Good morning, everyone. And welcome to the InfuSystem Holdings Inc. reports First Quarter 2019 Financial Results Conference Call. All participants will be in a listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. Joe Dorame, Managing Partner. Please go ahead.

Thank you, Jamie. Good morning. And thank you for joining us today to review the financial results of InfuSystem Holdings Inc. for the first quarter of 2019, which ended on March 31, 2019. With us today on the call representing the company, are Rich Dilorio, President and Chief Executive Officer and Greg Schulte, Chief Financial Officer. After the conclusion of today's prepared remarks, we'll open the call for a question-and-answer session. 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 would 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 and documents filed by the company with the United States Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31, 2018. Forward-looking statements speak only as of the date the statements were made. The company 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 events or otherwise. Now, I'd like to turn the call over to Mr. Rich Dilorio, President and Chief Executive Officer of InfuSystem. Rich?

[Technical Difficulty]

Pardon me, this is the conference operator. We're experiencing technical difficulties, we do ask that you please remain patient. We should have the speaker line back for you momentarily.

Hey Jamie, it's Rich Dilorio. We're back.

Mr. Dilorio, you're currently connected. Mr. Dorame has read through his statements, so you can begin whenever you are ready.

Thanks Jamie. And thanks Joe, and good morning, everybody. And thank you for joining InfuSystem first quarter 2019 earnings call. Before I begin, I would like to thank the phenomenal team at InfuSystem for their hard work. We've been running at full speed for almost two years, first to reorient the company around efficiencies and cost savings, which led us to the 48% increase in operating cash flows during the fiscal year of 2018. And now we prepare for growth that we believe lies ahead for the company. Our plan to advantage of this opportunity and gain market share in oncology is going exactly as planned. As I mentioned on the last call, our largest remaining competitor is in the process of changing its entire business model, and this is creating an exciting opportunity for us. But before getting more into that, I would like to go over a few highlights and then turn it over to Greg Schulte, our CFO, for a review of the Q1 results. First, I’m pleased to report the growth we talked about last quarter has begun rolling in. In the first quarter, we had revenue growth of 10.4%, which was a result of market share gains from both elastomeric pumps in oncology, as well as growth in our InfuBLOCK pain service and increased product sales. Second, I’m proud of the efforts of our sales teams as the 10.4% growth in the quarter is a testament to their hard work. Great news is that we're still early in the process of winning significant market share in oncology, and that impact specifically is yet to be seen. I will speak more about our progress in oncology. But first, Greg, will review the first quarter financials.

Thank you, Rich. I’m very pleased to report on the highlight of our first quarter of 2019 financial performance. As Rich mentioned, net revenues for the quarter ended March 31, 2018 were $18.2 million, an increase of $1.7 million or 10.4% in the same prior year period. Our cash flows from operating activities were $1.3 million for quarter end for March 31, 2019, up $0.2 million or 25% from the same period in 2018. Improved working capital net outflows of $1.3 million primarily due to the positive effect of vendor management on Accounts Payable, partially offset by net accounts receivable outflows due to our growth, while partially offset by unfavorable profitability after adjustments to net income, primarily attributed to the expenses related to our growth that was previously mentioned are the primary causes for the increased operating activities. These increased cash flows have allowed us to use our cash on hand to invest in purchase of funds to support our current and future revenue growth without taking out any additional debt in the first quarter. Net loss for the quarter ended March 31, 2019 was $1 million versus net income of $0.2 million for the quarter ended March 31, 2018. Adjusted EBITDA, a non-GAAP financial measure for the quarter ended March 31, 2019 was $3.1 million, a decrease of 12.5% from the same prior year period and representing 17.1% to 21.6% of net revenues respectively. In February, we also completed the fifth amendment to our credit agreement with JP Morgan Chase, which will allow us to finance our expected growth, primarily for internal cash to give us flexibility we need to respond quickly to opportunities in the marketplace. I will now turn the call back to Rich.

Thanks, Greg. Now, I’d like to give everybody an update on the growth opportunity in front of us on the oncology market. Our largest competitor is changing its model in oncology, which is creating a significant opportunity for us. As I mentioned, although we’re still early in the process of being earning customers, the process is going exactly according plan. With material new business expected, we begun investing in our team, our operations and our pump fleet as we begin to scale to meet that demand. These investments will negatively affect profitability in the short term as seen in the first quarter. The additional revenue from the market share gains is expected to start hitting the income statement in the second half of 2019 and carry into 2020. Over the long term, the incremental business we’re winning now will drive higher profitability, higher cash flow and substantial value creation for our shareholders. The nature of our business makes it difficult to predict the quarter-to-quarter impact of this new business. The timing of customer commitments, in services and our revenue cycle, all impact the phasing of revenue when we add new customers. However, our initial analysis shows the long term impact is likely to increase InfuSystem revenue to approximately $80 million annually, and to improve EBITDA to around $20 million through 2020. All of these are just preliminary numbers we feel the upside in 2020 is significant, and we will continue to refine our targets as we move further along in the process and we finalize our 2020 plan for the year. With that being said, I'm happy to answer any questions.

Ladies and gentlemen, at this time, we’ll begin the question-and-answer session [Operator Instructions]. Our first question today comes from Douglas Weiss from DSW Investment. Please go ahead with your question.

Good morning, congrats on the continued progress on revenue. I wondered if you could give a little more detail on the cadence of the operating investments. To what extent are those already reflected in the operating expense, and how do you see that flowing through the year?

So first quarter and second quarter as we're continuing on board this growth, we expect operating expenses to be ahead of revenues. Second half of the year, we expect to get the benefit of the operating expenses plus incremental revenues. So we expect for the first half of the year for the operating expense to stay ahead of the revenues.

I guess you’re saying you see a little -- you see some sequential growth in operating expense next quarter?

Probably recently not much more than this order, but revenue traction is expected to both pick up towards into Q2…

And is that mostly going into the G&A line or is it dispersed among the different…

There's just most of the increases in the G&A line, we have some small increases this quarter in selling just due to timing of expense, but mostly anticipate into G&A line, and also in the cost line we will see increases in our supply costs, which because we need to ship supplies ahead of the revenues supply costs doesn't [indiscernible].

Is it mostly additional employees to meet with medical providers…

We've increased -- we have got final number, we're planning on increase of about 20 to 25 employees to support the increased revenues.

Over the course of the year?

Yes, exactly.

Are you still maintaining the general EBITDA guidance you gave for 2019?

Yes, 2019, we expect the guidance to be -- we expect a little more revenue, but the EBITDA will be in the range what we've given, because it will take a little longer to get the EBITDA traction with the response.

And then you didn't break out the sales and rental numbers. Is it possible to share what those were?

We just -- for presentation purposes, we want to commence little more this quarter. But the rental business grew from $14.4 million last year to $15.1 million this year at 4.5%, and pumps and other product sales grew from $2.1 million to $3.1 million, 52% increase.

Last question, do you guys have a way of tracking your churn. And could you talk a little bit about -- it seems like the environment from a year two ago when there was pretty aggressive competition from disposal pump sales become a little more benign. But could you -- I don’t know if you have any actual numbers on that if you could track that or if not, could you just talk about it qualitatively?

Doug, you're right. So elastomerics were pretty aggressive for a year or two that is effectively died down as we mentioned over the last couple of quarters. The biggest manufacture is still on hold in the U.S., so that’s died down quite a bit. And obviously with our single biggest competitor changing their model the way that they are, I don’t watch the numbers but actually we're at almost 100% retention from a customer standpoint.

[Operator instructions] And ladies and gentlemen, at this time, I’m showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

Thanks Jamie. I would like to thank everyone for joining our call today. This is an exciting time for InfuSystem and we’re looking forward to future calls and sharing our progress. Have a great day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.