Q1 2025 InfuSystem Holdings Inc Earnings Call

Good day and welcome to the Info System Holdings, Inc. Reports first quarter 2025 financial results Conference call. All participants will be in listen only mode should you need assistance. Please signature.

Operator: Good day and welcome to the InfuSystem Hldgs, Inc.

Operator: reports first quarter 2025 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.

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 touch tone phone to withdraw your question. Please press star.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded.

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Joe Dorame: I would now like to turn the conference over to Joe Dorame, Managing Partner. Please go ahead.

Speaker Change: I would now like to turn the conference over to Joe Dormey Managing partner. Please go ahead. Good morning, and thank you for joining US today to review if you system's first quarter 2025 financial results ended March 31st 2025.

Rich DiIorio: Good morning and thank you for joining us today to review InfuSystem's first quarter 2025 financial results ended March 31st, 2025.

Joe Dorame: With us today on the call are Rich DiIorio, Outgoing Chief Executive Officer, Carrie Lachance, Chief Operating Officer and Incoming CEO, and Barry Steele, Chief Financial Officer. After the conclusion of today's prepared remarks, we will open the call for questions.

Speaker Change: Today on the call are rich Diario outgoing cheap Executive Officer, Kerry Lechance, Chief operating officer, and incoming CEO and Barry Steel Chief Financial Officer. After the conclusion of today's prepared remarks, we will open the call for questions.

Joe Dorame: 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 overlooking statements that involve risks and uncertainties.

Speaker Change: Remarks, I would like to remind everyone certain statements made by the management team of into 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.

Speaker Change: This conference call may contain forward looking statements that involve the 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.

Joe Dorame: Some of which is detailed under risk factors in documents filed by the company with the Securities Exchange Commission, including the annual report on Form 10-K for the year ended December 31st, 2024. 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.

Speaker Change: Four forward looking statements speak only as of the date. The statements were made the company can give no assurance except forward looking statements will prove to be correct. If you system does not undertake and specifically disclaims any obligation to update any forward looking statements except as required.

Joe Dorame: InfuSystem does not undertake and specifically disclaims any obligation to update any forward-looking statements except as required by law.

Rich DiIorio: Now I'd like to turn the call over to Rich DiIorio, Chief Executive Officer of InfuSystem. Rich. Thank you, Joe. And good morning, everyone.

Speaker Change: Now I'd like to turn the call to Rich Diorio, Chief Executive Officer of interview system Rich.

Rich Diorio: Thank you Joe and good morning, everyone. Welcome to Infie system's first quarter 2025 earnings call. Thank you all for joining US today. This will be my last earnings call as I pass the CEO Gabble to my successor, and NP systems next CEO carry Lechance as I said, when we announced a success.

Rich DiIorio: Welcome to InfuSystem's first quarter 2025 earnings call. Thank you all for joining us today.

Rich DiIorio: This will be my last earnings call as I pass the CEO gavel to my successor and InfuSystem's next CEO, Carrie Lachance. As I said when we announced the succession plan, I have absolute confidence in Carrie's abilities, her knowledge of the company and our various business initiatives, and the support that she has within the ranks of the organization. Carrie will do a great job seeing the execution of our growth opportunities and leading the company to what I believe is a very bright future.

Rich Diorio: Confidence and Carry's abilities, our knowledge of the company in our various business initiatives and the support that she has within the ranks of the organization Kerry will do a great job seeing you the execution of our growth opportunities and leading the company into what I believe is a very bright future before my departure.

Rich DiIorio: Before my departure, I wanted to say what an honor it has been serving as InfuSystem's Chief Executive Officer for the past seven and a half years. During my tenure, InfuSystem has faced and overcome many challenges, including COVID, each time coming back stronger than before. We have more than doubled revenue since 2018 while successfully diversifying our business and growth opportunities. This is largely due to the significant new partnerships we have created, including those with GE Healthcare, Smith & Nephew, and Sonara MedTech. Each of these partnerships have validated the growing role InfuSystem can play in providing healthcare solutions, particularly those related to medical devices in solving complex distribution and revenue cycle challenges for our key partners.

Rich Diorio: Serving is infusi.

Rich Diorio: [noise]. This is largely due to the significant new partnerships, we have created including those with G E healthcare Smith and nephew and Sonara Medtech. Each of these partnerships have validated the growing role in few system can play in providing healthcare solutions, particularly those related to medical devices and.

Rich Diorio: And revenue cycle challenges for our key partners I believe the progress that the team has made over the last several years was reflected in the company's strong 2024 second half earnings results and I am very pleased that we see a continuation of the positive trend in the first quarter of 2025, I will now pass the microphone.

Rich DiIorio: I believe the progress that the team has made over the last several years was reflected in the company's strong 2024 second half earnings results, and I'm very pleased that we see a continuation of the positive trend in the first quarter of 2025.

Carrie Lachance: I will now pass the microphone to Carrie, who will give her overview of the quarter. Thank you, Rich. I will talk briefly about the first quarter, and then Barry will provide a detailed summary of our financial results.

Speaker Change: Of the quarter. Thank you rich I will talk briefly about the first quarter and then Barry will provide a detailed summary of our financial results I will then come back with some additional comments before opening the line to questions as rich dated we believe the first quarter results.

Carrie Lachance: I will then come back with some additional comments before opening the line to questions. As Rich stated, we believe the first quarter results show a strong start to the year. Revenue was up 8.5%, and this was without significant contributions from two of our current growth initiatives, Advanced Wound Care and Chemo Mouthpiece. It was a mix of contribution from our other business activities that contributed to our growth during the quarter, with this demonstrating the robustness of our increasingly diversified business model. The revenue growth was accompanied by other positive financial measures for Q1, including a 64% year-over-year increase in adjusted EBITDA to $6.3 million and improved operating cash flow, which was $1.8 million, a nearly fourfold improvement over the prior year first quarter.

Speaker Change: A year revenue was up 8.5% and this was without significant contributions from two of our current growth initiatives advanced wound care and chemo mouthpiece. It was a mix of contribution from our other business activities that contributed to our growth during the quarter with this.

Barry Steel: The revenue growth of the company by other positive financial measures for Q1, including a 64% year over year increase in adjusted EBITDA to $6.3 million and improved operating cash flow, which was $1.8 million a nearly four improve.

Carrie Lachance: Among the many positive financial measures from the first quarter, one thing we want to emphasize on the call is the continuing improvement in our profitability. At the beginning of last year, we put an additional focus on continuous process improvement to increase our operating margins and long-term profit potential. The results we are reporting today for the first quarter of 2025 are a continuation of the profitability trend that started in the second half of last year. The 18.2% adjusted EBITDA margin is the highest first quarter result since 2021, and well above the 12.1% reported last year. This improvement is even after the nearly $500,000 expense incurred in the first quarter of 2025 related to our IT systems upgrade.

Barry Steel: Adjusted EBITDA margin is the highest first quarter results since 2021, and well above the 12.1% reported last year. This improvement is even after the nearly 500000 dollar expense incurred in the first quarter of 25 related.

Barry Steel: Upgrade we will remain focused on process improvement and operational efficiencies and work hard to continue this profitability trend through the remainder of the year stepping back to speak on the broader context of our improving profitability or we are seeing is the.

Carrie Lachance: We will remain focused on process improvement and operational efficiencies and work hard to continue this profitability trend through the remainder of the year.

Carrie Lachance: Stepping back to speak on the broader context of our improving profitability, what we are seeing is the back half of an investment cycle that started when InfuSystem elected to capitalize on opportunities to diversify its business into wound care and biomed. These initiatives have resulted in the company doubling in size over the last seven years. The company's revenue CAGR during the period was over 10%. Profitability was materially impacted during the period as we built the infrastructure and systems necessary to support those new growth opportunities. Much of that build-out work has been completed and we will expect to complete the major technology system upgrade project in early 2026.

Barry Steel: Investment cycle that started when amp system elected to capitalize on opportunities to diversify its business into wound care and biomed. These initiatives have resulted in the company doubling in size over the last seven years, the company's revenue cager during the period.

Barry Steel: Profitability was materially impacted during the period as we built the infrastructure and systems necessary to support those new growth opportunities much of that build out work has been completed and we will expect to complete the major technology system upgrade project I.

Barry Steel: Six next year those new systems are expected to enable greater operating efficiencies, providing payback year. After year. These systems will greatly improve information flow, allowing faster and smarter decision, making I'll return to this idea but first.

Carrie Lachance: Next year, those new systems are expected to enable greater operating efficiencies, providing payback year after year. These systems will greatly improve information flow, allowing faster and smarter decision making.

Barry Steele: I'll return to this idea, but first, Barry will take us through the financial results in the first quarter. Thank you, Carrie, and thank you everyone on the call today for joining us. I'm going to focus on three topics, including the main drivers of the current quarter's results, some additional insights into our full-year outlook, and finally, I'll update you on our current financial position and how it changed during the quarter. Well, let me start with our financial results for the period. During the first quarter of 2025, our net revenue totaled $34.7 million, representing a $2.7 million, or 8.5% increase from the prior year first quarter.

Barry Steel: Our financial results for the period during the first quarter of 2025, our net revenue totaled 34.7 million, representing a 2.7 million or 8.5% increase from the prior year first quarter that included growth in both of our operating segments with the patient.

Barry Steele: That included growth in both of our operating segments, with the patient services segment leading the way, reporting a year-over-year quarterly increase in net revenues totaling $2.2 million, or 11.7%, and the device solutions segment having increased net revenue of $538,000, or 4%. Higher net revenue for the patient services segment included increased patient treatment volumes in all three therapies and higher third-prior payer collection. Oncology net revenue increased by nearly $1.7 million, or 10.3%. Wound care treatment revenue, totaling $900,000, was up by 133%. And pain management increased by 8.8%. These increases were partially offset by a $200,000 decrease in negative pressure wound therapy equipment sales.

Barry Steel: Leading the way reporting a year over year quarterly increase in net revenues totaling 2.2 million or 11.7% and the device solutions segment, having increased net revenue of 538000 or 4%.

Barry Steel: Internet revenue from for the patient services segment included increased patient treatment volumes in all three therapies and higher third prior payer collections oncology net revenue increased by nearly 1.7 million or 10.3% wound care treatment revenue.

Barry Steel: Was up by 133% and pain management increased by 8.8%. These increases were partially offset by a 200000 decrease in negative pressure wound therapy equipment sales the growth and device solutions was primarily attractive.

Barry Steele: The growth in device solutions was primarily attributable to higher rental revenues coming from new customers and was partially offset by lower biomedical services revenue related to a reduction in the number of devices on contract with GE Healthcare. Gross profit for the first quarter of 2025 was $19.2 million, which was $2.7 million or 16% higher than the prior year first quarter. Our gross margin percentage was 55.2%, representing a 3.7% improvement over the prior year first quarter amount of $51.5%. This improvement was mainly driven by the improved third-party pair collection. better revenue mix favoring higher margin revenue and a normal amount of pumps disposal expenses as compared to the prior year when a partial reversal in our missing pump reserve created a benefit.

Barry Steel: Revenues coming from new customers and it was partially offset by lower biomedical services revenue related to a reduction in the number of devices on contract with GE health care gross profit for the first quarter of 2025 was 19.2 million, which was 2.7 million.

Barry Steel: Percent higher than the prior year first quarter, our gross margin percentage was 55.2% representing a 3.7% improvement over the prior year first quarter amount of 51.5%. This improvement was mainly driven by the improve.

Barry Steel: Better revenue mix favoring higher margin revenue and a normal amount of pump's disposal expenses as compared to the prior year when a partial reversal in our missing pump reserve created a benefit the improved product mix included higher unclea.

Barry Steele: The improved product mix included higher oncology and device solutions rental revenues and lower negative pressure wound therapy equipment. Selling general and administrative expenses for the first quarter of 2025 totaled $18.3 million and was $1.2 million or 7.2% higher than the prior year first quarter amount. The increase included approximately $500,000 in expenses associated with our business application upgrade project. increases in revenue cycle and other personnel needed to support the higher revenue volume, and a normalized amount of bad debt expense compared to an accrual adjustment benefit recorded in 2024. Both periods also included non-recurring expenses, which were $100,000 higher in the current quarter.

Barry Steel: Solutions rental revenues and lower negative pressure wound therapy equipment sales selling general and administrative expenses for the first quarter of 2025 totaled 18.3 million and was 1.2 million or 7.2% higher than the prior year first.

Barry Steel: The increase included approximately 500000 inexpenses associated with our business application upgrade project increases in revenue cycle and other personnel needed to support the higher revenue volume and a normalized amount of bad debt expense compared to an cool adjustment benefit.

Barry Steel: Both periods also included non recurring expenses, which were 100000 higher in the current quarter for 2025. This included 1 million in severance expenses for our outgoing CEO and in 2024. They included both a one time payment.

Barry Steele: For 2025, this included $1 million in severance expenses for our outgoing CEO. And in 2024, they included both a one-time payment of $600,000 to a former board member and $300,000 paid to our former auditor. Adjusted EBITDA during the 2025 first quarter was $6.3 million or 18.2% of net revenue. which represented an increase of $2.5 million or 64% from the prior year first quarter. These amounts included ad back adjustments for the non-recurring expenses, including the CEO severance in 2025 and the board member payment in 2024, but not the 2024 prior auditor.

Barry Steel: Former board member and 300000 paid to our former auditor.

Barry Steel: Adjusted EBITDA during the 2025 first quarter was 6.3 million or 18.2% of net revenues, which represented an increase of 2.5 million or 64% from the prior year first quarter. These amounts included.

Barry Steel: For the non recurring expenses, including the CEO severance in 2025, and the board member payment in 2024, but not the 2024 prior auditor fees.

Barry Steel: Turning now to the forecast we continue to expect full year growth in our net revenues of 8% to 10% in an adjusted EBITDA margin to a company that revenue level to be higher than the prior year amount of 18.8% our first quarter results.

Barry Steele: Turning now to the forecast, we continue to expect full year growth in our net revenues of 8-10% and an adjusted EBITDA margin to accompany that revenue level to be higher than the prior year amount of 18.8%. Our first quarter results, with almost 8.5% revenue growth and 18.2% adjusted EBITDA margin, have helped us to put us on the expected path. This is especially true with respect to the profitability measure, since our first quarter is usually somewhat lower than the rest of the year. In fact, due to the year-over-year improvement in adjusted EBITDA, our trailing four-quarter adjusted EBITDA margin was 20.2%.

Barry Steel: At revenue growth and 18.2% adjusted EBITDA margin have helped us to to put us on expected path. This is a especially true with respect to the profitability measure since our first quarter is usually somewhat lower than the rest of the rest of the year in fact.

Barry Steel: Year over year improvement in adjusted EBITDA, our trailing four quarter adjusted EBITDA margin was 20.2% as we look to the coming periods, our revenue growth expectations will become more dependent on volume increases in our new product initiatives, where we see multiple growth.

Barry Steele: As we look to the coming periods, our revenue growth expectations will become more dependent on volume increases in our new product initiatives where we see multiple growth pathways.

Barry Steel: Now a few points on our financial position and capital reserves, our operating cash flow. During the first quarter totaled 1.8 million. This amount was 1.4 million higher than the amount for the prior year first quarter. This increase was due to the higher adjusted.

Barry Steele: Now a few points on our financial position and capital reserve. Our operating cash flow during the first quarter totaled $1.8 million. This amount was $1.4 million higher than the amount for the prior year first quarter. This increase was due to the higher adjusted EBITDA offset partially by a higher increase in our working capital levels as compared to the prior year, which was attributable to higher sequential quarterly revenue growth in the current period. Our net capital expenditures were $2.6 million during the 2025 first quarter, which was higher than the $400,000 we spent during the first quarter of 2024.

Barry Steel: Higher increase in our working capital levels as compared to the prior year, which was attributable to higher sequential quarterly revenue growth in the current period. Our net capital expenditures were 2.6 million during the 2025 first quarter, which was higher than the 400 spent.

Barry Steel: Four the amount during the current period was focused on infusion pumps needed to support increased volume and oncology and the device solutions rental businesses and included some cash payment timing carryover from the fourth quarter of 2024.

Barry Steele: The amount during the current period was focused on infusion pumps needed to support increased volume in oncology and the device solutions rental business. and included some cash payment timing carryover from the fourth quarter of 2024. We continue to anticipate that our overall capital spending requirements will moderate as compared to amounts in prior years, as the sources of our future revenue growth will continue to be more weighted towards less capital intensive revenue sources. In fact, a significant amount of our expected growth during the remainder of 2025 comes from non capital intensive business lines. We continue to be positioned well to fund continued net revenue growth with a growing cash flow from operations backed by significant liquidity reserves available from our revolving line of credit and manageable leverage and debt service requirements.

Barry Steel: We continue to anticipate that our overall capital spending requirements will moderate as compared to amounts in prior years as the sources of our future revenue growth will continue to be more weighted towards less capital intensive revenue sources in fact, a significant amount of our expected growth during the remainder.

Barry Steel:

Barry Steel: We continue to be positioned well to fund continued net revenue growth with the growing cash flow from operations backed by significant liquidity reserves available from a revolving line of credit and manageable leverage and debt service requirements, our net debt increase.

Barry Steele: Our net debt increased by $3.8 million during the first quarter, however, this was largely due to our purchasing of nearly $3 million of our common stock during the quarter. Our available liquidity continues to be strong and totaled more than $47.6 million as of March 31, 2025. At that time, our ratio of net debt to adjusted EBITDA was a modest 0.98 times.

Barry Steel: No I enjoyed the first quarter. However, this was largely due to our purchasing of nearly 3 million of our common stock during the quarter. Our available liquidity continues to be strong and totaled more than 47.6 million as of March 31st first 2025.

Barry Steel: At that time, our ratio of net debt to adjusted EBITDA was a modest 0.98 times. Our debt consists of borrowings on our revolving line of credit with no term payment requirements just under three years of remaining term and with 20 million of the outstanding balance.

Barry Steele: Our debt consists of borrowings on a revolving line of credit with no term payment requirements, just under three years of remaining term, and with $20 million of the outstanding balance locked in at a below market rate of 3.8% by an interest rate swap having the same expiration I will now return the call back over to Thanks, Barry.

Barry Steel: Market rate of 3.8% by an interest rate swap having the same expiration I will now turn the call back over to Kerry. Thanks Berry.

Carrie Lachance: During the recent weeks, as I have been preparing to step into the CEO role, I've had many conversations with shareholders, members of the InfuSystem team, and other important stakeholders. The most common question presented to me in these discussions is what will be different going forward. While I will share more specifics in the future, today I am focused on the potential for improving the profitability profile of the company going forward as we affect the succession plan. We are using the transition as an opportunity to reevaluate each aspect of our business to ensure we are executing against our growth opportunities in the most capital efficient manner while focusing the team on the most promising opportunities and particularly those that are expected to drive our near and long-term growth.

Speaker Change: Capital efficient manner, while focusing the team on the most promising opportunity and particularly those that are expected to drive our near and long term growth. Our business is strong we are growing in a steady and sustainable way while delivering increased.

Carrie Lachance: Our business is strong. we are growing in a steady and sustainable way while delivering increased margins and profitability. Within our growing list of partnerships with major medical device companies, we are known for solving complex problems faced by our manufacturer partners and healthcare providers in facilitating continuity and quality of care involving medical devices. Right now we are focused on wound care and biomed. Going forward, particularly when our new IT systems are up and running, we will be able to more precisely align cost with current opportunities. Our incremental efforts will go to specific projects that are working and will benefit quickly from additional resources.

Speaker Change: Within our growing list of partnerships with major medical device companies. We are known for solving complex problems based by our manufacturer partners and healthcare providers and facilitating continuity and quality of care involving medical devices right. Now we are focused.

Carrie Lachance: We expect to see smaller and faster investment cycles and quicker returns on our investments. Moving to guidance, we are expecting revenue growth for the full year of 2025 to come in around 8 to 10% and our adjusted EBITDA margin to be above the 18.8% delivered in 2024. This improved adjusted EBITDA is after the impact of costs related to our ongoing technology systems upgrade. For which expenses are expected to be approximately 2.5M dollars in 2025 with an expected completion date in early 2026.

Speaker Change: Smaller and faster investment cycles, and quicker returns on our investments moving to guidance. We are expecting revenue growth for the full year of 2025 to come in around 8% to 10% and our adjusted EBITDA margin to be above the 18.8%.

Speaker Change: 2024. This improved adjusted EBITDA is after the impact of cost related to our ongoing technology systems upgrade for which expenses or expected to be approximately $2.5 million in 2025 with an expected completion date in early 2020.

Operator: Operator, we are ready for the Q&A portion of the call. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time, your question has been addressed. You may withdraw your questions by pressing star then 2. At this time, we will pause momentarily to assemble our roster.

Speaker Change: Operator, we are ready for the QA portion of the call.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If you're using a speaker phone please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed.

Speaker Change: You may withdraw your question by pressing Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Brooks O'neill with Lake Street Capital markets. Please go ahead.

Brooks O'Neill: The first question comes from Brooks O'Neill with Lake Street Capital Market. Please go ahead. Thank you. Good morning. Is it too early to assume that these excellent results are the result of Carrie taking over? I was, I was waiting for that one, Brooks. It's the result of a lot of years of Carrie's work behind the scenes on the operational side getting us to profitability and improved profitability. So it's not a surprise, shouldn't be. Great.

Brooks O'Neill: Thank you. Good morning is it too early to assume that these excellent results are the results of carry taking over.

Speaker Change: I was I was waiting for that one Brooks.

Speaker Change: It's it's it's the result of a of a lot of years of carriers work behind the scenes on the operational side getting us to profitability and improve profitability. So it's not a surprise shouldn't be.

Rich DiIorio: You know that we're going to miss you, but we're going to come visit you in New Hampshire pretty soon. Sounds good. I'm looking forward to it. All right. Good.

Speaker Change: Great you know that we're going to Miss you, but we're gonna come visit you in New Hampshire pretty soon sounds good I'm looking forward to it alright, alright, good now Harry.

Carrie Lachance: Now, Carrie, Do you have any thoughts, or Barry, do you have any thoughts about tariff impact? Sure, absolutely. So, as I think we may have mentioned before to a few people, the good thing about tariffs for InfuSystem is that we don't buy a significant amount of things generally. A lot of our cost structure is people or depreciation, buying pumps and that sort of thing. So, you can see that in our financial statements that we have a limited amount of actual purchasing of materials and cost of sales last year is about $34 million. As we see it right now, we do have a little bit of direct exposure to the foreign markets, but it's not a very large number.

Speaker Change: What do you have any thoughts or buried do you have any thoughts about teraf impact.

Speaker Change: Sure Yeah sure absolutely. So as I think we may have mentioned before to a few people. The good thing about terrorist for mph system is that we don't buy significant amount of things generally a lot of our cost structure is people or to.

Carrie Lachance: We do have our other suppliers in the supply chain that are making things in Mexico, South America and other places. We've had only a few conversations with a few suppliers about price increases. It's not been a very large number so far. The good thing is that most of what we see potentially happening, we do have the ability to mitigate it through price increases to our customers. So, so far so good. We have some small increases, but we don't see a very significant impact to our P&L or profitability going forward.

Speaker Change: But our other suppliers and the supply chain that are making things in Mexico, South American other places we've had only a few conversations with a few suppliers about pricing increases it's not been a very large number so far the good thing is that most of what we see potentially happening.

Speaker Change: To mitigate it through price increases to our to our customers. So so far so good we have some small increases, but we don't see a very significant impact to our P N L or profitability going forward.

Brooks O'Neill: Great, that's very helpful. And then I'm just curious, I know, Carrie, you said you want to defer significant comments about future opportunities for down the road.

Speaker Change: Great. That's very helpful. And then I'm just curious I know Kerry you said you wanted defer significant comments about future opportunities for down the road, but one of the areas I've always thought offered great opportunities for you guys is b.

Carrie Lachance: But one of the areas I've always thought offered great opportunities for you guys is biomed services with your infrastructure that's largely been focused on GE. Do you think there's opportunities to add additional customers in that business and leverage your fixed costs and really grow the operation there?

Speaker Change: Structure, that's largely been focused on G. E. Do you think there's opportunity to add additional customers in that business and leverage your your fixed costs and really grow the operation there.

Speaker Change: Hey, good morning, Brooks, Yeah, I think that's a focus for us for sure. We have is a great network certainly from our regional perspective as well the the technicians that really aren't traveling as much they're they're in specific locations there's opportunity for for additional work even outside of G. E. Hopefully some additional work.

Carrie Lachance: Good morning, Brooks. Yeah, I think that's a focus for us, for sure. What we have is a great network, certainly from our regional perspective as well. The technicians that really aren't traveling as much, they're in specific locations. There's opportunity for additional work, even outside of GE, hopefully some additional work there. So it is something that we're focused on and driving the team to take a look at and see what else we can bring in.

Speaker Change: There so does something that we're focused on and driving the team to take a look at and see what else. We can bring in great. Thank you for taking my questions.

Brooks O'Neill: Great.

Brooks O'Neill: Thank you for taking my question.

Brooks O'Neill: Thank you, Brooks.

Speaker Change: Thank you.

Speaker Change: The next question is from Matt Hewitt with Craig Hallum Capital Group. Please go ahead.

Matt Hewitt: The next question is from Matt Hewitt with Craig Hallam Capital Group. Please go ahead.

Matt Hewitt: Hello, this is Telephone for Matt, and one question from us. So with the Yeah, so I would say this is maybe a little bit of a high watermark from that perspective. As we look at some of the new products coming in, there'll be a little bit lower gross margin. We'll have some SG&A as well, but it still should be good on the EBITDA line. So I wouldn't see that the gross margin would necessarily go up from this point, but it should stabilize. All right. Thank you.

Speaker Change: Hello. This is telephone for Matt and one question from us so with the jump in gross margins how should we estimate it for the rest of the year. Thanks.

Speaker Change: Yes, so what I would say this is maybe a little bit of a high watermark from that perspective, as we look at some of the new products coming in there'll be a little bit lower gross margin, we'll have some SGA as well, but it's still should be good in the EBITDA line. So I wouldn't see that that the gross margin necessarily go.

Speaker Change: Alright, thank you.

Speaker Change: The next question is from Jim Sadati with Sidation Company. Please go ahead, hi, good morning, Barry Rich and Carey and rich I just want to say good luck and whatever you do.

Jim Sidoti: The next question is from Jim Sidoti with Sidoti and Company. Please go ahead.

Rich DiIorio: Hi, good morning, Barry, Rich, and Carrie, and Rich, I just want to say good luck in whatever you do, and that I'm actually pretty jealous of you right now. Thanks, Jim. I appreciate it.

Speaker Change: [laughter]. Thanks, Jim I appreciate it so you on the last call I pointed out that the oncology business has been growing high single digits and you know I've been doing really well and you said well don't expect that to continue and then you just reported.

Jim Sidoti: So, you're on the last call. I pointed out that the oncology business has been growing high single digits and you know been doing really well and you said well don't expect that to continue and then you just reported 10% growth for that business in the quarter so you know what's going on there and you know Why do you think it was slowed down? So I think it grew in the first quarter with a good combination of some volume and on the revenue cycle side, the collections. So it's a combination of both. We're always going to expect volume growth, and we've never expected a huge number, Jim, right?

Speaker Change: Why do you think it'll slowdown.

Speaker Change: [noise]. So I think it grew in the first quarter with a good combination of some volume and on the on the revenue cycle side. The collections. So it's a combination of of both you know, we're we're always gonna expect volume growth and we've.

Rich DiIorio: It's always low to mid-single digits there. I think the extra bump we saw in the first quarter, and we've actually seen it now for a year or two, comes on the revenue cycle side and our ability to collect. It's just improved processes, improved teams, leadership. There's a lot of reasons why. It's hard to expect that to continue. At some point, you squeeze everything out of it you can, and that slows down. But we don't expect the volume to necessarily slow down. There's still enough market share for us to go after and get on kind of a continuous, nice linear pattern.

Speaker Change: And that slows down, but we don't expect the volume to necessarily slow down there's still enough market share for us to go after and get on kind of a continuous nice linear pattern, but yeah. I think it was 10% for the quarter a little over 10% for the quarter that that's more than expected mostly to the revenue cycle.

Rich DiIorio: But yeah, I think it was 10% for the quarter, a little over 10% for the quarter. That's more than expected, mostly because of the revenue cycle side. It was split about 50-50 between volume and net growth to net benefit. Okay, so the volume was still, you know, roughly 5%. Yep, that's correct. Is pricing stable for that? It always comes in sort of timing by different quarters. So if you look at the comparison of the prior year, the growth to net was a little bit down and this year's first quarter was a little bit up. So it can go up and down a little bit as we go from quarter to quarter.

Speaker Change: What 50 50 between volume and and net gross to net benefit okay. So so the volume would still you know roughly 5%.

Speaker Change: Yep, that's correct. It is pricing stable for that for that business. It always comes in in sort of timing by different quarters. So if you look at the comparison of the prior year. The gross to net was a little bit down and the this year's first quarter was a little bit up so it.

Speaker Change: Okay, and then on the device solutions the gross margin business, there really really had a nice pop you know what was what was the responsible for that.

Rich DiIorio: Okay, and then on the device solutions, the gross margin business there really had a nice pop. What was responsible for that? It's the most important part of the growth there is the rental business, where, you know, when we buy rentals, we have a nice price that comes in. We do depreciate the pumps over seven years, so that is a little bit lower cost as we buy pumps to support that growth. Okay, so where do you anticipate, just for that component, do you think that this was kind of like a one-time thing, or do you think you stayed close to that level?

Speaker Change: It's it's the the most important part of the growth there is the rental business, where you know when we buy rentals, we haven't a nice price that comes in we do depreciate the pumps over seven years, so that is a little bit lower cost as we buy pumps to support that growth.

Speaker Change: Okay. So I D, where do you anticipate just for that component do you think that this was kind of like a one time thing or do you think you stay close to that level I think that I think this is a I would I would be a little bit more bullish on the margin for device solutions. It probably can go.

Rich DiIorio: I think this is a, I would be a little bit more bullish on the margin for device solutions. It probably can go up a little bit, but it certainly, we don't see it going down necessarily.

Speaker Change: It certainly does we don't see it going down necessarily okay.

Jim Sidoti: Okay, all right, then you commented on tariffs. You know, what about the other budget cuts that have been proposed by the new administration? Do you see any risk as a result of those cuts? I don't. Thanks, Jim. We don't. You know, we're in a really good space in the home care market, right? Hospitals are looking to cut costs all the time. And, you know, we live in a good world from a from a cost perspective for payers, et cetera. So we're not seeing any cuts to our reimbursement or anything, so we're pretty stable there. Yeah, a big piece is in 2016, CMS cut our reimbursement to zero, if you remember going through that.

Speaker Change: Then you commented on tariffs you know what about the other budget cuts that have been proposed on the New administration do you see any risk as a result of those cuts.

Speaker Change: I don't thanks, Jim We don't you know we're in a really good space in the home care market right hospitals are looking to cut costs. All the time and you know we live in a good world from a from a cost perspective for Forers. So we're not seeing.

Speaker Change: O R. Our reimbursements or anything so we're pretty stable there yeah, a big pieces in 2016 C. M. S. K reimbursement to zero, if you remember going through that so once that happened, we're very little exposure to the government cuts okay alright.

Jim Sidoti: So once that happened, we have very little exposure to the government cuts.

Jim Sidoti: Okay, all right, then two more. The $2.5 million in costs for the IT upgrade, is that essentially gonna be gone by 2026? I think you'll see a little bit in the first quarter of 2026 as we wrap up the project, but that's a very important point. It should drop off very rapidly after the first quarter according to our current plan.

Speaker Change: Two more the the 2.5 million in in cost of the I T upgrade is that essentially gonna be gone by 2026, I think you'll see a little bit in the first quarter 26, as we wrap up the project, but that's a very important point should drop off very.

Speaker Change: First quarter. According to our current plans, Okay and then the tax rate you know you reported.

Jim Sidoti: Okay, and then the tax rate, you know... You reported... income before taxes, you know, roughly, you know, $250,000. So you would have had a break even quarter if it hadn't been for the for the income tax rate. So one, was any of that tax paid in cash? And, you know, when do you think that rate comes to something more realistic? So, as you remember from the last quarter, the two main drivers or the main driver really is the fact that we have our equity plans that have an unfavorable or a shortfall and we don't get to deduct the expense associated with the plan.

Speaker Change: Income before taxes, you know roughly you know $250000. So you would've had a breakeven quarter if it hadn't been for the for the income tax rate. So one was any of that tax paid in cash and you know what do you think.

Speaker Change: What we holistic.

Speaker Change: If you remember from the last quarter. The two main drivers or the main driver really is the fact that we have our stock option, our sorry, our equity plans that have unfavorable or a shortfall and we're taking we don't get the deductible.

Speaker Change: So that costs causes the rate to go, especially when we're close to breakeven also the C. O severance was not taxed deductible because of the limitations on on officer compensation. So it's a very unusual amount last quarter.

Jim Sidoti: So, that causes the rate to go up, especially when we're close to breakeven. Also, the CEO severance was not tax deductible because of the limitations on officer compensation. So, it's a very unusual amount last quarter and this quarter even especially. Our sort of underlying natural tax rate is in the 30 range. It's not cash. We are paying a little bit to the states now, but most of the tax provision is deferred tax impact, so it's not cash. We have tax attributes that from at least a federal perspective will keep us from being a significant cash taxpayer for a while.

Speaker Change: Jennifer for a while.

Jim Sidoti: All right, thank you. Thanks, Jim.

Speaker Change: Alright. Thank you. Thank you.

Anderson Schock: The next question is from Anderson Schock with B. Reilly. Please go ahead. Hi, good morning.

Anderson: The next question is from Anderson shock with B Riley. Please go ahead hi, good morning. Thank you for taking our questions and congrats on the great first quarter. So first could you provide a little more color on gross margins. So you had a nice improvement of the device solution side, but this.

Anderson Schock: Thank you for taking our questions and congrats on the great first quarter. So first, could you provide a little more color on gross margins? So you had a nice improvement on the device solution side, but this is partially, or I guess this offset the decline on the patient services side. Could you talk about what drove the decline there and how we should think about that going forward? Sure, in the patient services side, some of the new business that we have is a little bit lower margin. It's still good at the EBITDA margin level, but it's a little bit lower on the gross margin.

Anderson: Or I guess, it's offset the decline on the patient services side could you talk about what drove the decline there and how we should think about that going forward.

Anderson: Sure and the patient services site some of the new business that we have is a little bit lower margin. It's still good at the gross margin or sorry, the the EBITDA margin level, but it's a little bit lower on the gross margin level won't care in particular, it's a little bit lower okay got it and then on.

Anderson Schock: The wound care in particular is a little bit lower. Okay, got it.

Anderson Schock: And then on chemo mouthpiece, could you discuss the reimbursement here and how do you expect adoption to play out through the year? Do you expect meaningful revenue in 2025, or is this going to take a little more time to build momentum? Well, I can say we're seeing a lot of interest and excitement for our customers, for sure. A lot of traffic and interest from our customers and nursing staff.

Anderson: Could you discuss the reimbursement here and how do you expect adoption to play after the year do you expect meaningful revenue in 2025 or is this gonna take a little more time to build momentum.

Anderson Schock: I do think it's going to take a little more time. What we're seeing is definitely some delays in the sales cycle, getting it onto formulary, you know, clinics taking some time building orders in the system, figuring out the logistics of the product. So, while we see a lot of interest, we are seeing a little bit of a delay or, you know, it's just taking some time for the customers to get those orders in, get the products, you know. into the system? Yeah, on the reimbursement side, it's until they start ordering and start going after reimbursement to the payers and get that experience to kind of help us understand that, we won't understand it.

Anderson: System figure out the logistics of the product. So what we see a lot of interest we are seeing a little bit of a delay or.

Anderson: It's just taking some time for the customers to to get those orders and get the get the products you know.

Anderson: Into the system, yeah on the reimbursement side, it's Intel they start ordering and start going after reimbursement to the payers and get get that experience to kind of help us understand that we won't we won't understand it I mean, our expectation is that it should get reimbursed there's a code there from CMS it's a.

Anderson Schock: I mean, our expectation is that it should get reimbursed. There's a code there from CMS that's approved. It shouldn't be a big issue, but we need that experience, which really comes after they start ordering product, billing patients, insurance companies, which could take a while to get that feedback.

Anderson: A big issue, but we need that experience, which really comes after they start ordering product billing billing patients insurance companies, which could take a while to get that get that feedback back.

Speaker Change: Okay got it and then on the I T. Upgrade. So is this is gonna conclude an early 2026 is that 2.5 across like until then or is this just for 2025 and I guess should we expect to see this or I guess should we expect this continue about 500000 per quarter through 20 or.

Anderson Schock: Okay, got it.

Anderson Schock: And then on the IT upgrade, so this is going to conclude in early 2026. Is that 2.5 across like until then? Or is this just for 2025? And I guess expected to see this, or I guess should we expect this to continue at $500,000 per quarter through 20, or first quarter of 2026, so $2.5 million total then, or how should we think Yeah, we were a little bit lower than we expected for the first quarter. I think we expected about $600,000. So we'll probably catch back up to $2.5 million for 2025. And that that rate will start to drop off, I think, pretty significantly in the first quarter of 2026 and then should be minuscule going forward from that point.

Speaker Change: 26, or 2.5 million total then or how should we think about this yeah. We we're a little bit lower than we expected for the first quarter I think we expected about 600000, so it probably catch back up the 2.54 2025.

Speaker Change: And that that rate will start to drop off I think pretty significantly in the first quarter of 2026, and then should be miniscule going forward from that point. So 22.5 million is our budget our plan for the current year for 500000 or a little bit less than 500000 into it in the first quarter.

Barry Steele: So $22.5 million is our budget, our plan for the current year. We're $500,000 or a little bit less than $500,000 into it in the first quarter.

Anderson Schock: Okay, got it.

Speaker Change: [noise], Okay got it thank you for taking our questions.

Debbie: Thank you for taking our questions. Debbie? I'm sorry.

Speaker Change: Debbie.

Debbie: I'm, sorry, I I was still on mute. This does conclude the question and answer session I would like to turn the conference over to Kerry Lechance for any closing remarks.

Debbie: I was still on mute.

Debbie: This does conclude the question and answer session.

Carrie Lachance: I would like to turn the conference over to Carrie Lachance for any closing remarks. Thanks, Debbie. I want to thank everyone for participating on today's call.

Kerry Lechance: Thanks, Debbie I Wanna, Thank everyone for participating on today's call. We look forward to our second quarter call and we can update on our results and further progress.

Carrie Lachance: We look forward to our second quarter call when we can update on our results and further progress.

Kerry Lechance: [noise]. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.