InfuSystems Holdings, Inc.

Good day and welcome to the NP Systems Holdings, Inc. Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Joe Dorme with Littleton Partners. Please go ahead.

Thank you, Rocco. Good morning, and thank you all for joining us today to review the financial results of Infosystem Holdings, Inc. for the third quarter of 2021, ended September 30th, 2021. With us today on the call are Rich DiIorio, Chief Executive Officer, Barry Steele, Chief Financial Officer, and Carrie Lachance, President and Chief Operating Officer. After the conclusion of today's prepared remarks, we'll 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 company's website at www.infusystem.com or numerous other financial websites. Before we begin with prepared remarks, I'd 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, 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 31st, 2020. Forward-looking statements speak only as of the date the statements were made, The company can give no assurance that such forward-looking statements will prove to be correct. InfuSystem does not undertake and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future event, or otherwise. Now I'd like to turn the call over to Rich DiIorio, Chief Executive Officer of InfuSystem. Rich? Thanks, Joe.

Good morning, everyone, and welcome to our third quarter 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. This morning we will review our financial results for the third quarter of 2021, provide an update on our business, discuss the status of our current growth initiatives, review guidance for 2021, and talk about the outlook for 2022 and beyond. To start, I am as excited as I've ever been with the progress the team is making across the board. We are building meaningful momentum in both of our business units, and we're doing this on top of delivering record revenue in the third quarter. Our financial performance came in on plan, which puts us on target to meet our updated guidance for 2021. As most of you know, InfuSystem has two operating units. Integrated Therapy Services, or ITS, is the original and larger of the two, and it is focused on providing turnkey solutions for continuity of patient care between the hospital or clinic and the patient's home, specifically when the care includes the use of complex, durable medical equipment, including oncology pumps, negative pressure wound therapy devices, et cetera. Integral to the ITS business is our third-party payer billing capability. Durable medical equipment reimbursement has unique billing requirements, and our operational focus on it, combined with our extensive payer contracts, is a key part to the turnkey solution that InfuSystem brings to the table. Our second operating unit is our durable medical equipment services business, which focuses on equipment rentals and biomedical services. The DMV business was originally acquired to support our ITS segment, This is the part of the business that provides equipment repair and maintenance and where our equipment rental offerings are located. About two years ago, we began efforts to expand and extend the operations of the ITS segment. The idea was to leverage the core competencies that were developed and perfected for our original therapy in oncology and apply those skills to an expanding number of additional therapies. Today, we have four therapies in ITS. Oncology is still the largest. The next two, pain and wound care, both have momentum, and we believe they will generate significant revenue in 2022 and 2023. The fourth and newest therapy is pneumatic compression to treat lymphedema, which is a couple years away from any revenue contribution, but with a $1 billion-plus addressable market, we are extremely excited for what the future holds. The reason why we are so excited is that each one of these therapies could be transformational in their own right, Therefore, we don't need to hit on all four to be successful, but I remain confident in our ability to deliver revenue growth in each of these four therapies due to our team's ability to focus and execute our growth plans at a high level. Additionally, all four business opportunities fit perfectly into our core competencies, and we have the capacity to manage each of these businesses effectively as we've been doing some form of each of these for the last 30-plus years. And one final point. there will almost certainly be more ITS therapies in addition to the current four in the future. By becoming a preferred partner for providing the last mile solutions for durable medical equipment going from the clinic to the home, InfuSystem has positioned itself such that we get a lot of inquiries from medical equipment manufacturers looking for help as more and more patients and therapies transition towards the home environment. My vision is that we will double the company revenue to approximately $200 million in the next three to five years. This is tremendous growth, given it took us more than 30 years to get to our current top-line levels. We have the right team in place to manage the growth, a strong financial foundation, and a highly leverageable service platform that will enable this growth. Now, getting back to the investments we're making this year to support our growth. I've frequently highlighted that the nature of our business is that we often have to make investments first, absorbing some expenses, and then waiting a quarter or more before revenues begin to show up in our financials. We saw this a few years ago when a major competitor left the oncology market and we ramped up our inventory and operations to allow us to capitalize on the opportunity and take on most of the former customers. And we are seeing something similar this year. While we didn't enter 2021 expecting it to be a material investment year, it has turned out that way due to a series of opportunities that we have eagerly capitalized upon and that have put us in a perfect position to build on the future. The first was discussed in some detail on our last call when we disclosed that we nearly doubled the size of our sales force after being given the chance to hire some of the best salespeople in the pain and wound care markets. With the help of these new experienced reps, we hope to be able to make more announcements like the one we made in the press release on November 2nd, announcing that INFUSystem has been selected by a leading US-based healthcare provider to provide our pain management service, INFU Block. In the agreement, InfuSystem will be providing pain management services to a top U.S. healthcare provider with more than 12 million customers. As part of the service agreement, we will provide InfuBlock, which includes electronic infusion pumps for continuous peripheral nerve block, a 24-7 clinical hotline in biomedical services, along with supplies. The pain business is really gaining traction in the marketplace, and a win like this gives us even more confidence. There is so much more to come as the team continues to build on its momentum. Our second biggest investment this year was touched on briefly on the last call. It involves our aggressive hiring of technicians into our biomedical team in DME. This hiring accelerated in the third quarter, and we've been busy onboarding, training, and equipping the expanded team, getting them ready to execute on the business we expected to come. As disclosed in this morning's press release, we are finally in position to begin discussing a major new opportunity. InfuSystem has been selected to provide biomedical services to a leading global medical technology and diagnostic equipment company with operations in more than 100 countries. As part of this service, we will provide biomedical services, including annual preventative maintenance and repair solutions, to the fleet of infusion pumps at hospitals and other medical facilities under contract in North America. Service will be conducted either on-site at most of their 1,200 medical facilities, including 800 hospital systems in the U.S. and Canada, or offsite at one of INFUSYSTEM's seven service centers. Once negotiations and contracting are finalized in the coming weeks, this program is estimated to generate approximately $45 million over three years, with $8 to $12 million in the first year of service. This new relationship marks a major shift in the DME side of our business and comes as a direct result of the acquisition of two unique biomedical services companies in the first half of the year. We decided it was finally time to extend our capabilities into the acute care space, so we enhanced our already strong biomedical team with on-site capabilities, which was done with the OB Health acquisition in April of this year, and to diversify our skills to be able to work on more types of medical devices, which was done with the Filamed acquisition in February of this year. With the addition of the OB Health and Filamed teams and their capabilities, InfuSystem can cover a broader range of services, including on-site repair, preventative maintenance, and physical device inventory management to hospitals and healthcare systems nationwide. We can also service not only infusion pumps, but also compression devices, defibrillators, electrosurgical units, and patient monitors. These incremental capabilities make it possible for Infusys to pursue potentially transformational deals in the future. I firmly believe our DME platform now has the same growth potential as our ITS platform and could be the fastest growing segment over the next couple of years. Acute care is a huge market opportunity, and it is our strategy to maximize the synergies created by the two acquisitions to drive growth and expand our market share in that space. Of course, executing against all of the available opportunities will require both operating discipline and increased scale. This points back to my earlier comments about upfront investments being necessary before material revenue is realized. In the case of our planned growth in DME, the investments began in the first quarter with the acquisition of filament, followed by the acquisition of OB Health in the second quarter. We have been ramping up our team and operations steadily ever since. To discuss how we've been preparing to onboard the anticipated new revenue, I will turn it over to President and Chief Operating Officer, Carrie Lachance.