Iradimed Q4 2023 Earnings Call Transcript

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February 8, 2024

There are 5 speakers on the call.

Operator

Welcome to the IRADIMED Corporation 4th 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, February 8, 2024, and contains time sensitive information that is accurate only today. Earlier, IRADIMED released its financial results for the Q4 of 2024.

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 sec.gov. This call is being broadcast live over the Internet on the company's website atiradamed.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 to 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

IRADIMED 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 SEC's Web site atsec.gov. I would now like to turn the call over to Roger Dusse, President and Chief Executive Officer of IRADIMED Corporation. Mr. Soussi?

Speaker 1

Thank you, operator. Good morning and thank you for joining us on today's call. I'm very happy to report our 10th consecutive record quarter. We believe Q4 2023 further demonstrates the strength liradimed's product offerings and our ability to execute. As this morning's press release announced, 4th quarter 2023 revenue came in at $17,500,000 representing a 17.4% increase or the Q4 of 2022.

Speaker 1

GAAP diluted earnings per share for the 4th quarter were 0.36 While non GAAP diluted earnings were $0.39 per share, a 22% increase over Q4 'twenty two. Our entire team's commitment, focus and can do attitude pulls together to provide the winning performances we have achieved. The MRI patient vital signs monitor continues to gain acceptance and new customers and once again with some sizable orders this past quarter. We have an expanded selling plan for these coming quarters to keep pushing the monitor business forward as we continue to gain a significant share of the market. Sales of our MRI IV pump came in very strong and with our new program fulfilled replacements of older pumps targeted To start after New Year's, we received and pleasantly were surprised by having brought in orders in for the plan in Q4 ahead of plan.

Speaker 1

Thusly, we are bullish regarding growth of this older product through 2024. With performance and the direction of the business, we once again feel comfortable providing our guidance for the year, which you shall learn in a moment. As I had indicated earlier in 2023, we plan to reduce our lead times, which in turn means reducing the backlog. And although a strong backlog of bookings provides excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise. We are striving to reduce the backlog and deliver products with less customer lead time.

Speaker 1

Thus,

Speaker 2

which is

Speaker 1

what we started in Q3. However, we still have a bit more backlog and associated loan customer delivery lead time than we prefer. So we shall continue to shave the lead time by another 15 to 30 days in the coming quarters. This is being done through an acceleration of production and materials delivery. Once again, I'd like to provide progress regarding our FDA efforts surrounding the new 3,850 MRIV pump.

Speaker 1

Previously, I have spoken of massive testing that's been underway, which continues with some tests finished while still others are in progress, but

Speaker 3

we

Speaker 1

are reaching the end. Our external support consultants are now deeply involved, one for technical help and the other for statutory and relationship assistance. And these costs have been in fact impacting earnings, but I do not see them rising materially as we move forward. Still, we felt the outside help necessary to ensure 510 success and minimize FDA review time. We are planning the submission for May for refiling the 3870s 510.

Speaker 1

But should our external help suggest additional or different elements that costs additional time, we will consider such input carefully. We feel that such external inputs would help us produce a more concise 510 filing and so shorten lead time the FDA needs for clearance. Expecting clearance in Q1 2025, we would plan to show revenue from the new device in the back half of 2025. As for our guidance for the full year 2024, we expect to report revenues $72,000,000 to $74,000,000 with GAAP diluted earnings per share of $1.37 to $1.47 and non GAAP diluted earnings per share of $1.52 to 1.62 For the Q1 of 2024 financial guidance, we expect revenue of $17,000,000 to 17,300,000 and GAAP diluted earnings per share of $0.29 to $0.31 and non GAAP diluted earnings per share of $0.33 to $0.35 Now I'd like to highlight some of the details of our device sales performance during the year. Relatively small contribution to overall revenue increased over 3 fold in 2023 from 2022.

Speaker 1

The 3,880 MR patient monitor device sales increased 17% and the 3,860 IV pump sales rose close to 35% in 2023 helped by the replacement strategy I spoke of earlier. All in all, we are very proud to deliver such performance to our shareholders and look forward to 2024. Now, I'd like to turn the call over to Jack Lim, our CFO, to review the financial results for the quarter year. Jack?

Speaker 4

Thank you, Roger, and good morning, everyone. 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 and a reconciliation of these non GAAP measures to the GAAP measure on the last page of today's As we reported earlier this morning, revenue in the Q4 of 2023 was $17,500,000 an increase of 17% compared to the Q4 of 2022. Domestic sales increased 12% to 13 45 percent to $3,800,000 Overall, domestic revenue accounted for 78% of total revenue for Q4 2023 as compared to 82% for Q4 2022. Device revenue increased 31% to $12,800,000 This was driven by 60% increase in monitor revenue.

Speaker 4

Revenue from disposables and services decreased 8% to 4,100,000 for the Q4 of 2023, while our maintenance contracts were down 13% at $518,000 The gross margin was 76.9 percent for the 2023 quarter compared to 75.5 percent for the 2022 quarter. The increase in gross margin is primarily due to the increased absorption of fixed overhead from the higher production volumes in the quarter. Operating expenses were $8,300,000 or 47 percent of revenue compared to 7,000,000 47% of revenue for the Q4 of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expense for additional headcount, higher regulatory expenses, legal and professional expenses and increased benefit expenses. As a result, income from operations grew 21 to $5,200,000 for the 2023 Q4.

Speaker 4

We recognized the tax expense during the Q4 of 2023 of approximately $1,100,000 resulted in an effective tax rate of 20.1 percent for quarter and an effective tax rate of 20.9 percent for 2024 for 2023. This was relatively the same effective tax rate as the 20.7 in 2022. On a GAAP basis, net income was 0 point 3 $6 per diluted share compared to 0 point 2 $9 for the 2022 quarter. On a non GAAP basis, adjusted income was $0.39 per diluted share for the 20 20 3 Q4 compared to $0.32 for the Q4 of 2022. Cash from operations was $3,900,000 for the 3 months ended I will turn the call over for questions.

Speaker 4

Operator?

Operator

Thank you. We will now begin the question and answer session. And our first question comes from Frank Tachman of Lake Street Capital Markets.

Speaker 3

Great. Thanks Congrats on the quarter. I was hoping we could start with 1 on the 2024 guidance. Can you help us understand how you're thinking about the growth Profile of pumps, monitors and disposables to bridges to the $72,000,000 guide $72,000,000 to $74,000,000

Speaker 4

Yes. Tak, do

Speaker 1

you want to handle that or?

Speaker 4

Well, sure. I think that Frank, from the pump perspective, we've seen and that's what you'll see in the Q4 that we had a very strong Orders coming in and bookings from the program that we've talked about on the end of life. So going forward, we probably are a little more optimistic On the pumps, the Navy before from that perspective, the monitors continue to grow in that double digit type growth. And the disposables, I would say consistently we'll be somewhere around that 25% to maybe as high as 30% of total revenues going forward and kind of grow in line with the capital, I would say. But on that, I would say the caveat being that Disposables can kind of be a little bit lumpy from quarter to quarter based on our lead times are shorter, so we don't have the visibility.

Speaker 4

But overall, I think that's how we kind of to our growth number to the 72 ish type number.

Speaker 3

Got it. That's helpful. And then maybe an update on the Monitor competitive landscape. Anything you can provide related to how penetrated you feel you are into that replacement opportunity of the previous players or current player on the market Other than yourselves in replacing those monitors, how penetrated to that opportunity do you think you are at this point?

Speaker 1

Well, maybe I'll take that one, Frank. Good to talk to you. Well, there's sort of 2 aspects to that, right? There's the Penetration into the, let's say, the day to day business that happens month by month, quarter by quarter. And at this point, we feel that we're probably between 35% 40% of the market for the day to day sales.

Speaker 1

But That doesn't address how many of the of our bigger competitors' Products are out in the field. They have probably 10,000 plus between the players in this market, we feel that we're shipping collectively somewhere just under, let's call it around 1,000 units a year and we have, as I said, 35%, 40% of those. But that still leaves you a long way to go to replace all these others Close to 10,000 older ones that are everywhere on the planet. So that's why I say it's kind of a Twofold way to look at the existing sales day to day versus replacing the legacy products that have been sold in the marketplace these last 30

Speaker 3

years. Got it. That's helpful. And then maybe just for Last one, if you can provide a little more of an update around the IV pump replacement cycle now that you have discontinued the warranty coverage on the 7 plus I know you've talked about there's been a there was an influx of, we'll call them, RFPs that came in and clearly that converted into some orders and some revenue recognition as well. How should we be thinking about that?

Speaker 3

Is there anything you can quantify that's out there to help us understand how significant the replacement of the old pump could be with this warranty discontinuation for the older pumps?

Speaker 1

Well, As I said earlier in the call, that growth, That's why I took the time to sort of break down by product by product, device by device what our growth has been. That old pump sales rose 35% in 2023, largely at the end of it, because as I maybe I fumbled the words a bit, Largely at the end of 2023 because we got results from this replacement announcement that we stimulated back in August or September is when we first decided to do it and made people aware of it. So yes, I think we got a nice surprise that not only were we getting quite a few 100 RFQs as you said and we quoted resulting in quotes to those customers, but some of those customers turned around and placed orders, which was more rapid than we thought they would, resulting in the pump business up pretty good in 2023. And so We're pretty happy that that trend is going to carry on for the next several months yet and breathe quite a bit of light still in the old pump. Thanks, Frank.

Speaker 1

Good to talk.

Operator

Thank you. One moment for our next question. And our next Question comes from Franchi Lorenzo of Singular Research.

Speaker 2

Good morning and thank you for taking my question and questions actually. The question about the general administrative increase for Q4, was that largely related to the consultants? Because that was a little bit of a bump there in the Q4. So if

Speaker 1

you could

Speaker 2

just talk about that.

Speaker 4

Yes, Frank. That was a lot attributed to Outside consulting and legal as we've talked about as we on the 510 Progress being made. And so that would be expected to be bumped up, I think, going into the especially early part of this year like in the Q1 and Q2 especially. So probably in kind of the spend in line with what was in Q4 from that perspective.

Speaker 2

Okay, thanks. And going back up toward the top line for Your gross margin is a goal of around 80%, is that still a realistic target longer term, say once you get the launch of the new product, assuming sometime in the second half of twenty twenty five, but say 2026 beyond, is an 80% gross doable On your side?

Speaker 4

Well, I would say that that's pretty optimistic. I mean, we certainly have a target and a goal to I would say that right now as we've said, it's probably obviously we've been north of 75% and in that range 76%, 77% kind of range. I think that maybe on and certainly as we get on some higher volumes, we could always again continue covered more of the fixed overhead, but I think 80% is possible, but probably not in the near future. That varies also just by geographic mix quarter to quarter, right, in product mix. But I would say that our ASPs have certainly A very strong and actually on the monitoring side, we were able to get some price increases up from an ASP standpoint and that certainly has helped us overcome some of the material costs that we've been seeing as everyone else has been over the last year.

Speaker 2

Okay. One other question, you said you had better than expected strength with the pump business. Looking into 2024, are you seeing any differences, similarities between 2023 regarding budgeting Landscapes for the various hospital systems out there, is it stable, is it strengthening? Could you provide maybe a little granularity on that?

Speaker 1

Yes. On the sell side, we aren't seeing any pullback from hospitals, if that's what you're Trying to get at, generally for ordering pumps or monitors or FMDs. But in fact, the pump is getting a boost on top of that From the obsolescence that we did, we in September back in August or September, we advised customers we wouldn't be selling extended maintenance on 7 plus 7 and older year pumps. And that's resulting in a lot of activity. It started last quarter and we think of those several quarters yet.

Speaker 1

And that money is, as I said, we were

Speaker 2

Okay, thanks. Just one other question for the firm Magnetic Detection Systems. Can you talk about long term what do you think the opportunity is, the total addressable market, U. S. Ex U.

Speaker 2

S. Thanks.

Speaker 1

Yes. Well, it's a small market still and it's getting littered with a lot of players we see. It has a very low barrier to entry, right? It's not a medical device. And so we see a lot of players that Small and not many type device makers doing these devices on the one hand.

Speaker 1

On the other hand, The size of this business is somewhere between $15,000,000 $17,000,000 $18,000,000 Sub $20,000,000 right now. So it's not a huge market. So but we're looking to take a sizable piece of this market. What we are learning is a big piece of the business is done through Design firms and architectural firms, contractors, these things are put in during the time that rooms and our rooms are being built. So that's a pipeline we're trying to fill.

Speaker 1

So obviously this takes a long way to get those things started before they start falling out the other end and resulting in business. But that's where we feel the best return is for our sales efforts, if you will, but they are rather slow to get that prime to pump, so to say.

Operator

Thank you. This concludes the question and answer session. I would now like to turn it back to Iratamed for closing remarks.

Speaker 1

Again, thank you. Again, it's with great pleasure that we report our year end and Q4 2023 results. It's also a great pride that we can guide, that we expect strong performance as the new year progresses. And with that, I look forward to reporting our future successes as the year progresses. And thank you all very much.

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Key Takeaways

  • IRADIMED delivered its 10th consecutive record quarter with Q4 revenue of $17.5 million (+17.4% YoY), GAAP EPS of $0.36, and non-GAAP EPS of $0.39 (+22% YoY).
  • The MRI patient vital signs monitor continued to gain market share with sizable orders and an expanded sales plan, contributing to a 17% increase in monitor device sales in 2023.
  • Sales of the legacy MRI IV pump rose nearly 35% in 2023, driven by an early and robust replacement program for older units, and management remains bullish on its growth in 2024.
  • Management plans to resubmit the 510(k) for the new 3,850 MRIV pump in May, targeting FDA clearance in Q1 2025 and revenue contribution in the back half of 2025.
  • For full-year 2024, IRADIMED guides revenues of $72.0–$74.0 million with GAAP EPS of $1.37–$1.47 and non-GAAP EPS of $1.52–$1.62, and Q1 revenue of $17.0–$17.3 million with GAAP EPS of $0.29–$0.31.
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Earnings Conference Call
Iradimed Q4 2023
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