Record Net Revenues of $31.9 million
Representing 17% Growth from the Prior Year
Operating Income Increased 80% - Net Income
Increased 56% - Adjusted EBITDA Increased 11%
Raising Full Year 2023 Net Revenue
Guidance
InfuSystem Holdings, Inc. (NYSE American: INFU)
(“InfuSystem” or the “Company”), a leading national health care
service provider, facilitating outpatient care for durable medical
equipment manufacturers and health care providers, today reported
financial results for the third quarter ended September 30,
2023.
2023 Third Quarter
Overview:
- Net revenues totaled $31.9 million, an increase of 17% vs.
prior year.
- Patient Services (formerly Integrated Therapy Services ("ITS"))
net revenue was $19.3 million, an increase of 11% vs. prior
year.
- Device Solutions (formerly Durable Medical Equipment Services
("DME Services")) net revenue was $12.6 million, an increase of 27%
vs. prior year.
- Gross profit was $16.2 million, a slight increase vs. prior
year.
- Gross margin was 50.9%, a decrease of 8.5% vs. prior year.
- Patient Services gross margin was 61.4%, a decrease of 4.2% vs.
prior year.
- Device Solutions gross margin was 34.9%, a decrease of 13.7%
vs. prior year.
- Net income increased $0.2 million, or 56%, to $0.7 million, or
$0.03 per diluted share vs. prior year net income of $0.4 million,
or $0.02 per diluted share.
- Adjusted earnings before interest, income taxes, depreciation,
and amortization (“Adjusted EBITDA”) (non-GAAP) was $6.2 million,
an increase of 11% vs. prior year.
Management Discussion
Richard DiIorio, Chief Executive Officer of InfuSystem, said,
“We delivered another quarter of strong operating results with
revenue and net income growth of 17% and 56%, respectively. The
financial results of our third quarter represent the seventh
consecutive quarter with record revenue, which we believe reflect
the fundamental strength of our business. Our team continues to
deliver sequential operational improvement with double-digit
revenue growth for both Patient Services (formerly ITS), up 11%,
and Device Solutions (formerly DME Services), up 27%. The positive
results reflect our continued focus on execution of our strategic
priorities, and I am proud of our team’s hard work.”
“With solid year-to-date performance, we are raising our
full-year 2023 net revenue growth guidance to be greater than 11%,
up from our previous estimate calling for an annual growth rate
above 10%. Although we expect to conclude the year with record
annual revenue, we also expect the fourth quarter to be slightly
lower versus this year’s record third quarter. As we had previously
anticipated, we have delivered a significant number of negative
pressure wound therapy devices as part of a large lease agreement,
which positively impacted the first three quarters of 2023, but
will likely be much lower during the fourth quarter of 2023. We
believe that our commitment to helping people live longer and
healthier lives and strengthening critical partnerships lays the
groundwork for long-term success that will reward our
shareholders.”
2023 Third Quarter Financial Review
Net revenues for the quarter ended September 30, 2023 were $31.9
million, an increase of $4.6 million, or 17.0%, compared to $27.3
million for the quarter ended September 30, 2022. The increase
included higher net revenues for both the Patient Services and
Device Solutions segments.
Patient Services net revenue of $19.3 million increased $1.9
million, or 11.0%, during the third quarter of 2023 compared to the
prior year period. 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. The largest net
revenue improvement came from Wound Care, which increased by $1.1
million, or 693%, compared to the same prior year period, mainly
due to increased sales of equipment on sales-type leases, partially
offset by lower treatment volumes. Net revenue in the Oncology
Business for the third quarter of 2023 increased by $0.8 million,
or 5.2%, compared to the same prior year period.
Device Solutions net revenue of $12.6 million (exclusive of
inter-segment revenues) increased $2.7 million, or 27.4%, during
the third quarter of 2023 as compared to the prior year period.
This increase included higher biomedical services revenue which
increased by $2.6 million, or 150%. The increased biomedical
revenue was mainly attributable to increased revenue from the
master services agreement that we entered into with a leading
global healthcare technology and diagnostic company in April
2022.
Gross profit for the third quarter of 2023 of $16.2 million
increased slightly compared to the third quarter of 2022. The
impact from the increase in net revenue was offset by a lower gross
profit percentage of net revenue ("gross margin"). Gross margin was
50.9% during the third quarter of 2023 as compared to 59.5% during
the prior year period, a decrease of 8.5%. Gross profit increased
in the Patient Services segment but was lower in the Device
Solutions segment. Gross margin decreased in both operating
segments.
Patient Services gross profit was $11.8 million during the third
quarter of 2023, representing an increase of $0.4 million compared
to the prior year period. The increase reflected higher net revenue
partially offset by lower gross margin, which decreased from the
prior year by 4.2% to 61.4%. The decrease in gross margin reflected
higher pump disposal expenses and an unfavorable product mix
favoring lower margin revenues. These impacts were partially offset
by improved coverage of fixed costs from higher net revenue. Pump
disposal expenses, which include retirements of damaged pumps and
reserves for missing pumps, increased by $0.2 million during the
third quarter of 2023 compared to the prior year period. 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.
Device Solutions gross profit during the third quarter of 2023
was $4.4 million, representing a decrease of $0.4 million, or 8.5%,
compared to the prior year period. This decrease was due to a
decrease in gross margin partially offset by higher net revenue.
The Device Solutions gross margin was 34.9% during the current
quarter, which was 13.7% lower than the prior year. This decrease
was due to an increase in labor costs related to an increase in the
number of biomedical technicians and other expenses associated with
the rapid on-boarding of the master services agreement described
above. Some of the additional labor costs include training
activities and other labor expenses associated with building a
larger team in order to have the capacity required to support much
higher planned revenue volume. Over time, higher revenue levels are
expected to absorb a portion of the increased labor costs and
result in an improved gross margin. Other increased expenses
associated with the on-boarding ramp, which include increased
travel expenses and employee acquisitions costs, are expected to
decrease in the future. We currently estimate that the additional
expenses incurred during the third quarter of 2023 that will either
be absorbed or reduced totaled approximately $1.2 million.
Selling and marketing expenses were $2.7 million for the third
quarter of 2023, representing a decrease of $0.2 million, or 5.7%,
compared to the prior year period. Selling and marketing expenses
as a percentage of net revenues decreased to 8.5% compared to 10.6%
in the prior year period. This decrease reflected a reduction in
sales team members and improved coverage of fixed costs from higher
net revenues.
General and administrative (“G&A”) expenses for the third
quarter of 2023 were $11.7 million, a decrease of 0.2% from $11.8
million for the third quarter of 2022. G&A expenses as a
percentage of net revenues for the third quarter of 2023 decreased
to 36.8% compared to 43.1% for the prior year period, mainly
reflecting improved net revenue leverage over fixed costs.
Net income for the third quarter of 2023 was $0.7 million, or
$0.03 per diluted share, compared to net income of $0.4 million, or
$0.02 per diluted share, for the third quarter of 2022.
Adjusted EBITDA, a non-GAAP measure, for the third quarter of
2023 was $6.2 million, or 19.5% of net revenue, and increased by
$0.6 million, or 10.9%, compared to Adjusted EBITDA for the same
prior year quarter of $5.6 million, or 20.5% of prior period net
revenue.
Balance sheet, cash flows and liquidity
During the nine-month period ended September 30, 2023, operating
cash flow decreased to $6.6 million, a $6.4 million or 49% decrease
over operating cash flow during the same prior year nine-month
period. The decrease reflected lower operating margins during the
period, resulting from the additional biomedical labor expenses and
higher working capital levels related to the increase in net
revenues. Capital expenditures during the nine-month period of 2023
included purchases of medical devices totaling $8.5 million, which
was $1.9 million, or 19%, lower than the amount purchased during
the same prior year period.
On April 26, 2023, the Company amended its 2021 Credit
Agreement, which, as amended, features a $75 million revolving line
of credit, does not include any term indebtedness, and matures on
April 26, 2028. On May 11, 2023, the Company entered into a rate
swap agreement to fix the amount of interest expense for $20
million of the outstanding borrowings under the loans with a
termination date matching the new credit agreement maturity date.
Two interest rate swaps existing prior to the amendment date were
settled. As of September 30, 2023, available liquidity for the
Company totaled $41.8 million and consisted of $41.6 million in
available borrowing capacity under the revolving line of credit
plus cash and cash equivalents of $0.2 million. Net debt, a
non-GAAP measure (calculated as total debt of $32.7 million less
cash and cash equivalents of $0.2 million) as of September 30, 2023
was $32.5 million representing a decrease of $0.5 million compared
to net debt of $33.0 million as of December 31, 2022 (calculated as
total debt of $33.2 million less cash and cash equivalents of $0.2
million). Our ratio of Adjusted EBITDA to net debt (non-GAAP) for
the last four quarters was 1.50 to 1.00 (calculated as net debt of
$32.5 million divided by Adjusted EBITDA of $21.7 million).
Full Year 2023 Guidance
InfuSystem is raising its annual guidance for the full year 2023
with net revenue growth estimated to be above 11%, up from our
previous estimate calling for an annual growth rate above 10%, and
the Company is maintaining its guidance for Adjusted EBITDA margin
(non-GAAP) to be between 17% and 18% for the year.
The full year 2023 guidance reflects management’s current
expectation for operational performance, given the current market
conditions. This includes our current estimate of net revenue
growth and Adjusted EBITDA. The Company and its businesses are
subject to certain risks, including those risk factors discussed in
our most recent annual report on Form 10-K for the year ended
December 31, 2022, filed on March 16, 2023. The financial guidance
is subject to risks and uncertainties applicable to all
forward-looking statements as described elsewhere in this press
release.
Conference Call
The Company will conduct a conference call for all interested
investors on Tuesday, November 7, 2023, at 9:00 a.m. Eastern Time
to discuss its third quarter 2023 financial results. The call will
include discussion of Company developments, forward-looking
statements and other material information about business and
financial matters.
To participate in this call, please dial (833) 366-1127 or (412)
902-6773, or listen via a live webcast, which is available in the
Investors section of the Company’s website at
https://ir.infusystem.com/. A replay of the call will be available
by visiting https://ir.infusystem.com/ for the next 90 days or by
calling (877) 344-7529 or (412) 317-0088, replay access code
1133909, through November 14, 2023.
Non-GAAP Measures
This press release contains information prepared in conformity
with GAAP as well as non-GAAP financial information. Non-GAAP
financial measures presented in this press release include EBITDA,
Adjusted EBITDA, Adjusted EBITDA Margin, net debt and Adjusted
EBITDA to net debt ratio. The Company believes that the non-GAAP
financial measures presented in this press release provide useful
information to the Company’s management, investors and other
interested parties about the Company’s operating performance
because they allow them to understand and compare the Company’s
operating results during the current periods to the prior year
periods in a more consistent manner. This non-GAAP information
should be considered by the reader in addition to, but not instead
of, the financial statements prepared in accordance with GAAP, and
similarly titled non-GAAP measures may be calculated differently by
other companies. The Company calculates those non-GAAP measures by
adjusting for non-recurring or non-core items that are not part of
the normal course of business. A reconciliation of those measures
to the most directly comparable GAAP measures is provided in the
accompanying schedule, titled "GAAP to Non-GAAP Reconciliation"
below. Future period non-GAAP guidance includes adjustments for
items not indicative of our core operations, which may include,
without limitation, items included in the accompanying schedule
below. Such adjustments may be affected by changes in ongoing
assumptions and judgments, as well as non-core, nonrecurring,
unusual or unanticipated changes, expenses or gains or other items
that may not directly correlate to the underlying performance of
our business operations. The exact amounts of these adjustments are
not currently determinable but may be significant. It is therefore
not practicable to provide the comparable GAAP measures or
reconcile this non-GAAP guidance to the most comparable GAAP
measures and, therefore, such comparable GAAP measures and
reconciliations are excluded from this release in reliance upon
applicable SEC staff guidance.
About InfuSystem Holdings, Inc.
InfuSystem Holdings, Inc. (NYSE American: INFU), is a leading
national health care service provider, facilitating outpatient care
for durable medical equipment manufacturers and health care
providers. INFU services are provided under a two-platform model.
The first platform is Patient Services (formerly Integrated Therapy
Services, or ITS), providing the last-mile solution for
clinic-to-home healthcare where the continuing treatment involves
complex durable medical equipment and services. The Patient
Services segment is comprised of Oncology, Pain Management and
Wound Therapy businesses. The second platform, Device Solutions
(formerly Durable Medical Equipment Services, or DME Services),
supports the Patient Services platform and leverages strong service
orientation to win incremental business from its direct payer
clients. The Device Solutions segment is comprised of direct payer
rentals, pump and consumable sales, and biomedical services and
repair. Headquartered in Rochester Hills, Michigan, the Company
delivers local, field-based customer support and also operates
Centers of Excellence in Michigan, Kansas, California,
Massachusetts, Texas and Ontario, Canada.
Forward-Looking Statements
The financial results in this press release reflect preliminary
results, which are not final until the Company’s quarterly report
on Form 10-Q for the quarter year ended September 30, 2023 is
filed. In addition, certain statements contained in this press
release are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, such as
statements relating to future actions, our share repurchase program
and capital allocation strategy, business plans, strategic
partnerships, growth initiatives, objectives and prospects, future
operating or financial performance, guidance and expected new
business relationships and the terms thereof (including estimated
potential revenue under new or existing contracts). The words
“believe,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “should,” “plan,” “goal,” “expect,” “strategy,” “future,”
“likely,” variations of such words, and other similar expressions,
as they relate to the Company, are intended to identify
forward-looking statements. Forward-looking statements are subject
to factors, risks and uncertainties that could cause actual results
to differ materially, including, but not limited to, our ability to
successfully execute on our growth initiatives and strategic
partnerships, our ability to enter into definitive agreements for
the new business relationships on expected terms or at all, our
ability to generate estimated potential revenue amounts under new
or existing contracts, the uncertain impact of the COVID-19
pandemic, our dependence on estimates of collectible revenue,
potential litigation, changes in third-party reimbursement
processes, changes in law, global financial conditions and
recessionary risks, rising inflation and interest rates, supply
chain disruptions, systemic pressures in the banking sector,
including disruptions to credit markets, the Company's ability to
remediate its previously disclosed material weaknesses in internal
control over financial reporting, contributions from acquired
businesses or new business lines, products or services and other
risk factors disclosed in the Company’s most recent annual report
on Form 10-K and, to the extent applicable, quarterly reports on
Form 10-Q. Our strategic partnerships are subject to similar
factors, risks and uncertainties. All forward-looking statements
made in this press release speak only as of the date hereof. We do
not undertake any obligation to update any forward-looking
statements to reflect future events or circumstances, except as
required by law.
Additional information about InfuSystem Holdings, Inc. is
available at www.infusystem.com.
FINANCIAL TABLES
FOLLOW
INFUSYSTEM HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except share and per
share data)
2023
2022
2023
2022
Net revenues
$
31,909
$
27,279
$
94,014
$
81,084
Cost of revenues
15,663
11,060
45,786
34,597
Gross profit
16,246
16,219
48,228
46,487
Selling, general and administrative
expenses:
Provision for doubtful accounts
(169
)
(90
)
(122
)
(84
)
Amortization of intangibles
248
704
743
2,125
Selling and marketing
2,728
2,894
8,937
9,296
General and administrative
11,742
11,768
35,832
34,525
Total selling, general and
administrative
14,549
15,276
45,390
45,862
Operating income
1,697
943
2,838
625
Other expense:
Interest expense
(563
)
(385
)
(1,667
)
(976
)
Other expense
(14
)
(11
)
(47
)
(69
)
Income (loss) before income taxes
1,120
547
1,124
(420
)
(Provision for) benefit from income
taxes
(431
)
(104
)
(324
)
331
Net income (loss)
$
689
$
443
$
800
$
(89
)
Net income (loss) per share:
Basic
$
0.03
$
0.02
$
0.04
$
—
Diluted
$
0.03
$
0.02
$
0.04
$
—
Weighted average shares outstanding:
Basic
21,095,404
20,683,366
20,968,711
20,625,826
Diluted
21,719,404
21,452,483
21,615,706
20,625,826
INFUSYSTEM HOLDINGS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
SEGMENT REPORTING
(UNAUDITED)
Three Months Ended
September 30,
Better/
(Worse)
(in thousands)
2023
2022
Net revenues:
Patient Services
$
19,289
$
17,375
$
1,914
Device Solutions (inclusive of
inter-segment revenues)
14,218
11,514
2,704
Less: elimination of inter-segment
revenues
(1,598
)
(1,610
)
12
Total
31,909
27,279
4,630
Gross profit (inclusive of certain
inter-segment allocations) (a):
Patient Services
11,837
11,400
437
Device Solutions
4,409
4,819
(410
)
Total
$
16,246
$
16,219
$
27
(a)
Inter-segment allocations are for cleaning
and repair services performed on medical equipment.
Nine Months Ended
September 30,
Better/
(Worse)
(in thousands)
Net revenues:
Patient Services
$
57,382
$
51,260
$
6,122
Device Solutions (inclusive of
inter-segment revenues)
41,541
34,684
6,857
Less: elimination of inter-segment
revenues
(4,909
)
(4,860
)
(49
)
Total
94,014
81,084
12,930
Gross profit (inclusive of certain
inter-segment allocations) (a):
Patient Services
35,223
32,251
2,972
Device Solutions
13,005
14,236
(1,231
)
Total
$
48,228
$
46,487
$
1,741
(a)
Inter-segment allocations are for cleaning
and repair services performed on medical equipment.
INFUSYSTEM HOLDINGS, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
(UNAUDITED)
NET INCOME (LOSS) TO EBITDA, ADJUSTED
EBITDA, NET INCOME (LOSS) MARGIN AND ADJUSTED EBITDA
MARGIN:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
GAAP net income (loss)
$
689
$
443
$
800
$
(89
)
Adjustments:
Interest expense
563
385
1,667
976
Income tax provision (benefit)
431
104
324
(331
)
Depreciation
2,820
2,736
8,621
8,131
Amortization
248
704
743
2,125
Non-GAAP EBITDA
$
4,751
$
4,372
$
12,155
$
10,812
Stock compensation costs
1,063
1,066
2,799
3,236
Medical equipment reserve and disposals
(1)
307
85
1,073
976
SOX readiness costs
—
—
—
110
Management reorganization/transition
costs
—
19
72
56
Certain other non-recurring costs
96
62
114
82
Non-GAAP Adjusted EBITDA
$
6,217
$
5,604
$
16,213
$
15,272
GAAP Net Revenues
$
31,909
$
27,279
$
94,014
$
81,084
Net Income (Loss) Margin (2)
2.2
%
1.6
%
0.9
%
(0.1
)%
Non-GAAP Adjusted EBITDA Margin
(3)
19.5
%
20.5
%
17.2
%
18.8
%
(1)
Amounts represent a non-cash expense
recorded to adjust the reserve for missing medical equipment and/or
the disposal of medical equipment and is being added back due to
its similarity to depreciation.
(2)
Net Income (Loss) Margin is defined as
GAAP Net Income (Loss) as a percentage of GAAP Net Revenues.
(3)
Non-GAAP Adjusted EBITDA Margin is defined
as Non-GAAP Adjusted EBITDA as a percentage of GAAP Net
Revenues.
INFUSYSTEM HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
As of
(in thousands, except par value and
share data)
September 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
161
$
165
Accounts receivable, net
19,455
16,871
Inventories
6,091
4,821
Other current assets
4,012
2,922
Total current assets
29,719
24,779
Medical equipment for sale or rental
3,975
2,790
Medical equipment in rental service, net
of accumulated depreciation
35,278
39,450
Property & equipment, net of
accumulated depreciation
4,233
4,385
Goodwill
3,710
3,710
Intangible assets, net
7,694
8,436
Operating lease right of use assets
4,291
4,168
Deferred income taxes
9,245
9,625
Derivative financial instruments
2,165
1,965
Other assets
1,761
80
Total assets
$
102,071
$
99,388
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
7,629
$
8,341
Current portion of long-term debt
—
—
Other current liabilities
6,646
6,126
Total current liabilities
14,275
14,467
Long-term debt, net of current portion
32,655
33,157
Operating lease liabilities, net of
current portion
3,672
3,761
Total liabilities
50,602
51,385
Stockholders’ equity:
Preferred stock, $0.0001 par value:
authorized 1,000,000 shares; none issued
—
—
Common stock, $0.0001 par value:
authorized 200,000,000 shares; 21,183,526 issued and outstanding as
of September 30, 2023 and 20,781,977 issued and outstanding as of
December 31, 2022
2
2
Additional paid-in capital
108,530
105,856
Accumulated other comprehensive income
1,634
1,489
Retained deficit
(58,697
)
(59,344
)
Total stockholders’ equity
51,469
48,003
Total liabilities and stockholders’
equity
$
102,071
$
99,388
INFUSYSTEM HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
Nine Months Ended September
30,
(in
thousands)
2023
2022
OPERATING ACTIVITIES
Net income (loss)
$
800
$
(89
)
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
Provision for doubtful accounts
(122
)
(84
)
Depreciation
8,621
8,131
Loss on disposal of and reserve
adjustments for medical equipment
1,278
1,450
Gain on sale of medical equipment
(1,990
)
(1,348
)
Amortization of intangible assets
743
2,125
Amortization of deferred debt issuance
costs
99
55
Stock-based compensation
2,799
3,236
Deferred income taxes
325
(331
)
Changes in assets -
(increase)/decrease:
Accounts receivable
(1,035
)
(607
)
Inventories
(1,270
)
(922
)
Other current assets
(1,090
)
224
Other assets
(2,304
)
(89
)
Changes in liabilities -
(decrease)/increase:
Accounts payable and other liabilities
(289
)
1,200
NET CASH PROVIDED BY OPERATING
ACTIVITIES
6,565
12,951
INVESTING ACTIVITIES
Purchase of medical equipment
(8,503
)
(10,452
)
Purchase of property and equipment
(616
)
(571
)
Proceeds from sale of medical equipment,
property and equipment
3,429
2,597
NET CASH USED IN INVESTING
ACTIVITIES
(5,690
)
(8,426
)
FINANCING ACTIVITIES
Principal payments on long-term debt
(43,160
)
(31,089
)
Cash proceeds from long-term debt
42,788
32,398
Debt issuance costs
(229
)
—
Cash payment of contingent
consideration
—
(750
)
Common stock repurchased as part of share
repurchase program
(153
)
(5,359
)
Common stock repurchased to satisfy
statutory withholding on employee stock-based compensation
plans
(1,157
)
(698
)
Cash proceeds from stock plans
1,032
1,150
NET CASH USED IN FINANCING
ACTIVITIES
(879
)
(4,348
)
Net change in cash and cash
equivalents
(4
)
177
Cash and cash equivalents, beginning of
period
165
186
Cash and cash equivalents, end of
period
$
161
$
363
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107417709/en/
Joe Dorame, Joe Diaz & Robert Blum Lytham Partners, LLC
602-889-9700
InfuSystems (AMEX:INFU)
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InfuSystems (AMEX:INFU)
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