InfuSystem Holdings Inc

Previous wording

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Form 10-K involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.”Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”For discussion and analysis of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023.

Current wording

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. The forward-looking statements included in this discussion and elsewhere in this Form 10-K involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.”Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”

Previous wording

We are a leading national health care service provider, facilitating outpatient care for Durable Medical Equipment manufacturers and health care providers. We provide our products and services to hospitals, oncology practices, ambulatory surgery centers, and other alternate site health care providers. Our headquarters is in Rochester Hills, Michigan, and we operate our business from a total of seven locations in the U.S. and Canada. We deliver local, field-based customer support as well as operate pump service and repair Centers of Excellence in Michigan, Kansas, California, Massachusetts, Texas and Ontario, Canada. ISI is accredited by the Community Health Accreditation Partner (CHAP) and is ISO 9001 certified at our Kansas, Michigan, Massachusetts, Canada and Santa Fe Springs, California locations as well as ISO 13485 certified at our Bakersfield, California location.

Current wording

We are a leading national healthcare service provider, facilitating outpatient care for Durable Medical Equipment manufacturers and healthcare providers. We provide our products and services to hospitals, oncology practices, ambulatory surgery centers, and other alternate site healthcare providers. Our headquarters is in Rochester Hills, Michigan, and we operate our business from a total of seven locations in the U.S. and Canada. We deliver local, field-based customer support as well as operate pump service and repair Centers of Excellence in Michigan, Kansas, California, Massachusetts, Texas and Ontario, Canada. InfuSystem is accredited by the Community Health Accreditation Partner (CHAP) and is ISO 9001 certified at our Kansas, Michigan, Massachusetts, Canada and Santa Fe Springs, California locations as well as ISO 13485 certified at our Bakersfield, California location.

Previous wording

InfuSystem competes for and retains its business primarily on the basis of its long participation and strong reputation in the Durable Medical Equipment space, its long-standing relationships with Durable Medical Equipment manufacturers and its health care provider customers, and the high levels of service it provides. Current barriers to entry for potential competitors are created by our: (i) growing number of third-party payer networks under contract, which included nearly 820 third-party payer networks as of December 31, 2023, an increase of 3% over the prior year period; (ii) economies of scale, which allow for predictable reimbursement and less costly purchase and management of the pumps, respectively; (iii) established, long-standing relationships as a provider of pumps to outpatient oncology practices in the U.S. and Canada; (iv) pump fleet of ambulatory and large volume infusion pumps for rent and for sale, which may allow us to be more responsive to the needs of physicians, outpatient oncology practices, hospitals, outpatient surgery centers, homecare practices, patient rehabilitation centers and patients than a new market entrant; (v) seven geographic locations in the U.S. and Canada that allow for same day or next day delivery of pumps; (vi) growing team of field-based and traveling biomedical technicians; and (vii) a wide array of pump repair and service capabilities. We do not perform any research and development on pumps, but we have made, and continue to make investments in our information technology.

Current wording

InfuSystem competes for and retains its business primarily on the basis of its long participation and strong reputation in the Durable Medical Equipment space, its long-standing relationships with Durable Medical Equipment manufacturers and its healthcare provider customers, and the high levels of service it provides. Current barriers to entry for potential competitors are created by our: (i) growing number of third-party payer networks under contract, which included nearly 835 third-party payer networks as of December 31, 2024, an increase of 2% over the prior year period; (ii) economies of scale, which allow for predictable reimbursement and less costly purchase and management of the pumps, respectively; (iii) established, long-standing relationships as a provider of pumps to outpatient oncology practices in the U.S. and Canada; (iv) pump fleet of ambulatory and large volume infusion pumps for rent and for sale, which may allow us to be more responsive to the needs of physicians, outpatient oncology practices, hospitals, outpatient surgery centers, homecare practices, patient rehabilitation centers and patients than a new market entrant; (v) seven geographic locations in the U.S. and Canada that allow for same day or next day delivery of pumps; (vi) growing team of field-based and traveling biomedical technicians; and (vii) a wide array of pump repair and service capabilities. We do not perform any research and development on pumps, but we have made, and continue to make investments in our information technology.

Previous wording

Our Patient Services segment’s core purpose is to seek opportunities to leverage our unique know-how in clinic-to-home health care involving Durable Medical Equipment, our logistics and billing capabilities, our growing network of third-party payers under contract, and our clinical and biomedical capabilities. This leverage may take the form of new products and/or services, strategic alliances, joint ventures and/or acquisitions. The leading service within our Patient Services segment is our Oncology Business. Colorectal cancer is the third most prevalent form of cancer in the U.S., according to the American Cancer Society, and the standard of care for the treatment of colorectal cancer relies upon continuous chemotherapy infusions delivered via ambulatory infusion pumps. One of the goals for the Patient Services segment is to expand into treatment of other types of cancers. In 2023, our Oncology Business approximated 89% of our total Patient Services segment revenues. In 2023, we generated approximately 46% of our total Patient Services segment revenues from treatments for colorectal cancer and 43% of our Patient Services segment revenues from treatments for non-colorectal disease states. There are a number of approved treatment protocols for pancreatic, head and neck, esophageal and other types of cancers, as well as other disease states which present opportunities for growth. There are also a number of other drugs currently approved by the FDA, as well as agents in the pharmaceutical development pipeline, which we believe could potentially be used with continuous infusion protocols for the treatment of diseases other than colorectal cancer. Additional drugs or protocols currently in clinical trials may also obtain regulatory approval over the next several years. If these new drugs or protocols obtain regulatory approval for use with continuous infusion protocols, we expect the pharmaceutical companies to focus their sales and marketing efforts on promoting the new drugs and protocols to physicians.

Current wording

Our Patient Services segment’s core purpose is to seek opportunities to leverage our unique know-how in clinic-to-home healthcare involving Durable Medical Equipment, our logistics and billing capabilities, our growing network of third-party payers under contract, and our clinical and biomedical capabilities. This leverage may take the form of new products and/or services, strategic alliances, joint ventures or acquisitions. The leading service within our Patient Services segment is our Oncology Business. Colorectal cancer is the third most prevalent form of cancer in the U.S., according to the American Cancer Society, and the standard of care for the treatment of colorectal cancer relies upon continuous chemotherapy infusions delivered via ambulatory infusion pumps. One of the goals for the Patient Services segment is to expand into treatment of other types of cancers. In 2024, our Oncology Business approximated 90% of our total Patient Services segment revenues. In 2024, we generated approximately 45% of our total Patient Services segment revenues from treatments for colorectal cancer and 45% of our Patient Services segment revenues from treatments for non-colorectal disease states. There are a number of approved treatment protocols for pancreatic, head and neck, esophageal and other types of cancers, as well as other disease states which present opportunities for growth. There are also a number of other drugs currently approved by the FDA, as well as agents in the pharmaceutical development pipeline, which we believe could potentially be used with continuous infusion protocols for the treatment of diseases other than colorectal cancer. Additional drugs or protocols currently in clinical trials may also obtain regulatory approval over the next several years. If these new drugs or protocols obtain regulatory approval for use with continuous infusion protocols, we expect the pharmaceutical companies to focus their sales and marketing efforts on promoting the new drugs and protocols to physicians.

Previous wording

The use of continuous infusion has been demonstrated to decrease or alter the toxicity of a number of cytotoxic, or cell killing agents. Higher doses of drugs can be infused over longer periods of time, leading to improved tolerance and decreased toxicity. For example, the cardiotoxicity (heart muscle damage) of the chemotherapy drug Doxorubicin is decreased by schedules of administration according to The Chemotherapy Source Book by Michael C. Perry. Nausea, vomiting, diarrhea and decreased white blood cell and platelet counts are all affected by duration of delivery. Continuous infusion can lead to improved tolerance and patient comfort while enhancing the patient’s ability to remain on the chemotherapy regimen. Additionally, the lower toxicity profile and resulting reduction in side effects enables patients undergoing continuous infusion therapy to continue a relatively normal lifestyle, which may include continuing to work, going shopping, and caring for family members. We believe that the partnering of physician management and patient autonomy provide for the highest quality of care with the greatest patient satisfaction.

Current wording

The use of continuous infusion has been demonstrated to decrease or alter the toxicity of a number of cytotoxic, or cell killing agents. Higher doses of drugs can be infused over longer periods of time, leading to improved tolerance and decreased toxicity. Nausea, vomiting, diarrhea and decreased white blood cell and platelet counts are all affected by duration of delivery. Continuous infusion can lead to improved tolerance and patient comfort while enhancing the patient’s ability to remain on the chemotherapy regimen. Additionally, the lower toxicity profile and resulting reduction in side effects enables patients undergoing continuous infusion therapy to continue a relatively normal lifestyle, which may include continuing to work, going shopping, and caring for family members. We believe that the partnering of physician management and patient autonomy provide for the highest quality of care with the greatest patient satisfaction.

Previous wording

•Wound Care: launched in November 2022, the Company established the SI Wound Care partnership with Sanara. The partnership will focus on delivering a complete wound care solution targeted at improving patient outcomes, lowering the cost of care, and increasing patient and provider satisfaction. The partnership is expected to enable InfuSystem to offer innovative products including Cork NPWT devices and supplies and Sanara's advanced wound care product line to new customers through the jointly controlled entity.

Current wording

•Wound Care: launched in November 2022, the Company established a partnership, SI Healthcare Technologies, LLC ("SI Healthcare"), with Sanara MedTech Inc. ("Sanara"). The partnership focuses on delivering a complete wound care solution targeted at improving patient outcomes, lowering the cost of care, and increasing patient and provider satisfaction. The partnership enables InfuSystem to offer innovative products including Cork and Genadyne Biotechnologies Inc. NPWT devices and supplies and Sanara’s advanced wound care product line to new customers through the jointly controlled entity.

Previous wording

•Acquisitions: we believe there are opportunities to acquire smaller, regional health care service providers, in whole or in part that perform similar services to us but do not have the national market access, network of third-party payer contracts or operating economies of scale that we currently enjoy. We may also pursue acquisition opportunities of companies that perform similar services, but offer different therapies or utilize different devices.

Current wording

•Acquisitions: we believe there are opportunities to acquire smaller, regional healthcare service providers, in whole or in part that perform similar services to us but do not have the national market access, network of third-party payer contracts or operating economies of scale that we currently enjoy. We may also pursue acquisition opportunities of companies that perform similar services, but offer different therapies or utilize different devices.

Previous wording

Our Device Solutions segment’s core service is to: (i) sell or rent new and pre-owned pole-mounted and ambulatory infusion pumps and other Durable Medical Equipment; (ii) sell treatment-related consumables; and (iii) provide biomedical recertification, maintenance and repair services for oncology practices as well as other healthcare site settings, including, home care and home infusion providers, skilled nursing and acute care facilities, pain centers and others. We purchase new and pre-owned pole-mounted and ambulatory infusion pumps from a variety of sources on a non-exclusive basis. We repair, refurbish and provide biomedical certification for the devices as needed. The pumps are then available for sale, rental or to be used within our ambulatory infusion pump management service. Our acquisition of FilAMed, a privately-held biomedical services company, on January 31, 2021 has supplemented the Company’s existing biomedical recertification, maintenance and repair services for acute care facilities and other alternate site settings, including, home care and home infusion providers, skilled nursing facilities, pain centers and others. Our acquisition of OB Healthcare, a privately-held biomedical services company, on April 18, 2021 further develops and expands InfuSystem’s Device Solutions segment by adding field service capabilities and complements the Company’s purchase of FilAMed.

Current wording

Our Device Solutions segment’s core service is to: (i) sell or rent new and pre-owned pole-mounted and ambulatory infusion pumps and other Durable Medical Equipment; (ii) sell treatment-related consumables; and (iii) provide biomedical recertification, maintenance and repair services for oncology practices as well as other healthcare site settings, including, home care and home infusion providers, skilled nursing and acute care facilities, pain centers and others. We purchase new and pre-owned pole-mounted and ambulatory infusion pumps from a variety of sources on a non-exclusive basis. We repair, refurbish and provide biomedical certification for the devices as needed. The pumps are then available for sale, rental or to be used within our ambulatory infusion pump management service. Our acquisition of FilAMed, a privately-held biomedical services company, on January 31, 2021 has supplemented the Company’s existing biomedical recertification, maintenance and repair services for acute care facilities and other alternate site settings, including, home care and home infusion providers, skilled nursing facilities, pain centers and others. Our acquisition of OB Healthcare, a privately-held biomedical services company, on

Previous wording

Net revenues for the year ended December 31, 2023 were $125.8 million, an increase of $15.9 million, or 14.4%, compared to $109.9 million for the year ended December 31, 2022. The increase included higher net revenues for both the Patient Services and Device Solutions segments.

Current wording

Net revenues for the year ended December 31, 2024 were $134.9 million, an increase of $9.1 million, or 7.2%, compared to $125.8 million for the year ended December 31, 2023. The increase included higher net revenues for both the Patient Services and Device Solutions segments.

Previous wording

Patient Services net revenue of $76.5 million increased $7.7 million, or 11.1%, during the year ended December 31, 2023 as compared to the prior year. This increase was primarily attributable to additional treatment volume in the Oncology business, revenue from sales-type leases of NPWT pumps, improved third-party payer collections on billings and higher average prices. Net revenue in Oncology for the 2023 represented the largest increase, totaling $4.9 million, or a 7.8% increase, compared to the prior year. This was followed by an increase in revenue for Wound Care, which increased by $2.8 million, or 262%, compared to the same prior year period, mainly due to an increase in sales of equipment on sales-type leases, partially offset by lower treatment volumes.

Current wording

Patient Services net revenue of $80.4 million increased $3.8 million, or 5.0%, during the year ended December 31, 2024 as compared to the prior year. This increase was primarily attributable to additional treatment volume totaling $6.4 million offset partially by $2.6 million lower revenue from sales-type leases of NPWT pumps. The improved volume benefited Oncology revenue by $4.1 million or 6.1%, Pain Management revenue by $0.7 million, or 14.7%, and Wound Care treatment revenue by $1.6 million, or 293.4%. The decrease in Sales-Type Lease revenue of NPWT pumps was mainly due to an unusually strong prior year comparison.

Previous wording

Gross profit for the year ended December 31, 2023 totaling $63.1 million increased $2.5 million, or 4.2%, from $60.6 million during the year ended December 31, 2022. The increase was driven by the increase in net revenues partially offset by a lower gross profit as a percentage of net revenue (“gross margin”). Gross margin decreased to 50.2% during 2023, as compared to 55.1% during the prior year period, a decrease of 4.9%. The increase in gross profit was attributable to the Patient Services segment whereas gross profit was lower for the Device Solutions segment. The gross margin was lower for both operating segments during 2023 as compared to 2022.

Current wording

Gross profit for the year ended December 31, 2024 totaling $70.4 million increased $7.3 million, or 11.6%, from $63.1 million during the year ended December 31, 2023. The increase was driven by the increase in net revenues partially offset by a higher gross profit as a percentage of net revenue (“gross margin”). Gross margin increased to 52.2% during 2024, as compared to 50.2% during the prior year period, an increase of 2.0%. Both operating segments contributed to the increase in gross profit and the increase in gross margin during 2024 as compared to 2023.

Previous wording

Patient Services gross profit was $47.8 million, during 2023, representing an increase of $4.4 million, or 10.1%, compared to the prior year. The improvement reflected an increase in net revenues offset partially by a lower gross margin which was 62.5% during 2023, a decrease of 0.6%, from the prior year. The lower gross margin was the result of an unfavorable product mix favoring lower margin revenues partially offset by improved third-party payer collections on billings and improved coverage of fixed costs from the higher net revenue. The unfavorable gross margin mix was mainly related to the increase 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 $52.8 million, during 2024, representing an increase of $5.0 million, or 10.5%, compared to the prior year. The improvement reflected increased net revenue and higher gross margin, which increased from the prior year by 3.3% to 65.7%. The increase in gross margin reflected favorable gross margin mix, lower pump disposal expenses 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 had 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 $0.9 million during the 2024 compared to the prior year period.

Previous wording

Amortization of intangible assets for the year ended December 31, 2023 was $1.0 million compared to $2.5 million for the year ended December 31, 2022 representing a decrease of $1.5 million, or 60.3%. The decrease is attributable to certain intangible assets becoming fully amortized. Amortization expense is expected to be about the same amount during 2024 but then decrease further in 2025 and beyond based on the current amortization schedule.

Current wording

Amortization of intangible assets for the year ended December 31, 2024 was $1.0 million which was unchanged from the year ended December 31, 2023. Based on the current amortization schedule and definite lived intangible assets existing as of December 31, 2024, amortization expense is expected to decrease in 2025 and beyond.

Previous wording

Selling and marketing expenses for the year ended December 31, 2023 were $12.7 million, an increase of $0.4 million, compared to 2022. Selling and marketing expenses as a percentage of net revenues decreased to 10.1% compared to 11.2% in 2022. This decrease was mainly attributable to a reduction in sales team members and a higher coverage of fixed expenses related to the higher revenue. Selling and marketing expenses during these periods consisted of sales personnel salaries, commissions and associated fringe benefit and payroll-related items, marketing, overall travel and entertainment and other miscellaneous expenses.

Current wording

Selling and marketing expenses for the year ended December 31, 2024 were $11.3 million, a decrease of $1.3 million, compared to 2023. Selling and marketing expenses as a percentage of net revenues decreased to 8.4% compared to 10.1% in 2023. This decrease was mainly attributable to a reduction in sales commissions and a reduction in sales team members. Lower commission rates reflected the slower sales growth in 2024 as compared to 2023. Selling and marketing expenses during these periods consisted of sales personnel salaries, commissions and associated fringe benefit and payroll-related items, marketing, overall travel and entertainment and other miscellaneous expenses.

Previous wording

G&A expenses for the year ended December 31, 2023 were $45.4 million, an increase of $1.2 million, or 2.8%, from $44.2 million for the year ended December 31, 2022. 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, annual management incentive bonuses, insurance and other miscellaneous items. The increase was primarily related to an increase in short-term incentive plan compensation totaling $0.9 million, resulting from improved performance metrics being achieved under the plan during 2023 as compared to 2022. G&A expenses as a percentage of net revenues for 2023 decreased to 36.1% compared to 40.2% for the prior year mainly reflecting the year-over-year increases offset partially by improved net revenue leverage of fixed costs.

Current wording

G&A expenses for the year ended December 31, 2024 were $51.2 million, an increase of $5.8 million, or 12.9%, from $45.4 million for the year ended December 31, 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, annual management incentive bonuses, 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 $4.9 million included increased stock-based compensation expenses of $0.4 million, increased short-term incentive compensation totaling $0.5 million, and $0.7 million of expenses not incurred in 2023 related to a project to upgrade the Company's information technology and business applications. Other increased expenses totaling $3.3 million 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 2024 increased to 38.0% compared to 36.1% for the prior year mainly reflecting the year-over-year increases offset partially by improved net revenue leverage of fixed costs.

Previous wording

During the year ended December 31, 2023, we incurred interest expense of $2.2 million, which was $0.8 million higher than interest expense during the year ended December 31, 2022. This increase was due to an increase in outstanding borrowings on the 2021 Credit Agreement, as amended, (defined below) revolving line of credit and higher average interest rates.

Current wording

During the year ended December 31, 2024, we incurred interest expense of $1.8 million, which was $0.4 million lower than interest expense during the year ended December 31, 2023. This decrease was due to a decrease in outstanding borrowings on the 2021 Credit Agreement, as amended, (defined below) revolving line of credit and lower average interest rates.

Previous wording

During the year ended December 31, 2023, the Company recorded a provision for income taxes of $1.0 million, representing an effective tax rate of 52.9% on pre-tax income totaling $1.9 million. This effective tax rate for 2023 differed from the U.S. statutory rate mainly due to state, local and foreign taxes and permanent differences between expense recognized for book purposes versus tax purposes including differences associated in the amounts of equity compensation expense, limits on compensation for certain executive members of management and limitations on deductions for travel related meal expenses. During the year ended December 31, 2022, the Company recorded a provision from income taxes of $0.1 million, representing an effective tax rate of 86% on pre-tax income totaling $0.1 million. This effective tax rate for 2022 differed from the U.S. statutory rate mainly due to permanent differences in the amounts of equity compensation expense recognized for book purposes versus tax purposes.

Current wording

During the year ended December 31, 2024, the Company recorded a provision for income taxes of $2.7 million, representing an effective tax rate of 53.6% on pre-tax income totaling $5.1 million. During the year ended December 31, 2023, the Company recorded a provision for income taxes of $1.0 million, representing an effective tax rate of 53% on pre-tax income totaling $1.9 million. The effective tax rate for both periods differed from the U.S. statutory rate mainly due to state, local and foreign taxes and permanent differences between expense recognized for book purposes versus tax purposes including differences associated in the amounts of equity compensation expense, limits on compensation for certain executive members of management and limitations on deductions for travel related meal expenses.

Previous wording

As of December 31, 2023, amounts outstanding under the Revolving Facility provided under the 2021 Credit Agreement 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 December 31, 2023 was 7.71% (Adjusted Term SOFR of 5.46% plus 2.25%). The actual ABR loan rate at December 31, 2023 was 9.75% (lender’s prime rate of 8.50% plus 1.25%).

Current wording

As of December 31, 2024, amounts outstanding under the Revolving Facility provided under the 2021 Credit Agreement 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

Previous wording

As noted above, our Board of Directors approved the Share Repurchase Program on June 30, 2021. As of December 31, 2023, 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 and had approximately $14.0 million of available repurchases remaining under the program. Repurchases under the Share Repurchase Program will be 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. 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 credit agreement. 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

Operating Cash Flow. Net cash provided by operating activities for the year ended December 31, 2023 was $11.2 million compared to $17.5 million for the year ended December 31, 2022. This $6.3 million, or 35.9%, decrease was primarily attributable to the use of cash to fund changes in working capital amounts which represented a net use of cash during 2023 totaling $5.6 million versus a net source of cash during 2022 of $0.4 million. Together, these changes represented a net unfavorable swing in cash flows in 2023 as compared to 2022 totaling $5.9 million. An additional decrease of $0.3 million resulted from a decrease in net income adjusted for non-cash items of $16.8 million during 2023 as compared to $17.1 million during 2022.

Current wording

Operating Cash Flow. Net cash provided by operating activities for the year ended December 31, 2024 was $20.5 million compared to $11.2 million for the year ended December 31, 2023.

Previous wording

The use of cash for working capital items during the 2023 included higher increases in other assets, totaling $2.7 million, accounts receivable, totaling $1.2 million, other current assets, totaling $0.8 million, inventories, totaling $0.7 million, and a lower increase in accounts payable and other liabilities totaling $0.5 million. These impacts to operating cash flow were all attributable to the increased net revenue growth during 2023 as compared to 2022. A portion of the increased revenue was attributable to sales-type leases, 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).

Current wording

This $9.2 million, or 82.3%, favorable difference was attributable to the funding of working capital, which was a $0.7 million source of cash during 2024 compared to a $5.6 million use of cash during 2023, a change favorable to operating cash flow totaling $6.2 million. The increase in operating cash flows also included an increase in net income adjusted for non-cash items, which was $19.8 million during the 2024 compared to $16.8 million during 2023, an increase of $3.0 million. The increase in net income adjusted for non-cash items was primarily attributable to higher revenue, higher gross profit and lower selling and marketing expenses in 2024, offset partially by increased general and administrative expenses described above. The source of cash for working capital items during the 2024 included a decrease in other current assets and other assets of $0.2 million and $2.0 million, respectively, offset partially by increases in accounts receivable and inventories of $0.7 million and $0.1 million, respectively, and by a decrease in accounts payable and other liabilities of $0.7 million. Increases in accounts receivable and inventory during 2024 reflected the higher revenue during the period. The decrease in other assets reflected repayments on Sales-Type leases that exceeded the amount of new Sales-Type leases entered into during 2024. The cash used for working capital items during the 2023 included increases in other assets, accounts receivable, inventories and other current assets of $2.8 million, $2.4 million, $1.6 million and $1.2 million, respectively, partially offset by an increase in accounts payable and other liabilities of $2.4 million. These impacts to operating cash flow were all attributable to the increased net revenue growth during 2023 as compared to 2022. A portion of the increased revenue in 2023 was attributable to sales-type leases, 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).

Previous wording

Investing Cash Flow. Net cash used in investing activities was $6.7 million for the year ended December 31, 2023 compared to $11.5 million for the year ended December 31, 2022. This $4.7 million decrease in net cash used was primarily due to a $4.0 million decrease in purchases of medical equipment. The lower purchase volume of medical equipment was due to improved utilization of our existing pump fleet, which allowed us to purchase fewer pumps to support revenue growth, and due to a reduction in the number of missing pumps, during 2023 as compared to 2022.

Current wording

Investing Cash Flow. Net cash used in investing activities was $13.2 million for the year ended December 31, 2024 compared to $6.7 million for the year ended December 31, 2023. This $6.5 million increase in net cash used was primarily due to a $6.6 million increase in purchases of medical equipment. The higher purchase volume of medical equipment was due to increased volume in our rental business which required us to purchase additional pumps to support revenue growth offset partially by a reduction in the number of missing pumps, during 2024 as compared to 2023.

Previous wording

Financing Cash Flow. Net cash used in financing activities for the year ended December 31, 2023 was $4.4 million compared to $6.1 million for the year ended December 31, 2022. The use of cash during 2023 primarily included net revolving line of credit repayments under the 2021 Credit Agreement totaling $3.9 million. During 2022, net revolving line of credit repayments were minimal. The use of cash for financing activities during 2022 primarily included repurchase of common stock totaling $5.5 million. Common stock repurchases in 2023 were minimal.

Current wording

Financing Cash Flow. Net cash used in financing activities for the year ended December 31, 2024 was $6.9 million compared to $4.4 million for the year ended December 31, 2023. The use of cash during 2024 primarily included net revolving line of credit repayments under the 2021 Credit Agreement totaling $5.3 million and the repurchase of common stock totaling

Previous wording

Medical equipment in rental service consists of equipment that the Company purchases from third-parties and is (1) for sale or rent, and (2) used in service to generate rental revenue. The Company periodically performs an analysis to identify potentially missing medical equipment and records a reserve equal to the underlying net book value. The Company determines the need for a reserve based upon the length of time a pump has been in the field without evidence of existence. The Company's basis for determining the need for a reserve is based upon historical experience and other meaningful observable information. The reserve is equal to the underlying net book value of the medical equipment considered missing, which was $2.1 million and $2.3 million as of December 31, 2023 and 2022, respectively. The expense related to adjustments in the reserve is recorded to cost of revenues on the Consolidated Statements of Operations and Comprehensive Income.

Current wording

Medical equipment in rental service consists of equipment that the Company purchases from third-parties and is (1) for sale or rent, and (2) used in service to generate rental revenue. The Company periodically performs an analysis to identify potentially missing medical equipment and records a reserve equal to the underlying net book value. The Company determines the need for a reserve based upon the length of time a pump has been in the field without evidence of existence. The Company's basis for determining the need for a reserve is based upon historical experience and other meaningful observable information. The reserve is equal to the underlying net book value of the medical equipment considered missing, which was $2.5 million and $2.1 million as of December 31, 2024 and 2023, respectively. The expense related to adjustments in the reserve is recorded to cost of revenues on the Consolidated Statements of Operations and Comprehensive Income.