Good afternoon, everyone. And welcome to InfuSystem Holdings Year End 2014 Conference Call. This is your operator, Alex. Let me first give you to Mr. Jonathan Foster, Chief Financial Officer.

Good afternoon. First of all, let me get some administrative matters out of the way. The company issued a press release today. The release is available on most financial websites. Additionally, a web replay will be available on the company's website for 30 days. Both the press release on Form 8-K and the company's Form 10-K for 2014 have been filed with the SEC today as well. Except for the historical information contained herein, the matters discussed in this conference call are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. Words believe, expect, anticipate and estimate, will and other similar statements of expectation identify forward-looking statements. Investors are cautioned that such forward-looking statements involve risks and uncertainties. These risks and uncertainties include general economic conditions, as well as other risks detailed from time to time in InfuSystem's publicly filed documents with the Securities and Exchange Commission. Specifically information about risks and uncertainties that could cause the company’s actual results and financial condition to differ from those predicted by forward-looking statements are disclosed in the company’s annual report on Form 10-K for the year ended December 31, 2014 under the heading Risk Factors and elsewhere in the report. Forward-looking statements reflect management and analysis only as of today. The company has no obligation to update the forward-looking information contained in this conference call. While discussing the company's performance, the company will refer to certain non-GAAP measures, such as adjusted EBITDA, which is not considered a measure of the financial performance under Generally Accepted Accounting Principles. A reconciliation of the differences between non-GAAP financial measures such as adjusted EBITDA and the most comparable GAAP measure is contained in the company’s press release previously mentioned. With that, I’d like to turn the call over to Mr. Eric Steen, Chief Executive Officer.

Good afternoon, everyone. And thank you for joining InfuSystem Holdings Inc. fourth quarter and 2014 year end earnings call. Joining me today are Jan Skonieczny, Chief Operating Officer; and Jon Foster, Chief Financial Officer. There are three things that I want to talk about today, an update on our strategic initiative of connecting electronically with our customers, a review of the new products and services that will fuel our continued growth and how our recent success in contracting with payers has reduced our bad debt and improved our profitability. But first, let’s go to the numbers, for the year ending December 31, 2014, revenue was $66.5 million, up 7% over prior year. Bad debt decreased 10% and was reduced to $5.8 million, which led to net collected revenues of $60.7 million, an increase of 9% over prior year. Direct product sales of both equipments and disposable products were up 23% for the year. Net income was $3.4 million, up 101% over prior. Earnings per share nearly doubled from $0.08 a share in 2013 to $0.15 a share in 2014. Adjusted EBITDA was $16.1 million, up 1% over prior year. Adjusted EBITDA was impacted in 2014 by four key things, the write-off of $400,000 in outdated pumps from the company’s 2010 acquisition of First Biomedical, $200,000 in severance as I reshape the management team, expenditures on IT of $500,000 as we built an information technology team for the process of taking the business from fax machines to electronic connectivity. Additionally, we invested in our new pain management service at $200,000. For the fourth quarter ended December 31, 2014, revenues were $16.3 million, down 5% from the fourth quarter of 2013. You may recall that in Q4 2013, we had a one-time low margin opportunistic sale of pumps. Additionally, due to our…

Thank you, Eric. CMS was acquired this past quarter as it relates to our business. As I mentioned on October 31, 2014, CMS released a Final Rule entitled End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies or the Final Rule. This Final Rule was published in the federal register on November 6, 2014, and finalizes several provisions related to our third-party payor oncology business, which classifies that we will be subject to payment reductions with Single Payment Amounts or SPAs will be equal to 110% of the unweighted average of the currently contracted SPAs. So what does this mean to InfuSystem? We’ve updated our figures and estimates, and based on the current mix of revenues and current fee schedules, we estimate that this new rule will reduce revenues as approximately $2 million in 2016 and $3 million in 2017. As Eric mentioned earlier, we are focused on improving our commercial contracts. Couple this with operational and improvements in IT, we believe we can potentially offset most of these reductions by this year. We are increasing our staff and managing payor contracts, and we continue to focus on ways to improve collections on patient billing. Just as we saw in the fourth quarter and as Eric mentioned, such focus can impact revenues and bad debt, and in the aggregate collected revenues in a favorable way. Eric?

Thanks you, Jan. Now I would like to ask Jon Foster to take us through the numbers in a bit more detail.

Thank you, Eric. Now I’ll highlight some key fourth quarter financial results and discuss more detail of the financial results for the full year. For the fourth quarter ended December 31, 2014, revenues in the fourth quarter was $16.3 million, down 5% from the fourth quarter of 2013. Net collected revenues of our rental business for the fourth quarter were $13.6 million or 8% increase when compared to the fourth quarter of 2013. Gross profit was up slightly at $11.6 million. More importantly, we experienced the 400 basis points improvement in gross profit margin of 71.5%, compared to 67.5% in last year's fourth quarter. This was a direct result to the impact of the sales in last year’s quarter. Net income was $1 million in the fourth quarter or $0.05 per share, up from $0.9 million and $0.04 a share in Q4 of 2013. Now for the full year, results for the full year ended December 31, 2014 was $66.5 million, which represents a 7% increase from the prior year $62.3 million, primarily due to continued growth in rentals and strong growth in sales. Rental revenue increased $2.8 million or 5% compared to the prior year. While, billings increased 9%, mix of in and out-of-network billings versus patient pay and payor mix hampered the increase in revenue dollars. Such shifts have occurred we believe due to ACA. As Eric and Jan have mentioned, we are focused on driving revenues and on improving collected revenue. Product sales increased $1.5 million or 23% compared to the prior year, largely attributable to sales during the first quarter of 2014 of a particular pump at a lower gross margin will resulted in additional revenue of approximately $0.9 million. 2014 we experienced a different trend in our sales, our business experienced sales activity throughout the…

Thank you, Jon. In conclusion, all areas of our business are growing. Going forward, our investment and accomplishments in information technology will continue to fuel growth as well our expansion in new products, new services and new therapy areas. Our focus on managed care contracting will generate the cash necessary to pay down debt. Our revenue growth will continue but profit remains the focus and we are not chasing high-revenue low margin pump sales. So with that said, for today, I am continuing our guidance of high single-digit growth through the end of 2015. And now I'd like to open it up for any questions that you may have.

Thank you. [Operator Instructions]

We’re ready for questions now.

Our question comes from Doug Weiss from DSW Investment. Please go ahead.

Good afternoon.

Hey Doug.

Hey Doug.

So I guess, first question on sales. And I take your point on recurring cash collection. On your high single-digit guidance, would you be able to give a little more granularity on how that would break out rental versus direct sales?

Yes. Well, you know, Doug, although we are focused more now on sales especially trying to launch the new disposable offerings to the marketplace, it’s still a small percentage of our business. So the rental business is the big center of gravity and that rental business will be in high single-digit growth and I would expect -- we had 23% product sale growth. I would think we are going to have double-digit growth in sales, pumps and disposables again. But the rental business is just so big that it all adds up to high single-digit revenue growth.

Okay. And then -- I assume that when you say high single, you are now talking in terms of the net number of rental less bad debt. But is that going to -- will bad debt improve again next year, so that the actual topline rental number might be lower, if you follow what I’m saying?

Yeah. I do. I think we would have high single-digit growth on revenue and net collected revenue. We want to continue to focus on the -- I think the net collected revenue. I sure haven’t talked about that number in my first call but I think as the team -- as we make progress on bad debt and contracting, we know that’s number to go after and that’s the certainly the focus so, high single-digit growth on both. There are still a lot of moving parts in the marketplace with the Affordable Care Act. And as we fine tune things a little bit more, I reserve the right to upgrade that guidance number going forward. But for right now, I want to stick with the single-digit growth. We also had a big -- we did have a big one time recurring revenue sale in the first quarter of 2014 but it’s -- I don’t see anything like that on the horizon in the near-term.

Right. You had a big sale in the first quarter that ran through the -- not into the rental line, at the other line.

Correct. Right.

Right. Okay. And I think, what I hear you saying is that some of the Affordable Care issues in terms of contracting with payors. You made progress on that this quarter but you are still going to get some benefit from that in the quarters going forward, am I understanding you correctly?

That’s correct. Yeah, absolutely, that's it.

Okay. And so growth could be better than you are now guiding but you just don’t want to -- it's too early to say for sure?

For today, yeah, for everything I see today. And that’s why I said for today. I hope I’m going to change that for you Doug but we’ve met individually and I told you we are such a small company with opportunities to spend money when I see opportunities come or focus in an area, I just don’t want to get too bound up with making short-term decisions and cannibalizing -- the weighted revenue numbers in this business is cannibalize your rental fleet and show double-digit revenue. Hitting revenue number is easy, getting earnings and income numbers are harder and I wanted to focus this on a long-term and I don’t want to cannibalize my rental fleet. That’s why I don’t want to over commit to you today on too aggressive revenue numbers.

Okay. Makes sense. And then on the -- the $1 million roughly of one-time expenses between severance and the other expenses you listed. Is it reasonable to assume that those will largely disappear in 2015?

We are still going to spend on IT and pain. But the severance and as you may recall, we moved to a new facility from Olathe, Kansas to Lenexa, Kansas this year. And we cleaned out the warehouse and wrote-off a bunch of old pumps, so that was a one-time event. But we are still going to see. We are going to see less IT investment this year. But I’m hoping that pain continues, especially as we start to see some progress. We had some good news on our pain business just a week go. There is a new drug, Exparel that did not get approved for Peripheral Nerve Block and it shouldn’t have been approved because there is no studies that shows it’s long-lasting. So some of the pain customers and anesthesiologists that were waiting to see if this drug was going to be approved are ready to go with the standard of practice, use our Peripheral Nerve Block pumps. And so I think we’ve got a little pent-up demand that will pick up of pain in the months ahead.

Okay. And you had a very good number for SG&A -- on the G&A specifically – sorry, for selling and marketing. And so is that sort of just a timing factor where -- first of all, is that where the IT expense goes or does it go in through the G&A line?

The IT expense goes in the G&A line.

Okay. So that $2 million in selling and marketing, is that a reasonable run rate going forward or was there something that made this quarter unusually good?

We don’t look at on a quarter-by-quarter basis but on an annual basis. We would expect to see some improvement in leverage this year. Couple of years ago, we were at 17%. Now, we are down to roughly 15% and we always want to improve on that, but I wouldn’t expect any large movement on the leverage line.

Yeah. I think that’s a good point, Jon. One thing, Doug, I would emphasize and you hear me you talk about electronic connectivity every time we talk and it does several things for us. It makes our customers’ life easier, so they stay with us and it also is attracting new customers. It saves time in Gem’s operation on the insurance billing because they're not keying in all this paper and it makes the insurance billing cleaner, so we should do better on, not going beyond [filing] [ph] limit on some of our insurance paper. And then another big thing it does for us is our sales reps, the 30 sales representatives that we have in the oncology marketplace who spend a lot of time in past years picking up paperwork. I’m very proud of that electronic order number, it is 52% now and it keeps going up, that’s freeing up the sales reps’ time. So they’re going to be able to sell other things like our pole mounted pumps, our new chemo safety products and IV sets programs that we’ve launched. And so I think, we’ll continue to see leverage on our selling and marketing expense.

But it sounded like Jon was saying we won’t see -- there will be some commensurate increase in SG&A. Is that coming from hiring more salespeople or where would that increase relative to…?

Part of its hiring more salespeople and where we’ve added is in this pain management service. So we’ve kind of gone from a crawl to walk and we’re going to start running soon here. Any time you’re doing something new, you got to slug it out at the beginning until you hit that tipping point and get a lot of records accounts and people talking about at the convention. So the pain investment, its more costs than profit right now but long-term we’ll ramp that up. As I said before that I see the orthopedic, post orthopedic surgical pain market as being tenfold above the number of patients that we could ever have on oncology. So it’s a huge growth opportunity. The benefit of eliminating all the oral narcotics from our community, better patient satisfaction scores and it just -- it takes time to move the needle. And I think especially, in today's environment, one thing the Affordable Care Act has done is practically paralyzed decision-making in our nation's hospitals. And I think as people get things figured out, they’ll be willing to pick up on some of these new areas that will improve patient care and save money. And we've got to just keep selling our good story and get those accounts moving over and its working and the pain business is growing.

Okay. Great. Actually, I have a few more questions but let me drop off and I’ll get back in the queue.

Keep going, Doug. I don’t see many people on there. I guess mainly because we’re doing an afternoon call. Keep rolling with your questions please.

The operating cash flow you called out at $7 million and you mentioned that you spend about $6 million increase in the pump fleet. Does the other million just go to kind of keeping your existing fleet in shape? Where does -- I guess, better way to put this, how do you breakout maintenance CapEx on your existing pumps and growth CapEx on this new pumps?

Well, one of the changes that have -- that occurred in 2012 because of the change in GAAP since the lot of the big boys’ operation companies that have rentals, we made a change. And so there’s not a line on our cash flow statement that says CapEx, we previously said in conference call, $1 million to $2 million a year is our maintenance CapEx. So the best way to look at what we’re spending on cost is the lowest in the detail business is what we’ve changed in is the historical cost of our pump fleet. We made that change in 2012. We really expanded our PPT footnote, broke out medical equipment and sort of its medical equipment held-for-sale and rental and our reserves and depreciation. So that’s really the best place to look at. I hate saying that the cash flow statement doesn’t -- sometime isn’t clear to us [that visit] [ph] now was having CapEx line. We have put it down what we buy in pumps and what we get in pumps and that just the way GAAP has developed.

Right. So 2014 was about a $1 million in maintenance and $6 million in growth using the numbers, you gave earlier?

Yeah.

And is that kind of what you expect for next year 2015?

I love to because we buy pumps for growth on a rental fleet. We really buy pumps for rental fleet when we know there is near term demand and said that in the past and that continues to be the way that we operate. So as we have stated before, our first priority when you are getting a rental revenue ratio above 1 meaning we are getting more than one time what the pump cost us and rental revenue in one year we will do that day in day out that to be day in day out than our second course of action of course is to pay down debt.

Okay.

The other thing I would add on pumps is, yeah, I love to buy more pumps too. I also happy to see our underutilized pumps going down, as I had told you before, we have developed our own software, inventory management and asset tracking software that we are planning to utilize more fully to help our utilization. So we want to improve our utilization. The other thing I want to point out is, 6,000 pumps at $600 million, that’s about a $1000 a pump. And in our presentations you’ve see in the past, Jan, always uses the $1,500 per pump number, because that’s how much a new ambulatory pumps cost. And one of our strengths is our break -- our broker trader desk that buys and sales used pumps. So the reasons are pump addition to our rental fleet was down to $1,000 last year is because we find a lot of ways to buy used pumps from hospitals, from banks, with pumps coming off of lease and so that’s why its $1,500 for a new pump and we have showed that model, but as the numbers add up last year, you can see that we are buying used pumps at a discount making our rate of return on our pump investment even better.

So and how this utilization trying to, and I know you want to improve it, but are you seeing any improvement at this point, is that something you can -- you will see in 2015?

One of the things we did last year is we tied our sales representatives, compensation to a number we call under utilized pump, and they made a 2% improvement in reducing under utilized pumps. And so, if you put the cheese on the Complan, so what you want to see happen like improve utilization will show not we got improved numbers by showing the sales reps how important it is to us by putting some of their compensation dollars tied to it.

Right. Okay. On the CMS numbers, so that’s -- I believe it’s the higher end of the range you gave last quarter? I guess, how good is your visibility on those numbers, if it’s still tone to change or are you pretty certain if that’s kind of what’s going to come in?

Yeah. So last time -- last call, when we gave a range, we have just received the notification. So since then we have had some time to digest the information that CMS has provided and crunch some numbers and we think, although, we think the numbers are pretty good right now. CMS hasn’t formerly announced any specific payment amounts yet. So it’s still an estimate at this point.

Okay. And then on ACA, do you -- you alluded to some uncertainty that’s affected buy decisions was -- with the case before the Supreme Court, there is obviously still some uncertainty? Do you think that the outcome on that case will you affect you in anyway?

Boy, not that I am aware at this time, but I think, anybody that tells you, they have got everything about the Affordable Care Act figured out might be overstating things. So I am going to say that I still need to wait and see on that one.

Okay. And then, I guess, my last question on taxes, so your GAAP rate is still higher than most of the companies that follow? Is there -- what’s the good long-term rate and I guess, I am curious why it’s so high on a GAAP basis? I know that you are not a substantial cash tax payer right now?

Yeah. I think rate prior to that that were closer -- that we have stated in the past that rates that were closer to 40% were better rates. As we mentioned in the call and in the K, adjusting from prior year, carryforward numbers on state tax liability in the Canadian taxes had an impact that would follow through in the quarter, should not be that high going forward.

Okay. And I do want to ask question which is you made the big investment on the external IT this year. I know that when you talked, you had talked about ultimately doing more investment in your internal IT. When do you anticipate making those investments?

That’s happening right now. And just for the other listeners, I’ll translate that a little bit. The first IT investment external was for the customers and so the web portal, the EMR integration make it easy for the customers and attract new customers. And I did give a number, I think last quarter, where we had $1.6 million in new revenue online to come on third-party payor business just because people that wanted the work-free EMR integration. And now the internal investment is streamlining the operation, especially our insurance billing operation and that project is happening as we speak. And so that’s more of the IT investment working this year is on our internal streamlined operation. And I look forward to reporting those results and how that’s going to impact our gross profit percentage with the automated workflow later in the year.

Okay. So you think another million or so for IT this year or you do not drove round about the detail yet?

You have seen extents of capitalization.

Well, I guess, I’m trying to kind of apples-to-apples. Last -- in 2014, it was primarily expensed, right, your IT investment?

Well, we had a lot of capitalized. The share is on the cash flow side, invested intangibles and you are going to see similar but slightly less than that as we move into next year.

I’d like to see less month -- I'm hoping to see less months. I’m looking at our IT Chief Information Technology officer as well I say that. He is one of the official here.

All right. Great. Well, thanks for all the answers and nice quarter and look forward to talking to you next quarter.

Okay. Thanks Doug. Nice to talk with you today. Look forward to seeing you soon.

Yeah. Thanks.

Thank you. [Operator Instructions] And our next question comes from [Will Bittenlit] [ph]. Please go ahead.

Hey guys, Will here. Congrats on continued improvement over the last four quarters. I had a couple of questions if you guys hear a second. The first one is on just the accounting for loss-gain on disposal of medical equipment. Certainly, if you could just kind of run through that quickly, because I’m not sure I totally understand that?

Well, what occurred in 2012 and I’ll quickly go through this. What basically happened in 2012 was derivative of speech, the SEC gave in 2007. And basically, if you sell -- primarily sell widget which we rent also them, everything flows through your cash flow statement and everything that shoulders with, we’ll show in inventory, even net of depreciation. The example of that is menswear house that rents Tuxedos. So you look at their financials and you’ll see inventory net of accumulated depreciation something that you’ll ordinarily see. For people like us, in Africa, there were another company that’s in similar business, that called up on it. If you primarily rent widgets that you also sell them, all your cash flow that’s associated with widgets is shown in the investing section. Once you do that, you now have to pull those widgets at inventory and put them in a different classification which we did in medical -- it’s now called medical equipment, held-for-sale or rental, just below current assets. So it’s after we did on the cash flow statement to move that cash flow related to sale of medical equipments you previously have rented and also pumps that you bought, you got to move that cash flow down into the investing sections. When you say purchases of pumps and proceeds we bought that include purchase of pumps we bought for sale and proceeds of pumps that we’ve sold. If we sell a pump that has been rented, we will flush through cost of good sold, sell that pump at the net book value.

Got it. So of the $6.8 million -- $6 million, $7 million of proceeds, $2.179 million of that was sort of non-cash booked gain above the book value of pumps that you previously were renting and now have sold.

Yes.

Got it. Okay. All right. And so on the income statement, the $2.179 million just shows up in COGS?

Yeah. But also what you’ve got to remember that on the cash flow statement it’s pure cash. If there was something that goes down the sizeable or KP is an adjustment there. So it’s just not a straight math addition from your balance sheet but yes in general. Again, that’s why we expanded note three on medical equipment.

Right. Okay. All right. I think I’ve got it. Cool. Thanks. And then on looking at the shareholder presentation and I might pull out -- but you guys had three models, three revenue streams. I didn’t understand the supplier-to-supplier. Do you guys actually rent to manufacturers of pumps?

Yes, we do and we also provide service for them.

Okay.

And so for example, I used to be the Chief Commercial Officer for B. Braun and when I was at B. Braun, I contracted with InfuSystem to do all of our services and warranty work for our pumps in Canada because InfuSystem had a Toronto facility and InfuSystem still does that work today. So some of it is service but it’s also rentals. Occasionally, one of the pump manufacturers -- we actually just had guests since here last week with one of the pump manufacturers and they have some supply problems. They had a big quarter. They want to start their new accounts. They don’t have pumps. So, we are going to work with them to rent pumps to their customers that want to buy the same model of pump when it comes off backorders. So, we have a lot of -- we also -- we talk about those big opportunistic sales. We have filled pumps to other rental companies. So when I talk about supplier-to-supplier, I'm talking about the business that we do with pump manufacturers and pump rental companies.

Got it. So the pump manufacturers aren’t really competing with you and that it's not like they're still running the same service to their customers. It's just filling sort of backorder pumps or something they can't sell to a given customer as opposed to like competing on the service side of taking care of all the billing and all the other stuff you do on sort of provider to patient or supplier of provider models?

I would say that we do compete with pump manufacturers for service and I would say that’s something where we all repair a pump and they will repair a pump and so in that aspect, we really are competing. I'm trying to make a lot more cooperative build and we are also trying to -- for some of the pump manufacturers, I'd like to do the same thing we are doing for Braun in Canada. They should focus on building pumps and I'm a big believer in outsourcing and I think we do a good job with our service. And so in some cases, some of the pump manufacturers are looking at us for more service. One of the companies had a recall a while back and they hired us to go out there and help, do field fixes for them. So we want to -- we aggressively market and sell to the pump manufacturers and we’ve got ISO-certified service organization. We meet international standards. We’ve got multiple locations. We’ve got people out on the field and we are marketing that service to manufacturers.

Got it. Okay. That’s all I got. Congrats again on having a great year.

Thank you. Thank you so much for your questions.

Thanks Will.

And our next question comes from [Larry Brooks] [ph]. Please go ahead.

I’m looking at your long-term debt, which looks like it’s gone consistently down. What’s your….

Can speak up, Larry?

Yeah. I saw that your long-term debt has gone consistently down. You’ve reduced it. What’s your target for the end of this year to have that and where do you expect that to be?

Well, I mean from a standpoint of a strong company and right now our EBITDA where it is today and where debt is today, I think we’re now sufficiently delever. We’d like to get at lower but from the standpoint of what’s market out there, hence my commentary that we’re looking forward to this year to lowering our cost of debt. The people of [Wales and Penny Park] [ph] have been great, love working with them. But at the same time, we’ve got to keep in mind what’s best for the company and their shareholders, so we are looking forward to lower the cost of our debt this year in the first half of 2015.

And I guess then, what is that presently what’s your target? And again, so it sounds like your long-term…?

I would say long-term growth.

Your long-term debt probably will remain about the same. What’s your interest rate been at this point?

Our interest rate, cash pay is 7.75%, down from the deal that we cut in the November of 2012 of 9.75%. And so with our leverage ratios being in market, I think you can make a fair assumption from those types of ratios?

All right.

I think Jon makes a great point. It depends on growth. If we’ve see an opportunity where we can acquire a lot more pumps and with the payback we get in the pump, that is going to be the priority. The priority is to grow market share. And when we don’t see those great returns on investments, we can more aggressively pay down debt. But for right now the number of growth opportunities we have is what’s really going to drive that number this year.

All right. Okay. Very good. Thank you.

Thanks for your questions.

Thank you. And we have no further questions at this time.

Okay. Thanks very much. Thanks for listening and we look forward to talking you all next quarter.