InfuSystem Holdings Inc (INFU) 2018 Q1 法說會逐字稿

Welcome to the InfuSystem Holdings Inc. First Quarter 2018 Earnings Call. My name is Richard, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded. (Operator Instructions) Additional detailed information concerning the important factors that could cause actual results to differ materially from the information given today is readily available in today's press release under the heading Forward-looking Statements. Additionally, during the conference, the company will be discussing certain non-GAAP financial measures, the reconciliation of those non-GAAP measures to GAAP measures can also be found in today's press release. This document is available on the company's website. I will now turn the call over to Rich Dilorio, CEO. Rich, you may begin.

Thank you, Richard. Good morning, everyone and thank you for participating in today's earnings call. I'm joined on today's call by Gregg Lehman, Chairman of the board; Jan Skonieczny, our Chief Operating Officer; and Trent Smith, our Chief Accounting Officer and Corporate Controller.

We're very pleased with our first quarter results. Growth, profits and cash flow are all well above prior year levels. It's been a challenging time, but I strongly believe the CMS changes from 2016 are behind us and we're back on track.

On our last call, I mentioned the task the team had in front of them for 2018, focused on our existing business and operated as efficiently as possible, while continuing to win new business when it creates value. To do this, we need to accomplish the following: First, provide the highest level of service to our oncology and infusion products customers, and most importantly, our patients. Second, bill and get paid in a timely manner for the services we provide. Third, manage our pump fleet as efficiently as possible to minimize CapEx spend; And fourth, continue to grow our peripheral nerve block business.

We capitalized on the momentum we had at the end of the year, and I'm excited to say that the plan is working, and our first quarter results prove it. We have continued to gain market share across all revenue streams. We've improved our collections and maximized our pump utilization, all of which are contributing to continued strong cash flow. One impressive example of improved efficiencies is evident in our utilization improvement. We have reduced our pump turnaround times internally, minimized unnecessary pump movement and improved warehouse workflows. These changes have allowed us to redeploy over 1,000 pumps in our fleet to support growth in new customers, resulting in CapEx savings in -- of over $1 million.

This supports the company's board decision to improve $1 million share repurchase program in March of 2018. We began applying some of our positive cash flow to our stock repurchase plan and have repurchased approximately 66,000 shares of stock in the last 30 days.

I will now turn the call over to Trent to discuss our first quarter financial results.

Thank you, Rich. Before going into the detail on the quarterly results, I'd like to make 2 general observations: First, about ASC 606. For the last several years, InfuSystem has been making the point to report both its GAAP revenue number shown on the financial statements as net revenues, and what we call our net collected revenue number, which was net revenues less the provision for doubtful accounts or bad debt.

Under ASC 606, we no longer need to report both numbers, as GAAP revenue is now reported in terms as what we used to call, net collected revenue.

One other item because InfuSystem adopted ASC 606 on a modified retrospective approach, we are going to need to pay special attention to year-over-year comparisons of our financial numbers. This issue is particularly notable in comparing year-over-year revenues. This year's numbers will show the net revenue number after the reduction for bad debt, whereas prior year numbers will show the old GAAP revenue with bad debt showing up on its own line in the income statement. The effect in the first quarter of 2018 was to reduce our GAAP reported revenue number by $1.9 million.

Please take note that despite our reported revenue number being lower in the first quarter, our actual business has grown. And that before the impact of ASC 606, our total company revenue would have been 4% higher than last year, and revenues from rentals even higher.

The second general observation is to remind everyone of the charges InfuSystem recorded late last year. In addition to the very large noncash charge taken for tax expense and valuation allowances, we booked several noncash charges for depreciation and amortization. These noncash charges related to pumps that were determined to have no future value and were written-off in several IT projects where some of the costs have been previously capitalized. These IT projects were determined to be obsolete or not commercially viable. And we're therefore accelerated with the remaining amortization.

The effect of the pump and IT right-offs in 2017 have the effect of decreasing the company's depreciation and amortization expenses in 2018.

Now, I'd like to discuss a bit more about the first quarter of 2018. Net income was $0.2 million, $0.01 per diluted share versus a loss of $1.5 million or a loss of $0.07 per diluted share in the same prior year period.

Total net revenues were down 7% or approximately $0.7 million to $16.5 million versus the prior year period. This decrease can be attributed to the implementation of ASC 606, which required the reclassification of approximately $1.9 million in bad debt to be netted against net revenues from rentals.

Absent the implementation of ASC 606, net revenues from rentals would have been $16.3 million or an increase of $1.2 million compared to the prior year period. Total revenues, both rentals and sales, would have been $18.4 million or an increase of 4% as compared to the same prior year period.

Gross profit was down 5% or $0.6 million versus the same prior year period to $10.1 million resulting in gross margin of 61% versus 60% in the prior year period. The decrease in gross profit can be attributed, again, to the $1.9 million reclassification of bad debt due to ASC 606.

Absent the implementation of ASC 606, gross profit would have been $12 million, an increase of $1.4 million or 12% compared to the same prior year period.

Selling and marketing expenses decreased $0.6 million or 20% to $2.3 million compared to the first quarter of 2017. G&A decreased $0.5 million or 7% to $6 million compared to the first quarter of 2017.

The following are some definitions for non-GAAP financial measures that the company utilizes to understand and compare its operating results in a more consistent manner.

Adjusted EBITDA was up 147% to $3.6 million versus the same 2017 first quarter period. Adjusted EBITDA margin, absent the implementation of ASC 606, increased 8.1% in 2017 prior year period to 19.3% in the first quarter of 2018. Net debt defined as total debt less cash and cash equivalents decreased $0.8 million during the first quarter of 2018 to end the quarter at $24.6 million and decreased $10.4 million when compared to $35 million at the end of first quarter of 2017.

With that, I will turn the call back over to Rich.

Thanks, Trent. Although we will not have a question-and-answer portion of the call. I welcome you to contact me directly if you have any questions.

I would like to conclude today's call by thanking the InfuSystem team and letting them know how proud I am of their efforts. I have absolute confidence in our leadership team and their ability to continue to build on our momentum and deliver strong results for the remainder of 2018. We all know there is more to do, and I'm excited to see what we can accomplish.

Thank you for your interest in InfuSystem. We appreciate you taking the time to learn more about the company and we look forward to speaking with you after the conclusion of the next quarter. Have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.