Iradimed Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 3, 2023

There are 5 speakers on the call.

Operator

Welcome to the IRADIMED Corporation's 2nd Quarter of 2023 Financial Results Conference Call. Currently, all participants are in a listen only mode. And at the end of the call, we'll conduct a question and answer session. As a reminder, this call is being recorded today, August 3, 2023 and contains time sensitive information that is accurate only as of today. In a listen only mode.

Operator

Earlier, IRADIMED released its financial results for the Q2 of 2023. A copy of this press release announcing the company's earnings is available under the heading News on their website at aradamid.com. A press release copy was also furnished to the the Securities and Exchange Commission on Form 8 ks and can be found on sec.gov.

Speaker 1

In a

Operator

listen only mode.

Speaker 1

This call is

Operator

being broadcast live over the Internet on the company's website at erotomed.com, and a replay of the call will be available on the web sight 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. Radimed reminds you that in a listen only mode. Future results may differ materially from these forward looking statements due to several risk factors.

Operator

For a description of the relevant risks and uncertainties position 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, a listen only mode, 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 IRADIMED Corporation. Mr. Susi?

Speaker 2

Good morning, and thank you for joining us on today's call. We certainly have more good news as can be seen by the announcement this morning. Last quarter, I reported was our top revenue quarter. But today, I once again point out that this Q2 2023 is now our top ever revenue quarter. Q2 also marks our 8th consecutive record revenue quarter.

Speaker 2

As this morning's press release announced, 2nd quarter 2023 revenue came in at $16,100,000 representing a 27% increase over Q2 of 'twenty 2. GAAP diluted earnings per share for the 2nd quarter were $0.33 Non GAAP diluted earnings per share for the 2nd quarter of $0.23 were 0.36 longer in the range of $0.08 per share, a 38% increase over Q2 2022. Once again, very proud of the fantastic efforts of the entire team. Revenue and order growth has been strong for all product lines. The MRI patient, vital signs monitor continued to make deep inroads into the competitive base with the growth of pump orders also very inspiring, in a position to execute.

Speaker 2

As with last quarter, we again feel comfortable in raising our guidance for the year, which you will in a moment. Our sales team has maintained a high level of performance as evidenced by strong customer demand for our products. Our total backlog built through Q2 continues to be at a robust level. Strong backlog provides excellent visibility and allows us to maneuver and reallocate longer in the range of resources as supply issues may arise. Though supply chain issues continue to become less and less of a concern, we still must be cautious.

Speaker 2

One trait of our caution can be seen in our inventory buildup. Once again, I'd like to provide progress toward our FDA efforts surrounding the new 3,870 MRIV pump. As reported last quarter, we have since then had a continuing dialogue with FDA. One such interaction was a face to face meeting at FDA in the D. C.

Speaker 2

Area, which was we understand May have been the first device company face to face since COVID. FDA personnel continue to work remotely, Which we could plainly see by the very few people in that facility during our visit. But there now have been some positions filled That of the lead reviewer and the director or assistant director, I should say, of the infusion devices, whom we met. And we're hopeful that these new people will come up to speed regarding IV pumps. And that As background, FDA has been working and clearing mostly repeat 510s from other hospital IV pump suppliers.

Speaker 2

But recently Fresenius and Baxter just having been cleared. And although we see a new recall happening earlier this week for yet another IV pump player, which may likely require a repeat 510 for them as well. So This adds to the staffing loads upon the FDA people. So we must take a conservative view that the current MRIV pump We'll remain strong in sales for our revenue stream into 2025. Now I'd like to recap We now announced an increase in our guidance with expectation of revenue for the year at $64,500,000 to $65,500,000 We also raised the forecasted annual GAAP diluted earnings per share to $1.25 to 1.28 in a range of $1.37 to $1.40 For the Q3 2023, 3rd quarter typically being our weakest, we expect to report revenue of $16,100,000 to 16,300,000 a listen to GAAP diluted earnings per share of $0.33 to $0.35 and non GAAP diluted earnings per share of $0.36 to 0.38.

Speaker 2

Now. Now I'd like to turn the call over to Jack Glenn, our CFO, to review the fiscal results for the quarter.

Speaker 3

Thanks, Jack. Thank you, Roger, and good morning, everyone. In a listen only mode. As in the past, our results are reported on a GAAP basis and a non GAAP basis. You can find a description of our non GAAP operating measures in this morning's earnings release in a reconciliation of these non GAAP measures to the GAAP measure on the last page of today's release.

Speaker 3

As we reported earlier this morning, revenue in the quarter of 2023 with $16,100,000 an increase of 27% compared to the Q2 of 2022. Domestic sales increased 20 percent to $12,900,000 and international sales increased 67 percent to 3,200,000 Overall, domestic revenue accounted for 80% of total revenue for Q2 2023 compared to 85% for Q2 of 2022. Device revenue increased 24 percent to $10,800,000 This was driven by a 17% increase in pump revenue and a 25% increase in monitor no longer subject to revenue. Revenue from disposables and services increased 40% to $4,800,000 for the Q2 of 2023, While our maintenance contracts were consistent at $500,000 for both periods. The gross margin was 75.5% for the 2023 quarter compared to 79.7 percent for the 2022 quarter.

Speaker 3

The decrease in gross margin is primarily due to the geographic mix as international sales with their inherently lower ASPs represented a larger portion of total sales in the quarter as compared to the Q2 of last year. Operating expenses were $7,200,000 or 44.8 percent of revenue compared to $6,000,000 or 47 percent of revenue for the Q2 of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount in higher and legal professional expenses. As a result, income from operations grew 19% to $5,000,000 for the 2023 second quarter. We recognize the tax expense during the Q2 of 2023 of approximately $1,119,000 resulting in an effective tax rate of 21.1 percent compared to a tax expense of approximately $939,000 in the 2022 quarter.

Speaker 3

This increase is due to higher taxable income in 2023. On a GAAP basis, net income was $0.33 a range of $0.26 for the quarter in 2022. On a non GAAP basis, adjusted income was $0.36 per diluted share for the 2023 Q2 compared to $0.26 for the Q2 of 2022. Cash from operations was $4,600,000 for the 3 months ended June 30, 2023, up from $1,400,000 for the same period in 2022. A listen only mode.

Speaker 3

For the 3 months ended June 30, 2023, 2022, our free cash flow, a non GAAP measure, was $3,100,000 $1,500,000 respectively. And with that, I will now turn the call over to questions. Operator?

Operator

Yes. Thank you. We'll now conduct our question and answer session.

Speaker 2

In

Operator

a listen only mode. Our first question comes from the line of Frank Tikhonnen with Lake Street Capital Markets. A listen.

Speaker 4

Hey, thanks for taking the questions and congrats on another solid quarter. Roger, you spoke about it a little bit in the prepared remarks, but it sounds like Ordering trends continue to be very favorable, especially in the monitoring business. Can you maybe expand on that a little bit no longer in the future. And then talk about any updates related to Phillips and how we should think about the durability of monitoring growth on a go forward basis?

Speaker 2

Okay. Yes, Frank, let me talk to you. So as you know, in a listen to this new monitor has been it's not so new anymore. We've been at it now for 4 plus years, but it's been gaining a heck of a lot of traction in the past longer in the year and we feel that's pretty I mean, I don't want to take away from our sales force. We're doing a great job bringing it to our customers and featuring it and describing it and gaining favor.

Speaker 2

But still, as you mentioned, There is that one large player, especially in the U. S. Market, which is Philips in the seminar monitoring business. And We continue to see deterioration in How strongly they're remaining in this market. So, seen that all year and that trend certainly continues.

Speaker 2

On the other hand, we still remain very pleasantly surprised with the demand for the pump. And That's still is a very they're almost neck and neck Yes. It's very encouraging for us. But again, to your point about Phillips, yes, we're not seeing and we don't predict no longer in the future. We think that they're just milk in this business and so be it.

Speaker 2

We'll compete on that basis.

Speaker 4

Got it. That makes sense. Maybe one follow-up in monitoring specifically. Can you talk about any Pricing changes. I know you guys have been no longer disclosing ASPs, but my assumption is being The only game in town with Phillips deemphasizing that business, you're able to take price.

Speaker 4

So I was just hoping you could talk about that a little bit more and if there's forward plans to take more price as well?

Speaker 2

Yes. Well, we most of these domestic Sales for both products are subject to a GPO contract in some way, shape or form. So It takes a long time to move pricing, but we've been working on that, as you know, for a year plus. And in fact, 2 of the major GPOs would have had their new pricing start, I believe, in July, right, Jack? Yes.

Speaker 2

Yes. So by the time we start to have new quotes at that level and orders coming in, it'll be Probably not in Q3. Just the speed of getting such things. But by Q4 And certainly all through next year, we will start to also see the fruits of those price increases. It was larger for the monitor.

Speaker 2

It was fairly substantial for the monitor and just a smaller amount for the pump. But Both of them, we think you will see in the revenue. It's a little hard to see in the revenue because we're increasing the number devices we sell along with that price went up, but you'll probably see it more in the cost of goods.

Speaker 4

Okay. That's helpful. And then maybe for my last one, just one on the P and L. You guys have done a really nice job consistently growing the top line at a much faster rate than operating expenses. If you're looking out To that cadence or any material changes that need to occur within the P and L to support $100,000,000 organization?

Speaker 2

We're building a new building, but the stuff there we're talking about would be CapEx And not much anyhow, relatively speaking. So far as real costs, the ongoing costs like personnel, That sort of thing?

Speaker 3

No. Yes, I would just add, as a percentage of sales, Frank, it's probably going to stay in line with where we're at Obviously, on the sales side is where The higher sales you'll see over the upcoming quarters that we plan to have that some of that sales commission expense will be higher.

Speaker 4

Okay, that's great. I'll stop there. Thanks for taking the questions and congrats again on all the progress.

Speaker 2

In a listen only mode.

Operator

Thank you. One moment for our next question. This question comes from Scott Henry with Roth Capital. Please proceed.

Speaker 1

Thank you and good morning, gentlemen. Another very strong quarter. First question, when we think about the upside in the quarter and the upside in the guidance, do you think it's More a function of demand or just having additional capacity, meaning you can kind of always fill the demand as long as you can make the product?

Speaker 2

I don't know. You want that one, Jack?

Speaker 1

I'm a

Speaker 2

little confused by it.

Speaker 3

Well, I think, Scott, we've been benefiting certainly from having a very strong backlog and we continue to have a very robust backlog as Roger mentioned. So certainly that gives us some visibility in the upcoming quarters from the demand side. But I think, yes, I mean, it's probably Both of those things.

Speaker 1

Okay. And then looking longer term, when we think about the monitor market, Roger, I'd be curious your take. Where would you estimate your market share is today? And how would you think about the annual monitor market in terms of size at your prices.

Speaker 2

Well, the size we think of the market is maybe $125,000,000 ish. And so you can look at what we have out of that so far. So that would tell We probably have a strong upper 20s percent, right, of that market share. So Yes. Unless our presence in this market has been increasing the overall market, which I really don't think that's a Significant thing, it could be a little bit, but I still think the overall market is around $125,000,000 So there you have it.

Speaker 2

You can Figure out from there that we certainly must have 25%, 26%, 27% of that market.

Speaker 1

And when you think about the growth rate for the monitor market, I mean, obviously, there's a pricing component and inflationary component. But how should we think about the volume as well as perhaps as you just mentioned and alluded to, perhaps they order more monitors if They have a better monitor. How do you think about the growth of that $125,000,000

Speaker 2

Well, we're optimistic that will be able to grow it, but that would be with the strategy of multiple no Like we do with the pumps, where we have these power users that have worked it into their workflow because of the portability of it, they use more than one per scanner as we've done with the pump for probably 20% of our customers are what we call those power users. So we haven't really gone there yet. And that's what we see will really open up We are seeming to sell, like you say, a good number Anyways, and but I still think the majority of those are in the U. S. Market.

Speaker 2

No I mean, that business is primarily because people are moving away from the Phillips product, which they bought for years years years and are giving us a serious nod and buying our product.

Speaker 1

Okay, great. Thank you for the color. Final question, The F and D rollout, obviously, still very early days. Given the past couple of quarters, how do you think about the size of that a position to be able to provide a better understanding of potential revenue stream.

Speaker 2

Well, like I've said, we're doing okay. We've talked about this before. I think in the last call a bit, right, that the way you sell it is different than you sell a pump or a monitor. So It's taken a while for our sales force to get their footing on though it's the same call point, no longer in the future. It doesn't lend itself to the pizzazz and the excitement in the buyer's eye that the pump and the monitors do because they interact with those, the users longer in the future.

Speaker 2

FMD, you buy it, you set it, you forget it. So but we're getting to where Still where it goes. I mean, I think this whole market is under $20,000,000 as I've said before, And that's worldwide. So will it grow? They should.

Speaker 2

Every doorway could be protected by every door with every MRI should and could be protected by such a device. I think to some extent, the reason it's small is the players that have been out there so far are small. And Their method of bringing it to the market is through catalogs essentially and advertisements. They don't have people that walk in and do the sort of direct selling that we do. So, but having said all that, I'm not ready to get too excited that our chunk of this market, if we could get it to $10,000,000 I'd be very, very satisfied with that.

Operator

Thank you. One moment. Our next question

Speaker 3

Yes. Hi. I'm in for Ashim. Can you give us an update on the status of your supply chain challenges?

Speaker 2

Well, like I alluded to, they're fading away. It's it was Starting to get better even 2 quarters ago. So last quarter, I mentioned that we still keep a watchful eye on it, which no There was a major problem every week that we dealt with to solve the supply chain problem. That's fading into the background longer at this point, but we still are keeping a careful eye on it. There's still some spot shortages of this or that.

Speaker 2

But in general, I don't predict much risk any longer significant chance or risk any longer from supply chain issues.

Speaker 3

Okay. Thanks for that. And how is the new FMD products helping in the cross selling efforts?

Speaker 2

Well, it's one more it's great. That's an interesting it's great you don't go into a hospital. Basically everybody no longer in the market. Has an MRI door that could use an FMD, whether shopping for a monitor or a pump at the time. So it's one more reason to go in and Talk to your customer and you have something else to show them.

Speaker 2

So the cross usage of it is a nice feature

Speaker 3

What's that?

Speaker 2

If you were thinking like bundling or something like that, I mean, We look at that opportunity as well, but that's we'll see how that plays out over these coming quarters. Okay, okay. Thanks. Can you

Speaker 3

comment on the overall pricing environment for these products?

Speaker 2

Our pricing is going up, as we said. I mean, we've been increasing pricing. So as you can see, we've been selling more numbers of units longer in the market. And we've been increasing the cost the sale price of those units. So it's check plus for both situations.

Speaker 2

Okay, great. Thanks for the answers. All righty. Good to talk to you.

Operator

Okay. Thank you. I would now like to turn the conference back to Roger Tsushy for closing remarks.

Speaker 2

Thank you, operator. And again, it's with great pleasure that we've reported our Q2 2023 results, demonstrating yet another quarter in a very strong growth. It is also with great pride that we can guide that we expect strong performance as the year progresses. Listen only mode. With that, I look forward to reporting our future successes as this year continues.

Speaker 2

And thank you very much.

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Key Takeaways

  • Second quarter 2023 revenue reached $16.1 million, up 27% year-over-year, marking the company’s eighth consecutive record quarter and delivering GAAP EPS of $0.33 and non-GAAP EPS of $0.36.
  • Management raised full-year guidance to $64.5 million–$65.5 million in revenue, with GAAP EPS of $1.25–$1.28 and non-GAAP EPS of $1.37–$1.40.
  • All product lines showed robust order growth, especially the MRI patient vital signs monitor, which captured market share amid Philips’ pullback, while infusion pump sales also remained strong.
  • The FDA review for the new 3870 MRIV pump is progressing after in-person meetings and new reviewer appointments, though management expects current pump models to drive revenue into 2025.
  • Supply-chain constraints continued to ease, backlog stayed at robust levels, and cash flow improved significantly with operating cash flow of $4.6 million and free cash flow of $3.1 million for Q2.
AI Generated. May Contain Errors.
Earnings Conference Call
Iradimed Q2 2023
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