InfuSystem Holdings Inc. Q2 FY2026 Earnings Call - Record Revenue and Margin Expansion Driven by Oncology Growth and a 154% Surge in Lymphedema Devices

Conference Operator: Good morning, welcome to the InfuSystem Holdings Inc. Reports Second Quarter Fiscal Year 2026 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Glen Akselrod, Investor Relations. Please go ahead.

Glen Akselrod, Investor Relations, InfuSystem Holdings Inc.: Good morning, thank you for joining us today to review InfuSystem’s second quarter 2026 financial results ended June 30th, 2026. With us today on the call are Carrie Lachance, Chief Executive Officer, and Barry Steele, Chief Financial Officer. After the conclusion of today’s prepared remarks, we will open the call for questions. Before we begin with prepared remarks, I would like to remind everyone, certain statements made by the management team of InfuSystem during this conference call constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under the risk factors in the documents filed by the company with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31st, 2025.

Forward-looking statements speak only as of the date the statements are made. The company can give no assurance that such forward-looking statements will prove to be correct. InfuSystem does not undertake and specifically disclaims any obligation to update any forward-looking statements except as required by law. Now, I’d like to turn the call over to Carrie Lachance, Chief Executive Officer of InfuSystem. Carrie.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Thank you, Glen, good morning, everyone. Welcome to InfuSystem’s second quarter fiscal year 2026 earnings call. Thank you all for joining us today. I will provide a second quarter overview highlighting our progress in the quarter. Barry will provide a detailed summary of our financial results. I will come back with some closing comments before opening the line to questions. During the 2026 second quarter, we made measurable progress in our efforts to drive revenue growth and to improve our operational capacity and efficiency to make the revenue growth more profitable. This morning, we reported second quarter of 2026 revenue of $36.9 million. This represented a new quarterly record and an increase from the prior year of just over one million dollars or 2.6% on a GAAP basis and a 7.5% increase on a non-GAAP pro forma basis.

On a GAAP basis, the increase was achieved despite the impact of restructuring of our biomedical services contract with GE HealthCare, which reduced revenue by $1.6 million during the second quarter and is the basis for the adjustment to providing pro forma revenue growth. As previously mentioned, this restructuring improves our earnings because it allowed for an even larger reduction in direct contract expenses. As a result of the increased revenue and the benefits of the GE restructuring and other initiatives, we generated approximately $8.6 million in adjusted EBITDA this quarter, representing a 7.6% increase over the prior year and resulting in an increase of more than 1% in our EBITDA margin, which came in at 23.4%. These results were driven by both continued steady growth in our core oncology business and accelerating growth in wound care.

Quarterly oncology revenue surpassed the $20 million mark for the first time during the second quarter and grew 6.4% over the prior year, further extending our large share of the outpatient oncology ambulatory infusion market, where we serve 18 of the top 20 U.S. hospital systems. Within wound care, compression devices for lymphedema patients represent the main growth driver. In total, wound care net revenue grew by $2.1 million or 154% year-over-year during the second quarter. Compression devices represented nearly 90% of that increase. As the newest offering in our portfolio, added less than a year ago during the last year’s third quarter, we are pleased with the growth and partnerships that we have in place today.

We are now working with two manufacturers, which bring us a breadth of product offerings covering both pneumatic compression devices or PCDs, which use sequential compression technology, and adjustable compression wraps, which feature Velcro closures that are easier for patients with limited mobility as compared to traditional products such as compression stockings. This new product line is expected to continue to drive near-term growth with these existing suppliers while also opening up potential opportunities by adding additional manufacturing relationships in the future. We believe our capabilities and payer contract portfolio make us an attractive DME partner to current and potential future manufacturing partners. Less noticeable in the current period results is continued progress on our new enterprise resource planning application, or ERP, and other business applications that we’ve been updating.

During our first quarter call, we reported that our new ERP was launched successfully and that we were continuing to work to stabilize certain areas of the system. During the second quarter, we made significant progress towards that effort and as a result, brought down the spending rate. While refinement and enhancement work continues, we see additional opportunities and are laser-focused on using the new application to drive improved capacity and efficiencies in the many processes that operate in that application. As we look towards the second half of the year, after adjusting for the expected $7.1 million lower annual revenue related to the GE HealthCare contract restructuring, on a pro forma basis, we continue to anticipate annual revenue growth in a range of 6%-8%.

Additionally, we continue to anticipate that our adjusted EBITDA margin will remain in the low to mid 20% range, consistent with our longer-term target of a 22%-25% margin. This is inclusive of the impact of costs related to our information technology systems upgrades. We are excited about the opportunities ahead, and we’ll look to update you again in future quarters. Now I’ll turn it over to Barry Steele for a detailed review of the second quarter financial results. Barry Steele?

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: Thank you, Carrie Lachance, thank you everyone on the call for joining us today. As Carrie Lachance mentioned, second quarter revenue increased 2.6% to $36.9 million, compared to $36 million in the prior year. Importantly, this result includes a $1.6 million reduction in biomedical services revenue from the restructuring of our GE HealthCare contract. Excluding that impact, revenue growth would have been approximately 7.5% year-over-year, demonstrating continued strength in our core operations. Patient services continued to perform exceptionally well, with revenue increasing 15.2% to $24.8 million. That included oncology revenue, which grew 6.4%, or $1.2 million, driven by higher treatment volumes and improved reimbursement collections. While wound care revenue increased by 154%, or $2.1 million, benefiting from the successful launch and expansion of pneumatic compression devices and adjustable compression wraps.

Device Solutions revenue declined by 16.1% to $12.1 million, primarily due to the planned reduction in biomedical services revenue associated with the GE HealthCare contract restructuring and a 49% decline in equipment sales resulting from a large rental customer buyout that occurred last year. However, despite the lower revenue, Device Solutions gross profit remained stable at approximately $6.1 million, reflecting significantly improved profitability. Consolidated gross profit increased 7.7% to $21.4 million, while gross margin expanded to 58% from 55.2% last year, an improvement of 2.8%. This margin improvement was largely driven by Device Solutions, where gross margin increased to 50.2%, from 41.9%, an improvement of 8.3%. The GE contract restructuring alone improved Device Solutions margin by approximately 4.8%, while procurement initiatives, productivity improvements, and a favorable revenue mix provided additional benefits.

In patient services, gross profit increased 10.9% to $15.3 million as higher revenue more than offset a modest decline in gross margin to 61.8%, from 64.2%, a decrease of 2.4%. The margin decline was primarily attributable to a larger mix of wound care revenue, which carries lower margins than our oncology business, and increased pump maintenance costs in the segment. Net income increased to $3.2 million, or $0.15 per diluted share, compared to $2.6 million or $0.12 per diluted share a year ago. Adjusted EBITDA increased 7.6% to $8.6 million, representing 23.4% of revenue, compared to $8 million or 22.3% of revenue in the prior year period. While we continued investing in growth, operating expenses increased as expected. Selling and marketing expenses increased 10.5% to $3 million, reflecting additional sales resources and higher travel costs.

G&A expense increased 7.2% to $14.1 million, driven by higher stock-based compensation, wage inflation, healthcare costs, and investments to support our expanding patient services business. Spending on our new ERP decreased sequentially as we anticipated and was focused on post-go-live stabilization and enhancement activities. From a cash flow and balance sheet perspective, we generated $7.7 million of operating cash flow during the first six months of the year, invested $6.5 million in rental equipment to support growth, and returned $4.4 million to shareholders through share repurchases. We ended the quarter with $55.2 million of available liquidity, including $54.2 million of revolver availability, and maintain a conservative leverage profile with net debt of $19.5 million, representing only 0.61 times trailing 12-month adjusted EBITDA.

This financial flexibility supports both our continued investment in organic growth and selective tuck-in acquisitions.

I’ll now turn the call back over to Carrie.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Thanks, Barry. As we reflect on our second quarter progress, the updates shared today, and our priorities for the remainder of 2026, we remain focused on the strategic objectives we previously outlined for shareholders. Executing with discipline, delivering profitable growth, and driving long-term value creation. Underpinning that is a diversified, de-risked revenue base, where no single customer represents more than 10% of our revenue. Our Medicare exposure remains below 10%, and our 800-plus payer contracts cover more than 97% of U.S. insured lives, providing strong visibility and predictability. Operator, we are ready for the Q&A portion of the call.

Conference Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jim Sidoti with Sidoti & Company. Please go ahead.

Jim Sidoti, Analyst, Sidoti & Company: Hi, good morning. Thanks for taking the question. The oncology business, it continues to perform very well, up 6% in the quarter. Is that something you think is sustainable?

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Hi, good morning, Jim. Thanks for the question. I think we’ve continued to see a little bit higher than that single kind of lower digits growth over the years. We’re seeing certain great volume. We’ve added some new customers this year, and then our collections and reimbursements improvements are also contributing to that. I do think it’s pretty sustainable moving forward.

Jim Sidoti, Analyst, Sidoti & Company: Yeah. The other big surprise to me was the, I guess it’s the lymphedema business that’s really boosting sales for the wound care business. Is that correct? Is that really the product that’s growing? Is that something that continues to grow throughout the course of 2026 and into 2027?

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah, we’ve seen great success growing. We have a couple of new partners there. As we’ve talked about in the past, I think we’re 154% growth. We continue to see volume coming in that is improving, and we continue to foresee that happening through the remainder of 2026 and certainly beyond. Yes, I would expect some continued growth there.

Jim Sidoti, Analyst, Sidoti & Company: The big difference between this time with lymphedema and when you tried to get into that market a couple of years ago, is that the contracts or the product or, why is it so strong this time?

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah. I would say it’s certainly the partnerships. Again, we were in this a few years ago. We have to have a good partner that’s going to get us the paperwork that we need to be able to submit claims. That process just has to work really well. We struggled in that in the past. We’ve learned a lot since then. We have a couple of new partners on board, as I said. We continue to work on looking for additional partners as well. That’s really the key. If you have a really good partner that’s going to get you all of the paperwork and work with their patients and their clinics to make sure that you have what you need is perfect.

I think an additional piece of that is that patient Lymphedema Treatment Act that was enacted in 2024, really, I think we saw take off in 2025. That’s seeing the whole market really is growing, which is great for patients, right? That’s a needed treatment and necessary. The reimbursement around that has been very helpful.

Jim Sidoti, Analyst, Sidoti & Company: All right. Just a couple more. The decline in ERP expenses, I think you said that was about $300,000. Is that year-over-year? Do you think that number grows as the year progresses? Do you think you’ll make increased investments in the ERP system?

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: Yeah. It was a sequential decrease. We highlighted that because this is the post-go-live period where we’re kind of just refining things. It definitely was a significant and larger decrease from the prior year, while we’re still in the process of going through the implementation phase. We do expect it to continue to taper down as we’ve launched it, there’s tons of opportunities to improve our processes and even enhance it. It probably won’t go to zero because we see great opportunities to make investments that give us real efficiency and cost improvement savings. It should taper down and certainly be more of the enhancement type of spend as opposed to stabilization spend.

Jim Sidoti, Analyst, Sidoti & Company: How did it compare the ERP spending this quarter to the year-over-year quarter?

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: I think it was about half. They were about $600,000 to $700,000 last year, we’re in the $300,000 range this quarter.

Jim Sidoti, Analyst, Sidoti & Company: Okay. That $300,000, that’s a year-over-year number.

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: Yeah.

Jim Sidoti, Analyst, Sidoti & Company: Okay. Any changes on pain management? I know there was some new reimbursement there.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah. No, we continue to be relatively steady from a pain management. That’s the NO PAIN Act, the two devices that we use in that platform were both added to that program. We continue to be steady. We haven’t won a significant amount of new customers. We have added a few with that from a reimbursement perspective. I would consider it’s going to be relatively stable.

Jim Sidoti, Analyst, Sidoti & Company: Okay. All right. Last one for me. You seem to be doing very well with the wound management business, the Oncology business seems to be doing well. Do you have enough on your plate right now, or are you looking to expand into any other markets?

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah, I wouldn’t expect any expansion route. We always have our eye out for what makes sense for InfuSystem if we have a new manufacturer or partner that has come to us asking for some help, which does tend to happen. We do have a lot on our plate right now. We’re excited about the compression market. We see the growth there. We want to continue to focus there and enjoy that growth.

Jim Sidoti, Analyst, Sidoti & Company: Great. Thank you.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah. Thanks, Jim.

Conference Operator: The next question is from Matt Hewitt with Craig-Hallum Capital Group. Please go ahead.

Tal Cohen, Analyst, Craig-Hallum Capital Group: Hello, and thank you for taking the questions. This is Tal Cohen for Matt Hewitt. One quick one from us. You mentioned your long-term adjusted EBITDA margin target. Could you provide a timeframe for us on that? Thank you.

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: Yeah. We obviously didn’t give a timeframe, but we think that there’s probably more upside than downside as we work within that range. That clearly the growth is definitely helping. Some of the new products are a little bit lower gross margin, but we see opportunities to be accretive to the EBITDA margin, some work to do there. As we step back, we do see opportunities to take costs out generally, the ERP improving processes and things like that. Wouldn’t want to pin any specific time to it, but I think it’s within the next two or three years probably for us to be able to work up in that range. That’s definitely what we’re going to try to do.

Tal Cohen, Analyst, Craig-Hallum Capital Group: Great. Thank you very much.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Thanks, Tal.

Conference Operator: The next question is from Benjamin Heinard with Lake Street Capital Markets. Please go ahead.

Benjamin Heinard, Analyst, Lake Street Capital Markets: Good morning, folks. Thanks for taking the questions. First off for me on the lymphedema side of things, are you seeing anything specific with the prior authorization that CMS has put in place? I think it was in April. Is that any different than what you’d experienced earlier? Is it similar to what you’ve seen with private insurers? Any color on the impact there would be great.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Yeah, we haven’t seen a significant change for us. Again, we’re a little bit newer in the lymphedema space, so it’s really just part of that process that we’re developing with those new, as I said, our partnerships are really important. For them to work with the clinics to make sure that we’re getting all of the paperwork, including any kind of prior auth or anything is really the importance there. It has not impacted us tremendously. Obviously, we need all of the paperwork, so as long as those partnerships and any that we continue moving forward, any new partners that we may be speaking to, that’s part of that process. No big hits for us.

Benjamin Heinard, Analyst, Lake Street Capital Markets: Okay. That makes sense. Just on the ERP system, it sounds like you may be starting to see some of the benefits. Are there opportunities that you could call out that you think will make a really big difference? Any more color on how that’s gone and how you see that going?

Barry Steele, Chief Financial Officer, InfuSystem Holdings Inc.: Yeah. What I would say is that there’s not any specific thing, but there’s a lot of points of light, I’d say, in what we think we can do. It’s everything from managing working capital better to provide better cash flow as we grow to making push our throughput of devices and turning around devices to help us our utilization of devices. Clearly all the departments that are affected by the ERP, the process are probably actually taking us a little longer today as we’re still going through the learning curve, but we expect that we’d be able to reduce the effort that goes into a lot of different things that we do. It’ll be across the board, I think.

Again, working capital, pump utilization, asset utilization, as well as just lowering the need for team members and how long they have to do to get the jobs done.

Benjamin Heinard, Analyst, Lake Street Capital Markets: Okay. That’s helpful. I think that’s all I had. Thanks for taking the questions and congrats on the quarter.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Great. Thanks, Ben.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Carrie Lachance for any closing remarks.

Carrie Lachance, Chief Executive Officer, InfuSystem Holdings Inc.: Thank you, Debbie. Thank you everyone for joining today’s call. We look forward to speaking to you again on our third quarter call, where we will provide an update on results and progress.

Conference Operator: This concludes our conference. Thank you for attending today’s presentation. You may now disconnect.