior year quarter led by our <unk> business, which grew revenue by 18% in the quarter, our operating cash flow was especially notable increasing by 54% compared to the prior year proving once again, the excellent cash flow characteristics of our business.
Our business is strong and we are steadily improving the companys prospects and ability to deliver long term sustainable growth.
We are very well positioned to participate in several macro trends, including the growing movement toward maximizing opportunities to shift treatment from clinics and hospitals to the patient's home.
That trend drives demand for last mile solutions offered by our Ats segment another.
Another favorable trend as the increase increasing demand for expert outsource services. This trend is currently very very relevant to our <unk> business unit.
Coming into this call the biggest piece of news for the company as the recently announced deal involving our Dms segment as reported last week in fee system has signed a three year Master service agreement with GE healthcare.
Finally signed this long awaited contract we have begun to onboard the work that we've been preparing to execute on since the second half of last year.
Before going into details of the agreement and the potential it unlocks. It is important to note that we've been working towards this opportunity since 2020.
That year, we conducted an internal review that reveal the high return characteristics of our Biomed services offering the high return as the result of two things.
First NP systems, Concierge model, which specifically pursues.
Margin opportunities, where the customers, especially concerned about quality and second the low capital investment required the bench and tools used by our technicians are relatively inexpensive and they are only needed to be required once.
At that time, an <unk> system at a highly certified and very well regarded biomed team, but the vast majority of the work. They did was on our own fleet of devices the strategic.
Decision to expand upon that existing small base of business led in early 2021 to the acquisition of two biomed services companies.
One extended our capabilities beyond infusion pumps and the other one gave us significantly increased access in our hospitals, most especially because the company had an existing relationship with GE healthcare.
Most immediately after the capabilities of the <unk> companies were combined with a <unk> system, the greater resources national reach and proven track record. We began seeing that we had created something with truly exciting potential.
One more piece of background information historically, our Dms segment is conducted its business in the home health care market. This suited us well when we were smaller but as we grew larger and more capable we were very aware of our lack of access to the acute care market and the business opportunities relating to literally millions of medical devices inside of hospitals.
We bought one of the biomet companies in 2021, hoping that it will open doors with some hospital business and it did.
As part of the GE healthcare MSA will be providing our white glove Biomed service and 200 medical facilities, including 800 hospital systems in the U S and Canada, GE healthcare's preferred customers infusion pump fleet consist of more than 300000 pumps and we estimate revenue under the contract will ramp to approximately 10 million to $12 million in annual <unk>.
Revenue.
Our Biomed services will include annual preventative maintenance and repairs conducted onsite at the hospital or off site at one of our seven service centers.
This is of course, an excellent way to get started on our dual strategy of extent of expanding our biomedical services business and expanding the reach of our Dms segment and into acute care.
Emphasized the word start having become a national partner to a tier one global health care equipment and service provider, we hope to see many more opportunities open up to US. This includes additional opportunities with GE healthcare other large medical device and services companies and with our hospital customers.
I've been saying for a while now that I believe our biomedical services business will likely be the first to catch and pass the revenue contribution of our oncology business and I believe that now more than ever.
Although the <unk> agreement took considerably longer than we anticipated to get across the finish line. We are very excited to have begun operating under the contract. This week and things are going great.
Turning to our integrated therapy services platform, we saw growth of 5% with solid gross margin of 64, 5%.
Our oncology business had a record quarter for patient treatments in the first quarter with this signaling a potential for a post COVID-19 returned to normal patient treatment levels.
While March was strong the early months of the quarter were impacted by <unk> with our pain business again being the most impacted.
But as omicron waned pain management in wound care gained traction and delivered 13% revenue growth for the first quarter. The pain team treated a record number of patients in March which is exciting as we head into the second quarter, we remain excited and very optimistic about the future prospects of these two therapies.
So our top line momentum is strong, particularly following the signing of the GE agreement as we begin to onboard a significant amount of new revenue questions are certain to turn next to the health of our bottom line.
Twice last year, we made strategic made a strategic decision to invest in building our business to capture and hopefully accelerate opportunities for long term sustainable growth.
Midyear, we added to our sales teams and pain in wound care and then towards the end of the year in anticipation of the GE business. We invested in building up our biomed services team to be ready to ramp our services as soon as the contract was signed.
As a result of these investments our cost structure is higher than our current adjusted EBITDA margins are lower than they would be without the investments in the growth this situation.
And we'll continue on to continue until the anticipated revenue begins to flow through as.
As discussed during our last earnings call, we expected that we would see incremental pain in wound care revenue, appearing before the end of last year, but that expectation was foiled by the appearance of omicron and delays related to the timing of some new business wins.
As discussed above our strong March month, and continuing momentum in our Ats segment together with even stronger momentum in the Dms segment, plus the GE contract all come together to support our expectation that revenues will increase over the next few quarters sufficient to offset the cost of the investments made last year.
Our return on our growth investments were delayed but they are still coming and now with the big contract signed we can talk about what we've been investing in Hawaii.
I firmly believe the strategic investments we made last year have made the company stronger and our future that much brighter.
I'm confident that this will be apparent to everyone in coming quarters.
In summary, we remain confident in the long term growth potential of the business and we see this confidence supported by the solid momentum in our <unk> platforms coming out of the first quarter of 'twenty two.
Led by our core oncology business displaying solid growth with our pain management in wound care therapies getting traction our Ats segment is doing exactly what it should be at.
At the same time, our Dms segment now let led by our <unk> service business is positioned for long teams long term sustainable growth beyond anything that could have been imagine for the segment just one year ago.
We are now working to leverage the new GE healthcare relationship in order to capitalize on an opportunity set that we believe is as big for <unk> and <unk> as any of the therapy is being pursued in our Ats segment.
This is an exciting time at <unk> system, and we are well positioned for multiple growth opportunities.
We strongly believe in our business model and as a result, we recently took the opportunity to purchase approximately $4 million of our common shares in the open market.
At these levels, we believe our stock represents a great investment and a good use of capital. Although our main priority is to utilize our capital to grow the business. We are prepared to be opportunistic when the prices right.
Looking forward, we are projecting our annual full year 2022 guidance for revenue growth to be within the range of 15% to 20% or approximately $118 million to a $123 million in net revenues.
And adjusted EBITDA to be within the range of $24 million to $27 million. We are forecasting adjusted EBITDA margin to be in the range of 20% to 22% for the year.
Our guidance for 2022 takes into account biomedical services revenue under the GFS GE MSA commencing in May and then ramping into next year. In addition, we have accounted for the possibility of scenarios outside of our control. For example, another COVID-19 surge that may affect pain or any new long term supply chain disruptions. Even if these were to occur we are comfortable that we.
We'll be within our range of $118 million to $123 million of top line revenue.
Now I would like to turn over the call to our CFO , Barry Steele, who will provide a review of our first quarter financial results.
Thank you rich and thank you everyone on the call for joining us today.
Im going to focus on three topics. The main drivers for the current quarter with all the details related to the net revenue and profitability outlook for the rest of the year, including assumptions for the new <unk> contract and a SaaS or our financial resource reserves.
First let me touch on our financial results for the first quarter, which was largely a repeat of the 2021 fourth quarter with one exception, which I'll mention in a minute.
Net revenues for the first quarter of 2022 totaled $26 8 million, representing a more than 9% increase from the prior year first quarter.
<unk> was a record and slightly ahead of head sequentially from the 2021 fourth quarter revenue, which was $26 5 million.
The main growth drivers included revenue from the acquisition, which rose to $1 million. During the 2022 first quarter increases in pain management and negative pressure wound therapy revenues and strong treatment volumes and patient collections and oncology.
The pain management net revenues grew despite headwinds caused by disruptions related to the <unk> of COVID-19 in January and February and then negative pressure wound therapy net revenue included two small equipment capital leases.
Preparations for the new large biomedical services agreement continued to create additional costs during the quarter totaling 800000 in both cost of sales and general and administrative expenses that slightly diminish our gross profit and adjusted EBITDA margins and increased our G&A expenses.
These expenses include both an increase in our workforce on the biomed team and expenses associated with the development of specialized business software, which will be used in the contract.
Three additional factors unfavorably impacted profit margins and they include the following.
First we had increased expenses totaling 400000 as compared to the prior year first quarter and as compared to the 2021 fourth quarter related to increased travel expenses industry conferences and other annual meetings, which are now being held in person for the first time since the outbreak of Covid.
We expect some of these expenses to moderate in the coming quarterly periods to the typical timing of annual marketing events being concentrated in the first quarter.
We incurred additional costs totaling $1 million related to the increased sales team and marketing efforts for negative pressure wound therapy, and pain management, which started during the second quarter of 2021.
A portion of this increase totaling 600000 was included in selling expense with the remaining amount included in G&A expenses. The amount was slightly higher than the 2021 fourth quarter, mainly due to the additional marketing expenses.
And finally.
The one exception I mentioned earlier that 2021 fourth quarter General and administrative expenses included a reversal of a portion of an accrual for the 2021 short term incentive bonus program, which was not repeated during the 2022 first quarter.
The total difference in expense between the two periods was $1 million.
Partially offsetting these were a decrease in our stock based compensation expense due to a reduction in estimated performance restricted stock valuation and lower intangible asset amortization expense, resulting from certain assets, becoming fully amortized during in prior to the current first quarter.
As a resolve these impact, particularly the added investments in our sales force and our investment in the Biomed teams. Our adjusted EBITDA was $4 1 million or 15, 5% of net revenue during the 2020 to first quarter.
This amount was $2 million lower than the fourth the first quarter of 2021, and $2 4 million lower sequentially from the 2021 fourth quarter.
Takeaway the added expenses and adjusted EBITDA would have been $1 $8 million higher and adjusted EBITDA margin would've been just over 22% of net revenues, which is much closer to a normal adjusted EBITDA margin, which we expect to see it in the coming quarters as we generate new revenue that will begin to absorb these expenses.
That is in the short term additional revenue will be highly accretive given the cost base is already in place.
That takes me to the subject of the outlook for the rest of the year.
Let me.
Now, let me share some details about the new biomedical services contract with GE healthcare, which is very important to the outlook for 2022 and beyond.
And this contract we will be providing repair and maintenance services, including annual preventative maintenance for what we estimate to be a majority of the infusion pumps for GE healthcare customers.
The work will be performed both locally and customer facilities and at our seven existing biomedical depots in the U S and Canada the.
These include a fixed annual mile for each pump under contract plus additional charges during the Onboarding phase for repairs required prior to contract start and on an ongoing basis and certain special repair situations.
In addition, we expect to generate additional revenue per sale some accessories.
Services under the contract we began earlier this week are expected to ramp over a 15 month period and are expected to generate between three and $4 5 million in revenue during 2022 and between 10 and $12 million in revenue annually at full run rate.
That could cause these amounts to vary include the volume of board on boarding phase repairs.
Timing of the ramp schedule the number of devices eventually coming on the contract and the amount of required accessories.
As rich mentioned, we are forecasting 2022 net revenue to be between 118, and 123 million, which represents an increase over net revenue during the prior year of 15% to 20% in.
In addition to the GE contract. Our 2022 revenue outlook includes several additional buy smaller biomedical service arrangements that are set to launch the second and third quarters and continued growth in all three <unk> therapies.
The growth for negative pressure wound therapy includes a handful of equipment leases, including at least one that is significant on a standalone basis.
That could impact where we fall within this range fairly wide range include the following.
The <unk> cadence.
Onboard timing for two large new oncology customers timing of the additional biomet opportunities.
Supply chain issues.
<unk> of a of the large negative pressure wound therapy leases.
Impacts from additional outbreaks of COVID-19 that can unfavorable impact our pain management business business or a reduction in rental revenue if god willing additional outbreaks do not occur.
We have Patrick each of these items into our 2020 forecast model in a way that each factor can be both a risk and an opportunity regardless of whether it's positive or negative items. For example variations in the ramp cadence for the GE contract could either be a benefit if we onboard devices quicker or unfavorable at that schedule of within our base assumption.
As a result of these increases in revenue we expect the adjusted EBITDA for 2022 to be within the range of $24 million to $27 million. Adjusted EBITDA margin is expected to be between 20, and 22% represent a significant recovery from a 15, 5% amount during this year's first quarter.
The improvement will mainly be driven through absorption of the higher spending rate of our sales and biomedical teams, which have been put in place in anticipation of revenue growth and additional leverage on our other current fixed costs.
We expect to exit the year with an adjusted EBITDA margin run rate close to a normal rate in the mid <unk> with additional accretion potential to be gained as the revenue continues to grow to the annual mop $10 million to $12 million into 2023.
Turning to a few points on our financial position and capital reserves, we continue to be positioned well defined net revenue growth with strong cash flow from operations backed by significant liquidity reserves available from our revolving line of credit and manageable leverage and debt service requirements.
Our liquidity position was relatively unchanged during the first quarter, despite having repurchased 310000 shares of our common stock.
Strong operating cash flow totaling $4 1 million essentially funded the stock.
<unk> repurchased which totaled $4 million, whereas borrowings up $2 million on our revolving line of credit cover $2 1 million in net capital expenditures.
Operating cash flow improved 54% over 2021, due largely to a reduction in the annual short term incentive plan payment.
Our net debt increased by $1 6 million to $34 5 million and our available liquidity totaled $39 8 million at the end of the quarter, which represented a decrease of $1 2 million.
The combination of the increase in our total debt and lower first quarter adjusted EBITDA caused our ratio of total debt to adjusted EBITDA for the last 12 months increased modestly to 157 times at the end of the quarter as compared to 137 times at the end of 2021 and fourth quarter.
Most of this increase is attributable to the 4 million stock repurchase repurchase without which we would pay down the revolver and close with a ratio of only 139 times.
Our debt primarily consists of borrowings on our revolving line of credit with no term payment requirement.
Almost four years remaining on its term and $20 million of which is protected from increase in increasing interest rates through an interest rate swap having the same tenor.
Notwithstanding the strong financial position our growth capital needs are expected to be lower as compared to historical growth periods. This is because the capital equipment investment requirements of our biomedical services business are relatively small compared to our Ics business.
And with that I'd like to turn it back over to Mr. D area. Thanks, Barry We are building the company into a leading healthcare service provider, helping people live longer and healthier lives with our last mile solutions and unique business offerings, enabling the continuity of care for patients with our two service platforms.
We're seeing clear progress as we start the year with solid performance in both platforms and I want to emphasize that we have relentless focus on executing our strategic growth plans driving operational excellence and building on our momentum for the balance of 2022 and beyond we are transforming the company for long term success with our patient first culture to improve patient outcomes that will create value for our <unk>.
<unk> shareholders.
And now with that we're happy to answer any questions.
Gentlemen, thank you and to our audience joining today, if you would like to ask a question over your phone at this time simply press star and one on your telephone keypad pressing star Manuel place your line into a Q and a friendly reminder, that if you are joining us today on a speaker phone. Please return to your handset prior to pressing star one to be certain that Youre <unk>.
Does reach our equipment once again, ladies and gentlemen that is star and one for questions. We will hear first from Alex Nowak at Craig Hallum capital.
Great. Good morning, everyone. I appreciate the launch of the 2022 guidance. There was a lot of detail there I got three to $4 5 billion inclusion for GE, but I guess I just wanted to kind of break out what are the growth assumptions for the Ips business growth assumptions for DMA Sands biomedical, but also include biomedical in there and.
Maybe just an update on where the pain in the wound businesses for Ips and what the run rate is and where that run rate is going to go this year.
Okay.
Good morning, Alex.
Good question so the growth.
For the year is going to come basically it's going to be split down the middle it's about half out of Etfs and half out of <unk>.
So on the <unk> side, it's going to be a little bit of kind of our core DIY business radar rentals and sales will grow.
Mid single digit number and then a lot of it will come out of the <unk> agreement to $3 million to $4 million or so this year. So that's going to be half. The other half is going to be out of Etfs, we know oncology doesn't grow a ton, but again mid single digits and then you add in the.
<unk>.
The pain in wound care I actually think pain is going to probably lp's wound care. This year, even with the first couple of months being effectively offline with omicron. They had such a good month in March that we're kind of seeing what this business can do without all the noise of Covid.
That being said, we don't know if another wave is going to hit us and take them offline, but we don't see that today, although we have accounted for it in our in our guidance. So.
So it's about half and half half <unk> half Etfs.
Yes, mainly being driven by wound care and pain.
And a little bit from oncology in dnb, driven quite a bit by the <unk> contract.
Understood. That's helpful and then the run rate for <unk>.
It was originally pegged for a $12 million to $15 million from last year.
The crowd, we came up short in that any any update to that number where we had through the end of the year I know they can run through the numbers in the model, but just curious what you are saying.
Yes.
I think by the end of the year.
Have the model in front of us, but I think by the end of the year. The combined run rate of that to those two is pushing almost $20 million in annual revenue.
The one thing that throw out there, though is that we do have these as I mentioned large.
Capital lease opportunities, which will that run rate will jump around a little bit based on the timing of those.
Okay understood and it sounds like the GE agreement did more of a little bit at the end here to become a master service agreement.
<unk> to add some additional products on there so maybe some background what could be added.
Where that number could go through from the <unk>.
Annual revenue potential and then the other biomedical contracts that you have under works.
How large are those are any big ones, such as GE like contract in there.
Sure So you're right the MSA basically gives us preferred vendor status with GE.
So the current statement of work is for this contract that we've talked about that we were waiting for there are other there are other opportunities not really in the infusion pump space, but more on other devices. So if you remember the two the two acquisitions right. One was Ob health It gave us the entre into GE in the hospitals.
And there was filament, which gives us entre into the other devices. So that's really the growth capability.
Under the GE contract over time doesn't mean, we're going to get it we have to we will improve ourselves GE and prove that we can be a good partner and execute and provide the quality of service we expect to provide.
But there is definitely upside there I can't put a number on what it means I mean, it could be $1 million more it could be $10 million more I don't know.
As far as other biomed contracts.
Is there another one sitting out there, that's 10 or $12 million a year not something we see today, but there are there are manufacturers that are coming to us to help them.
With issues that they're having with their devices getting on site to repair devices.
There is some big hospital systems that we're talking to you for big deals not to the magnitude of $10 million to $12 million, but theres certainly in the hundreds of thousands if not low single digit millions and.
And Thats why this opportunity is exciting and that's why I continue to believe that <unk> services will be will be the first to catch oncology from a revenue standpoint.
And that'll be over the next couple of years I think yes.
Yes.
That I mentioned in talking about the forecast there in that single digit millions for the year.
Okay. That's helpful. And then what are the gross margins and operating margins look like for the new biomass businesses that are coming online.
Yes, if you look at.
The way that debt is structured.
With that.
This segment has a lower gross margin and these will be towards the lower end of the range in our products within the <unk> segment. The good thing now is theres not a lot of G&A. So they are still viewed as accretive to our EBITDA margin at any point in that the EBITDA margin.
For the first quarter, but our normalized EBITDA margin.
Okay Perfect and then just lastly, we've seen a number of payers make acquisitions and investments that are at home care, such as UNH acquiring LHC.
Well I know that doesn't necessarily touch excuse business just could you the macro environment out there for the last mile.
What you're seeing in the market.
Yes, I mean, its what <unk> heard everywhere right and exactly exactly your point about UHC in LHC.
Yeah.
I think it was already moving that way and I think we've probably talked about this in the past that the market was already going that way I think Colby just gave it a push right. So the patients wanted to be home.
Devices get smaller and more capable to be transportable.
And then what people realize with Covid is there were a lot of people in hospitals.
That didn't need to be in hospitals right. So they came to that decision when they needed the space for COVID-19 patients, but the reality is there are a lot of people spending nights there that didn't need to be spending nights. So what we're starting to see us.
Hospitals are realizing that and payers starting to realize that and actually incentive people to go home.
And as that continues and accelerates that puts us in a perfect position.
That's great I appreciate the update thanks al.
Our next question will come from Brooks O'neil at Lake Street Capital. Please go ahead.
Hey, good morning, guys. Congratulations on the strong start in <unk>.
Personally I'm very excited about the outlook for the company.
I have a couple of quick questions first labor is one of the big Hot buttons out there in the broad.
Economy today can you just comment on whether youre seeing difficulty hiring the people you would need to grow these businesses.
Yes, that's definitely the question of the quarter Brooks.
It's definitely tougher than it used to be but certainly not impossible I think we're fortunate that we offer great benefits and programs for our teams. So we get to retain a lot of our people. So we don't have a lot of turnover to start. So we don't have to backfill a bunch of positions, which helps US right. We are at a better starting point.
Yes, Yes, certainly you certainly we've had to put up some some.
Incentives to people for people to kind of walk in the door and interview.
But once they go through that process, we've been able to find everyone. We've needed to find so we don't have any real open positions that have been sitting out there for months.
Maybe where it used to take 30 days it takes 45 or 60 to get people in but it's.
It's not easy, but but our HR team and our hiring managers have done a great job, bringing in good talent and really improving the team even in the last year or two when it's been difficult just to keep steady for a lot of companies. So we're pretty fortunate.
Good for you.
And the second question so.
Excited about the growth of Dnb hear everything you guys said about that.
Could you just talk about how you sell in the <unk> marketplace.
Or whether these opportunities are just knocking on your door.
I'm just curious about the environment out there.
Yes, so it's a little bit of both.
I think when we're talking about big companies like GE or big <unk>.
Manufacturers that need help with their devices in the marketplace.
A lot of those guys come to us they know that we are in the space. We've been around for so long that they know the quality that we provide and on the service side and the team does a phenomenal job.
So I think in that case, a lot of it comes to us on the hospital side, it's us going to them right its kind of old fashion, salesmanship, and knocking on doors, and making phone calls and talking about our offering. The good news is we're in a lot of hospitals already right a lot of our 2100 oncology customers of hospitals, a lot of our pain management customers are negative pressure customers are all hospital based so we already have.
An existing relationship which helps us open the door a little bit just makes a little bit easier certainly not easy, but it makes it easier. So it's a combination of the two I would say, it's a hospital at the customer level, it's old fashion selling.
When it comes to big manufacturers and Big Health care providers to a degree they come to US which is nice it's great. Okay. Just one more quickie.
Excited to see the stock repurchase do you think that will continue here in <unk> or dirty to cure.
How you feel about your ability to continue buying stock and the valuation of this years.
Hey, Brooks with Berry.
Certainly we will view of the current price even today as being attractive certainly the intrinsic value of this company is much much higher.
And our liquidity position is very very strong we do have some limitations on how much we can buyback in our buyback program <unk> nine was supposed to be over three years, we brought in or 4 million now four six I think so I think that you'll probably see some by at some point.
But that will we'll keep quiet when and how much so that we can get the best price possible because our strategy is to get the lowest price possible.
It makes sense to me thanks, a lot for taking my questions.
Thanks Brooks.
Our next question today comes from Jim Sidoti of Sidoti <unk> Company. Your line is open.
Hi, good morning, and thanks for taking the question.
Again back to the GE contract.
Who is providing the maintenance on this equipment.
Before you guys get these contracts.
Yes, good morning, Jim.
A little bit of everything so GE has some of their own people that they were providing the maintenance on they turn especially with.
With it being a challenge to keeping and hire people they want to put those guys on the higher ticket items the imaging equipment those sorts of things some of the hospitals were doing it themselves or use some regional providers. This was a way to consolidate all of that and give a nice offering to their hospitals.
And the way the contracts written if things work out on the infusion pumps.
You work out a deal with GE.
Other equipment do you have to go back to the drawing board and start a new contractor can you just expand this one.
Yes, so that's a great question. So the MSA is in place so the ability to do business with GE was really the longest part of this process. So that's in place now and we're kind of under that umbrella at this point, if they call us and they want us to work on defibrillators, we add a new statement of work with the pricing and the timeframe and we're often running so its much much ease.
You are now to layer in new products and services.
Alright, and then with regards to <unk>.
For 2022 can you talk about what you expect for cash flow.
And we havent disclose that today it would be.
Strong because it'll be.
We're right on our lines with.
With.
The higher EBITDA than we had in the first quarter keep in mind too that the higher amount we had in Q1.
Turning that impact future quarters in terms of being lower right. The balance that we have will continue to be for the full year.
And.
What are your thoughts regarding cash you talked a little bit about.
Potentially buying back some more stock, but would you rather use the cash or.
Additional acquisitions to add capabilities or do you see yourself using it to pay down debt.
Yes. So the nice thing is our debt is all revolver. So if we have extra cash we'll pay down debt I don't see that as a high priority even buying back shares in a high priority in the normal course, when our stock is trading way below intrinsic value, we definitely see that as attractive, but our first priority is invest in the business.
Which is a little bit less capital intensive which is makes it makes it nice and we can do more things, but investing in devices that we need to grow pain in negative pressure, even oncology as our highest priority and potential acquisitions are certainly being considered as well.
Okay alright, thank you.
Thanks, Jim.
Our next question today will come from the line of Aaron Warrick at breakout investors. Please go ahead, Sir your line is open now.
Hey, guys hope you're doing well. Thank you for the guidance looking forward to the rest of the year.
On the EBITDA margins.
Margins.
Given that it was low this year for the reasons excuse me this quarter.
The reasons you stated.
And then the guidance for the rest of the year, what should we be thinking about as you get towards the back half of the year as sort of a normal run rate on those margins.
Yes, Thats, what we mentioned is that as they get to that to that in the coming quarters. Certainly has to go up a lot for us to hit the full year guidance, but we expect to end the year at.
Pretty close to normal rates, which isn't that mid twenties.
As a percentage.
Do you think there's any room to go up beyond that.
Or is that sort of be waiver steady.
Steady state going forward EPS at all.
Our goal to do that and where we build our model we have contingencies in there where that we sometimes need sometimes you don't so I think that we're giving ourselves the ability to be successful on the guidance for sure.
Great Okay.
And as it relates to that.
The service agreement with GE congratulations on that.
We had talked earlier about it I think more privately.
Can you just sort of indicated you were real happy about.
The way that that.
Came together and the terms you had and then.
Of course after that took several months for the contract to be finalized I was just wondering are you guys still does anything change as it relates to the terms of the contract is it still.
You are quite pleased with where there was just a matter of waiting on them to execute the agreement.
Yes, I mean, if you go back and look at GE, what they decided to do I think it was back in November December split into three entities.
That might have been the single biggest holdup right I mean, when you're trying to get lawyers attention. They break it up into three public companies, it's a tough.
It's a tough swim against the tide.
Yes, I mean, we wouldn't have signed the agreement if.
If the terms weren't good.
As tough as it would've been to come back to you guys and so we walked away from the agreement we would've done it at the end of the day, we want to grow but we want to grow smartly.
And profitably. So we believe the terms are good in.
Were looking into some looking forward to some really fun things with GE in the future.
Great. Thank you guys congratulations thanks.
Thanks Sarah.
Okay.
Yeah.
And at this point I would like to turn the floor back to Mr. Rich Diiorio for any additional or closing remarks.
Okay.
Thanks, Jim I want to thank everyone for participating on today's call I Hope everyone has a great day and I look forward to talking with you again, when we host our second quarter call. Please stay safe and thank you.
Ladies and gentlemen, this does conclude today's financial results. We thank you all for your participation you may now disconnect your lines and we hope that you enjoy the rest of your day.
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