May 12, 2015
Executives
Jonathan Foster - Chief Financial Officer Eric Steen - Chief Executive Officer Jan Skonieczny - Chief Operating Officer
Analysts
Douglas Weiss - DSW Investment Brooks O’Neil - Dougherty & Company Raymond Myers - Alere Financial Partners
Operator
Good morning, everyone and welcome to InfuSystem Holdings’ Quarter One 2015 Conference Call. This is your operator, Vivian.
Let me first give you to Mr. Jonathan Foster, Chief Financial Officer.
Jonathan Foster
Thank you, Vivian. 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 and Form 8-K and the company’s Form 10-Q for the first quarter of 2015 were filed with the SEC today as well. Except for the historical information contained herein, the matters discussed on the conference call are forward-looking statements that involve risks and uncertainties.
Such risks and uncertainties could cause actual results to differ materially from those predicted by such forward-looking statements. The words believe, expect, anticipate, and estimate or other similar statements or expectations identify forward-looking statements.
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 conditions to differ from those predicted by forward-looking statements are disclosed in the company’s year end report on Form 10-K for the year ended December 31, 2014 under the heading Risk Factors and elsewhere in the report and in other filings made by the company from time-to-time with the Securities and Exchange Commission.
Forward-looking statements reflect management’s analysis only as of today. The company has no obligations 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 and adjusted net income, which are not considered measures of the financial performance under Generally Accepted Accounting Principles, or GAAP. A reconciliation of the differences between non-GAAP financial measures and those measures such as adjusted EBITDA and adjusted net income and then most comparable GAAP measures are contained in today’s press release.
With that, I would like to turn the call over to Mr. Eric Steen, Chief Executive Officer.
Eric Steen
Good afternoon, everyone and thank you for joining the InfuSystem Holdings Inc. first quarter of 2015 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.
How our investment and electronic connectivity is attracting a record number of new rental customers, our recent asset purchase from Ciscura Holdings, and our new credit facility. But first, let’s go to numbers.
In the first quarter, revenue was $16.7 million, a decrease of 3% versus prior year, when we had a large opportunistic lower margin sale of pumps in the first quarter of 2014. Our net collected revenue was $15.5 million, up 3% as our new payer contracts, helped us build more in network patients than we did in prior year.
Remember from our last call that having a payer contract and being in network reduces our total revenue by not being built at gross price out of network. So, with more payer contracts, our net collected revenue goes up and bad debt goes down.
In Q1, bad debt decreased 43% versus prior year. Our recurring net collected rental revenue was $14.2 million, up 12% versus prior year.
In Q1, we had an early extinguishment of debt charges of $1.6 million, associated with closing out our old high interest credit facility to make way for our new more cost-effective facility. We also have $300,000 in cost associated with the Ciscura asset purchase.
After adjusting for these one-time events, operating income was $1.9 million, up 6% and net income was $700,000, up 17% versus prior year to-date. Adjusted earnings per share, was $0.03 per share, the same as prior year.
Adjusted earnings before taxes, interest, depreciation, and amortization was $3.8 million, an increase of 15% versus prior year. Our electronic connectivity success is growing.
In the first quarter, we added another 15 sites on our total electronic medical records integration, InfuConnect. We now have a total of 40 sites with $4 million in annual revenue coming from this full EMR integration.
We are the only company in our market that has a full integration with every data element, except the patient’s signature coming from the electronic medical record. This saves our customer’s valuable nursing time in order entry, and as a reason that we are taking customers from our competitors.
A record 56 new rental accounts started in April, many of these are large accounts, who attracted to the time savings efficiencies of our not only paper free, but work free InfuConnect. We have filed for patent protection production on our advancement in this area of electronic connectivity solutions.
We believe that the novel IT developments we have created to make our customers and ourselves more efficient will be valued by other healthcare organizations and we plan to license these technologies in the future. One of the things that investors who closely follow our company can see is how purchase of pumps in one quarter can lead to increased insurance billings in the following quarter.
There is a process flow. From purchasing pumps to checking their performance metrics, then logging them into our system, shipping them to the customer, then training and in-servicing the nurses on both the pumps and our insurance billing process.
I can’t highlight enough how much easier the billing process for our customers, nurses is today with our electronic connectivity solutions compared to just a few short years ago with paper and fax machines. After that training implementation preparation is complete, an InfuSystem pump is finally attached to that first patient at a new customer location and later an insurance bill is generated and revenue is collected from a third party insurance payer.
Like many things in life, there is a delayed gratification from buying pumps at InfuSystem. Please, take notice of the $2.6 million in pumps, we bought in Q1, only a very small percentage of them were bought opportunistically for resale at a later date.
The vast majority of Q1 pump purchases were bought for accounts that have put their first patients on the InfuSystem rental pump program at the end of second quarter. Regarding the Ciscura asset purchase agreement, the assets were primarily ambulatory infusion pumps.
For me, an asset purchase of pumps is like buying real estate. There are three things I look for location, location and location.
The locations of these pumps were on the shelves on patient’s homes delivering medications from 106 oncology infusion clinics. It’s important to note these are new customers that InfuSystem is not doing business with.
The asset purchase agreement is a variable or sliding scale agreement that ultimately depends on the total number of pumps we received. And the utilization of these pumps once obtained, we only pay it for pumps we can put our hands on and put into our fleet for service.
Based on our most likely case model, I estimate we will obtain around 1,600 pumps and that the final acquisition price will be somewhat less than $5 million. The asset purchase will be accretive, even though we are only trading at 5 times earnings.
We expect the fully burdened payback, including interest expense to be three years. I calculate a higher internal rate of return compared to a fully burdened comparison of the current cost of obtaining pumps and new customers.
Moving on to our new credit facility, I am so pleased with the work that our CFO, Jon Foster and our Treasurer, Chris Downs did to establish our new $45 million credit facility with JPMorgan Chase to now be borrowing money in the 3% range, instead of the 7.75% range of the previous agreement, opens up a new world of possibilities, like our asset purchase of Ciscura, for example. Going forward, paying down debt and strengthening our balance sheet will be a priority.
In my first two years at InfuSystem, we have invested in a number of strong potential rate of return opportunities, including expanding our pump fleet, funding the IT solutions that are bringing us so many new customers, and allocating resources to diversify our revenue streams, like our pain management service. In view of these timely opportunities, the reduction of debt took a backseat to these longer term growth drivers.
But now with the money we will be saving in interest expense, over $1 million a year, our ability to pay down debt will increase. Now, I would like Jon Foster to take us through the numbers in the new credit facility in a bit more detail.
Jonathan Foster
Thank you, Eric. I will highlight some key first quarter financial results and discuss the impact of the new credit facility.
For the first quarter ended March 31, 2015, revenues were $16.7 million, down 3% from the first quarter of 2014. This is largely due to 34% decrease in product sales, which was due to the opportunistic pump sales that Eric mentioned in the prior year quarter of $0.9 million.
The prior year’s pump sale was partially offset by an increase in rental business of $0.6 million. As we stated previously, the payer mix and the impact of the Affordable Care Act, or ACA and our payer environment is continuing to change.
Consequently, we continue to focus on net rental revenues less bad debt, or as we call it, net collected rental revenues. This focuses on what matters in the end, while we get paid for our services.
Net collected rental revenues in Q1 of ‘15 increased 12% to $14.2 million versus $12.7 million in the first quarter of 2014. This increase occurred mainly as a direct result of our focus on contractual insurance changes.
Gross profit was consistent with the same prior year period of $12.1 million. More importantly, we experienced a 200 basis point improvement in gross profit margin of 72% compared to 70% in the prior year quarter.
Net loss was $0.4 million in the first quarter or $0.02 per diluted share, down from income of $0.6 million and $0.03 per diluted share in Q1 of 2014. Adjusted net income, excluding the non-recurring items, related to the extinguishment of debt, which was due to the establishment of new credit facility with JPMorgan Chase and to the closing and integration cost associated with the acquisition of Ciscura, was $0.7 million beating Q1 of 2014.
Of the $1.6 million of early extinguishment of debt, $0.5 million was cash, the rest was non-cash. The $0.3 million related to the Ciscura asset purchase contain legal, professional and transitional cost.
We expect these costs to total less than $0.5 million in 2015. Provision for doubtful accounts decreased $0.8 million compared to the first quarter of 2014 and represented 7% of revenues compared to 12% of revenues for the same period in 2014.
This change is a result of our increased number of third party payer contracts, whereby previous insurance billings were billed at a higher at a network rate, along with higher rates of bad debt are now being billed at lower in network rates with lower rates of bad debt. Selling and marketing expenses remain consistent at $2.7 million for the quarter.
G&A expenses were $6.0 million, an increase of 22% from $4.9 million for the quarter ended March 31, 2014. This increase was mainly attributable to increases in spending on IT and pain management initiatives of $0.4 million, increased the composition of headcount of $0.1 million, increases in stock compensation of $0.2 million and the previously mentioned $0.3 million in expenses associated for the asset purchase with Ciscura.
Adjusted EBITDA increased 15% or $0.5 million to $3.8 million compared to the same prior year period, despite the increased investments in IT and pain management initiatives. As of March 31, 2015, we had cash or cash equivalents of $3.2 million and also we had $9 million of net availability under the revolver compared to the $0.5 million in cash and cash equivalents and $6.6 million availability under the previous revolver as of December 31, 2014.
This drastic increase in liquidity is a direct result of our recent agreement with JPMorgan Chase. Comparing the working capital days as of March 31, 2015 to this time last year, we ended the quarter with accounts receivable, days sales outstanding or DSO of 62 days, compared to last year 63 days.
Our days sales and inventory including our medical equipment held for sale or rental or DSI increased from 23 days to 25 days. Days sales and accounts payable increased from 27 days to 29 days reflecting better management of accounts payable.
Overall, net working capital days decreased slightly from 59 days to 58 days. One of the efficiency measures that I have mentioned in prior calls is our turnover ratio, as I sometimes referred to it our rental revenue ratio.
Taking just our rental revenue over our medical equipment and rental service at historical cost, on an annualized basis the ratio was 1.32. This slight decrease reflects the purchase of the new equipment that Eric mentioned in anticipation of our new business in Q2.
To end, let me share with you my simple view. I am exited about the company’s sound balance sheet to support future growth.
Our net debt has grown with the business. In Q1 of 2014, net debt reflected two times our annualized adjusted EBITDA.
Today, even with the pumps purchased for the new business we expect in Q2, we are slightly below two times on the same ratio. Coupled this with increase of our liquidity to over $10 million and our new lower interest rate, which resulted in over $1 million in interest savings in 2015 alone, we are set for growing revenues profitably in 2015.
Eric?
Eric Steen
Thank you, Jon. In conclusion, all areas of our business are growing.
Our investment in IT and electronic connectivity is attracting new customers at a record rate and we will see significant improvements in our internal operations by year end. Our improvements in managed care payer contracting and reductions in interest expense will continue generating the cash necessary to invest in new revenue opportunities and to pay down debt.
With the success we have had to begin the year, I am revising our guidance upwards to double-digit collected revenue growth through 2015. Now, I would like to open up the phone lines and answer any questions that you may have.
Operator
Thank you. We will now begin the question-and-answer session.
[Operator Instructions] And our first question comes from Douglas Weiss from DSW Investment. Please go ahead.
Douglas Weiss
Hey, good afternoon.
Eric Steen
Afternoon, Doug.
Douglas Weiss
Just wanted to follow-up a little bit on some of the cost items on provisions and congrats on the improvements there, provision for doubtful accounts. Will that still decline through the year the way it has in prior years?
Jonathan Foster
I think you will see the rate similar to the current rate that we are seeing – we saw on the fourth quarter and then the first quarter. As you saw last year’s double-digit revenue, now we are in the high single-digits.
Douglas Weiss
Okay. And I guess…
Eric Steen
I would add, Doug that we have got a long list of new payer contracts that we are in negotiations with. And so I think there will be some improvement in the rate as the year continues.
Douglas Weiss
Yes, I guess that was my other question was where I guess based on [indiscernible], I mean, how much room is there to go on the – in terms of spending on additional insurers from an earning standpoint?
Eric Steen
With the Affordable Care Act became one of the extra innings, this is baseball term, but I think there is sort of a reset for us in the last year, but we still have plenty of the game left to play and there are organizations that we don’t have contracts with. We have over 300 now, but there is still especially in the federal exchange, the people that we are working with and so we have reached all the ways to go with adding new payer contracts.
Douglas Weiss
So, that’s like ‘17 or ‘16?
Eric Steen
I don’t think the game ever ends, I think would be my answer with that. And I am not trying to be vague, Doug, but I do think that there continues to be – it’s a dynamic market and there is changes and sometimes payer status changes.
So, I think it’s a game that, I mean, I will let Jan answer. She has been doing this for 25 years, whenever you ever felt you have been close to being with all the payers, Jan?
Jan Skonieczny
Exactly. I think what we see is a market that continues to change, especially with the new exchange plans and payers are reinventing plans to keep up with the Affordable Care Act.
So, I think I don’t see our job is ever being done in that respect.
Douglas Weiss
Okay. And then on SG&A pretty big increase of the fourth quarter, even though this is on selling and marketing, was that just sort of an anomaly that dip in the fourth quarter or is there something going on this quarter that’s unusual, on the adjusted selling and marketing line?
Eric Steen
Well, we were flat year-over-year on selling and marketing. Jon, did you have some comments on that?
Jonathan Foster
Doug, you are talking about G&A or selling and marketing?
Douglas Weiss
Yes, I was just looking at the sequential increase in selling and marketing, because last year, in the fourth quarter, you got down slightly below $2 million, let me kind of bounce off that.
Jonathan Foster
Now, it varies from quarter-to-quarter and really depends if commissions we are filing, so...
Eric Steen
I will say one thing in first quarter we true up for the accrual we have had for commissions throughout the year. So I think why don’t we – let’s take a look at that Jon.
And just – I don’t if we may be that’s something that we can get back with more information later. But, I feel that the – our rate has been somewhat consistent.
We have added a small number. We continue to add incrementally at a small rate to our new pain sales force.
But there is nothing – there is not any one-time events that I can think of.
Douglas Weiss
Okay. And, so I mean is it reasonable that that would run pretty flat through the year, I think sort of year-over-year basis?
Eric Steen
I will look at it – I would look at it as the year-over-year basis, in the first quarter which you normally have, you have some seasonal events that occur. And that’s why, it’s best to compare quarter-over-quarter.
We are going to see some increase in selling cost and sales increase with the higher commissions that you are not a tit-for-tat.
Douglas Weiss
Right. And then on G&A, you gave some detail in the press release, but I guess what I am wondering a little bit about is you called out the additional IT expense, but wasn’t there already an elevated IT expense in the first quarter of last year?
Eric Steen
Yes, it was. I was just pointing out the increase year-over-year as we invest more in IT, as you see us – as you have heard us talk about the new business we are expecting in Q2, is a direct result of the initiatives that we are making in IT.
So I will just point out the difference from year-over-year that you are exactly correct, there was an increase in ‘14 Q1 over Q1 of ‘13.
Douglas Weiss
Is that going to, I mean does IT expense stay elevated through the year or is there something kind of front end loaded?
Eric Steen
We will continue to spend on IT. One thing just to start with, 2 years ago this was a paper and fax machine business.
Now we have got our customers, we have got over half of our orders now we will receive electronically. With our InfuConnect for EMR integration, we have our customers order VPCs.
We have our iPad solutions for them. We have our sales force using Salesforce.com CRM.
Last year spending was primarily customer focused to make our customers more efficient and make us stickier with them and that is working. I mentioned the 56 new accounts we had that started in April.
Now this year spending is more on our own internal operations, making us more efficient. And looking forward, I see opportunities to create value not only for our current customers, but for new customers in the acute care space as well.
So I am always going to be looking for loudly profitable return on investments with the high profitability of success. And as long as I see those, we are going to continue to spend in IT to create solutions that are going to bring value in the marketplace.
Douglas Weiss
So if I net out the $300,000 of acquisition expense, that’s about $5.7 million G&A, is that a reasonable run rate number for the year?
Jonathan Foster
Yes. We are also going to have the addition as we have talked about the Southeastern service center with the new acquisition.
You are going to see some increased cost there. All of our service centers show in G&A and not in cost of goods sold.
Eric Steen
And so that will be offset by savings in shipping and transportation, but also increase in revenue too.
Douglas Weiss
Right. Okay.
I mean what about – I mean I guess I think certainly as you spoke to in prior calls, the longer term thought on these investments, is it you will get some – it will improve your cost structure longer terms, you have eliminated redundancies and reduced paperwork, I mean when did you think you really started seeing the benefit from the cost standpoint and the margin standpoint?
Eric Steen
Well, we are already seeing some of that, but there is a lot of moving parts, good things happened and then we have investments that we need to make as the market progresses. So, our gross profit margin was up over prior year and that can be attributed to a lot of things.
We are on cost pressures on our reimbursement pricing. And so the fact that we are improving our gross margin in a climate, where there is downward pressure on reimbursement range, I think show some of the efficiencies that we have achieved.
Douglas Weiss
Okay. Well, I will jump back in the queue.
I have a couple of other questions, but I will let someone else get in.
Eric Steen
Okay. Thank you, Doug for your questions.
Douglas Weiss
Thanks.
Operator
And our next question comes from Brooks O’Neil from Dougherty & Company. Please go ahead.
Brooks O’Neil
Eric, Jon, Jan, good afternoon. Congratulations on the good start to the year.
Eric Steen
Thank you, Brooks.
Jan Skonieczny
Thank you, Brooks.
Jonathan Foster
Thanks, Brooks.
Brooks O’Neil
So, I have couple of questions. One, I know you offered a lot of comments during your prepared remarks, but one line jumped out of me in the press release, that is we are building a strong foundation for future growth.
And obviously, I mean, it looked to me like a $45 million line of credit is a substantial availability for company of your size, which is terrific. So, just talk a little bit about, in a general sense sort of your vision for the future, what this company can become over the next year or two?
Eric Steen
Well, thanks for the question. What could the company become over the next year or two?
Well, we continue to grow organically. Sadly, cancer rates continue to increase in this country.
Brooks O’Neil
Yes.
Eric Steen
And now, we have, in our segment, the largest company ourselves has purchased the third largest assets from Ciscura. So, I think – our net collected revenue rental went up 12% and we started 56 new rental accounts just in April.
And we are going to be attracting more customers with our electronic connectivity solutions, which I mentioned, Brooks, that we feel so exited about some of the things that we have developed internally. We filed for patent protection on them.
And I know in one of my previous answers, I mentioned the acute care space. We don’t really play it all, but some of the investment in IT that we are making, where some of the investments are larger than just making a $70 million company more efficient.
We are going to be licensing in technologies and being able to get into new technologies. I have talked in the past about how we are expanding in the new revenue streams.
Our pain management service continues to grow of having a solution for post orthopedic surgery that eliminates the need for oral narcotics is being well received in the marketplace, lot of committees and decision-makings to work with in the surgical space, but that continues to grow. And we continue to add new product opportunities.
I have said in the past, I think it’s often easier to build something and buy something, but with the opportunity with Ciscura and with our new credit line, we are able to buy something that faulted right into our operations. Jan is doing a great job with her team on the integration.
It’s going as exactly as planned. We are pretty pleased with that.
And there might be other things – other opportunities that present themselves. And now that we have got a nice credit facility at a low interest rate, if good opportunities present itself, there may be another opportunity for acquisition.
I think I am less acquisition happy. There maybe some others and a lot of my experience has been in building things from scratch or with everything we have payer contracts, facilities, salespeople, equipment I think there is a lot of things that we can do on our own.
And that’s why, I have upgraded our guidance to now double-digit net collected revenue because with our payer contracts, we are focused on not how much we can build and pop-up big revenue numbers, billing things out of network that we are never going to collect and they are going to go into bad debt, but having – leveraging those 300 payer contracts and collecting revenue at the double-digit rate through the rest of the year.
Brooks O’Neil
Well, I think that’s great. Thank you very much.
Operator
Thank you. And our next question comes from Raymond Myers from Alere Financial Partners.
Please go ahead.
Raymond Myers
Yes. Thanks for taking the questions.
I want to ask about your market share and market penetrations geographically after the acquisition. Are there still some markets in the United States where you are not well penetrated?
Eric Steen
Geographically, we had a lot of good Southeast business especially in the State of Georgia where Ciscura was headquartered. And I think about all those Atlanta-based customers, we already had that are now going to be so nicely serviced out of our new Atlanta service center.
So geographically, we are well penetrated across the country. We have – we do business with I think nine of the leading of the top 10 cancer hospitals in the United States, we are doing business with nine of them.
So we are doing very well with the big – the segment of big teaching hospitals and university hospitals where we are well penetrated with. I would say there are certain segments like VAs and military, where we are under-penetrated, but we operate two of our newest InfuConnect customers, once in Maine and once in San Diego and we have got customers everywhere in between.
Raymond Myers
But you mentioned earlier that there might be some areas where investments, now you have access to what percent of capital, could you give us a highlight of what those might be and what impact those are going to have on your business?
Eric Steen
I think the most exciting area for investment in my view is still IT. Healthcare as an industry is under-invested in our IT.
And by listening to our customers and by listening to some of the large accountable care organizations that have come to us for solutions to the problem, because we are going to listen and invest with them, I think that continued IT investment on things like our, I have mentioned some of these things in the past, but I will just do a brief review of some of the things that we come out with recently. A pump portal that allows our customers to do a life cycle management on their pumps, we have one large customer that leases 3,000 pumps from us.
And they love our pump portal and the information it gives them on the maintenance of their pumps. We have a new asset tracking system, that’s being well received in both the alternate site and acute care marketplaces.
Our InfuConnect solution, where we get all the data points from electronic medical record, except for the patient’s signature, who can sign on our iPad so we get 100% of our insurance billing information electronically. This is something that InfuConnect doesn’t care of its IV pumps or oxygen or wheel chairs.
So I look forward to go into other DME and other service providers to talk with them about our IT capabilities and I think some of them are going to be interested in that. We have a Block Pain Dashboard, our pain management service that eliminates the need for all narcotics after orthopedic surgery and we call every patient and access their pain and provide the clinician with any red flags with patients that are in pain and the patient pain scores that we are getting are fantastic.
I think I have mentioned this on a call before. We have these postcards, where the patients can give us their comments.
They are called tell us what you think and I love reading the handwritten comments from patients that say things like, this is my second knee surgery, after the first knee surgery I had oral narcotics, they made me sick and I didn’t feel well. With this surgery, I was able to go home after the surgery and be on a conference call for my business at the same day.
Thank you, InfuSystem. I read cards like that and I realize that investing in our pain service and investing in things like Block Pain Dashboard that give our customers an up-to-date reading of all their patients pain levels and the improvement in their patient satisfaction scores regarding pain, that will be important for their reimbursement in the future as CMS changes from buy and build models to performance metrics, like pain scores.
So I could get – I can go on about some of the IT areas that where you see the IT expense and I know I have had one of our large shareholders as they built their model probably one-time, I don't know how much credit to give you for what your investment in IT is. And there is only one, at the end of the day there is just one big scoreboard of revenue and profitability that will put numbers upon as we continue to grow especially with these large accountable peer organizations that our cancer treatments has put us in contact with some for as long as 25 years InfuSystem customers.
So I think you going to continue to look at IT and then continue to look at new therapies. I was at a specialty pharmacy convention last week.
And the number of new infusion drugs that are coming out that not only now go from treating diseases to curing diseases, we are in a credible time in this country with pharmaceuticals that are continuously infused and InfuSystem is in a great position to work with these leading hospitals, to provide our pump rental program, to allow them to have a cost effective way to deliver these new breakthrough specialty continuous infusion pharmaceuticals.
Raymond Myers
Thanks for that. My last question is about the change in mix and how it affected bad debt, if you were to adjust for that change in mix, how much additional revenue would you have recognized if you hadn’t improved the mix?
Eric Steen
Well, that’s a very interesting question. I haven’t looked at it that way.
And I don’t think – as I look around the table, I don’t think we have either. So if bad debt had gotten down 43%, we would have had a lot of billings that would have been out of network and build the gross.
And so, we would have had a much larger revenue number, especially on our recurring revenue. I hate to say things of at the top of my head, people tell me not to do that.
But it would – probably the question quite interesting, I would think just…
Jonathan Foster
You simply had the difference in bad debt from one quarter to the next revenue.
Eric Steen
Yes. All that take it to one thing I want to point out that when we compare it year-over-year, in Q1 of 2014 we had a big sale of smart pumps to a large hospital rental company that made our direct sales as a very large number in Q1.
And we will have some of those sales again, but they are opportunistic as we buy pumps coming off the leases from banks and things like that, and they kind of skew our numbers. Then focusing, I would say focus on our recurring...
Jonathan Foster
Yes, if you just look at rental revenue where mostly the bad debt is you are talking about your growth would have gone from couple of points, would have gone to 9%.
Eric Steen
Okay, to 9%. So, high single-digit there?
Jonathan Foster
Yes.
Eric Steen
Yes. I hope that answers it and sorry for the confusions here, but we haven’t looked at it that way before.
Raymond Myers
Okay, well yes. Thank you.
That’s helpful. Thanks a lot.
Eric Steen
Okay, thanks for the questions.
Operator
[Operator Instructions] And I am not showing any further questions at this time. I apologize.
I will now turn the call back over to Eric Steen. Please go ahead.
Eric Steen
No, I am sorry I stepped on your introduction. I just want to say thanks to everyone for listening.
We look forward to talking to you next quarter.
Operator
And thank you, ladies and gentlemen. This concludes today’s conference.
Thank you for participating. You may now disconnect.