Iradimed Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2023

There are 6 speakers on the call.

Operator

Welcome to the Iretimed Corporation Third Quarter of 2023 Financial Results Conference Call. Currently, all participants are in a listen only mode. And at the end of the call, we will conduct a question and answer session. As a reminder, this call is being recorded today, November 3, 2023, and contains time sensitive information that is accurate only today. Earlier, IRADIMED released its financial results for the Q3 of 2023.

Operator

A copy of this press release announcing the company's earnings is available under the heading News on their website at iradimed.com. A press release copy was also furnished to the Securities and Exchange Commission on Form 8 ks and can be found at snek.gov. This call is being broadcast live over the Internet on the company's website at iretimed.com and a replay of the call will be available on the website for the next 90 days. Some of the information in today's session will constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements focus on future performance, results, plans and events and may include the company's expected future results.

Operator

Iredimid reminds you that future results may differ materially from these forward looking statements due to several risk factors. For a description of the relevant risks and uncertainties that may affect the company's business, please see the Risk Factors section of the company's most recent reports filed with the Securities and Exchange Commission, which may be obtained free from the SEC's website atsec.gov. I would like to turn the call over to Roger Susi, President and Chief Executive Officer of Aradimed Corporation. Mr. Susi, Please go ahead.

Speaker 1

Good morning. Thank you for joining us on today's call. I'm very pleased to report our 9th Consecutive record quarter, with Q3 'twenty three again showing our ability to execute and grow our business. This morning's press release announced Q3 'twenty three revenue came in at $16,500,000 and a 23% increase over Q3 of 2022. GAAP diluted earnings per share for the 3rd quarter were $0.40 Non GAAP diluted earnings per share for the Q3 of 2023 was $0.43 per share, a 48% increase over Q2 of 2022.

Speaker 1

Our entire team remains strong, committed and able to pull together to bring in orders, continues to gain acceptance and new customers with some very large orders this past quarter. Sales of our MR IV pump remained strong And with the new program for field replacements of older pumps, we anticipate growth of this older product line as well. As with last quarter, we again feel comfortable raising our guidance to the year of Q3 is typically our weakest quarter for new bookings due to the summer holidays, yet still our total backlog built year to date continues to be sizable. As I have said before, though a strong backlog provides excellent resources as supply issues may arise, we are striving to reduce this backlog and deliver products with less customer lead time. However, we still have a bit more backlog and associated long lead times than we prefer.

Speaker 1

We recently quote Domestic lead time to our customers of 90 days and international at 120, but we plan to shave off Some lead time by close to 30 days in the coming quarter. This is being done through an acceleration of production and materials flow to provide customers quicker access to the products that they have purchased. Now I'd like to provide progress regarding our FDA efforts, Serrano 3,870 MRI of EPO. Last quarter, I spoke of the massive testing that's underway here, which continues with some tests finished, while still others remain in progress. I'd like to note that the results are positive so far and so it's a matter of continued forward efforts and progress to complete the test.

Speaker 1

As further support for our internal 510 team, we have engaged 2 external support consultants, One for technical help and the other for statutory and relationship assistance. Neither is inexpensive. Still, we feel it necessary to ensure 510 success with a minimal amount of FDA review time. We saw such a payoff for reusing Nexstar with the recent 8 month approval of another manufacturer's new IV pump. Though we've been targeting late Q1 for refiling the new 3870s 510, should our new external Help suggest additional or different elements that cost us additional time to pay off with reduced FDA review time, We will consider such input carefully.

Speaker 1

Again, the hope is that such an external input should shorten the time FDA needs for clearance. Now I'd like to recap our Q3 performance and indicate our confidence that this upward trajectory will continue. Therefore, we now announce an increase in our guidance with the expected revenue for the year 2023 of 65 to $65,500,000 We also raised the forecasted annual GAAP diluted earnings per share to $1.34 to 1 0.3 For the Q1 of 2023, we expect to report revenue of Thanks. Yes. In the Q4, we expect to report revenue of $16,900,000 with GAAP diluted earnings per share of $0.35 to $0.38 and non GAAP diluted earnings per share of $0.38 to $0.41 Now I'd like to turn the call over to Jack Glenn, our CFO, to review the financial results for the quarter.

Speaker 2

Thank you, Roger, and good morning, Everyone, as noted on a GAAP basis and non GAAP basis. You can find a description of our non GAAP operating As we reported earlier this morning, we recorded the Q3 with $500,000

Speaker 3

an increase of 23% compared to

Speaker 2

the Q3 of 2022. Domestic sales increased 29% to $13,900,000 and international sales remained flat at $2,600,000 Overall, domestic revenue accounted for 85% of total revenue for Q3 of 2023 compared to 81% for Q3 of 2022. Device revenue increased 25 percent to $11,800,000 This was driven by a 40% increase in monitor revenue. Revenue from disposables and services increased 24% to $4,200,000 for the Q3 of 'twenty three, while our maintenance contracts were consistent at $500,000 for both periods. The gross margin was 77.8 percent for the 2023 quarter compared to 78.67 percent for the 2022 quarter.

Speaker 2

The decrease in gross margin is primarily due to higher overhead costs and increased raw material costs. Operating expenses were $6,900,000 or 42 percent of revenue compared to $6,400,000 or 47.8 of revenue for the Q3 of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount, higher regulatory and legal and professional expenses and increased benefit expenses. As a result, income from operations grew 43% to $5,900,000 for the 2023 Q3. We recognized the tax expense during the Q3 of $1,341,000 resulting in an effective tax rate of 20.9% compared to a tax expense of approximately $810,000 in the 2022 quarter.

Speaker 2

This increase is due to higher taxable income in 2023. On a GAAP basis, net income was $0.40 per diluted share compared to $0.27 for the 2022 quarter. On a non GAAP basis, adjusted income was $0.43 per diluted share for the 23 Q3 compared to $0.27 for the Q3 of 2022. Cash from operations was $1,400,000 for the 3 months ended September 30, 2023, down from $3,900,000 for the same period in 2022. And for the 3 months ended September 30, 2023, 2022, our free cash flow, a non GAAP measure, was $1,000,000 $3,400,000

Speaker 1

respectively. And with

Speaker 2

that, I will now turn the call over for questions. Operator?

Operator

Thank you. We will now begin the question and answer Our first question will come from Scott Henry of Roth Capital Partners. Your line is open.

Speaker 3

Thank you. Good morning and congratulations. Another strong quarter. Just a couple of questions. First, Any thoughts on what you're seeing on the pricing environment?

Speaker 3

And perhaps with the monitors, how the Shifted between U. S. And OUF.

Speaker 1

How are you doing there, Scott? This is Roger. So Maybe I'll take that one. So our pricing has with the monitor specifically, We increased that by negotiating a lot of the so the Previous 18 months, the largest, I think 2, Those increases actually began in July. So actually, these are going and That's on the monitor, it was decent increase there.

Speaker 1

The pump increase was very, very small So relatively insignificant. So we're seeing we're not seeing A pushback from that sort of thing, if that was your question. As far as international goes with the monitor, Monitor sales internationally are very strong. Yes. The rate of adoption and growth in the sales internationally for the monitor has been pretty stout, both from Just penetrating the countries that we had been in historically, but as well as cultivating some new areas.

Speaker 1

In Mexico and Colombia, for example, with some Nice opportunities for the monitor there. So all in all, just positive, I guess, positive things to report.

Speaker 3

Okay, great. And then on the monitor side, We know one of your competitors appears to be less focused on that segment. Has anything changed on that landscape? Or do you feel So you're in an position to take share right now?

Speaker 1

Well, good question. Yes. They are less focused. They still have huge problems that are in the news at least weekly. So you can tell where their focus is, but we had another little manna During COVID, from them because where they not so focused, which remains to be the case generally, but their deliveries got extremely long because they had real supply chain issues much, much greater than we did.

Speaker 1

So we see them catching up there. So that's, let's say, one point for them. But it removes one of their hurdles. But overall, The focus is still light. The size of the sales force is still lighter than it had been.

Speaker 1

And they have their hands full dealing with, let's say, bigger fish to fry. Just the same.

Speaker 3

Okay, great. Thank you, Roger, and final question, gross margin strong in the 3rd quarter. As we start to think about 2024, 2025 in higher volume of monitors and pumps, How do you think about is 78%, 79%, does that start to move in on the ceiling for gross margins? Or do you think With higher volumes, could you get to that 80% level?

Speaker 1

Another good question. Okay, another good question. So During COVID, you can't really see it that much, but We did lose some pricing advantage with suppliers. We were paying through the nose, let's say, for a lot of components just to get our hands on them. And so we're a matter of fact, just the last This project for a few days this week that I've had with our materials people.

Speaker 1

It is A visible impact to our raw materials costs that are up a couple of percent. So there is something there to be corrected. How long it will take? Of course, it's not going to be like a 1 quarter fix. But That's a mandate now for this coming year in 2024.

Speaker 1

We think and you can see it, right? The semiconductor suppliers are now There are shortages everywhere, surpluses and we're even thinking to come back some output. So there's opportunity there to sort of recover to expedite in an effort to get parts that were very short supply during COVID and upped our costs to turn that back around. But it won't be quick, but you can I'm counting on the effect over this coming year. So short answer to your question is, yes, I hope that we will be able to even boost our gross margin.

Speaker 3

Okay, great. Thank you for taking the questions.

Speaker 1

Great. Good to talk.

Operator

Thank you. One moment please for our next question. Our next question will come from Frank Pechkinen of Lake Street Capital Markets LLC. Your line is open.

Speaker 4

Hey, this is Nelson Cox on Frank, congrats on quarter. Jack, you mentioned Q3 being a seasonally slower quarter for orders. I was hoping to hear your expectations for Q4.

Speaker 1

Well, the flip is Q4 is usually a big quarter for us. Yes. Q3 is conventionally light And Q4 is conventionally strong. And last year, I think we also had a pretty strong Q1 because A lot of stuff, even though we had a good Q4 last year, there was still stuff that carried over, didn't get written as far as the orders until Q1, so yes, I mean, we don't expect the seasonality factor to change. Got

Speaker 4

it. And then in relation to the customer announcement to discontinue service on IV pumps over 7 years old, Can you help us understand your installed base better to try and place context around how many of your pumps could be over 7 years old and how large could that increase per year going forward?

Speaker 1

Well, I believe, let me think, I somehow lost that number.

Speaker 2

Yes, somewhere I think we think that it's somewhere in that 1500 to 2000 units out there that are in that category over 7 years.

Speaker 1

Yes. So large number of pumps and we've had we've quoted We've quoted, I think, close to 400 already. That kicks in at the end of December, right? So that is being a factor that might bring in some orders certainly in the Q4, but much more so Q1 and Q2. Those will be We're going to start seeing those turn into orders here very soon with I think the strength of it Being great in Q1.

Speaker 4

Got it. That's great. Thanks for the color and congrats again.

Speaker 1

Thank you.

Operator

Thank Next question will come from Frank DiLorenzo of Singular Research. Your line is open.

Speaker 5

Thank you and good morning. Can you talk on strength you saw in the protection systems this past quarter? And can you talk about to what extent you may be able to maintain growth going forward for the Q4 and into next

Speaker 1

Yes, thank you. Okay. Yes. Well, the sales have been growing slowly, frankly, with the FMD product. It's a matter of our sales force really learning

Operator

what

Speaker 1

the critical cost is. National demand has actually grown quicker than our domestic market is quite huge compared to where we're at now. So we've got a decent number on the back. It is not up to our expectations. So I think with the U.

Speaker 1

S, with the domestic market, it's a matter of that sale It is a little different to our sales folks than it is to sell a pump or a monitor. And They're learning how to come to grips with that as they do. We see different territories starting to sell FMDs as those different reps in those territories really learn who they should be talking to. And the internationals, it Seems to be a little bit more quick for them. They're picking up the ball on that one a little quicker.

Speaker 1

So long runway for the FMD, Lots of opportunity and we hope to over the year 2024 in the U. S. Again the keys to how we position that product and to whom we position that product to increase the sales.

Speaker 5

Okay, thanks. One other question regarding your next generation pump. Can you talk a little bit about Your strategy outside the U. S. For that as far as getting approvals and launch kind of the timing on that going forward?

Speaker 5

Thanks.

Operator

Yes.

Speaker 1

We won't turn our guns to chains, Mark, probably until mid late summer. That's when we'll Have the capacity with our team that's working on the 510 to deal with making the tech file and Getting our notified body on board to do that. And with the changes in Europe, For products like ours, yet the notified bodies are still kind of The logic of the future of mandatory NDR stuff currently. So they're taking a long time to review tech files and clear them. So an estimate of that would be mid-twenty 25 before We'd have a CE marked pump.

Speaker 1

Now having said that, that's probably accounts for a third of our international business. The other 2 thirds of it doesn't need a CE mark. And so we'll enter those markets Very soon. Much sooner. Those will enter as soon as we're launched in the U.

Speaker 1

S.

Operator

Okay. Thank you. Thank

Speaker 1

One moment. All right.

Operator

This will end the Q and A session. Would now like to turn the conference back to Rajesh Susi for closing remarks.

Speaker 1

Thank you, operator. Again, it's with great pleasure to report our Q3 2023 results demonstrating yet another quarter of strong growth. It is also a great pride that we can guide that we expect strong performance as the year concludes. With that, I look forward to reporting our year end success. And thank you all for participating in today's call.

Operator

Thank you. This does conclude the call. You may now disconnect. Have a pleasant day and enjoy your weekend.

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Key Takeaways

  • Ninth consecutive record quarter: Q3 2023 revenue of $16.5 million, up 23% year-over-year; GAAP diluted EPS $0.40 and non-GAAP EPS $0.43, a 48% increase over Q3 2022.
  • Raised full-year guidance: now expecting 2023 revenue of $65.0–65.5 million and GAAP diluted EPS of $1.34–1.43; Q4 is guided to $16.9 million in revenue with GAAP EPS of $0.35–0.38.
  • Backlog reduction plan: although total backlog remains sizable, domestic lead times are ~90 days (120 days international), with a target to shave off about 30 days next quarter via accelerated production and materials flow.
  • FDA 510(k) progress on new 3870 pump: testing continues with positive results, supported by two external consultants to minimize FDA review time and maintain a late-Q1 refiling target.
  • Field replacement opportunity: an estimated 1,500–2,000 installed pumps over seven years old qualify for the new replacement program, expected to generate significant orders in Q4 and into Q1.
AI Generated. May Contain Errors.
Earnings Conference Call
Iradimed Q3 2023
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