$INFU FY 2015 Results Review

Infusystems ($INFU) released Fourth Quarter 2015 and Full Year 2015 earnings today which were very good.  The company has executed very well over the past 3 years and momentum is really building in terms of revenue growth and earnings growth.  I wanted to cover some of my thoughts about the 2015 10-K, conference call, and news release.  I’ve been invested in $INFU for a few years now, and I believe the business is still on the right track to keep growing and producing cash flow for the foreseeable future.   Highlights for the full year 2015: Revenue of $72.1m for the full year which was 9% growth over FY2014 Rental Revenue grew 10% YoY and billings actually increased 12% but since the mix of in-network and out-of-network payor’s caused the collected revenue to be lower than billing increases Gross Profit held steady at 71% but the Gross Profits / Total Assets dropped to 53% from 59% in FY2014 Reduced Interest Expense by $1.4m because of the new credit facility Cash Flow from Operations was $7.1m even with the purchase of Ciscura and penalty for the early extinguishment of debt ($1.6m) EBITDA was $15.5m and if the fee for the debt…

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Infusystems ($INFU) and the Round 1 Recompete Analysis

I’ve noticed a few more SeekingAlpha articles (here and here)  discussing the investment in $INFU, including discussions about the result of the CMS Round 1 Recompete.  If you would like to read more about the Recompete process, you can visit the CMS website.  In a nutshell, the Durable Medical Equipment  suppliers for patients using Medicare and Medicaid were included in the new Recompete (competitive bidding) process.  The goal of the bidding process is to finalize a price for services and equipment that for reimbursement by the government.  Each item category includes items listed in a Healthcare Common Procedure Coding System (HCPCS).  So, the new Recompete included the HCPCS codes for external infusion pumps and supplies, thus including Infusystem.  The end goal of the competitive bidding process is for the government to set an exact price on services and equipment and to lower those costs through the bidding process.  Overall CMS’ goal was to lower their reimbursement costs by 32%. So, let’s take a look at the information that INFU has provided us recently, and then dig into some numbers to see what the impact on INFU will be going forward.  Remember, CMS reimbursements make up ~30% of INFU’s revenue, so that’s a large percentage…

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InfuSystem Holdings ($INFU) 2013 Annual Meeting

I took a few days off from work around Labor day to go visit my mom in Vermont.  I hadn’t been back to Vermont for several years, so I wanted to get back before it was too cold for my liking.  During this time, $INFU had their annual meeting.  I did not attend the meeting since I was flying to Vermont, but would have liked to have gone.  I would love to hear from anyone that attended the meeting and would like to give me a summary. Management also released an 8-k with an investor presentation attached!  It is great to see management trying to get the word out about their company and providing shareholders with more information than they previously supplied.  If you have not reviewed the presentation, I would follow the link and take a gander. A couple of my observations after reviewing the presentation: The company has been focusing on increasing their IT systems to automate more of the internal processes.  I’m a fan of efficiency and automation, so I like to see the improvements the company is making.  More throughput can be realized with less errors which will allow the company to record more revenue while…

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InfuSystem Holdings Q2 2013 Review

$INFU released their 2013 Q2 earnings and completed their conference call.  You can read the 10Q and conference call transcripts from the links.  Since the recent failed take private situation, I wanted to review what is happening with the company. Positive Revenue up 4% from Q2 2012 Management has made strides in expanding their business model outside of the oncology market.  Meaningful revenue was not shown this quarter, but it’s good to see that the company is expanding to other markets.  Long-term care is one of markets, which is a good market to enter, along with post-surgical pain.  These markets require different types of pumps, but fit the INFU model well.  From the conference call it sounds like $250,000 was spent on smart pumps (for long-term care) which will generate $375,000 in revenue.  Not much revenue yet, but the return is very similar to the oncology market at $1.50.  This is a good sign that the business model can be expanded to other markets profitably. Management is making strides in reducing costs by rolling out new ordering processes including the roll-out of iPads, and upgrading their IT services.  Streamlining these processes will cut costs, and allow INFU to be more…

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Ryan Morris makes his initial bid for INFU

Last night, Meson Capital Partners (i.e. Ryan Morris) filed the anticipated offer to purchase InfuSystems.  The offer was for a price per share of between $1.85 to $2.00 in cash.  I view this as an initial offer, as the price is at the low end of the range I was expecting.  If you want to read the letter, click here and read the short letter.  From the language in the letter, it sounds like a purchase can happen quickly if the special committee and Meson Capital can agree upon a satisfactory price.  $INFU closed the day yesterday at $1.55 per share providing an upside of ~20-30%. The special committee has already filed a response to the official offer, which can be read here.  The full 8-k is available for full reading.  I agree with the committee that the purchase price underscores the value of INFU.  The language in letter definitely is favorable to working with Morris to come to a satisfactory price, and even provides him exclusivity for more due diligence.  Confirmation of financing commitments was also requested. With the recent changes to the contracts of the executives providing them change of control compensation, I believe that management will  agree to a price…

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Update on $INFU and Ryan Morris

Due to travel and my day job, I have not had a lot of time to keep up with the blog.  Over the past weeks, I have been keeping track of my investments and potential ideas, but just haven’t had enough time to put something on the blog.  It could also have to do with the stock market’s continual rise and not finding too many interesting ideas. I’ve written up InfuSystems ($INFU) awhile back and with the release of their latest quarterly earnings, some new developments have happened that create an interesting situation.  First, the results for the first quarter were good, with a 2% increase in revenue from the year before with a gross margin of 71%.  Net Income was just barely positive, and they used $2.8M to pay down debt.  As expected, both SG&A and Marketing expenses decreased from the previous year.  Overall, not too bad of a quarter.  The new developments include a couple of board members leaving, including Charles Gillman and Dilip Singh.  Dilip Singh was the interim CEO, and has now been replaced with a permanent CEO, Erik Steen.  In addition, John Climaco also resigned from the board.  Overall, that is a lot of change…

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Update on $INFU based upon 2012 10-K

Infusystem ($INFU) released their 2012 10-K on March 28th.  This is the first annual report released since the new management team took over in the spring of 2012.  Lots of changes have occurred throughout the year, so I was anticipating the release of this report.  You can read my initial writeup on INFU to get some background information.  A quick summary of the situation is that the old management group did a very poor job at creating shareholder value for a business that generated high gross margins and growing revenues, ~10% per year.  An activist shareholder group took control of the board, and the new management team set out to reshape the company to become profitable once again. The first item of business was to clean up the mess that the previous management team left, which included debt that was coming due in 2013 with a high interest rate.  On November 30th 2012 a new credit facility was entered into with Wells Fargo to retire the debt from Bank of America and eliminate the 1% ticking fee that the company was paying due to the change in control.  This put the company in much better financial shape, as the high interest payments were…

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$INFU InfuSystem Holdings – Interesting Micro Cap Opportunity

InfuSystem Holdings ($INFU) is a company that I ran across when I was reading about Ryan Morris in Businessweek.  Ryan Morris is a young activist investor, and Businessweek wrote up a story about him and a couple of his activist forays.  One of those companies was InfuSystem Holdings, so I decided to do some more research about the company to see if it was a good opportunity. Ryan Morris is the managing partner at Meson Capital Partners.  Meson had an outstanding year in 2009, which you should read the annual partnership letter, as the partnership gained 753% for the year!  However,  the past couple of years of returns were lagging the S&P 500.  The total 3 year return is still incredible. Introduction $INFU is in a transitional period, which started earlier in 2012.  Prior to 2012, the company produced high gross margins and solid free cash flow but management was poor.  The stock price had declined 70% over the past several years but management decided to grant themselves 18% of the stock as compensation.  This is a good business, but being mismanaged with unacceptable stock compensation and high salaries.  A handful of the largest stockholders that held a considerable amount of…

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