InfuSystem Holdings, Inc Q4 FY2025 earnings call

• Fourth quarter saw solid top line growth 7%, full year adjusted EBITDA up 24% to $31.5 million, operating cash flow $7.1 million. Net debt declined 30% y-o-y. - Completed migration of Wound Care business to new revenue cycle app; Oncology is final therapy to migrate. Obtained new accreditations for home healthcare DME products. Restructured field-based biomedical services team. Made progress on IT application upgrade, expected to complete Q1 2026. Restructured largest biomedical services contract, starting 2026 at reduced revenue volume by $7.1 million (5.5% annually) with expected larger expense reduction. - Anticipate 2026 annual revenue growth 6%-8% pro forma, adjusted EBITDA margin mid- to low 20% range, inclusive of IT system upgrade costs expected to decrease after Q1.

During the fourth quarter of 2025, net revenue totaled $36.2 million, up 7% from the prior year. Patient Services net revenue increased $1.1 million (5.4%), with Oncology up ~$500,000 (2.8%) and Wound Care treatment volume revenue up nearly $900,000 (over 160% driven by pneumatic compression devices). Device Solutions net revenue increased $1.3 million (9.7%), primarily from higher medical equipment sales and biomedical services revenue, partially offset by a $400,000 reduction in equipment rental revenue. Gross profit was $20.4 million, a $2.2 million (12%) increase, with gross margin over 56% (+2.6% from prior year).

• 2026 annual revenue growth expected in range of 6% to 8% pro forma after adjusting for GE Healthcare contract restructuring. - Adjusted EBITDA margin expected to continue in mid- to low 20% range, inclusive of IT system upgrade costs expected to decrease after first quarter. - Patient services is main growth area, with Wound Care focusing on PCDs and other products; Device Solutions has opportunities despite revenue reduction from contract restructuring. - ChemoMouthpiece is expected to contribute to higher guidance range if approved.

Q: Maybe starting with the top line guidance, 6% to 8% for the year. Can you talk a little bit about how we should anticipate the growth rates within each segment, Patient Services and Device Solutions to trend? Would we anticipate a continuation of maybe higher percent growth in Device Solutions like you saw in Q4 versus Patient Services? Any color here would be appreciated.

A: Yes. I'll throw a couple of thoughts out there, Kyle. Definitely, the patient services is where we see our growth mainly coming from. Even Oncology, we see some success there but Wound Care is our main focus right now for driving further volume through the PCDs that we launched last year and other products we might bring online. That's not to say that we don't see growth in Device Solutions, we definitely do. We're going to give some revenue back because we restructured the GE contract but we see lots of opportunities for us to take that team and grow the base at much better returns for the company.

Q: The ERP is expected to go live this quarter. I guess what's the remaining spend to completion? And when should we expect to see the net maintenance cost savings to fully materialize?

A: Yes. So we'll see the number to be slightly higher in this coming quarter as we're in that final launch phase. A lot of activity is currently happening to get us ready, and we have extra help from our consultants on that as we bring actual real live transactions and convert over. So that will be a little bit higher in the first quarter but then it should taper down. It won't go to 0, though. As we look at the full benefit on a sort of annualized basis, if we compare the periods where we're doing the ERP to the future when we're not doing the actual implementation, it about $2 million savings annually. So that's the spend that should come out where we do have some ongoing spend, higher maintenance costs, if you will. So the net difference between when we've been doing the implementation to the future is about $2 million in savings. What we expect sometime later in the year 2026 or beyond 2027 is to start seeing some benefits as the new application starts to -- we get good at it and we start to consolidate and see efficiencies for all the rest of the teams that are impacted by it.

Q: Are there any other costs associated with the transition of the RCM platform from Apollo to expand it into the oncology business?

A: No, no, no additional costs. Again, that system is up and running. We're just -- we're defining those processes to get oncology over there. We use several systems today for the oncology work. So we're excited to get it moved into that new system but no additional cost.

Q: Do you have any updates on the ChemoMouthpiece billing code approval or timing there?

A: I do. Unfortunately, I don't have any updates, meaning it was approved or not approved. What I would say is that we're in touch with them very frequently. We have weekly calls regarding kind of the momentum that we see and the interest in the product. We are seeing devices that are shipped out on a weekly basis. They don't have any new information based on their December 17 meeting with CMS but they continue to be encouraged. And again, there's product interest, and we're looking forward to. They were looking forward to maybe a February information back with approval or whatnot but we haven't heard an update yet.

Q: You mentioned that the expense reduction related to the renegotiated GE contract will be greater than the $7.1 million in revenue reduction. Where will that show up on the income statement? Will we see that mostly in the gross margin?

A: Yes, it's gross margin. It's -- we restructured the team, so we had to take some team members out of the program and things like we'd have to pay for the parts for repairs, at least not in the field. So there's a lot of costs that come out of the cost of sales line as we see the revenue come down.

Q: In addition to -- I think you said expenses should come down about $2 million because of the change in -- or because of the ERP completion. You said on an annual basis, they should come down about $2 million. In 2025, you had some expenses related to the CEO transition. Those should go away as well in 2026, right?

A: That's correct. Yes. Those are added back for EBITDA, but obviously not added back for our operating income or net income.

Q: Are there any other low-margin businesses you're considering exiting or just opportunities to drive more efficiency?

A: I don't think there's any other really low-margin areas that we're looking at today. We will continue to look at -- from a biomed perspective, if there's -- we have a much smaller team today from a nationwide aspect of the number of technicians. So we will try to keep it to a regional kind of the work that we're doing in the biomed space to a regional area unless we see good pricing that we can kind of afford to fly people all over the place. So I think otherwise, we don't have any low-margin areas that we're looking to kind of exit from.

Q: First off for me, I know the subject has been already touched on a bit but I was just curious on the Wound Care cost efficiency and maybe how you see that tracking throughout the year.

A: I would say from the new system, it's allowing us to ramp, bring in volume. It's a much more efficient system. We're using multiple systems before. So it's allowing us to bring in more products. Again, we saw some really good benefit from -- with PCDs. We were able to ramp that relatively quickly. We expect that to continue to grow over the course of the year as well as adding new products.

Q: Can you share what categories those are in at all? Or is that something we should be staying tuned for?

A: I would say from an accreditation standpoint, I'm happy to share we were accredited for a few new products. One is called the Defender Boot, one is called HidraWear in the ostomy category. So we got accredited for some of those codes. We see some interest in some of those products. We've been approached by some folks with some of those products. I would say as a whole, we -- I would typically not love to share. We want to prove out what we're doing before we set expectations on that. We really want to prove out that it's working for us. Reimbursement is working. So we are working with some companies here to take a look at this, see if it's going to be a good opportunity for us. And as we are successful in those areas, we'll continue to share more information.