Q3 2025 InfuSystem Holdings Inc Earnings Call
Good day and welcome to the info system. Third quarter 2025 earnings conference call.
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I would now like to turn the conference over to Joe door of Lytham Partners. Please go ahead.
Good morning, and thank you for joining us today to review. Infused systems, third quarter 2025 Financial results, ended September 30th 2025
with us today on the call are carry a chance chief executive officer and Barry steel Chief Financial Officer.
After the conclusion of today's prepared remarks, we'll open the call to questions.
Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of infused system. During this conference call constitute for looking statements within the meaning of the private Securities, litigation Reform, Act of 1995
Except for the statements of historical fact. This conference call may contain forward-looking statements that involve risks and uncertainties some of which are detailed under risk factors and documents filed by the company with the Securities and Exchange Commission, including the annual report on form 10K for the year. Ended December 31st 2024
Statements were made the company can give no Assurance at such forward-looking Central proved to be correct. Infused system, does not undertake at 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 the input system, Carrie
Thank you, Joe and good morning everyone. Welcome to MP systems third quarter fiscal year 2025 earnings call. Thank you all for joining us today.
I will provide a third quarter, overview highlighting key, successes addressing notable, challenges and outlining our strategic priorities. As we wrap up 2025 and look forward to 2026,
Ben, Barry will provide a detailed summary of our financial results.
I will then come back to some closing comments before opening the line to questions.
This morning, we published our third quarter earnings report, which Illustrated another strong quarter of financial performance marked by continued Revenue growth margin expansion, robust cash flow, debt reduction, and returning Capital to our shareholders.
In the report, we shared examples of the activities and initiatives, we have underway that have contributed to these improved Financial metrics.
I'll take a few minutes now to walk through some of them.
I'll start by discussing some very important projects driving our wound care initiatives.
We see an opportunity to leverage strategic competencies present in our patient solution, segment beyond our existing therapies of oncology and pain management.
A key driver for long-term success. In this initiative has been taking steps that will lower the processing costs for each patient referral
This is why we acquired Apollo in May of this year.
Integrating this company and its systems, not only brought us wound care customers. But more importantly presented a quick and low-cost means to upgrade to a more streamlined billing software that will allow us to process upfront, paperwork and insurance claims more quickly and efficiently.
During the third quarter, we completed key integration tasks, including connecting the new RCM applications to our insurance billing Clearing House, which effectively plugs in our large portfolio of insurance payers.
We are now focused on additional system and process improvements, particularly building out the AI and automation enhancements that that new tool allows.
And completing the transition of our existing wound care, volume into the new system.
While it's still too early to measure the exact cost reduction benefit. We believe the new system will allow us to process. The highly complex wound care claims on a cost-efficient basis
The ongoing progress also brings us a few steps closer to onboarding, our oncology and Pain Management, billing volume onto the application, further leveraging, the investment, and improving our overall, RCM efficiency.
also, in the third quarter, we began accepting patient referrals and booking revenue for pneumatic compression devices or pcds through a new relationship with the device manufacturer
Although the amount of Revenue was relatively small, the quickness to launch illustrates, not only the strength of our pear portfolio, when we bring it to bear on new products. But the significant improvements that the team has made to accelerate the speed at, which we bring new products online,
For now, we are classifying these revenues in wound, care category.
With hopes, they will grow large enough in the future to report them separately.
Next.
I'd like to Note 3 developments positively impacting our business Beyond wound care.
First.
In addition to the new Billing System acquired integrated via the Apollo acquisition during the third quarter, we went live with a machine learning tool focused on our front-end intake process, which is another complicated and time-consuming manual tasks.
This was done even while continuing the implementation of our Erp level software system. Upgrade that we began in 2024
Second.
We secured a significant new contract with a large hospital system.
Apology business.
And this 1 along with others increases, our market share and will help us to continue to report report, oncology Revenue growth at levels. Exceeding, expectations, a challenge, given our high market share.
The contract wins resulting in higher volume will, of course require us to send capital on pumps a fair trade given oncology is our most secretive Revenue source.
In addition, I'll note that oncology revenue for the third quarter reached, an all-time record, which is a common Accolade for the business.
secured a multi-year contract extension with 1 of our largest National Insurance payers
This type of event is not normally newsworthy since we routinely extend existing contracts and add new payers to our very extensive portfolio. However, this one stands out as particularly exciting because it provides enhanced service coverage and product areas we are focused on, such as negative pressure, wound therapy devices, and PCBs.
The extension also contains a much appreciated price increase.
the accomplishment demonstrates, the depth of our contract relationships, as a whole, and the value our payer see in our capabilities,
Before I turn the call over to Barry, I need to provide an update on developments in our Biomedical Services business.
As we mentioned in our last quarterly call, we've been working with our largest biomedical services. Customer to modify the contract to reflect changes in market economics and developments in the relationship.
During the third quarter, we signed a contract amendment that will improve pricing and ship. The relationship to reduce device volume and lower service levels on most of the devices remaining on the contract.
these changes will result in a reduction in Revenue, under the contract, by an estimate, 6 to 7 million dollars, annually, starting in December of this year,
However, it is important to note. These changes will also result in an expansion of our operating income by reducing cost and expenses in an amount greater than the revenue decline.
We are now focused on resizing and relocating our field-based biomedical technicians team to conform to the changes.
While we are always disappointed by changes that reduce our revenue, we believe that profitability is a key driver of shareholder value.
and that these strategic adjustments are essential to our continued progress and will leave us with a very solid core field-based, biomedical Services business from which to build upon
Now, I'll turn it over to Barry for a detailed review of the third quarter Financial results.
Barry.
I'm going to focus on the main drivers for the current quarter's results and I'll update you on our current financial position. How it changed during the quarter,
Now, let me start with our financial results for the period.
During the third quarter of 2025 our net revenue total 36.2 million. This was another record and it represented a 1.2 million or 3.3%, increase from the prior year. Third quarter,
The Improvement was applicable to increase, net revenue for the patient services segment, partially offset by lower revenue from device Solutions.
Patient services, net revenue increased by 1.6 million, or 7.6% and included increased patient, treatment volumes in oncology and wound care.
Oncology net revenue increased by nearly 700,000 or 3.6% and wound care Revenue was up by 116%. Totaling 2 million which was mainly driven by violent increases in negative pressure. Wound therapy, treatments related to the Smith and nephew partnership increased volume from the Apollo acquisition and first-time revenue for a Pneumatic compression devices.
Device Solutions, net revenue decreased by 400,000 or 2.9%. This decrease was primarily, primarily attributable to about 400,000 in lower Revenue, volume and biomedical services, and a standout large equipment sale during the prior year to a large Rental. Customer that bought out 1 million in Lost pumps from their contract.
Partially offsetting these declines with a 600,000 non-recurring benefit, to adjust the contract asset related to our largest biomedical services. Customer
The lower revenue from the biomedical Services, mainly relates to a remediation contract that benefited the prior year but was nearly completed prior to the current year period.
Gross profit for the third quarter of 2025 was 20.8 Million which was also a quarterly record and a 1.8 million or 9.3% increase over the prior year. Third quarter.
Our gross margin percentage. At just over 57%, increase by 3.1% from the prior years of amount which was a significant improvement improvement. Even without the 1 time, 1.7% boost that received from the contract asset adjustment.
The remaining increase was mainly driven by improved labor efficiency and pricing in biomedical Services, improved Revenue. Mixed favoring higher margin Revenue such as an ecology lower procurement costs and lower pump disposal expenses.
More than half of this increase was attributable to 7373000 in expenses. Associated with our project to upgrade our main enterprise resource planning software.
Other increases were related to additional headcount and revenue cycle. And other Personnel needed to support the higher Revenue volume and a higher approval for short incentive compensation.
Partially offsetting. These increases was a lower sales commissions rate related to shifts and Rapido mix.
Adjusted Eva. During the 2025 third quarter was 8.3 million which which represented an increase of just over 400,000 or 5.6% from the prior year. Third quarter adjusted Ava
This represented 22.8% of net revenue for 2025, which was slightly above the prior year, rate of 22.3%, despite a 500,000 increase in spending on the Erp project.
on a trailing 12-month basis, adjusted evaa totaled, 30.2 million representing a margin of 21.4%
This demonstrates that our focus on profitable Revenue growth and operational efficiency is yielding meaningful results.
now, if you point on our financial position and capital Reserves,
On a year-to-year to date basis for the first 9 months, we generated operating cash flow, totaling over 17 million. This amount was 4.8 million higher than the amount realized during the prior year-to-date period.
This increase was due to the higher adjusted debe, which on a year-to-date basis was also up by 4.8 million.
Our net capital expenditures were 3.1 million so far in 2025, which represented a significant decrease from 10 million spent during the first 9 months of last year.
The amount during the prior period was focused on infusion pumps needed to support increased volume in the device solutions rental business, which grew more more significantly during that period.
Although we anticipate an increase amount of medical equipment purchases during the next quarter, to support some new customers oncology, we continue to anticipate that our overall Capital spending requirements will remain at moderate levels as compared to a month and prior years. As a sources of our future, Revenue growth will continue to be more weighted towards less Capital intensive, Revenue sources.
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 5.7 million. During the third quarter, we are able to do this despite purchasing 2.2 million of our common stock during the quarter, under our 20 million stock repurchase authorization,
this brings total shareholder, Capital returned under the plan so far this year to 8.6 million
Our available liquidity continues to be strong and totaled, nearly 55 million as of September 30th 2025 at that time, our ratio of net debt to adjust. The debt was modest s at 66 times,
Our debt consists in borrowings, on our evolving line of credit with no term payment requirements. Early in the third quarter, we amended our credit agreement, extending the facility for 2 additional years, the facility. Now, expires in July 2030, we continue to benefit from an outstanding interest rate swap, which fixes our interest rate on 20 million of the outstanding borrowings at a below market rate of 3.8% until April 2028,
I'll now turn the call back over to Carrie.
Thanks Barry.
as we close out the year with,
From momentum. We are reaffirming our 4-year Outlook targeting adjusted. EBA margin to be 20% or greater and revenue growth between 6 to 8%.
We are entering 2026 as a stronger and more focused company. Well positioned to build on this progress.
As I reflect back on the efforts we made during the third quarter, the updates that we've shared with you today and what we are currently focusing on as we close out 2025, I hope you will agree that we've been diligent in pursuing the Strategic priorities. We laid out for you in early August when we reported the second quarter.
Those priorities are to 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 will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone,
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Momentarily to assemble our roster.
Our first question comes from Kyle bosser, with Roth Capital Partners, please go ahead.
Great, thank you. Hi Karen, Barry. Uh, glad to see the very nice progress, around prioritizing, profitable growth, and sort of improving the, the processes to lower costs here. Um, it sounds like you you've made some nice strides across the business, uh, in relation to this, particularly wound care and oncology. Um, seems like ecology is probably much more streamlined, uh, than kind of the growing wound care business. Um, the can you maybe talk a little bit more Carrie about
Uh the additional ha enhancements you'll want to make in the wound care. Business kind of around Ai and automation enhancements. Thank you.
Yeah, sure. Good morning. Kyle.
You know, from an AI perspective or an automation perspective, we we have our new system that we implemented, uh, for the revenue cycle aspect, um, you know, over the past few months that's working tremendously. Well, we have a good portion of our business that we're starting to put into that. Uh, our older system, didn't have any AI or automation technology um, you know, that it allowed for. So, uh, we're we're looking forward to plug in even more up the business in, but we can see some efficiency starting already in that in those lines of business.
Okay, got it. And and um, regarding the, the the largest biomedical service contract changes, um, of course, it sounds like it will be, you know, much more, uh, profitable moving forward, which is great. Can you speak a little bit more about the level of reduction in this contract, from a sales perspective? And then I think you mentioned kind of being able to recoup that in profit. So just any more call that appreciate it.
Good morning, I'll jump in on that. So it is a pretty significant, uh, adjustment for, um, the amount of Revenue we'll see for from that contract. It's a, it's we're estimating between 6 and 7 million, uh, for 2 Reasons 1, although we increased our price. Um, there are certain locations and certain, um, areas that we're just not working well for us, or for the the customer. And so, our volume will go down about 40% and the remaining volume will have a decrease in the service level. So we only been doing preventive maintenance services and not doing the stand. Ready. Repairs. Although we do have an opportunity to get some of those repairs back into our, into our buildings, from a Depot perspective, they'll ship them into us. We're not sure exactly how much revenue we'll see in that, but we expect that some of the devices we've been repairing the field we'll see you in our depots.
uh, the good thing though, is that helps that allows us to adjust our cost structure significantly and uh, the economics on the program will now be
Should be pretty good. Uh, so it's unfortunate that that we have to get back a little Revenue but we'll, we'll definitely start from a very good base, uh, to build out from. In fact, we've already won some other non non business with other customers that, um, that allows us to start building it back at a, at a much, um, more favorable margin to us.
We got it, appreciate that. Thanks Barry, and maybe just lastly, um, kind of related to that. Uh, so the 68% sales growth rate, uh, reiterated which is great. Um, how should we think about kind of the, the growth profiles of, um, you know, patient services versus device Solutions either in for, for this year or going forward, I guess I'm trying to get at, um, does does device Solutions what sort of growth profile can we envision their kind of moving forward with the with the change in this big contract? Yep. So, so I was at a pretty, um, um, big headwind for us for next year, just from that 1 contract adjustment. Um, as you as you're aware, we do see our growth continuing where we're focused on is in the wound care of the patient services aside uh with the bunch of different potential therapies and things that we'll we'll look at bringing online and um you know, so I think that will be a little bit slower on the on the growth side for the uh device Solutions.
Where you see more growth, uh, being driven by the patients Patient Service site, as we as we proceed through the year, the good thing is that the change that we're talking about, uh, don't take effect until December. And so, there'll be a small impact on on, uh, on on the current year, for the adjustment, to the uh the large biomedical Services contract.
Okay, got it. That makes sense. Appreciate that. Cool. Um, thanks for taking my questions. Great updates. I I think it's um, great to be prioritizing the profitable growth, so I'll jump back in queue. Thanks.
Thanks, go.
Please go ahead.
Hello. This is Talon from Matt giving your focus on profitable growth. How do you balance margin improvement with maintaining Revenue momentum across your key segments. Thank you.
Yeah, I'll jump in on that 1. So um, you clearly are our businesses has, um, a fairly sizable difference from 1, uh, Revenue source to the other terms of how much margin we get and more specifically how much Capital we have to spend to grow. So, um, we have been focusing on, you know, uh um, correcting, some of the areas where we're a little bit, um, less um, cash flow, or lower margins and making some improvements. And that's what we saw with, uh, the significant shift in the, um, the uh, the the large biomedical Services contract and focusing, uh, where we, where we can grow with our core competencies in areas that, uh, that that we can be more profitable and, and specifically where we don't have to spend as much Capital to grow. So, so that that, that's a, um, in order to be able to balance out those decisions about what we focus, we're we're thinking about return on invested Capital. So we have a smaller requirement to get into a market or to grow an area. Um, and we can see a good return and good cash flow from that best where, where we've been, uh, prioritizing ourselves. So it's not just
Just about the, the margins we can see it's about our ability to actually successfully operate in a in a particular product segments, and the, the quickness to how fast we get a cash flow from it.
Okay, thank you. And then, are there any additional opportunities in oncology or other? Therapeutic areas to replicate success of the hospital system partnership? Thank you.
Yeah, good morning Tom. I do you know, we mentioned the pcds which we were into pcds a few years ago and and it was uh we struggled in that area a little bit. I think again the back-end systems that were improving automating, some of those areas being a little bit more streamlined, their had to allowed us to continue that growth and get back into the PCD area. Uh so that along with wound care, our 2 areas that we're focused on and we see a lot of opportunity there.
Thank you.
Thank you.
Your next question comes from Jim. Sedoti with sedoti and Co please go ahead.
Hi, good morning, thanks for taking the questions. Uh, so Barry, I think I heard you say that the Erp expenses in the quarter was about 733,000. Is that right?
770.
770. All right, so that's that's an increase last year last year. It was a couple hundred thousand, so we're 500,000 higher year-over-year.
And and you think that'll be gone by 2026, right?
No. We're we'll have spend in the first quarter. We'll be going live during the first quarter so it'll it'll taper off. Um, after that. Keep in mind though, our overall maintenance cost on the old, the new system versus the old system is a little bit higher so it doesn't all completely go away but a very large portion of it goes away starting in the second quarter of next year.
Okay? And and and that's more than than the game you got from renegotiating the, the pricing, you know, on the contract then.
Um, well, I think you're, you're, I thought we were talking about the ERP, um, and now that we're talking about the, uh, the, the um,
trying to figure out if its 11 cents. It's, you know, if it's a clean EPS number but it sounds like,
The the 1 time benefit uh was offset by the 1 time expense because of the Erp.
uh, that's a good way to
look at it. We also had some adjustments to our our, uh, our our, um, shortterm compensation systems. So 1 thing that I think I said in my remarks in and it's probably true is if you back out the, in the impact of the contract adjustment. So, part of the price increase, we we got to count for prior periods, because it related to Prior prior services that we already completed, that was about 600.
000. If you take that out, we still had uh growth in our gross margin. We still had uh um um growth in our ibida margin.
So, but you're correct there. There is offset expenses in there that you could or unrelated somewhat but but yeah, there will be, if you took those both things out, we'd be better.
Okay.
All right, and then um in terms of the um the new service agreement so it sounds like that business went from around 11 million to to about 6 to 7 million in terms of Revenue. Is that right?
I was around um 10 to 12 million dollar business. It'll it'll be uh quite a bit lower but keep in mind that we have 1 some other business that will make up for some of it.
Okay. And on that 1, that was the 12 million dollar business, can you give us a sense on what the operating profit or the? Yeah, the operating profit was for that and what it'll be on the smaller. Sure. I think, I think it, I think illustrate that it's clearly. We were not making, um, margins that we thought were we needed to make under the contract. And, and with the new structure with a higher price and the different, um, um, we're we're, we're servicing in a way that we're more able to there's going to be a distinctive improvement in our margins even at and and that I'm not talking about margin. Percentage is actual margin dollars under the new structure.
So maybe going back to per share the impact of the change. So so so the operating dollars,
Under this new agreement. You know what? What it's down to maybe a 5 million dollar level, you're saying that you'll have more operating profit.
Than you will than you had. When you had a 12 million dollar business. That's correct. That's, that's right.
Okay, so yeah, I was just, yeah, our Top Line will, our Top Line is, will will be negatively impacted and yet, the bottom line will be positively impacted.
And I assume now that that some of that access capacity, you'll you'll try and and uh use you know, use that for for new customers.
Um, I don't think that will look at it as access capacity. No longer we we're, we won't have Regional team members. We'll be sending people out from, will be a little bit more concentrated as far as our, our footprint, where we have team members closer to those devices. So our some of our operating costs that get people on site will will decrease.
Uh, the nice thing though is that um, I think that what, you know, as we build it will have probably not have a big concentration in 1 customer. Right. That's kind of got the Lost leader, kind of a um um um contract uh we do since we're winning other contracts, we think that we're going to build continue to build out in a smart way with smaller contracts. That that are much more, more favorable to us,
all right, and we have
in terms of, uh,
Yeah. Uh, I think so, um, I mean there's other opportunities that that from time to time will will consider that are potentially m&a possibilities. But um, you know, you'll hear about those when, if we, if we get something going. Um, so we're kind of left with since we have positive cash flow and we and the business becoming less Capital intensive. We're, we're left with excess cash to, uh, and so we'll have to return that to investors and and, uh, and the ways that we have are pay down our debt, which is getting pretty low. Um, so yeah, it would probably be a very similar in the fourth quarter. We definitely, we have, we have some, um, some, some, some new customers ontology, that will need to have pumps.
So we'll be increasing the capital spend in the fourth quarter.
Yeah. But but, but it sounds like, you know, with this new new uh, strategy, that the operating cash flow is going to go up. Not going to go down over the next couple of years. That's a good problem. Yes, yeah.
Okay. All right. Just making sure that was clear. All right, thank you.
Yep, thanks again.
Our next question comes from Ben Haner with Lake Street Capital markets, please go ahead.
Good morning guys, thanks for taking the questions. Uh, just a couple for me. First off on the, uh, biomedical Services contract are, are there going to be any sort of 1 time expenses to, to, to kind of the transition here? Moving team members around any, anything related to that? That just kind of, they get reallocated to get relatively easily.
Not not any real expenses associated with the the change to the contract.
Yeah, there, there's definitely some costs, they're fairly low um, both in in um, some some Severance um, conditions and um, some relocations. But it's it's uh, it'll be in the fourth quarter. Very, very small, very manageable amount.
Okay, and even with that you, you would expect that the operating profit dollars to to go up.
Yeah, keep in mind the um, the real impact to the revenue.
Again, it's more of an impact in next year where we see less Revenue, but even more a bigger number to reducing some of our costs.
Okay, makes sense. Thanks for the, the help there. Um, and then, uh, secondly, and I guess, lastly, for me on the multi-year extension, within the national insurer, you get the pricing Improvement and obviously good there. Um, you know, can you maybe characterize how much of a boost you got there and then on the enhanced service coverage, you know, kind of what uh what goes into that? What's the opportunity on that front?
Yeah, good morning. Uh
Yeah, yeah, yeah. The the we, you know, the the price increases is important. We we do see price increase of the in other countries as well. This 1 will be, will be good for us and yet you must um, most of our contracts are are, there's no no real concentration, so we'd have to get price increase on all of our countries. We're going to be very uh, extremely um visible but it is important for us to be able to indicate that we don't see price D cases in these contracts.
Got it.
Thank you very much for taking the questions.
Thanks man.
Our next question comes from, Matt Hewitt with Craig, how Capital group, please go ahead.
Hello. Is there any updates on the, uh, pricing negotiations with Kima mouthpiece? Thank you.
Hey, good morning, Matt. Uh, so from a chemo mouthpiece. I, I actually, we do actually have some good news from, uh, we don't have anything back from, um, CMP as far as their approval for a, a code, at a rate for a code, so that should come by the end of this year. Uh, however, we have seen some, uh, increased placement in the market. So, uh, from a sales perspective, we have to started to see the uptake into facilities for, uh, placement of the device, which is, which has been a really great start. So, um, again that that, uh, approval, uh, accreditation kind of cool will come up by the end of the year, we're waiting for, uh, CM Pizza to announce that. And then that rate, uh, for that coach should be out, uh, mid year, uh, next year.
This concludes our question and answer session. I would like to turn the conference back over to Carrie LaChance for any closing, remarks,
Thank you. I want to thank everyone for participating on today's call, and we look forward to our fourth quarter call when we will update on our results and progress.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect