InfuSystem Holdings, Inc Q3 FY2021 Earnings Call

Good day and welcome to the InfuSystem Holdings, Inc. Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I'd now like to turn the conference over to Joe Dorame with Lytham Partners. Please go ahead.

Thank you, Rocco. Good morning and thank you for joining us today to review the financial results of InfuSystem Holdings, Inc. for the third quarter of 2021 ended September 30, 2021. With us today on the call are Rich DiIorio, Chief Executive Officer; Barry Steele, Chief Financial Officer; and Carrie Lachance, President and Chief Operating Officer. After the conclusion of today's prepared remarks, we will open the call for questions. If anyone participating on today's call does not have a full text copy of the press release, you can retrieve it from the company's website at www.infusystem.com or numerous other financial websites. Before we begin with prepared remarks, I'd 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 the Private Securities Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under Risk Factors in documents filed by the company with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2020. Forward-looking statements speak only as of the date the statements were 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, whether as a result of new information, future events, or otherwise. Now I'd like to turn the call over to Rich DiIorio, Chief Executive Officer of InfuSystem. Rich?

Thank you, Joe. Good morning everyone and welcome to our third quarter 2021 earnings call. I appreciate you all joining us today, and I hope you and your families are well. This morning, we will discuss our financial results for the third quarter of 2021, provide an update on our business operations, review the current growth initiatives, outline our guidance for 2021, and offer insights into our outlook for 2022 and beyond. I am genuinely excited about the progress our team is making across the board. We are gaining significant momentum in both of our business units while delivering record revenue in the third quarter. Our financial performance is aligned with our expectations, which keeps us on track to meet our updated guidance for 2021. As many of you are aware, InfuSystem operates through two units, with integrated therapy services being the original and larger unit, focused on providing comprehensive solutions for patient care continuity between hospital or clinic settings and the home. This is particularly relevant when care involves complex, durable medical equipment such as oncology pumps and negative pressure wound therapy devices. A crucial component of the ITS business is our third-party billing capability. Durable medical equipment reimbursement has specific billing needs, and our concentrated effort in this area, alongside our extensive payer contracts, is a key aspect of the comprehensive solutions InfuSystem offers. Our second unit is the durable medical equipment services business, focusing on equipment rentals and biomedical services. This part of the business was initially acquired to support our ITS segment, providing repair and maintenance of equipment. Approximately two years ago, we began initiatives to expand our ITS operations. The goal was to utilize the core competencies developed for oncology therapy and apply them to various additional therapies. Currently, we have four therapies within the ITS unit. Oncology remains the largest, with pain management and wound care also gaining momentum, and we anticipate significant revenue growth from these areas in 2022 and 2023. The fourth therapy, pneumatic compression for lymphedema treatment, is still a few years away from contributing revenue but presents an exciting market opportunity exceeding $1 billion. Each of these therapies holds transformative potential individually, so we do not need to excel in all four to achieve success. Nevertheless, I am confident in our capacity to generate revenue growth across all four, thanks to our team’s focus and high-level execution of our growth strategies. Additionally, these business opportunities align perfectly with our core competencies, and we have the necessary resources to manage them effectively, as we have been doing some form of this work for over 30 years. It's important to note that we will likely introduce more ITS therapies beyond the current four in the future. By establishing ourselves as a preferred partner for delivering last-mile durable medical equipment solutions from clinics to homes, InfuSystem has become a prime point of contact for medical equipment manufacturers seeking assistance as more patients and therapies transition to home settings. I envision doubling the company's revenue to around $200 million in the next three to five years, marking substantial growth considering it took over 30 years to reach our current revenue levels. We have the right team in place to facilitate this growth, supported by a solid financial foundation and a service platform that is highly adaptable to enable our expansion. Regarding the investments we’re making this year to bolster our growth, I have often emphasized that business dynamics require us to make initial investments, incurring some expenses before we see revenue reflected in our financials. This trend was evident a few years back when a major competitor exited the oncology market, allowing us to enhance our inventory and operations to serve a larger customer base. We are experiencing a similar situation this year. Although we did not anticipate 2021 to be a year needing significant investments, it has turned out that way due to several favorable opportunities that we have eagerly embraced, positioning us well for future growth. The first point was extensively covered in our last call when we shared that we nearly doubled our sales force after acquiring some of the best talent in the pain and wound care markets. With the support of these new experienced representatives, we aspire to announce additional milestones similar to our recent press release on November 2nd, where we revealed that InfuSystem was selected by a leading U.S. healthcare provider to deliver our pain management service, InfuBLOCK. Through this agreement, we will provide services to a prominent U.S. healthcare provider with over 12 million patients, including electronic infusion pumps for continuous peripheral nerve block, a 24/7 clinical hotline, biomedical services, and necessary supplies. The pain management segment is gaining traction in the market, and accomplishments like this enhance our confidence in the potential for more successes as our team continues to harness this momentum. Our second major investment this year, which was briefly mentioned in the last call, involves our proactive hiring of technicians for our biomedical team in durable medical equipment services. This hiring surge began in the third quarter, and we have been actively onboarding, training, and equipping the expanded team to prepare for our anticipated business. As announced in today's press release, we are excited to discuss a significant new opportunity. InfuSystem has been chosen to provide biomedical services to a leading global medical technology and diagnostic equipment company operating in over 100 countries. In this partnership, we will deliver biomedical services, including annual preventative maintenance and repair solutions for their infusion pump fleet in hospitals and medical facilities under contract in North America. Services will be provided either onsite at their dozen medical facilities, which includes 800 hospitals throughout the U.S. and Canada, or offsite at one of InfuSystem’s seven service centers. Once we finalize negotiations and contracting in the coming weeks, this program is expected to generate approximately $45 million over three years, with $8 million to $12 million in the first year. This new partnership marks a significant development for our durable medical equipment segment and stems from the acquisition of two specialized biomedical service companies in the first half of the year. We decided to extend our capabilities into the acute care sector, enhancing our strong biomedical team for onsite service, which was accomplished in April of this year, along with diversifying our skills enabled by the FilaMed acquisition in February. By integrating the capabilities of the OB Health and FilaMed teams, InfuSystem can now deliver a wider array of services, including onsite repair, preventative maintenance, and inventory management for medical devices across hospitals and healthcare systems nationwide. We can service not only infusion pumps but also compression devices, defibrillators, electrosurgical units, and patient monitors. These enhanced capabilities position InfuSystem to pursue potentially transformative opportunities in the future. I am confident that our durable medical equipment platform now exhibits the same growth potential as our integrated therapy services platform and could become the fastest-growing segment in the next couple of years. The acute care market is a significant opportunity, and we aim to optimize the synergies from our two acquisitions to drive growth and increase our market share in this sector. Naturally, taking advantage of all available opportunities will necessitate operational discipline and increased scale. This reaffirms my earlier point about the need for upfront investments ahead of realizing material revenue. Regarding our intended growth in DME, investments commenced in the first quarter with the acquisition of FilaMed, followed by OB Health in the second quarter. We have been steadily ramping up our team and operations since then. To elaborate on our preparations for onboarding the expected new revenues, I’ll now hand the floor over to Carrie Lachance, our President and Chief Operating Officer.

Thanks Rich and good morning everyone. As Rich just mentioned, the process of upgrading the company's systems and operations in preparation for growth has been ongoing for some time now. Our third-party payer billing collections team was the first area of focus given the importance of getting paid for the services we provide. We have a very strong team under Jamie ThinkBanner, our VP of Revenue Cycle, in place now and we've implemented a system of constant process improvements. This includes increasing automations and new efficiencies that reduce costs and drive both higher revenues from increased collections and higher operating margins. Our process in rationalizing the billing and collections function has been so successful, we completed the long desired integration of teams, bringing ITS and DME under a single, more efficient operating structure. The next functional area I'd like to comment on as delivering substantially greater output with far greater efficiency is our IT Department under Addam Chupa. We've got great coordination now with IT operating very comfortably in support of the rest of the company. Key implementations have been rolling out on schedule, including upgrading and integrating systems that support our continued growth. Integration of the two biomed acquisitions went very smoothly and is complete. As Rich discussed, we are adding to those teams as well as to our legacy biomed team, adding people, equipment, and increasing the footprint of our biomedical operations. With COVID having changed many work practices, we're taking advantage. Changing of our space for cubicles used to sit and setting up dozens of new workbenches, training of new technicians has progressed smoothly, and the team is ready to begin onboarding new work. We expect hiring to continue as the workload ramps up through much of the next year. Senior management has given careful thought to setting priorities for the next year. Obviously, biomedical services is a top priority and we plan to continue the same work done over the last two quarters to hire, train, and ensure the highest quality work and the most efficient operation of this rapidly expanding part of the company. Pain management is also growing quickly, and we are focused on streamlining processes both in the field and the back end office to stay ahead of the anticipated growth. Wound care is next, and we've had time this year to fine-tune our processes in advance of the revenue scaling expected in that business. And finally, operations will be ready to support the pneumatic compression business when the therapy begins to come online. Overall, the approach is to scale existing operations in ITS and DME, taking advantage wherever possible to achieve greater efficiencies by a greater throughput. Areas including warehouse and nursing support have existing capacity to support higher volumes, while our biomedical team and billing and collections have the space, structure, and leadership to support significant growth. Operations is ready for growth and we are already executing in anticipation of everything we have talked about here today. With that, I will turn it over to our CFO, Barry Steele to provide a review on our financial results.

Thank you, Carrie. Thank you to everyone on the call for joining us today. I will focus on three areas: our financial resource reserves, the main drivers behind this quarter's results, and key factors that will enhance our revenue and profitability in the fourth quarter. First, let's discuss our financial position. As Rich mentioned, we anticipate a significant increase in our revenue growth in the next quarter and into 2022. We are well-positioned to support that growth with strong cash flow from operations and significant liquidity reserves from our revolving line of credit. Despite this strong position, our capital needs for growth are expected to be considerably lower than historic levels because our biomedical services revenue growth does not require purchasing medical equipment or other capital items, unlike our ITS businesses. This year, through the first three quarters, we have generated $14.6 million in operating cash flow, which is a 15% increase from $12.7 million in the prior year. This amount was sufficient to cover $8 million in net capital expenditures during the period and financed nearly all of the $7.7 million FilaMed and OB Healthcare acquisitions, leaving only $1.1 million remaining. We continue to expect our full-year operating cash flow to be between $19 million and $22 million. We also anticipate our investing cash flow, which includes cash used for purchasing medical devices and other capital expenditures, as well as cash generated from selling used equipment, to be within the range of $12 million to $15 million for the full year of 2021. By the end of the third quarter of 2021, our total debt was $30.9 million, a decrease of $1.6 million since the end of the second quarter, resulting in a total debt to adjusted EBITDA ratio of 1.3 times over the last 12 months. This debt includes $30.8 million of outstanding borrowings on our $75 million revolving line of credit, alongside an equipment loan totaling $400,000. This debt structure aligns well with our growth strategy for several reasons. The credit line operates as a revolving facility and does not require principal amortization, expiring in February 2026. We have strong partnerships with traditional banks such as J.P. Morgan, Wells Fargo Bank, PNC Bank, and Comerica Bank. Under the credit agreement, we have ample financial covenant headroom, with a maximum leverage ratio of 3.5 times and a minimum fixed charge ratio of 1.2 times. We benefit from a low interest rate at LIBOR plus 200 basis points and have protected $20 million of the outstanding drawings against interest rate increases until the end of the term. This all-revolver facility grants us efficient cash management capabilities, which is why our cash balance at the end of September was only $165,000. Our available liquidity at the end of the quarter totaled $43.6 million, which consisted of $43.5 million in available borrowing capacity under the revolving line and cash on hand. Regarding our operating results, net revenues for the third quarter of 2021 reached $26.6 million, marking our highest quarterly revenue ever; it even surpassed our best quarterly revenue in 2020 during the COVID pandemic when the demand for infusion pumps was exceptionally high. This reflects a 6% and 7% increase from the prior year and sequentially, aligning with our forecasts. Key growth drivers included revenue from acquisitions, increases in pain management and negative pressure therapy, strong collections, robust equipment sales, and better performance in rental fleet volumes. We incurred additional costs during the quarter for preparations related to new large biomedical services opportunities, which slightly reduced our gross profit and adjusted EBITDA margins, increasing our G&A expenses. Other factors that affected profit margins included a slight uptick in pump maintenance costs and an increase in our loss pump reserve for the ITS segment, as well as an unfavorable gross margin mix in the DME business due to lower rental revenues compared to the previous year. We also spent $800,000 on expanding our sales team for negative pressure wound therapy and pain management, which began in the second quarter. Of this amount, $500,000 was recorded in selling expenses, with the remainder in G&A expenses. Furthermore, our G&A expenses rose by $1.3 million due to higher equity compensation driven by an increase in our common stock market price and performance-based awards related to acquisitions and operational targets, including growth achievements in the biomedical services business. Looking ahead to the remainder of the year, as Rich stated in the press release this morning, we are maintaining our revenue and earnings guidance, with 2021 revenue expected between $107 million and $110 million, and adjusted EBITDA projected to be between $27 million and $28 million. Additionally, we continue to expect a combined revenue run rate for pain and wound care to close this year at approximately $15 million. These figures include substantial increases from previous quarters, resulting from the ongoing sequential revenue growth we experienced in the third quarter. This increase also accounts for notable medical equipment and capital lease sales in our negative pressure wound therapy business, a critical part of our market strategy. The outlook also encompasses extra expenses related to our preparations for successfully launching new programs in the biomedical services business as mentioned by Rich and Carrie. These primarily involve new personnel as well as supply costs and other expenses. However, despite these increased expenses, we anticipate that the significantly higher revenue will yield a favorable contribution margin, enhancing overall profitability. With that, I will turn it back over to Mr. DiIorio.

Thanks, Barry. I believe InfuSystem is at an inflection point and I am extremely confident about the future of the company with multiple material growth initiatives in both our ITS and DME segments. The strength of our business model and positive outlook for 2022 and beyond provides us the confidence to make these important growth investments in 2021 that will allow us to drive long-term revenue growth. We are reaffirming our guidance for 2021, as Barry mentioned, and we'll be exiting 2021 in a position of strength to successfully execute our growth plans. As a result, we expect stronger top and bottom line financial performance in 2022 and subsequent years. I am extremely excited for the future of InfuSystem as we are transforming the company for long-term success. And now we are happy to answer any questions.

Today's first question comes from Alex Novak with Craig-Hallum. Please go ahead.

Great, good morning everyone and thanks for the update. I just want to better understand the sales agreement with this medical device company that you announced this morning. Are they a global manufacturer of devices and InfuSystem will essentially become the contract service provider for them and just those devices and then what sort of additional staffing do you need to do to get ready for this deal next year?

Good morning, Alex. Yeah, so great questions. They manufacture devices; they also provide services. So we're going to be helping them with their service of infusion pumps and all of their customers once the agreement is signed. So they are definitely global. When everything is finalized, we'll put out a press release likely with their name in it, you guys will see that. But what we're going to be doing is we're going to be providing some supplemental services for them on their mostly infusion pumps around the country, and even a little bit in Canada. From a staffing standpoint, we definitely need to hire the biomed techs, right. They only have so much capacity per person per day. So we have all the numbers and we can back into how many texts we need, where they need to be, whether they're on site or in one of our service centers. But that's the majority of the staffing. We don't need a bunch of extra salespeople. There's no clinical involved, there's no revenue cycle involved. So it's really just the biomed technicians that we've been adding now for a little bit in the second quarter, quite a bit in the third quarter, and that'll continue through the fourth quarter as well. To get to the number we need to service the number of devices that we're going to need to service.

Okay, got it; that makes sense. And then your competitor in lymphedema, the big one out there hit some disruption in the starting cycle. Is there any potential to go faster and that market makes them make some investments like you've made in the pain and the wound space to get you better positioned for 2022 or at least early 2023?

We are not neglecting lymphedema. We plan to develop the program properly and will invest some resources into it next year, as we have done this year to some extent. Realistically, we expect to start seeing revenue in early 2023. Next year, we will keep enhancing the program and building our team, including bringing in some necessary experts to target that market. We are confident about the long-term prospects for lymphedema. However, we also recognize the importance of focusing on our current opportunities in biomed and the growth in pain and wound care, ensuring we execute effectively on our existing programs. We are not overlooking lymphedema; the revenue from it is just a year or two away.

That's helpful. And then thinking about Q4 but also next year, the company has a number of building blocks that are going to help make 2022 I think look pretty good. You got pain and wound ramped into that run rate, you've got this DME contract coming on board. So I guess the guidance seems a pretty material step up for Q4. So are you already starting to see some of these contracts materialize in October or November or are these all kind of put to the end of December? Just help us get comfortable with the Q4 guide but then also how are you thinking about 2022 from a growth perspective when you put all those together?

The fourth quarter will be influenced by various factors. Normal growth is expected, and the sales representatives hired in Q2 will begin to make an impact by then. We anticipate a slight increase in pain and wound care during this quarter. Pain typically sees seasonal effects in Q4 as patients tend to schedule elective surgeries towards the end of the year when their out-of-pocket expenses are lower due to reaching co-pays and deductibles. Barry also mentioned that our go-to-market strategy for wound care involves both inpatient and outpatient programs for negative pressure treatment. We have several significant leases either signed or in progress that we expect to materialize in the fourth quarter. This is how we project our Q4 numbers. Looking ahead to 2022, we expect substantial growth. I noted earlier that we anticipate improvements in both revenue and profit next year. The $8 million to $12 million anticipated from a specific agreement, once finalized, is a positive figure. When we consider pain and wound care, we're still finalizing our budget for the year, so I don't want to get too far ahead, but next year looks to be a significantly better growth year compared to this year.

Yeah, certainly looks like it. I appreciate the update. Thank you.

Thanks, Alex.

And our next question today comes from Brooks O’Neil of Lake Street Capital Markets. Please go ahead.

Good morning, all. Thank you very much for the comprehensive overview. I found it terrific. I have a couple questions. One is, most of the companies that have reported in our area or sector so far this quarter have highlighted COVID disruptions, nursing shortages, labor shortages in general, and supply chain disruptions. I don't think I missed it but I don't think you mentioned very much about that. Do you guys see that in your markets, are you being hurt by it, are you benefiting from it, what's going on out there?

We’re fairly neutral regarding the current situation. While we recognize the disruption, it hasn’t significantly impacted us. From a labor perspective, we’ve successfully retained our team, and when we need to hire, we offer attractive benefits and a positive work culture, which makes it easier to find talent even in today’s challenging market. As for the supply chain, we haven’t faced any issues. Although we’re small in the healthcare sector, we’re quite substantial in our field, allowing us to secure the necessary products even when conditions become tight. Since the pandemic began, we’ve noticed virtually no supply chain disruptions. Ultimately, the demand for our services remains essential; they are not optional. Overall, we haven’t experienced much disruption this year. Last year was notably different during the initial outbreak, but in 2021, we’ve encountered minimal issues. There might be isolated cases of hospitals limiting access during local surges, but nothing significant that affects us.

Great. So second question, what I have found over a long period of time is words that are tossed around in our industry. Some people think they know what they mean and I usually don't. So I'm going to ask you to help me understand what the acute care opportunity is like, or what you're seeing there just to make sure that I am clear about what you're doing in that area, and what the opportunity is?

Sure, so acute care in the hospital space, right. So InfuSystem historically has lived in what we call alternate sites. So physician practices, ambulatory surgery centers, home infusion providers, basically all healthcare kind of entities outside of the hospital. And that's been great for us, right, that's where our DME business has rented pumps and service pumps, that's where oncology kind of lives, even pain and wound care to a degree. The shift in the last, call it nine months, 10 months since the acquisitions is really on the biomedical services piece in the acute care setting. So historically, we've done a few million dollars in repairs outside of our own fleet and that's been for home infusion companies that need some repairs and maintenance done on their devices. But the acute care space is where all the devices are, right. So a hospital system could have 5000 to 10,000 devices in one hospital system, just in infusion pumps in addition to everything else that moves around the hospital that's in there. So the opportunities are just at a much bigger scale and we never had the chance to take advantage of them because we didn't have onsite repair; we could only do infusion pumps. And between the two acquisitions now, we can repair more than just infusion pumps, and we can do it onsite at the hospital. The hospital is not going to want to ship back 1000 pumps to do a preventive maintenance; you have to do it there. Kind of, right next to the bed in their basement kind of thing. So now we have those capabilities and it just creates a whole new world of opportunity for us. We're already seeing the team capitalize on, the sales team go out and win some major accounts and some big business and obviously, this new opportunity is a piece of that. So it's just a market that was untapped for InfuSystem, and strategically we made those acquisitions to get into that market and now we're off and running.

And Rich, just pretty much the DME business, you don't see an opportunity to provide services in acute care facilities?

I believe that's correct. We have relationships with most of the major oncology hospitals across the country. While we may be present in their outpatient oncology centers, we are also within the hospitals. The same applies to wound care, where our presence is expanding. We have some pain management clients in hospital settings as well. This means we can leverage those existing relationships in acute care hospitals because we have earned their trust, allowing us to introduce our other services. Gaining their trust for biomed services adds another valuable aspect to our offerings. However, we will not be providing clinical support for the pumps; our role will focus on repairs, maintenance, and inventory management.

Okay, that's good. And then Carrie and Barry provided great insight to your ability to scale. I'm just checking with you to make sure you don't think your eyes are bigger than your stomach in terms of your true ability to manage all the growth and all the things you're doing while continuing to deliver the kind of steady, profitable business results you've always done.

I'm not concerned at all. So we very deliberately have built this team over the last few years to be ready for this. We have an infrastructure in place that we've built over 30 plus years. And at the end of the day, I think I mentioned in the opening remarks that nothing we're embarking on is anything different than what we do every day and have been doing every day for 34 years. So whether it's biomedical services that we've been doing for years on our own pumps, pain management and wound care which mirror our oncology program that we've had for 34 years, all of these things are right in our wheelhouse. If you see us start selling software, we probably have a problem. But when we were bearing devices and helping patients get home, that's exactly what we do, and I would argue we're the best in the world at that. So I have no concern between this team and the system we have in place and the infrastructure. No concerns at all.

Right. Perfect. Thank you very much. Congratulations. Keep it up.

Thanks, Brooks.

Your next question comes from Jim Sidoti with Sidoti and Company. Please go ahead.

Hi, good morning and thanks for taking the questions. First one is a quick one, were there any one-times in the quarter that contributed to revenue or on the expense side other than the option expense, any one-time expenses that are notable?

We did have some expenses again related to just the ramp-up that we had planned for the new opportunities. But nothing that was really one time in nature; I wouldn't say we'll have the revenue to pay for it very quickly, the way I'd characterize it.

Alright, and then kind of a bigger question, bigger picture question. As you look out over the next couple of years, it sounds like you have four or five significant opportunities to grow revenue. How important is it for you to grow the bottom line in the near term? I mean, is that something you kind of put on the side as you make these investments or do you think you'll still be able to grow earnings and increase cash flow in the near-term while you're investing for these larger opportunities on the top?

I believe we definitely have the potential to enhance our profitability. We have previously indicated that there is a clear path to improved EBITDA margins. The extent of this improvement will largely depend on the investment opportunities available to us. For our company, there are more opportunities to invest in our profit and loss statement than in capital expenditures. If we examine the situation closely, we can see the potential for increased profitability and cash flow. However, we will need to make some investments along the way.

Alright. Thank you.

Thanks, Jim.

Thanks. And your next question today comes from Aaron Warwick with Breakout Investors. Please go ahead.

Hey guys, thanks for taking the call. I'm going to kind of piggyback off the last question, your EBITDA margin is around 21% this quarter, in the first quarter 25%, last year 27%. What are you kind of thinking for next year? Do you think it will see a return to that 25% to 27% level and then I know long-term you've said 30% is your target; is that kind of still what you're thinking and specifically then that 25% to 27% is that attainable next year?

First, I want to clarify that last year's margin was high mainly due to the benefits from COVID. We sold many devices from our inventory, which had no book value left as they were fully depreciated. Therefore, it's not a reliable indicator for us. If we look at the investments we're making this year, we're about at the 25% mark. We haven't fully completed our budget for next year. Some of the investments we're making won't be fully covered by the revenue generated from the sales team, and they will almost be fully funded by the end of the year. Consequently, we still face some challenges. However, I believe we have a clear path to achieve 30%, although it may not happen next year but likely thereafter. One positive aspect is that sectors like biomed and lymphedema, when they fully launch, have good contribution margins, making them beneficial for us. The new biomed contract also presents a significant opportunity for us. Importantly, both biomed and lymphedema initiatives do not require capital investment. Overall, our free cash flow has notably improved, which is a critical metric for our company.

Thank you for that. It seems that the biomedical services business is likely one of your higher margin operations; is that correct?

Yes, again, generally has lower gross margin, but has a lot less sort of overhead and G&A. So that's, again, what we see is the biomed as we grow definitely is accretive to EBITDA.

What are you guys thinking about, last year I think it was in December, you came out apart from an earnings release, and gave the 2021 guidance. What should we expect and a lot of moving parts I know, but when do you expect to give any sort of guidance on 2022?

Yeah Aaron, I think you just hit the nail on the head. There's a lot of moving parts; we want to finalize this agreement first to make sure we can put it in the books for next year. There are a couple of other opportunities that are out there that we should have better visibility into in the next call 30 to 60 days. But once we finalize it, we will certainly come out with our guidance. If I had to put a date on it, it's probably early January. It could be a little bit sooner than that, a little bit later but it's in that ballpark. We just want to get comfortable with the opportunities between the salespeople we've added in wound care and pain that are starting to come to the door. This one big opportunity in biomed; there are a couple more out there. We want to get our arms around them and have as much information as possible before we put the number out. But the good news is, it's going to be a really good number in 2022, almost any way that we look at it. Any model we've looked at 2022 is going to see some significant growth for sure.

I have been analyzing the figures based on what you've shared during this call, and even without considering additional potential outcomes, I believe that revenue growth will not fall below 15% to 16%. Is that an accurate assessment based on the numbers you've presented?

Yeah. I mean, I think that that's on the very low end. Yeah, I mean without getting into all the numbers, I think in order of magnitude of 20% is probably a good baseline to start out. But again, we'll finalize what the opportunities are out there and see what that looks like. But yeah, next year is going to be a pretty solid, if not better, growth year.

Yeah, and then I mean, and then the EBITDA should be even higher percentage-wise, given the return to better margins that Barry just mentioned. So that's good. So, we're probably not going to hear from you again until March since it's the end of the year for you. Are you thinking then that there may be some updates in between, besides just the guidance? Sounds like you've got some things in the pipeline; maybe we'll hear from you before that?

Yeah, I think when something significant happens, we'll let everybody know for sure. There's no reason not to. That could be a combination of announcements or guidance for next year. I think all of that will happen before March, so you'll hear from us.

Alright, thanks guys. Appreciate it. Keep up the good work.

Thank you.

So ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Rich DiIorio for closing comments.

Thanks, Rocco. I want to thank everyone for participating in today's call. I hope everyone has a good day. And I look forward to speaking with you again when we report our fourth quarter 2021 results. Please stay safe and thank you.

Thank you. This concludes today's conference call. We appreciate everyone for joining the presentation. You may now disconnect your lines and have a wonderful day.