InfuSystem Holdings Inc

Previous wording

Patient Services net revenue of $18.6 million decreased $0.2 million, or 1.0%, during the three-month period of 2024 compared to the same prior year period. This decrease was primarily attributable to decreased third-party payer collections on billings totaling approximately $0.5 million and lower revenue from sales-type leases of NPWT pumps, which decreased by $0.3 million, both of which had tough comparisons to strong prior year amounts. These decreases were partially offset by higher treatment volume in both Oncology and Wound Care.

Current wording

Patient Services net revenue of $20.2 million increased $0.9 million, or 4.8%, during the second quarter of 2024 compared to the prior year period. This increase was primarily attributable to additional treatment volume and increased third-party payer collections totaling $2.1 million offset partially by $1.2 million lower revenue from sales-type leases of NPWT pumps. The improved volume and collections benefited Oncology revenue by $1.5 million, or 8.9%, Pain Management revenue by $0.3 million, or 28.9%, and Wound Care treatment revenue by $0.3 million, or 188.0%. Sales-Type Lease revenue of NPWT pumps, which had a tough comparison to an unusually strong prior year, decreased by $1.2 million.

Previous wording

Device Solutions net revenue of $13.4 million increased $1.8 million, or 15.6%, during the three-month period of 2024 compared to the same prior year period. This increase included higher biomedical services revenue, which increased by $1.0 million, or 31%, higher sales of medical equipment, which increased by $0.6 million, or 40% and higher rental equipment revenue, which increased by $0.3 million, compared to the same prior year period. These increases were partially offset by lower sales of disposable medical supplies which decreased by $0.1 million. The increased biomedical revenue was mainly attributable to increased revenue from the master services agreement that we entered into in April 2022.

Current wording

Device Solutions net revenue of $13.5 million increased $1.0 million, or 8.3%, during the second quarter of 2024 compared to the prior year period. This increase included higher biomedical services revenue, which increased by $0.5 million, or 13.6%, higher rental revenue totaling $0.4 million, or 9.2%, and higher disposable medical supplies revenue, which increased by $0.4 million, or 20.4%. These increases were partially offset by lower medical equipment sales, which decreased by $0.3 million, or 18.8%. The increased biomedical revenue was mainly attributable to increased revenue from the master services agreement that we entered into in April 2022. The increases in rental revenue and disposables are mainly attributable to a new customer added during the period. Lower medical equipment sales reflects normal shipment timing for large contracts.

Previous wording

During the three-month period of 2024, the Company recorded a benefit from income taxes totaling $0.2 million on pre-tax losses of $1.3 million, representing an effective tax rate of 14.3%. During the three-month period of 2023, the Company recorded a benefit from income taxes totaling $0.3 million on pre-tax losses of $0.6 million, representing an effective tax rate of 48.2%. These rates differed from the U.S. statutory rate mainly due to the effects of local, state and foreign jurisdiction income taxes, limitations on the deductions of certain expenses including meals and entertainment expense and management compensation and differences between expense recognized for book purposes versus tax purposes associated with equity compensation expense. The impact of permanent differences weighs heavier on the effective tax rate when pre-tax earnings are close to break even.

Current wording

During the second quarter of 2024, the Company recorded a provision for income taxes totaling $0.6 million on pre-tax income of $1.3 million, representing an effective tax rate of 45%. During the second quarter of 2023, the Company recorded a provision for income taxes of $0.2 million on a pre-tax income of $0.6 million, representing an effective tax rate of 31%. The effective tax rates for these periods differed from the U.S. statutory rate mainly due to the effects of local, state and foreign jurisdiction income taxes and certain permanent differences in expenses recognized for tax purposes, such as non-deductible meals and entertainment, management compensation and differences between expense recognized for book purposes versus tax purposes associated with equity compensation expense. The impact of permanent differences weigh heavier on the effective tax rate when pre-tax earnings are close to break even.

Previous wording

Net revenues for the three-month period ended March 31, 2024 (“three-month period of 2024”) were $32.0 million, an increase of $1.6 million, or 5.4%, compared to $30.4 million for the three-month period ended March 31, 2023 (“three-month period of 2023”). The increase included higher net revenues for the Device Solutions segment offset partially by lower revenue for the Patient Services segment.

Current wording

Net revenues for the six-month period ended June 30, 2024 ("first half of 2024") were $65.7 million, an increase of $3.6 million, or 5.8%, compared to $62.1 million for the six-month period ended June 30, 2023 ("first half of 2023"). The increase included higher net revenues for both the Patient Services and Device Solutions segments.

Previous wording

Patient Services gross profit was $12.3 million during the three-month period of 2024, representing an increase of $0.7 million, or 6.4%, compared to the same prior year period. The improvement reflected a higher gross margin, which increased from the prior year by 4.5% to 66.0%. The higher gross margin was the result of a change in product mix favoring higher margin revenues. These improvements were partially offset by lower third-party payer collections on billings. The favorable gross margin mix was mainly related to the decrease in revenue related to NPWT equipment leases, which have a lower average gross margin than other Patient Services revenue categories.

Current wording

Patient Services gross profit was $25.7 million during the first half of 2024, representing an increase of $2.3 million, or 10.0%, compared to the same prior year period. The improvement reflected increased net revenue and higher gross margin, which increased from the prior year by 4.8% to 66.2%. The increase in gross margin reflected increased third-party payer collections, lower pump disposal expenses, favorable gross margin mix and improved coverage of fixed costs from higher net revenue. The favorable gross margin mix was mainly related to the decrease in revenue related to NPWT equipment leases which have a lower average gross margin than other Patient Services revenue categories. Pump disposal expenses, which include retirements of damaged pumps and reserves for missing pumps, decreased by $0.6 million during the first half of 2024 compared to the prior year period.

Previous wording

Selling and marketing expenses for the three-month period of 2024 were $3.4 million, representing an increase of $0.2 million, or 4.7%, compared to selling and marketing expenses for the three-month period of 2023. Selling and marketing expenses consist of sales personnel salaries, commissions and associated fringe benefit and payroll-related items, marketing, travel and entertainment and other miscellaneous expenses. Selling and marketing expenses as a percentage of net revenues was 10.6% for both the current and prior year periods.

Current wording

Selling and marketing expenses for the first half of 2024 were $6.4 million, representing an increase of $0.2 million, or 3.4%, compared to selling and marketing expenses for the first half of 2023. Selling and marketing expenses consist of sales personnel salaries, commissions and associated fringe benefit and payroll-related items, marketing, travel and entertainment and other miscellaneous expenses. Selling and marketing expenses as a percentage of net revenues was 9.8% representing a slight decrease from the prior year period amount of 10.0%.

Previous wording

G&A expenses for the three-month period of 2024 were $13.7 million, an increase of $2.1 million, or 18.2%, from the three-month period of 2023. G&A expenses during these periods consisted primarily of accounting, administrative, third-party payer billing and contract services, customer service, nurses on staff, new product services, service center personnel salaries, fringe benefits and other payroll-related items, professional fees, legal fees, stock-based compensation, insurance and other miscellaneous items. Additionally, the amount for 2024 included a one-time $0.6 million payment to a former member of the board of directors related to a Cooperation Agreement and a one-time payment to the Company's former audit firm for services related to their consent to include their prior year audit report in our 2023 annual report totaling $0.3 million. The remaining increase of $1.2 million included timing-related higher management incentive compensation and stock-based compensation expenses of $0.4 million and $0.3 million, respectively, and other increased expenses totaling $0.5 million. The other increases were associated with revenue volume growth including the cost of additional personnel, information technology and general business expenses and included inflationary increases. G&A expenses as a percentage of net revenues for the three-month period of 2024 increased to 42.8% compared to 38.1% for the same prior year period.

Current wording

Additionally, the amount for 2024 included a one-time $0.6 million payment to a former member of the board of directors related to a Cooperation Agreement and a one-time payment to the Company's former audit firm for services related to their consent to include their prior year audit report in our 2023 annual report totaling $0.3 million. The remaining increase of $1.4 million included increased stock-based compensation expenses of $0.4 million and other increased expenses totaling $1.0 million. The other increases were associated with revenue volume growth including the cost of additional personnel, information technology and general business expenses and included inflationary increases. G&A expenses as a percentage of net revenues for the first half of 2024 increased to 38.4% compared to 36.9% for the same prior year period.

Previous wording

During the three-month period of 2024, other income and expense included interest expense of $0.5 million, which was slightly lower than interest expense for the three-month period of 2023. This decrease was due to a decrease in outstanding borrowings on the 2021 Credit Agreement, as amended, (defined below) revolving line of credit partially offset by higher average interest rates.

Current wording

During the first half of 2024, other income and expense included interest expense of $0.9 million, which was slightly lower than interest expense for the first half of 2023. This decrease was due to a decrease in outstanding borrowings on the 2021 Credit Agreement, as amended, (defined below) revolving line of credit partially offset by higher average interest rates.

Previous wording

Benefit From Income Taxes

Current wording

(Provision For) Benefit From Income Taxes

Previous wording

As of March 31, 2024, amounts outstanding under the Revolving Facility provided under the 2021 Credit Agreement, as amended, bear interest at a variable rate equal to, at the Company’s election, Adjusted Term SOFR for Term Benchmark loans or an Alternative Base Rate for ABR loans, as defined by the First Amendment, plus a spread that will vary depending upon the Company’s leverage ratio. The spread ranges from 2.00% to 3.00% for Term Benchmark Loans and 1.00% to 2.00% for base rate loans. The weighted-average Term Benchmark loan rate at March 31, 2024 was 7.42% (Adjusted Term SOFR of 5.42% plus 2.00%). The actual ABR loan rate at March 31, 2024 was 9.50% (lender’s prime rate of 8.50% plus 1.00%). As of March 31, 2024, the Company was in compliance with all debt-related covenants under the 2021 Credit Agreement, as amended.

Current wording

As of June 30, 2024, amounts outstanding under the Revolving Facility provided under the 2021 Credit Agreement, as amended, bear interest at a variable rate equal to, at the Company’s election, Adjusted Term SOFR for Term Benchmark loans or an Alternative Base Rate for ABR loans, as defined by the First Amendment, plus a spread that will vary depending upon the Company’s leverage ratio. The spread ranges from 2.00% to 3.00% for Term Benchmark Loans and 1.00% to 2.00% for base rate loans. The weighted-average Term Benchmark loan rate at June 30, 2024 was 7.43% (Adjusted Term SOFR of 5.43% plus 2.00%). The actual ABR loan rate at June 30, 2024 was 9.50% (lender’s prime rate of 8.50% plus 1.00%). As of June 30, 2024, the Company was in compliance with all debt-related covenants under the 2021 Credit Agreement, as amended.

Previous wording

On June 30, 2021, our Board of Directors approved a stock repurchase program (the “Share Repurchase Program”) that authorizes the Company to repurchase up to $20.0 million of the Company’s outstanding common stock through June 30, 2024. Repurchases under the Share Repurchase Program are subject to market conditions, the periodic capital needs of the Company’s operating activities, and the continued satisfaction of all covenants under the Company’s existing 2021 Credit Agreement, as amended. Repurchases under the Share Repurchase Program may take place in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. The Share Repurchase Program does not obligate the Company to repurchase shares and may be suspended, terminated, or modified at any time at the discretion of the Board.

Current wording

On May 16, 2024, our Board of Directors approved a stock repurchase program (the "Share Repurchase Program") that authorizes the Company to repurchase up to $20.0 million of the Company’s outstanding common stock through June 30, 2026. The Share Repurchase Program supersedes the previous authorization, which was set to expire on June 30, 2024. Repurchases under the Share Repurchase Program are subject to market conditions, the periodic capital needs of the Company’s operating activities, and the continued satisfaction of all covenants under the Company’s existing 2021 Credit Agreement, as amended. Repurchases under the Share Repurchase Program may take place in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. The Share Repurchase Program does not obligate the Company to repurchase shares and may be suspended, terminated, or modified at any time at the discretion of the Board.

Previous wording

As of March 31, 2024, the Company had repurchased and retired approximately $6.2 million, or 553,149 shares, of the Company's outstanding common stock under the Share Repurchase Program.

Current wording

As of June 30, 2024, the Company had repurchased and retired approximately $0.3 million, or 41,139 shares, of the Company's outstanding common stock under the Share Repurchase Program. The Company had repurchased and retired approximately $6.2 million, or 553,149 shares under the previous authorization.

Previous wording

Operating Cash Flow. Operating cash flows provided $0.4 million in cash during the three-month period of 2024 and used $0.2 million of cash during the three-month period of 2023. This $0.5 million favorable difference was attributable to a reduction of cash used to fund working capital items, which was $1.5 million during three-month period of 2024 compared to $3.1 million during three-month period of 2023, a decrease of $1.6 million. This amount was offset by a decrease in net loss adjusted for non-cash items, which was $1.9 million during the three-month period of 2024 compared to $3.0 million during the three-month period of 2023, a decrease of $1.1 million. The decrease in net loss adjusted for non-cash items was primarily attributable to the increased general and administrative expenses, offset partially by the higher revenue and gross profit described above. The use of cash for working capital items during the three-month period of 2024 included a $1.1 million decrease in accounts payable and other liabilities net of capital items, a $0.7 million increase in other current assets and a $0.2 million increase in accounts receivable. These cash flow uses were partially offset by a $0.2 million decrease in inventories and a $0.4 million decrease in other assets. The cash used for working capital items during the three-month period of 2023 included a $1.0 million increase in accounts receivable, a $0.8 million increase in inventories, a $0.8 million increase in other current assets and a $0.8 million increase in other assets. These were partially offset by a $0.3 million increase in accounts payable and other liabilities net of capital items.

Current wording

Operating Cash Flow. Operating cash flows provided $2.7 million in cash during the first half of 2024 and $2.3 million of cash during the first half of 2023. This $0.4 million favorable difference was attributable to a reduction of cash used to fund working capital items, which was $4.4 million during first half of 2024 compared to $5.3 million during first half of 2023, a decrease of $0.9 million. This amount was offset by a decrease in net (loss) income adjusted for non-cash items, which was $7.1 million during the first half of 2024 compared to $7.6 million during the first half of 2023, a decrease of $0.5 million. The decrease in net (loss) income adjusted for non-cash items was primarily attributable to the increased general and administrative, offset partially by the higher revenue and gross profit described above. The use of cash for working capital items during the first half of 2024 included a $3.3 million decrease in accounts payable and other liabilities net of capital items, a $1.2 million increase in accounts receivable, a $0.4 million increase in other current assets and a $0.4 million increase in inventories. These cash flow uses were partially offset by a $0.9 million decrease in other assets. The cash used for working capital items during the first half of 2023 included a $1.7 million increase in other assets, a $1.0 million increase in other current assets, a $0.9 million increase in inventories and a $0.5 million increase in accounts receivable. These were partially offset by a $1.2 million decrease in accounts payable and other liabilities net of capital items.

Previous wording

The increase in accounts receivable during both periods was mainly due to the increase in revenue during for each period. This increase was greater during the three-month period of 2023 when the revenue was growing at a higher rate and increased revenue attributable to sales-type leases was included, which resulted in higher lease receivables (of which the long-term portion is included in other assets versus accounts receivable) and to the biomedical master services agreement described above, a part of which increased the related contract asset (which is included in other current assets versus accounts receivable). Revenue increased in the three-month period of 2024, but at a lower rate than the three-month period of 2023, largely resulting in an increased accounts receivable balance. Accounts payable and other liabilities net of capital items decreased by $1.1 million during the three-month period of 2024 and increased $0.3 million during the three-month period of 2023, representing a $1.4 million unfavorable cash flow swing, mainly due to an increase in the amount paid in 2024 for the 2023 short-term incentive bonus plan as compared to the amount paid in 2023 for the 2022 short-term incentive bonus plan. The increase in inventories during 2023 reflected the higher revenue growth during that period. The decrease in other assets was due to lower long-term lease receivables due to customer payments received and a decrease in the amount of equipment sales on leases during 2024 as compared to 2023.

Current wording

The increase in accounts receivable during both periods was mainly due to the increase in revenue during each period. This increase was greater during the first half of 2023 when the revenue was growing at a higher rate and increased revenue attributable to sales-type leases was included, which resulted in higher lease receivables (of which the long-term portion is included in other assets versus accounts receivable) and to the biomedical master services agreement described above, a part of which increased the related contract asset (which is included in other current assets versus accounts receivable). Revenue increased in the first half of 2024, but at a lower rate than the first half of 2023, largely resulting in an increased accounts receivable balance. Accounts payable and other liabilities net of capital items decreased by $3.3 million during the first half of 2024 and decreased $1.2 million during the first half of 2023, representing a $2.1 million unfavorable cash flow swing, mainly due to an increase in the amount paid in 2024 for the 2023 short-term incentive bonus plan as compared to the amount paid in 2023 for the 2022 short-term incentive bonus plan. The increase in inventories during 2023 reflected the higher revenue growth during that period. The decrease in other assets was due to lower long-term lease receivables due to customer payments received and a decrease in the amount of equipment sales on leases during 2024 as compared to 2023.

Previous wording

Investing Cash Flow. Net cash used in investing activities was $0.4 million for the three-month period of 2024 compared to $3.1 million for the three-month period of 2023, a decrease of $2.6 million. The decrease was due to a decrease totaling $2.6 million in cash used to purchase medical equipment and other property and equipment during the three-month period of 2024 compared to the three-month period of 2023. Purchases of medical equipment were lower during 2024 compared to 2023 because a higher portion of the revenue growth in 2024 came from biomedical services that do not require capital equipment purchases.

Current wording

Investing Cash Flow. Net cash used in investing activities was $7.1 million for the first half of 2024 compared to $5.4 million for the first half of 2023, an increase of $1.7 million. The increase was due to an increase totaling $1.8 million in cash used to purchase medical equipment and other property and equipment during the first half of 2024 compared to the first half of 2023. Purchases of medical equipment were higher during 2024 compared to 2023 because a higher portion of the revenue growth in 2024 came from rental revenues that require capital equipment purchases.

Previous wording

Financing Cash Flow. Net cash provided by financing activities for the three-month period of 2024 was $0.6 million compared to $3.3 million for the three-month period of 2023. The amount of cash flow provided by financing activities during 2024 included net revolving line of credit borrowings under the 2021 Credit Agreement totaling $0.8 million and cash proceeds from employee stock option exercises and employee stock purchase plan proceeds totaling $0.2 million combined. These cash sources were partially offset by cash used to satisfy statutory withholding on employee stock based compensation plans totaling $0.4 million. Cash provided by financing activities during 2023 primarily related to net revolving line of credit borrowings under the 2021 Credit Agreement totaling $3.2 million and $0.6 million in cash proceeds from employee stock option exercises and employee stock purchase plan proceeds combined. These were partially offset by cash used to satisfy statutory withholding on employee stock based compensation plans totaling $0.3 million and $0.2 million to buy back the Company's common stock.

Current wording

Financing Cash Flow. Net cash provided by financing activities for the first half of 2024 was $4.3 million compared to $3.1 million for the first half of 2023. The amount of cash flow provided by financing activities during 2024 included net revolving line of credit borrowings under the 2021 Credit Agreement totaling $5.0 million and cash proceeds from employee stock option exercises and employee stock purchase plan proceeds totaling $0.2 million combined. These cash sources were partially offset by cash used to satisfy statutory withholding on employee stock based compensation plans totaling $0.6 million and $0.3 million to repurchase the Company's common stock. Cash provided by financing activities during 2023 primarily related to net revolving line of credit borrowings under the 2021 Credit Agreement totaling $3.1 million and $0.8 million in cash proceeds from employee stock option exercises and employee stock purchase plan proceeds combined. These were partially offset by cash used to satisfy statutory withholding on employee stock based compensation plans totaling $0.5 million, $0.2 million to repurchase the Company's common stock and $0.2 million in debt issuance costs related to the First Amendment to the 2021 Credit Agreement.