Q2 2025 InfuSystem Holdings Inc Earnings Call

Conference Operator: Good day and welcome to the InfuSystem Holdings Inc. second quarter fiscal year 2025 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Dorame of Lytham Partners LLC. Please go ahead.

Good day and welcome to the info system Holdings. Second quarter fiscal year 2025 for financial results conference call.

All participants will be in a listen. Only mode.

Should you need assistance please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions.

to ask a question, you may press star then 1 on your telephone keypad,

To withdraw your question please press star then 2 please note this event is being recorded.

Joe Dorame: Good morning and thank you for joining us today to review InfuSystem's Q2 2025 financial results ended June 30, 2025. With us today on the call are Carrie Lachance, Chief Executive Officer, and Barry Steele, Chief Financial Officer. After the conclusion of today's prepared remarks, we will open the call for questions. Before we begin with prepared remarks, I would like to remind everyone of certain statements made by the management team of InfuSystem during this conference call to forward-looking statements within any 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 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 31, 2024.

Good morning, and thank you for joining us today to review InfuSystem’s second quarter 2025 financial results, ended June 30, 2025.

With us today on the call are carrying the chance cheap executive officer and Barry steel Chief Financial Officer. After the conclusion of today's prepared remarks we will open the call for questions

Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of in system. During this conference call to forward looking statements within the meeting of the private Securities, litigation Reform, Act of 1995,

Joe Dorame: 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. InfuSystem does not undertake and specifically disclaims any obligation to update any forward-looking statements except as required by law. Now I'd like to turn the call over to Carrie Lachance, Chief Executive Officer of InfuSystem. Carrie?

Except for the statements of historical facts. This conference called may contain what was deep statements that involve risks and uncertainties, some of which you detailed risk factors and documents filed by the company with the Securities and Exchange Commission, including the annual report on form 10K for the year. Ended December 31st, 2024 forward-looking statements speak only as of the date. The statements were made. The company can't get no. Assurance of such forward-looking statements will prove to be correct.

If your system does not Undertake and specifically, disclaims any obligation update any forward-looking statements except as required by law. Now, I'd like to turn the call over to Carrie the chance, Chief Executive Officer of Infuse system, Carrie

Carrie Lachance: Thank you, Joe, and good morning, everyone. Welcome to InfuSystem's second quarter fiscal year 2025 earnings call. Thank you for joining us today. I will provide a second quarter overview highlighting key successes, addressing notable challenges, and outlining our strategic priorities for the balance of the year and beyond. Then Barry will provide a detailed summary of our financial results. I will then come back with some closing comments before opening the line to questions. We are pleased to report another strong quarter of financial performance marked by meaningful margin expansion, robust cash flow, and enhanced profitability. In Q2, revenue grew 7% to $36 million and gross margins expanded by 574 basis points to reach 55.2%. This resulted in a 32% year-over-year increase in adjusted EBITDA to $8 million, with EBITDA margins improving by 427 basis points to 22.3%.

Thank you, Joe and good morning, everyone. Welcome to MP systems. Second quarter fiscal year, 2025 earnings call. Thank you for joining us today.

I will provide a second quarter, overview highlighting. Key, successes addressing notable, challenges and outlining our strategic priorities for the balance of the year and Beyond

Then Barry will provide a detailed summary of our financial results.

I will then come back with some closing comments before opening the line to questions.

We are pleased to report another strong quarter of financial performance marked by meaningful margin expansion, robust, cash flow and enhanced profitability.

In Q2 Revenue grew 7% to 36 million and growth margins expanded by 574 basis points to reach 55.2%.

Carrie Lachance: Net income increased by 262% and cash flows from operations more than doubled both for the quarter and year to date. These results reflect our team's disciplined execution and ongoing commitment to process improvement across our organization. In addition to operational performance, we returned approximately $3.5 million to shareholders through stock repurchases during the quarter, bringing the total shareholder return to $6.4 million for the first half of the year. We have demonstrated a significant improvement in year-over-year operating cash flow, paired with a significant reduction in capital expenditures. This is in line with the expectations and trends we have discussed with you. For the first six months of 2025, operating cash flow was $8.7 million, an increase of $6 million over the prior year, and net capital expenditures for 2025 were only $2.9 million, a decrease of $4.2 million over the first six months of 2024.

This resulted in the 32% year-over-year increase in adjusted Eva to 8 million dollars, with Eva margin improving by 427 basis points to 22.3%.

Net income increased by 262% and cash flows from operations. More than doubled, both for the quarter and year to date.

These results, reflect our team's disciplined execution, and ongoing commitment to process Improvement across our organization.

In addition, to operational performance, we return to approximately 3.5 million to shareholders through stock repurchases. During the quarter, bringing the total shareholder, return to 6.4 million for the first half of the year.

We have demonstrated a significant Improvement in year-over-year. Operating cash flow paired with a significant reduction in capital expenditures.

This is in line with the expectations and Trends, we have discussed with you.

Carrie Lachance: We expect this strong cash flow to continue for the rest of the year. In a moment, Barry will share some additional details surrounding this. We use this cash flow surplus for a few different important initiatives aligned with our capital allocation strategy and priorities. These initiatives include buying back common stock under our share buyback program, acquiring a small company that facilitates our strategy to grow and improve efficiencies in advanced wound care, and payments to reduce outstanding revolving line of credit borrowings. Our positive outlook for additional strong operating cash flow for the back half of the year of 2025 positions us to make similar investments. Now I'd like to touch on some underlying positives for the quarter. First, the relationship with Smith & Nephew is progressing as expected, and we believe we have an opportunity to beat our 2025 forecast.

For the first 6 months of 2025, operating cash flow, was 8.7 million and increase of 6 million over the prior year and net. Capital. Expenditures for 2025 were only 2.9 Million, a decrease of 4.2 million over the first 6 months of 2024,

We expect the strong cash flow to continue for the rest of the year in a moment. Barry will share some additional details surrounding this.

We use this cash flow Surplus for a few different important initiatives. Aligned with our Capital allocation strategy and priorities.

These initiatives include buying back common stock, under our share buyback program, acquiring a small company that facilitates our strategy to grow and improve efficiencies and advanced wound care.

And payments to reduce outstanding revolving line of credit borrowing.

Our positive outlook for additional strong. Operating cash flow for the back, half of the year of 2025, positions us to make similar Investments.

Now, I'd like to touch on some underlying positive for the quarter.

Carrie Lachance: This business has lower margins, but is asset light because we rent the devices from Smith & Nephew. Revenue for the program was $1.6 million during the first half of 2025, $946,000 for Q2. It's still a small part of our total business, but it shows promise for sustained growth with minimal upfront capital requirements. Second, investments made in 2024 for devices in the Device Solutions Direct Rental business are paying off. Last year, we bought $5.2 million in devices for that business that have led to $3.5 million in increased revenue annually. The rental business has one of the highest operating cash margins in our project portfolio. Third, Oncology continues to be a solid contributor to steady and sustainable growth in both revenue, profits, and cash flows, and as such, we have increased our outlook for that business.

First, the relationship with Smith and nephew is progressing as expected and we believe we have an opportunity to be our 2025 forecast.

This business has lower margins, but is asset light because we rent the devices from Smith and nephew.

Revenue for the program. Was 1.6 million during the first half of 2025 94600 for Q2?

So, it's still a small part of our total business, but it shows, promise for sustained growth with minimal upfront, Capital requirements.

Second Investments made in 2024 for devices. In the device Solutions, direct rental business are paying off.

Here we bought 5.2 million in devices for that business that have led to 3.5 million increased Revenue annually.

The rental business has 1 of the highest operating cash margins in our project portfolio.

Carrie Lachance: Finally, we are successfully managing spending in order to maintain or expand margins. Turning to our outlook this morning, we are updating our 2025 revenue growth outlook to a range of 6% to 8% from the previous range of 8% to 10%. There are a number of reasons driving the update; however, before I expound upon those, I'd like to share a few positive financial updates. Despite the slightly lower revenue guide, we are increasing our outlook for full-year adjusted EBITDA and, consequently, raising our range of adjusted EBITDA margin by approximately 120 basis points to 20% or higher. This adjusted EBITDA outlook continues to include expenses we are currently investing to implement new business applications, our ERP, totaling approximately $2.5 million in 2025. This program, along with most of the related spending, is expected to be completed at the end of the first quarter of 2026.

Third oncology continues to be a solid contributor, to steady and sustainable growth, and both Revenue profits, and cash flows. And as such, we have increased our outlook for that business.

Finally, we are successfully managing spending in order to maintain or expand margins.

Turning to our Outlook. This morning, we are updating our 2025 Revenue growth Outlook to a range of 6 to 8% from the previous range of 8 to 10%.

There are a number of reasons driving the update. However, before I expound upon those, I'd like to share a few positive Financial updates.

Despite the slightly lower Revenue guide. We are increasing our outlook for a full year. Adjusted, Evita and consequently. Raising our range of adjusted ebit or margin by approximately 120 basis points to 20% or higher.

This adjusted ibida Outlook continues to include expenses, we are currently investing to implement new business applications. Our Erp totaling approximately 2.5 million in 2025,

Carrie Lachance: In essence, the project will impact our adjusted EBITDA margin by nearly 200 basis points in 2025, but will swing to a margin tailwind as savings from the project start to pay off the investment in 2026 and beyond. There are three key drivers to the lower 2025 revenue outlook. First, we are delaying the rollout of additional increases in advanced wound care volumes to later in the year, which allows time for important processing improvements that are needed to make this a profitable business. This opportunity continues to be very exciting for InfuSystem Holdings Inc. due to our wide breadth of payer contracts. However, while there appears to be plenty of volume within our reach, offering respectable gross margins, our current billing processes and systems lack the level of productivity needed to make the economics viable.

This program along with most of the related spending, is expected to be completed at the end of the first quarter of 2026 in essence, the project will impact. Our adjusted IBA margin by nearly 200 basis points in 2025, but will swing to a margin Tailwind at savings from the project start to pay off the investment in 2026 and Beyond.

There are 3 key drivers to the lower 2025 Revenue Outlook.

First we are delaying the role of a additional increase in advanced wound care volumes to later in the year, which allows time for important processing improvements that are needed to make this a profitable business.

Carrie Lachance: To date, wound care billings on average have been smaller and are more complicated than our other TPP revenues, such as Oncology. We do not think it is prudent to sacrifice our overall company margins and profitability until we solve this issue. Fortunately, we have the solution. During the second quarter, we bought a small company that provides the opportunity to achieve increased productivity through its improved processing tools. Not only do they offer increased efficiency, but they also offer automation, connectivity to machine learning, and eliminate multiple processing steps for our teams to continue the trend of becoming a more efficient and scalable company. If it works as we anticipate, it opens a significantly attractive opportunity in the large market, and it provides opportunity to lower the current processing costs of our other TPP businesses.

This opportunity continues to be very exciting for empty systems due to our wide breadth of pear contracts. However, while there appears to be plenty of volume within our reach offering respectable gross margins, our current current billing processes and systems black, the level of productivity needed to make the economics viable.

The date Wound Care Billings on average have been smaller and are more complicated than our other. TPP revenues such as oncology.

We don't think it prudent to sacrifice our overall company margins and profitability until we solve this issue.

Fortunately, we have the solution.

During the second quarter, we bought a small company that provides the opportunity to achieve increased productivity through its improved processing tools.

Not only do they offer increased efficiency but they also offer automation connectivity to machine learning and eliminate multiple processing steps for our teams to continue the trend of becoming a more efficient and scalable company.

If it works as we anticipate, it opens a significantly attractive opportunity in the large market and it provides opportunity to lower the current processing cost of our other TPP businesses.

Carrie Lachance: Second, we are taking out the 2025 revenue we had in the forecast for Chemo Mouthpiece until we have better visibility. We have received notice from Chemo Mouthpiece regarding changes to the previously recommended CPT reimbursement code for their product. This said, as we navigate this change in the moment, we are extremely optimistic as Chemo Mouthpiece has submitted applications for new coding that could provide coverage for the product under a patient's DME benefit. This would be an exciting one for patients and providers, as in this case, InfuSystem Holdings Inc. would provide the product at no cost to clinics, similar to other products currently provided under our patient services platform. This makes our contribution to the rollout of this new product even more vital, and we are working closely with the Chemo Mouthpiece team through this change.

Second, we are taking out the 2025 Revenue. We had in the forecast for chemo mouthpiece, until we have better visibility.

We've received notice from chemo, mouthpiece regarding changes to the previously recommended CPT reimbursement, code for their products.

This said as we navigate this change in the moment we are extremely optimistic as chemo. Mouthpiece had submitted application for new coding that could provide coverage for the product under a patient's, DME benefits.

This would be an exciting 1 for patients and providers. As in this case, entry system would provide the product at no cost to clinics similar to other products currently provided under our patient services platform.

Carrie Lachance: We continue to see great potential and interest in the product, and will keep everyone informed as Chemo Mouthpiece updates us on the reimbursement landscape. Our investment in this process is minimal, and we've not made any significant contributions to the program to date, which means there is no capital at risk. Finally, we are working to restructure our biomedical services relationship with GE Healthcare. The current business has not met our margins expectation, and we are working closely with GE Healthcare to make adjustments in both price and service level to address this issue. This could result in lower revenue; however, that revenue will deliver increased profitability, which has been below acceptable levels to date. Now I'll turn it over to Barry for a detailed review of the second quarter financial results. Barry?

This makes our contribution to the role of this new product, even more vital, and we are working closely with the chemo. Mouthpiece team through this change.

We continue to see great potential and interest in the product and will keep everyone informed as chemo. Mouthpiece updates us on the reimbursement landscape.

Our investment in this process is minimal and we've not made any significant contributions to the program to date which means there is no Capital at risk.

Finally, we are working to restructure our biomedical Services relationship with GE Healthcare.

The current business is not meeting our margin expectations. We are working closely with GE Healthcare to make adjustments in both price and service level to address this issue.

This could result in lower Revenue, however, that Revenue will deliver increased profitability which has been below acceptable levels to date.

Now, I'll turn it over to Barry for a detailed review of the second quarter financial results.

Barry.

Barry Steele: Thank you, Carrie, and thank you everyone on the call for joining us today. I am going to focus on the main drivers for the current quarter's results, and I will update you on our current financial position and how it changed during the quarter. Let me start with our financial results for the period. During the second quarter of 2025, our net revenue totaled $36 million. This was a record and represented a $2.3 million or 6.8% increase from the prior year's second quarter. The improvement was supported by growth in both of our operating segments, with the increase in patient services totaling $1.2 million or 6.5%, slightly edging out growth from Device Solutions, which increased by $1 million or 8.3%. Higher net revenue for the patient services segment included increased patient treatment volumes in Oncology and Wound Therapy, offset partially by lower amounts in Pain Management.

Everyone on the call, thank you for joining us today.

I'm going to focus on the main drivers for the current quarters results and I'll update you on our current financial position and how it changed during the quarter.

Now, let me start with our financial results for the period.

During the second quarter of 2025 our net revenue totaled 36 million. This was a record and represented a 2.3 million or 6.8% increase from the prior year. Second quarter.

The improvement was supported by growth in both of our operating segments, with the increase in patient services totaling 1.2 million or 6.5% slightly edging out growth from Device Solutions, which increased by 1 million or 8.3%.

Barry Steele: Oncology net revenue increased by more than $800,000 or 4.5%, whereas Wound Therapy revenue totaling $1.3 million was up by 117% and was mainly driven by volume increases in negative pressure wound therapy vacs treatments related to the Smith & Nephew partnership. Pain Management decreased by approximately $300,000, mainly due to timing of shipments to large customers. The growth in Device Solutions was equally attributable to higher rental revenues coming from new customers and increased equipment sales. Biomedical services revenue was flat year-over-year but included increased on-site project revenue and depot-based repair services, which offset a reduction in the number of devices on contract with GE Healthcare. Gross profit for the second quarter of 2025 was $19.9 million, which was also a quarterly record and a $3.2 million or 19% increase over the prior year's second quarter.

Higher net revenue for the patient services segment included increased patient, treatment volumes in oncology and wound care offset, partially by lower amounts and Pain Management.

Oncology net revenue increased by more than 800,000 or 4.5% whereas wound care Revenue, totaling 1.3 million was up by 117%.

And was mainly driven by volume increases in negative pressure. Wound therapy, treatments related to the Smith and nephew partnership.

Pain management decreased by approximately 300,000, mainly due to the timing of shipments to large customers.

The growth in device Solutions, was equally attributable, to higher rental, revenues coming from new customers and increase equipment sales.

Biomedical Services Revenue was flat year-over-year but included increased on-site project revenue and Deo based repair services which offset a reduction in the number of devices on contract with GE Healthcare.

Barry Steele: Our gross margin percentage was 55.2%, representing a 5.7% improvement over the prior year's second quarter amount of 49.5%. This improvement was mainly driven by better revenue mix favoring higher margin revenue and lower pump disposal expenses. The increase also was the result of a one-time $600,000 unfavorable adjustment made in 2024 to correct an immaterial error in our travel accrual. The improved product mix included higher Oncology revenues, increased Device Solutions rental revenues, and higher sales of used equipment. Selling general and administrative expenses for the second quarter of 2025 totaled $16.1 million and was $1.3 million or 8.7% higher than the prior year's second quarter amount. About half of this increase was attributable to $632,000 in expenses associated with our business application upgrade project.

Gross profit for the second quarter of 2025 was 19.9 Million which was also a quarterly record and a 3.2 million or 19% increase over the prior year. Second quarter.

Our gross margin percentage was 55.2%, representing a 5.7% improvement over the prior year, second quarter amount of 49.5%.

this Improvement was mainly driven by better Revenue, mix favoring higher margin, revenue and lower pump disposal expenses,

The increase also was the result of a 1-time 600,000 unfavorable adjustments made in 2024 to correct an immaterial error in our travel approval.

The improved product mix included, higher ontology revenues, increased device solutions rental revenues and higher sales of used equipment.

Selling, General and Administrative Expenses for the second quarter of 2025 totaled $16.1 million, which was $1.3 million, or 8.7%, higher than the prior year.

Barry Steele: Other increases were related to additional headcount and revenue cycle and other personnel needed to support the higher revenue volume and a higher accrual for short-term incentive compensation. Partially offsetting these increases was lower stock compensation costs, mainly due to forfeitures from our outgoing CEO. Adjusted EBITDA during the 2025 second quarter was $8 million, or a margin of 22.3% of net revenue, which represented an increase of $2 million, or 32%, and a margin expansion of 4.3%, up from 18% in the prior year's second quarter. It's worth noting that on a trailing 12-month basis, adjusted EBITDA totaled $29.4 million, representing a margin of 21.2%. This clearly demonstrates that our emphasis on operational efficiencies is translating into measurable performance gains. Now a few points on our financial position and capital reserves. Our operating cash flow during the second quarter totaled $7 million.

About half of this increase was attributable to 632,000 in expenses associated with our business application, upgrade project.

Other increases were related to additional headcount and revenue cycle. And other Personnel needed to support the higher Revenue volume at a higher approval for short-term incentive compensation.

Partially offsetting, these increases was lower stock. Compensation costs mainly due to 4 pictures from our outgoing CEO.

Adjusted EBA during the 2025 second quarter with 8 million, or a margin of 22.3% of net revenue, which represented an increase of 2 million or 32% and a margin expansion of 4.3% up from 18%. In the prior year, second quarter,

It's worth noting that a 12 inch trailing 12-month basis. Adjust the debt total of 29.4, million representing a margin of 21.2%. This clearly demonstrates that our emphasis on operational efficiencies is translating into measurable performance gains.

Now, a few points on our financial position and capital Reserves.

Barry Steele: This amount was $4.7 million higher than the amount for the prior year's second quarter. This increase was due to the higher adjusted EBITDA, a smaller increase in our working capital levels, and lower interest expense as compared to the prior year. Our net capital expenditures were $273,000 during the 2025 second quarter, which was a significant decrease from the prior year amount of $6.7 million. The amount during the prior period was focused on infusion pumps needed to support increased volume in the Device Solutions rental business, which is now paying off, as we can see from the increased gross margin previously mentioned. 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.

Our operating cash flow during the second quarter, totals 7 million. This amount was 4.7 million higher than the amount for the prior year. Second quarter,

This increase was due to the higher adjusted ibaa, a smaller increase in our working capital levels and lower interest expense as compared to the prior year.

Our net capital expenditures were 273,000 during the 2025 second quarter which was a significant decrease in the prior year amount of 6.7 million.

The amount during the prior period was focused on infusion pumps needed to support increased volume in the device solutions rental business, which is now paying off. As we can see from the increase, gross margin. Previously mentioned,

Barry Steele: 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 the growing cash flow from operations backed by significant liquidity reserves available from our revolving line of credit and manageable leverage and debt service requirements. Our net debt decreased by $2.3 million during the second quarter. We were able to do this despite purchasing $3.5 million of our common stock during the quarter and funding the acquisition of Apollo for $1.4 million. Our available liquidity continues to be strong and totaled more than $49 million as of June 30, 2025. At that time, our ratio of net debt to adjusted EBITDA was a modest 0.86 times. Our debt consists of borrowings on our revolving line of credit with no term payment requirements.

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 their remainder of 2025 comes from non- Capital intensive, business lines.

And manageable leverage and debt service requirements.

Our net debt decreased by 2.3 million. During the second quarter, we were able to do this despite purchasing 3.5 million of our common stock during the quarter and funding the acquisition of Apollo for 1.4 million.

Are available liquidity continues to be strong and totaled more than 49 million as of June 30th 2025.

At that time, our ratio of net debt to adjusted debe de with a modest 0.86 times.

Barry Steele: A few weeks ago, we amended our credit agreement, extending the facility for two additional years. The facility now expires in July 2030. We continue to benefit from outstanding interest rate swap, which fixes our interest rate on $20 million of our outstanding borrowings at a below market rate of 3.8% until April 2028. I will now turn the call back over to Carrie.

Our debt consists of a borrowing line of credit with no term payment requirements. A few weeks ago, we amended our credit agreement, extending the facility for 2 additional years. The facility now expires in July 2030.

We continue to benefit from outstanding interest, rate swap, which fixes our interest rate on 20 million of our outstanding borrowings at a low at a below market rate of 3.8% until April 2028.

I will now turn the call back over to Carrie.

Carrie Lachance: Thanks, Barry. I want to emphasize the strength of our business, built on nearly four decades of operational excellence. At InfuSystem, one mission guides us, helping patients live longer and healthier lives. We maintain more than 800 national payer contracts covering 96% of the U.S. population and hold key strategic partnerships with leading medical device companies. We help to solve many complex problems that face our partners and healthcare providers in facilitating continuity and quality of care for their patients. As we reflect on how we performed in the second quarter and how we are planning for the near future, we would like to share what we see as the key drivers necessary to deliver shareholder value. First, we must focus on growing profitable revenue. This may include a willingness to restructure or even exit an underperforming business when necessary.

Thanks Barry.

At in system, 1 Mission guides us.

Helping patients live longer and healthier lives.

We maintain more than 800 National pair contracts, covering 96% of the US population and hold key, strategic Partnerships with leading medical device companies.

We help to solve many complex problems, that face, our partners and healthcare providers in facilitating continuity and quality of care for their patients.

As we reflect on how we performed in the second quarter and how are your planning for the near future we would like to share what we see as the key drivers necessary to deliver shareholder value.

First, we must focus on growing profitable Revenue.

Carrie Lachance: We will delay launching new products until they are proven ready for launch. We will prioritize internal value creation initiatives equally to new revenue opportunities. Some examples of this include our new ERP, productivity improvement initiatives we have in place for several of our teams, and several cost-saving projects we have in progress that are paying off, as demonstrated by our growing margins and cash flow. Finally, we will pursue new opportunities and partnerships that complement our core strengths and align with the disciplined strategic investment approach. We have phenomenal opportunities at our fingertips and a clear understanding of the value of our capital allocation decisions. We remain focused on areas that offer accelerated growth, a sustainable future, and a quick return on investment that will drive value creation. We are evaluating business opportunities based on their potential contribution to return on invested capital.

This may include a willingness to restructure or even exit and underperforming business when necessary.

We will delay. Launching new products until they are proven ready for launch.

We will prioritize internal value creation initiatives, equally to new Revenue opportunities.

Some examples of this include our new Erp productivity Improvement initiatives. We have in place for several of our teams

and several cost-saving projects. We have in progress that are paying off as demonstrated by our growing margins and cash flow.

And finally, we will pursue New Opportunities and Partnerships that complement, our core strengths and aligned with the disciplined Strategic investment approach.

We have phenomenal opportunities at our fingertips, and a clear understanding of the value of our Capital, allocation decisions.

We remain focused on areas that offer accelerated growth. A sustainable future and a quick return on investment that will drive value creation.

Carrie Lachance: This requires us to consider our relevant competitive strengths, upfront requirements for development, capital investment, timing of cash flow, and sustainability. Lastly, our strategic priorities entering the second half of the year are clear: execute with discipline, deliver profitable growth, and drive long-term value creation for our shareholders. Operator, we are ready for the Q&A portion of the call.

We are evaluating business opportunities based on their potential contribution to return on invested capital.

This requires us to consider our relevant competitive strengths.

Upfront requirements for development, capital investment timing of cash flow and sustainability.

Lastly.

Our strategic priorities entering the second half of the year are clear.

Execute with discipline.

Deliver profitable growth and drive long-term value creation for our shareholders.

Operator, we are ready for the Q&A portion of the call.

Conference Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from the line of Kyle Browser, Rose Capital Partners. Please go ahead.

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 speaker-phone please pick up your handset before pressing the keys.

If at any time your question has been addressed and you would like to withdraw your question, please press start and 2.

The first question comes from the line of Kyle browser Ruth Capital Partners. Please go ahead.

Kyle Browser: Hi, good morning. Thanks for all the updates. I'm glad to see the margin expectations bumping up here. Maybe I'll start with Oncology. Obviously, it's been a very nice cash flow on that business. Is mid-single-digit growth going forward, do you think, a reasonable expectation for this business? I know last quarter there was slightly above that, just given the increased volumes. I just want to get a sense of how we look at that business going forward.

hi, good morning, thanks for all the updates and um, glad to see the the margin expectations bumping up here

Um, maybe I'll start with oncology. Um, obviously been a very nice, uh,

Cash flow on that business, uh, is mid single digit growth, going forward. Do you think, uh, reasonable expectation for this business? I know, last quarter, um, there was there was a slightly above that just given the increased volume, just want to get a sense of how we look at that business going forward.

Carrie Lachance: I do. I think mid-single digits make sense for us. We have been seeing some subtle increases in volumes, which are certainly hopeful, but I think mid-single makes sense for us.

I do, I think mid single to, to just, uh, make sense for us. We have been seeing, um, you know, some settle increases in volumes which, uh, you know, are certainly helpful. But I think maybe single makes sense for us.

Kyle Browser: Okay. Got it. On the GE contract, any more color you can provide? How large is that contract? I guess it is part of the Device Solutions side of the business. What sort of change do you envision? I know you mentioned, Carrie Lachance, that you are going to prioritize margins going forward, but just kind of want to get a sense of the impact on the top line.

I guess this is part of, um, you know, the device solutions side of the business or, um, you know, what sort of changes do you envision? I know you mentioned, Carrie, that you're going to prioritize margins going forward, but just kind of want to get a sense of the impact on the top line.

Barry Steele: Yeah. It's talked about a $7 to $8 million business currently on an annual basis, which kind of jutted out after some devices were taken off contract over the last couple of quarters. It, you know, with the lower margins and just some of the higher costs that we've seen over time, the margins are not where we would like them to be. So we're working with GE directly to make some changes that hopefully will, you know, help us find a way to create value for them while also bringing some margin that we need for ourselves.

Yeah, it's it's um how about a 7 to 8 million dollar business currently on an annual basis? Where it's kind of adjusted out after some devices were taken off contract over the last couple quarters? Um, it, you know, with the lower margins and just, uh, some of the higher costs that we've seen over time the margins are not where we would like them to be. So we're working uh, with GE directly to make some changes that hopefully will um,

You know, help us find a way to create value for them while also bringing some margin that we need for ourselves.

Kyle Browser: Okay. Helpful. On the acquisition of Apollo, I think you said for $1.4 million, that will, of course, help drive more efficient collections. Is that specifically just for the Wound Therapy business, or are there economies of scale for the broader platform?

Carrie Lachance: Yeah, I would say for the broader platform, we will start with Wound Therapy specifically just because that's, as we said, the backend profits that are a little heavier than Oncology. But once that's stabilized, we are looking forward to kind of transitioning that over to our Oncology platform as well. It's a great system.

Okay, that's helpful. And and then on the acquisition of Apollo, I think he said for 1.4 million, um, that will, of course, help drive more efficient collections. Is that specifically just for the wound care business, or are their economies of scale for, you know, the broader platform

Yeah, I would say for the broader platform we will start with wound care specifically just because that's as we said the the back end process that are a little heavier than oncology. But once that stabilized, uh, we're looking for to kind of transition that over to our oncology platform as well. It's a great system.

Kyle Browser: Great. Got it. Then I guess just one last, the ERP system, how is that progressing and, you know, what can we expect in future expenses and kind of the updated timeline there? Thanks so much.

Barry Steele: Yep. It's going very well. We're working through all the basically the blueprint stage right now. We'll be in the mode of getting data in the system and starting to do a lot of testing in the back half of this year as we continue through the process. In the last quarter, we spent $632,000 on the project. The cost will be hovering around, you know, half a million or maybe a little bit higher as we continue. We do expect the project to wrap up and go live sometime in the first quarter of 2026. So that roughly estimated $2.5 million annual spend will go away after the first quarter with the hope that it'll start paying back. So in other words, we're trying to get, with improved systems, higher productivity and other benefits.

Barry Steele: So it'll not only weigh down our margin, it'll stop weighing down our margin, it'll start actually contributing to our margin after that.

Right, got it. And then I guess just 1 last uh the Erp system. Um, how is that progressing? And you know, what can we expect in in future expenses and kind of the updated timeline there? Thanks so much. Yep. It's it's going very well. Um, we're we're working through all the, all the, basically blueprint stage right now. Uh, we'll be in the mode of getting data in the system and starting to do a lot, a lot of testing in the back half of this year, as we continue through, uh, the process. Uh, and the last quarter, we spent 632,000 on the project, the the cost will be hovering around, you know, half a million or maybe a little bit higher. As we continue, we do expect the project to wrap up and go live sometime in the first quarter of 2026 so that that roughly estimated 2.5 million annual spend will go go away after the first quarter, uh, with the hope that, uh, it'll start paying back. So in other words, we're trying to get, uh, with improved systems higher productivity and out of other benefits. So,

It'll, um, not only be a way, not only way down our marginal stop, weighing down our marginal start actually contributing to our margin after that.

Kyle Browser: Okay. Sounds great. Appreciate all the updates.

Okay. Sounds great. I appreciate all the updates.

Carrie Lachance: Thanks, Kyle.

Conference Operator: The next question comes from Matt Hewitt, Craig-Hallum Capital Group. Please go ahead.

Thanks Co.

The next question comes from Matt havit Craig halum. Please go ahead.

Unidentified Analyst: Hello. This is Unidentified Analyst from Matt Hewitt. Congrats on a great quarter. With the expanding margins, what levers are you planning to utilize and how should we think about that going forward? Thank you.

Hello. This is Talon from Matt hu and congrats on the great quarter. So with the expanding margins, what levers are you planning to utilize? And how should we think about that going forward? Thank you.

Barry Steele: Yeah. So we certainly have seen improved margins. If you look at on a trailing 12 basis over the last few quarters, both our gross margin and our EBITDA margin have certainly moved in a positive trajectory. This is coming from the improved growth that we've had and just internally being efficient on our spending and increasing some productivity. So the mix has helped us. We bought a bunch of pumps last year for the rental business, and so that's contributed to the margin sort of mix, if you will. We wouldn't necessarily predict that we can continue to improve the margins indiscriminately into the future, but we do think that if you take away the current spend on ERP, we're well into the low 20s and should be able to continue sustaining that as we continue to grow on the top line into the future.

Yeah, um so so we certainly have um, seen improved margins. If you look at sort of on a trillion 12 basis over the last few quarters, both are um our gross margin are IBA. Margin has certainly moved in a positive trajectory. This is coming from the improved growth that we've had and just just internally being efficient on, um, our spending and and increasing some productivity, some mixes helped us. So we bought a bunch of pumps last year for the rental business. And so that's contributed to to the margin sort of mix. If you will, um, we wouldn't necessarily predict that we can continue to, to go, uh, continue to incre improve the margins, you know, uh, indiscriminately into the future. But we do think that if you take away the current spend on Erp, we're we're, we're well into the low 20s and should be able to continue sustaining that as we continue to grow on the top line into the future.

Unidentified Analyst: All right. All right. Great. Can you provide color on the ramp-up specifically with your new estimates and the timeline of that with Chemo Mouthpiece? Thank you.

All right, all right, great. And then can you provide color on the ramp-up specifically with your new estimates and the timeline of that? Keep my mouthpiece. Thank you.

Barry Steele: Are we talking about Chemo Mouthpiece specifically, what the outlook is?

Unidentified Analyst: Yes.

Yeah so so um are we talking about key mouth piece? Uh specifically what the Outlook is.

Yes.

Barry Steele: I think that we've taken it completely out of our forecast, and the forecast changes have some other things in it, obviously, as well. We've not put it back in at any stage, and we won't until we have better visibility on what we think that the launch date will be and getting codes actually updated so that we'll be able to sell the product through.

Yeah, I think that we've taken it completely out of our forecast, and the forecast changes have some other things in it, obviously, as well. We've not put it back in at any stage, and we won't until we have better visibility on what we think the launch date will be and getting codes actually updated for that. We'll be able to sell the product through.

Unidentified Analyst: All right. Thank you.

All right. Thank you.

Conference Operator: The next question comes from Jim Sidoti, Sidoti & Company. Please go ahead.

The next question comes from jimc Dirty c c. Please go ahead.

Jim Sidoti: Hi. Good morning. Thanks for taking the question. I am looking at this quarter. It is the best quarter that you have reported since COVID. Clearly, something has gone right. $3.4 million of income from ops and $7 million of operating cash. Were there any one-time things that drove these results?

Uh, you know, so clearly something's gone right. Um, you know, 3.4 million of...

Income from my opps and 7 million of operating cash. You know, were there any 1-time things that, uh, drove these results?

Barry Steele: No, I'm sorry.

Carrie Lachance: Yeah. I would say no, Jim. Nothing specific. I think this is just kind of the accumulation we've been, you know, working on some operational improvements on the backend that's been over time, and things are starting to shift out certainly from an improvement standpoint. No one time.

No, I'm sorry.

Yeah, I I would say

working on some operational uh improvements on the back end that's been over time and and things are starting out certain uh from an improvement standpoint, so no no 1 time.

Barry Steele: Yeah. The only thing I would add to that, Jim, is that if you really looked at, again, we like to chart every quarter of the trailing 12 results. Since about, you know, the early part of last year, every quarter has improved in as such that our EBITDA is growing nicely and the margins associated with it is growing nicely. So it is really a combination of all the things we have been doing over the last, say, 18 months.

Uh, very, yeah, I would add to that. Um, Jim, is that if you really looked at, again, we like to chart the every core of the trailing 12 results.

since about, um,

you know, the, the, the early part of last year, every quarter has improved in as such that, that our our, our our our I was growing nicely and the margins associated with growing nicely. So it's really a, it's a, it's a combination of all the things we've been doing over the last say 18, 1 8, 1 8,

Jim Sidoti: Do you think high single-digit operating margins or low double-digit operating margins, do you think that is sustainable over the next few quarters?

So, so do you think, you know, High single digit operating margins or low double digit? Operating margins? Do you think that's sustainable over the next few quarters?

Barry Steele: It is interesting. We always kind of focus on adjusted EBITDA. The reason being there are some things in the operating margin that are a little odd, like, for example, depreciation. When we buy pumps, we depreciate pumps very fast, even though they last a very long time. So you have to be cautious about how that impacts operating margins. Then the stock comp, when the stock is really strong, we see more expense, and that is non-cash. We like to add that back because it does not take away from our actual operating earnings. So it is a little tougher to predict that. That said, clearly, the growing EBITDA dollar amount and margin is going to help the operating margin as well.

Yeah, it's interesting. We always kind of um, focus on adjusted Eva. The reason being is, there's some things in the operating margin that that are that are a little odd. Like, for example, depreciation, when we buy pumps, we depreciate pumps are very fast even though they last a very long time. So, you have to be cautious about how that impacts operating margins and then the stock comp when the stock is really strong, we see more expense and so and that's non-cash. We like to add that back because it doesn't uh, doesn't take from away from our actual operating earnings. So it's a little tougher to to predict that but that said, you know, clearly that growing ibida dollar amount and margin is going to help the operating margin as well.

Jim Sidoti: All right. You know, it sounds like you still expect that the costs related to ERP and definitely the costs related to the CEO transition, those will all be out after the first quarter of 2026, right?

Barry Steele: Yes, that is correct. The CEO transition was all expensed in Q1. This quarter, ERP was $632,000, and the first quarter was $466,000. Last year's third quarter was $245,000, so we have a little bit easier comp for when we go into the third quarter here. That sort of run rate, that $500,000 to $600,000, will continue at least through the first quarter of 2026 when we expect to go live. We will still have some, probably growing pains of putting it in place, but that should drop pretty rapidly next year. Again, we expect productivity improvements coming out of it, particularly as we grow.

All right. And you know it sounds like you still expect that um the incarcerated to Erp and and definitely the cost related to the CEO transitions. Those will all be out uh after the first quarter of 2026, right?

Yeah, that that's correct that. So that CEO transition was all all expense in q1 and the um, you know, the the the this quarter Erp was 600232000 and the first quarter was 466.

Uh, last year's third quarter was 2.45. So we have a little bit easier cop for for when we go into the third quarter here. But that, that sort of a run rate that 5 is 600,000 will continue at least through the first quarter of 2026 when we expect to go live and the, the, we'll still have some, you know, uh, probably Growing Pains of of putting it in place, but that should drop pretty rapidly next year. And

And we we expect productivity improvements coming out of it particularly, as we grow.

Jim Sidoti: All right. All right. Well, that's it for me. Thank you.

All right. All right. Well, that's it for me. Thank you.

Carrie Lachance: Thanks, Jim.

Thanks Jim.

Conference Operator: The next question comes from Neil Chatterjee, B. Riley Securities. Please go ahead.

The next question comes from Neil chattery bi please, go ahead.

Anderson Schock: Good morning. This is Anderson Schock. Thank you for taking our questions and congrats on the quarter. Wound care revenue more than doubled while Pain Management declined 15%. How should we think about this mix shift toward lower margin Wound Care and the impact it may have on longer-term margins and profitability?

Uh, good morning. This is Anderson shock. Thank you for taking our questions and congrats on the quarter.

Uh, so wound care revenue more than doubled, while pain management declined 15%. How should we think about this mixed shift toward lower margin wound care and the impact it may have on longer-term margins and profitability?

Barry Steele: What I would say is that the Pain Management isn't the highest margin in our portfolio, so it's not as tough a comparison to trade in that fashion. Yet, what you heard Carrie Lachance say is that our Wound Therapy has really nice, decent gross margins. We just give it back when we process claims. When we're solving that, which we think we will, I think that you'll see a business that is accretive to our cash flow margins.

Yeah. So what I would say is that um, the um, pain management isn't the highest margin in our portfolio, so it's not as tough as a comparison to trade in that fashion. And, and yet, um, what, what Carrie you heard Carrie say that, our room care has really nice decent gross margins, we just give it back when we process claims. So when we're solving that, which we think will be well, uh, I think that you'll see a, a business that is a creative to our our cash flow margins.

Anderson Schock: Okay. Got it. Device Solutions grew 8% with some really impressive year-over-year margin expansion. Is this 42% margin sustainable going forward? What is driving the outperformance here versus the patient services?

Barry Steele: Yeah, it's really a mix. We grew the rentals last year, and so that's been that's very good because the biggest part of the cost for a rental is the depreciation, which for EBITDA we're adding back, obviously. I think that it is, again, it will always kind of bounce around a little bit, and we're still working, as we mentioned, on a few contracts to make them better. I think that it's in a decent position to hold its own, but it will go up and down based on this. We sell a bunch of new pumps. We lower our margins because we get lower margin on those. We sell a bunch of used pumps off our fleet. Depending on where the depreciation was on those pumps, you can see you could see it go up. That's kind of the the the quarters in which it operates.

Okay. Got it and then device Solutions grew 8% with some really impressive year-over-year. Margin expansion. Is this 42% margin sustainable going forward and what is driving the outperformance here versus the patient services

Yeah, it's really mix. You know, we, we grew the rentals last year. Um, and so that's been, that's always very good. Because the biggest part of the cost for rental, if the depreciation was for, even though we're adding back obviously, so I think that's it is, you know, again, it will always kind of bounced around a little bit and we're still working as we mentioned, a few contracts, to make them better. So, I think that it's in a, it's in a decent position to, to hold its own, but we'll go up and down, based on it. So, we, we sell a bunch of new pumps. We lower our margins because we get lower margin on those. We sell a bunch of used pumps off of our Fleet, depending where depreciation was on those pumps. You can see, you can see it go up. So that's kind of the, the, the, the, the borders in which it operates.

Anderson Schock: Okay. Got it. Is there any timing you can share on when you expect to hear back on resolving the reimbursement challenges for Chemo Mouthpiece?

For chemo mouthpiece.

Carrie Lachance: Yeah. We should hear something by the end of the year. The Chemo Mouthpiece team, they have submitted their applications. We should be hearing back probably Q3, maybe into early Q4 of this year. Then, once coding is established, the reimbursement rates actually would be July of next year. Coding comes first, and then rate reestablishment is for next year. We should know by the end of the year, which is exciting. It is actually a really great change.

Yeah, so we should hear something by the end of the year so chemo, mouthpiece team. They, you know, they've submitted their applications, we should be hearing back, uh, probably Q3, you know, maybe into early Q4 um, of this year. And then really, the once once coding is established the reimbursement rates actually would be July of next year. So Cody comes first and then rate re uh, establishment is for next year. So but we should know by the end of the year. Um,

Which is exciting. It's, it's actually a really great change.

Anderson Schock: Okay. Great. Thank you for taking our questions.

Carrie Lachance: Yeah. Thanks.

Okay, great. Thank you for taking our questions.

Yeah.

Thanks.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Carrie Lachance, CEO, for any closing remarks.

This concludes our question and answer session, I would like to turn the conference back over to Carol. Lee Cheo, for any closing remarks.

Carrie Lachance: Thank you, Sherri. I want to thank everyone for participating on today's call, and we look forward to our third quarter call when we will update you on results and progress.

Thank you. She, I want to thank everyone for participating on today's call and we look forward to our third quarter. Call when we update you on results and progress,

Conference Operator: Ladies and gentlemen, the conference is now over. Thank you for attending today's presentation. You may now resources.

Ladies and gentlemen, the conference is now over. Thank you for attending today's presentation. You may now disconnect goodbye.