InfuSystems Holdings, Inc.

Good day, and welcome to the NFE System Holdings Incorporated Report Second Quarter Fiscal Year 2022 Financial Results 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 your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I'd now like to turn the conference over to Managing Partner, Mr. Joe Dorme. Please go ahead.

Thanks, Ian. Good morning, and thank you for joining us today to review InfuSystem Holdings, Inc. financial results for the second quarter of 2022, ended June 30, 2022. With us today on the call are Rich Diorio, 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 infusystem.com or numerous other financial websites. Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of MFU System 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, 2021. 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. IMFU System 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 the call over to Rich DiIorio, Chief Executive Officer of IMFU System. Rich?

Thanks, Joe, and good morning, everyone, and welcome to our second quarter 2022 earnings call. Thank you all for taking the time to join us today. As communicated in this morning's press release, InfuSystems core business segments delivered very solid second quarter results. Our ITS business, led by continuing strength in oncology, grew revenue by 6% over the prior year. Our DME business, which includes rentals and related pump and consumable product sales, experienced top line growth of 15%. Together, our two business units grew in the second quarter by 9% on a year-over-year basis. Operating cash flow in the first half of the year increased 8% to $9.5 million. with sequential quarterly cash flow increasing by 33% compared to the first quarter. If we were still the infuse system of a couple years ago, the second quarter would likely be viewed as a tremendous success. But of course, we're not that company anymore. We now consider ourselves a growth story with several exciting high TAM initiatives, including those in pain management, wound care, and biomedical services. So while 9% growth in the second quarter was solid, it is below the pace we were expecting to be at halfway through this year. Having successfully repositioned infuse system from its long history as a niche oncology company to its new model as a specialist in providing last-mile solutions for durable medical equipment, we find ourselves with no shortage of exciting growth opportunities. This includes an increasing number of large and successful healthcare companies that have recognized InfuSystem's unique capabilities and our commitment to quality, resulting in a steady stream of industry leaders approaching us and proposing significant opportunities for us to grow our business. We continue to analyze and assess these opportunities, passing on high-risk and flash-in-the-pan ideas in favor of those that we believe play to our core strengths and present the best opportunities for sustainable and profitable long-term growth. As pleased as we are by our new positioning and the opportunities it is presenting, our business transition and the increasing work with larger industry-leading players does present a particular challenge. Few things in healthcare happen quickly. InfuSystem is a relatively small company that provides itself on being nimble, But many of our new partners and customers are massive, diversified organizations. The result for us is frequently a hurry-up-and-wait cycle, where we stand ready to execute but have to wait for our partners to work through their longer and more complex internal processes. Now, being patient in waiting for revenue to work its way forward is nothing new to Infosystem. We've always explained that investments in new business must be made quarters in advance of significant new revenue appearing on our income statement. What has changed is the anticipated scale of our new business initiatives. Until recently, a new customer win meant being patient while maybe tens of thousands of dollars per quarter worked its way through the revenue cycle process. But this year, we announced a single contract win with GE, the impact of which is expected to ramp to more than $10 million annually. That's a single contract that by itself could add more than 10% to our top line. It is hard to be patient with opportunities like that, and we are going through some growing pains as we adjust to the scale of our new business opportunities. Last year when we began making material investments in order to be ready to execute under the large pending Biomed Services contract, we followed the example we set a few years earlier when a major competitor exited the third-party payer oncology market and we assumed much of their business. We tried to be as transparent as possible, explained that increasing expenses were being driven by anticipated material revenue growth that would ramp over a period of a year or more. That was when InfuSystem first started providing annual guidance. We followed this template in 2021, and it didn't work out as well as the last time. We knew a lot of the new work was coming that we needed to invest to be ready, and then investors would want an explanation. So we were as transparent as we believed we could be while waiting for the contracting process to be completed. And that process took much longer than we expected, taking until April of this year to be finalized. It is now August of 2022, and we are happy to report that the work began under the large BioMed services contract during the second quarter. But as discussed in this morning's press release, the ramp has been much lower than expected. In the mid to long term, the reasons for the delay are good news, as our white glove approach identified the need for significantly more device repair work as part of the onboarding process. With the potential of touching upwards of 300,000 devices as part of this first contract under the master services agreement, more work and more trust directed towards InfuSystem is something we should view as extremely positive. But getting through the process with such a large diversified company as GE took significant time. The good news is we believe there could be more revenue than originally forecast. The bad news is that less of that revenue came through during the second quarter. And as Barry will explain shortly, this has the effect of pushing back revenue under the contract and forcing a change in our guidance for the remainder of 2022. Stepping back from this one contract to a broader view, INFI system is seeing a lot of opportunities, and we have no doubt that we are now a growth company that is capable of generating average long-term growth of around 20% per year. We can control which opportunities are pursued and the amount and timing of the investments we make into those opportunities. Unfortunately, when working with much larger and more complex national and global healthcare companies, we are sometimes placed in the position of accepting and not dictating the timing of the contract process and the ramp-up of the new revenue emerging out of these opportunities. The result is that while the average rate of our future growth might be in the range of 20%, that growth will be lumpy and with some years coming in above and others below based on when the new business initiatives begin and ramp towards their potential. I've said that our repositioning as a services company, as a specialist providing last mile solutions for patients has resulted in no shortage of exciting growth opportunities with many involving large healthcare companies approaching us. As these opportunities As these are opportunities that we will continue to pursue, and as it has become clear that pandemics, supply chains, and extended negotiating periods make it very difficult to pin down when these initiatives will start and ramp, we have determined that we need to change the way Infosystem provides its financial guidance. Starting today, our annual revenue guidance will include only revenue where the associated work is already being done and with respect to growth where we have very good visibility and extremely high confidence in the revenue ramp. We hope this will free us up to talk about strategies and developments in our business without having to predict the precise timing and revenue impact of new initiatives. We believe that as we move forward, this change will allow us to get back to the beat and raise paradigm that characterized Infosystem prior to 2021. Turning to the discussion on the second quarter, we see that it provides one example after another of the challenges we have faced providing guidance related to a new class of significantly larger growth initiatives for Infosystem. Recall that after the first quarter, we discussed how our full-year guidance included provision for all types of possible risks. But even then, the second quarter had some surprises. Before reviewing the details, let's remember that the second quarter was still a very solid quarter with 9% year-over-year growth despite the various challenges we were presented with. I've already provided some detail of the first few months of our big new Biomed services contract with GE Healthcare. During our team's initial on-site visits, we determined there was more than expected amount of repair work required in addition to the routine preventative maintenance. This led to a pause as we worked with GE to achieve alignment on the scope of the work required. As of August, we are back to onboarding facilities and pumps, and we are doing this at an elevated pace. Given the size of the project, we expect it to take approximately 15 months to ramp to onboard all of the work and sites anticipated, with the potential of additional work under the master services agreement as the relationship continues to develop. In terms of guidance for the year, we are modeling cautiously. including making no assumptions regarding incremental revenue relating to the higher service levels due to increased pump repair work. Moving next to our pain management business, we remain very positive and excited about the program and its near-term prospects. In the second quarter, we had some supply chain issues which didn't allow us to onboard all of our growing backlog and new accounts. The issue is resolved and we were still able to end the quarter with record patient treatments and expect this ramp to continue. In fact, patient treatments in June were up over 50% versus June of 2021. In terms of guidance for the year, we have adjusted our numbers to reflect the first half interruptions, but continue to forecast strong growth in our core pain management program through the balance of the year. In our wound care business, we also experience material supply issues. Here we are taking a different path, one consistent with our long-term plan to expand our service offerings in both pain and wound care by, among other things, diversifying our OEM equipment partners. We plan on adding multiple best-in-class products to our offering in order to win market share. We have made significant progress in this area and hope to soon be issuing a press release announcing a new partnership. In the meantime, we have put our two large lease opportunities on hold and removed the forecasted revenues relating to these deals from our guidance. In anticipation of our new supplier relationship, we have already begun customer assessment of the alternative devices. The net effect of the new approach to providing guidance together with the supply and other impacts discussed above, is to revise our full-year 2022 revenue growth guidance to be in the range of 10% to 13% and adjusted EBITDA to be in the range of 20% to 21%. These figures are based upon the current trends in our core services and newer businesses that are currently producing revenue. New initiatives with less visibility regarding rampant timing are largely taking out of the forecast, and we'll be updating when the timing is clear and we can precisely calculate the timing and the rate of ramp. While we are taking revenue out of our guidance that is uncertain as to timing, we cannot take out the expenses that will be realized in anticipation of that revenue. Respecting this, we will seek to remain transparent with respect to where and why we are investing, speaking to the potential of our new business initiatives, but not including revenue forecasts in our guidance until it is well-defined and we have high confidence in its rate of ramp. Now I would like to turn the call over to our CFO, Barry Steele, who will provide a review of our second quarter financial results.