Q2 2020 IRadimed Corp Earnings Call
[music].
Okay.
Welcome to I Radnet Corporation second quarter, 2000, interim Chief Financial results Conference call. Currently all participants are any with only mode and out the ended the call. We will conduct a question and answer session. As a reminder, this call is being recorded.
Today July Thirtyth 2020, and contains time sensitive information that is accurate only as of today.
Earlier I read the Med released financial results for the second quarter 2020, a copy of this press release announcing the Companys earnings is available under the heading news on their website at <unk> Radnet Dotcom a copy of the press release will also be furnished to the securities and Exchange Commission on form 8-K and can be.
I don't add S E C dot Gov.
This call is being broadcast live over the Internet on the company's website at <unk> Dot com and a replay of the call will be available on the web site for the next 90 days.
The agenda for today's call will be as follows Roger Susi, President and Chief Executive Officer of or Radnet will present opening comments, then Chris Scott a random as Chief Financial Officer will summarize the Companys financial results before opening the call up two questions.
Some of the information to be furnished in today's session will constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements are those focused on the future performance reversals plans and events may include the company's expected results for 2020.
At AMAG reminds you that future results may differ materially from the is from these forward looking statements due to a number of risk factors for a description of the relevant risks and uncertainties that may affect the company's business. Please see the risk factor section of the company's most recent reports filed with Securities and Exchange Commission, which.
Again may be obtained for free from the S. He sees website at SCC Dot Gov.
I would now like to turn the call over to Roger Susi, President and Chief Executive Officer of Iradimeds Corporation Mr. savvy.
Thank you and good morning and.
Let me say, but at the outset that I'm very happy and indeed energized now that I returned to the chief executive position.
This is not an interim solution, but one which I look forward to maintaining for some time comp.
Every step back for nearly a year provide the time to focus on engineering developments as well as time to see and ponder around him as operations from a rather fresh perspective.
The future to me is as rich with opportunity is there and I relish are helping us elite helping to lead us forward.
It's a it's good to be back.
So now for a review our second quarter.
Earlier today, we announced second quarter revenue of 6.8 million, representing a 26.3% decrease compared with the second quarter last year.
Also reported a loss of 17 cents per share on a GAAP basis.
With a non-GAAP net net income of five cents per diluted share. These results were significantly impacted not only by kobe's 19 and them, but also a onetime charge to gionee expense of approximately 2.7 million related to the separation of our former CEO.
The coal, but my team pandemic has certainly upset the orderly function governments economies markets families. Unlike generally.
Most certainly nearly all aspects of health care worldwide.
It should come as no surprise to anyone to learn that our customers straining under the various demands and limitations cobot 19 has created.
We salute those frontline caregivers dealing with the uncertainty in danger on a daily basis bus them all.
Of course, there are some locales harder hit the numbers as we see ice use in hot spot can be vastly overload well other areas experienced more manageable patient levels.
However, it is not an exaggeration to say that most ever U.S. facility in preparing for the worst has reduced their previous normal services clearing beds to assure availability before and expected crusher cobiz patients at the same time or customers overall greatly.
Expanded spending to stock up on P.P.B.E. medicines oxygen in various co business and assess necessary equipments, such as ventilators and so forth.
Further in the interest of safety, our customers have severely limited access to their facilities.
Face to face sales meetings are extremely hard to come by these days.
The combination of limited access and Colgate oriented spending by hospitals presents challenges for our Salesforce and thus our ability to provide financial guidance.
That said, we believe that by providing insight into what we're doing some sense of the future can be drawn that as we heard from health experts. The virus is setting the pace and certainly rather mad at not alone and experiencing this pressure.
In lieu of financial guidance I believe for a review of our business and what we plan will be helpful.
Consider that around them. It is yeah, one nish market and MRI compatible medical devices with two primary products. The more mature product is our unique worlds only nonmagnetic denmar Ivy pump system.
This device, we can identify two distinct types of customers first is that large greenfield of potential customers, who have yet to adopt our device. In for example, still rely on long lines or refuse patients needing Ivy therapy during an EMR scan.
These customers need a large amount of direct selling effort, which is very difficult without the ability just physically enter a hospital demonstrate the equipment engage clinicians and discover the decision makers.
Historically, these greenfield customers accounted for about half of our Ivy pump sales.
The second half of our Ivy pump business derives from existing customers, who are expanding their use of our equipment when the facility.
As you can imagine sales into the Greenfield have been hit the hardest while new orders from existing company customers, though also challenging to obtain have been affected much less.
Our second product the relatively new edmar patient vital signs monitor behaves more like the pump business from existing customers. This markets more mature and has a robust replacement order process still functionally rather well.
You'll hear more about how sales of these products have been trending as we review the Q2 financial results in a few minutes.
I've heard positive sign is that international business for both product lines has been fairly robust and we expect as the rest of the world continues to open this trend will continue.
So what can we do.
First off hospitals are completely shut to us have continued to perform product training both on site and virtually as a service our products are clinical application specialists team is getting into hospitals and that need our support and training and this is in some cases opening a door to increased needs with.
In these existing customers also we still have managed to perform a limited number of in person demos of our products and we have seen an encouraging uptick in our ability to engage hospital personnel using other means such as by phone or video comp.
Plans to encourage customers plans to engage customers I should say and draw and business have been formulated. These plans are being deployed modified deployed again on a very frequent basis, where honing our abilities in the area of virtual sales calls and Moreover, demonstrations produce.
During various tools to assist this effort.
The one its infant stage, we see promising signs as such new methods of engagement, a workable and indeed, yielding positive results.
We also formulating a sales message that method to take advantage of two recent developments first was FDIC. This issuance of a guidance document regarding changes in their quote enforcement policy for infusion pumps that specifically and with reduced regulatory burden. This advice.
<unk> pump manufacturers to provide remote monitoring and our control of infusion pumps.
Second event was to grab them, a new patent to Iradimeds for system and method for remote communication with an infusion device.
Many including US imaginary FDA has seen news photos of Cobiz crowded facilities with multiple Ivy pumps congesting, the hallways, Daryl Ivy lines extended dangerously from patient into hallway located pumps.
If you use guidance.
Nices this as a pump use hazard, thus the push to adopt remote controls with remote control capability of our Ivy pump the pump stays close to the patient or staff can hear and respond to alarms titrate doses and otherwise handle Ivy pump control issues at a safe distance from an isolated patient not only.
Creasing safety with saving on PPP and medicines and so forth.
Our RV pump being the only one with a remote control now with patient with patent protection provides the FDA suggested use safety for those I see you beds with highly contagious patients I hope to report on this use model more in the coming quarters.
Or planning there is response being responsive to Pandemics business complications is not all been entirely made up of exploring new sales methods in markets, where we also looked within it costs and the value.
We had for several weeks for example worked our production at 80 percentile.
Weve frozen hiring and reduced management's target bonuses expectations and accruals as well.
They also carefully reviewed our sales territories and found that a number of expansion territories may not be counted on for a timely development in light of the pandemics impacts and so we collapsed a.
Seven territories into the more established remaining 22.
This will allow us to focus sales plans on the more proven territories and reduce the cost of selling in territories in which meaningful revenue would likely be several quarters in the future.
Regarding regarding our product development efforts.
We have only experienced a relatively minor delay in our engineering efforts, mostly due to slowdowns that outside contractors, especially test houses that said, we have made great progress with the development of our next generation now MRI be pump.
The FDA filing will be submitted within the next several days and we are becoming more and more excited as this new devices come together. These past several months and we can see it performing.
Additionally, user interactions we study during a number of human factors test scenarios were very encouraging.
Also we've made good progress with the FMD device and still expect to have it at least a small number operational before years end.
The launch of a new device may be significantly slowed a pandemic still ways on our customers.
Now I'd like to turn the call over to Chris to summarize our financial results.
Thank you and good morning, everyone as always I'll be discussing our financial results on a GAAP basis as wells on a non-GAAP basis.
Our non-GAAP operating results exclude stock based compensation expense and other operating expenses that we believe or not indicative of our ongoing core performance.
And frequent tax items.
Our considered based on their nature and excluded from the provision for income taxes.
As these items are not indicative of our normal provision for income tax.
Free cash flow is cash flow from operations.
Less cash used for purchases of property and equipment.
We believe the presentation of these non-GAAP measures along with our GAAP financial statements can be helpful and providing a more thorough analysis of our ongoing financial performance.
You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release.
Capacity here. This morning second quarter revenue decreased 26.3% compared to the second quarter last year.
Revenue from domestic sales decreased 38.6% to $4.6 million during the current quarter.
This decrease was primarily driven by lower device revenue, which we believe is tied directly to the cobot impact that Roger spoke about a moment ago.
Revenue from international sales increased 29.3% to $2.2 million for the current quarter the increase in rough and international sales was driven by higher monitor revenue.
Revenue from sales of our devices decreased 41% to.
The $3.8 million for the second quarter 2020. This decrease was driven by a 58.8% decline in IB pump revenue that was partially offset by 1.9% increase in revenue from our monitoring systems.
The average selling price of RMR compatible Ivy infusion pump system.
During the 2020 quarter was approximately $30200 compared to approximately $35300 for the same period between 19.
This decrease in ASP as it relates to higher international sales of our infusion pumps.
Recognizing revenue when compared to the second quarter last year.
The average selling price of our MRI compatible patient vital signs monitoring system. During the second quarter 2020 was approximately $30600 compared to approximately $32200 for the same period in 2019.
This decrease in NSP also relates to higher international sales were monitoring system recognizing revenue.
When compared to the second quarter last year.
Revenue from sales of our disposables services and other increased 9.6% to two and a half million dollars for the current quarter from $2.3 million for the same quarter and 29 team.
Lastly revenue from the amortization of extended maintenance contracts was consistent at a half million dollars for both periods.
Gross margin was 72.6% for the point 20 quarter and 79.9% for the 2019 quarter.
The decrease in gross margin percentage as a result of higher international sales as a percent of total revenue and unfavorable overhead variances compared to the same quarter last year.
Operating expenses were $7.6 million or 115.7% of revenue compared to $5 million or 54.1% or revenue for the second quarter last year.
During the second quarter 2020, we recognized DNA expense of $2.8 million related to our former CEO.
Of which $2.7 million relates to the separation.
Additionally, we recognize higher salaries and benefits expense due to higher headcount.
These increases were partially offset.
By lower legal and professional fees and lower sales activity expenses.
We recognize the tax benefit of $800000 and the current quarter compared to tax expense of about $400000 into 2019 quarter.
Our effective tax rate for the 2020 quarter was 27.4% compared to 14.9% for the 2019 quarter.
Higher effective tax rate is due to a limitation due to a limitation on the deductibility of certain executive compensation associated with the separation of our former CEO.
Partially offset by discrete items related to stock compensation and a us state tax benefit.
Additionally, we recognize the benefit resulting from the carriers are.
That allowed us to carry back our net operating loss two years prior to the enactment of the tax cuts and jobs Act, which increases the benefit to the previously inherited federal tax rate of 35% versus the current federal tax rate of 21%.
Okay.
On a GAAP basis, we recognize that net loss of 17 cents per share for the second quarter 2020, compared to net income of 17 cents per share for the 2019 quarter.
On a non-GAAP basis net income was five cents per diluted share for the current quarter compared to 20 cents per share for the second quarter last year.
From a cash flow perspective, we generated $2 million of cash from operations for the six months ended June Thirtyth 2020, compared to 3.1 million for the same period in 2019.
For the six months ended June 2020.
Cash provided by operations was positively impacted by cash inflows from accounts receivable and deferred revenue.
And negatively impacted by inventory prepaid income taxes prepaid expenses accrued payroll.
Benefits and accounts payable.
For the three months ended June Thirtyth, 2020, and 29 team.
We're keeping our free cash flow a non-GAAP measure.
Was approximately $700000 and $2.4 million respectively.
And lastly, we exited the quarter with a combined cash and investments balance of $47.8 million.
And no third party debt or other restrictive covenants.
Now before going into questions I thought I would provide some financial context to Roger's comments on how cobot is impacting our business by reviewing recent trends in bookings.
For the first six months of 2020.
Total bookings were down approximately 14% compared to the first six months last year.
This decrease was led by a 44% decline and pump bookings, which shines a light on our past comments about roughly half of our pump business coming from the Greenfield.
And Rogers commentary regarding the difficulty we are experiencing accessing greenfield customers and the current code induced environment.
Despite this despite this decline we saw healthy growth in other areas of our business led by a 28% increase and monitor bookings and an 18% increase and bookings for our disposable products during the year to date time frames.
We view these as highly positive as the increase in monitor bookings is indicative of our ability to take share in this competitive market and higher disposable sales as an indication that our monitor and R&D pump are being utilized more frequently.
As of yesterday these product booking trends appear to be holding in the July over June sequential timeframe.
And with that I'll turn the call over for questions Brandy.
Thank you at this time, if you would like to ask your question. Please press Star then the number one on your telephone keypad.
Again that scars on the number one we will pause for just a moment to compile the Q any roster.
Your first question comes from the line up at Lisa Springer singular research.
Thank you good morning.
Morning, or do you expect this trend that the sales to be more heavily weighted towards international to hold for the second half of the here.
Yes.
Okay.
I think I think it's a reasonable expectation.
Just giving fee.
The diversity of the rest of the world and how the pandemic is impacting different parts of the world at different points in time, and how how different governments are responding differently.
Compared to just Isnt just inside the United States. So I think it's a reasonable expectation that we will continue to see international or strengthen the international channel.
Okay and.
During the second quarter the.
Device revenues were nearly 50 50 split up comes versus a monitor Oh, what are you seeing in the September quarter, you're seeing similar kind of flip.
Yes, I think that goes so the comment I just made about recent bookings trends and so far as of yesterday.
Those the booking trends that we're seeing in July are pretty consistent with the comments about the six month periods.
Okay.
And then one final question, you're very close to filing your fiber one k. for the next generation pump could you remind us what are the advantages of cell death versus the current model.
Yes be happy too so far the five 10-K as courses seek clearance for.
Device and as we've said in the past the.
One thing that we find lets say as a weakness is.
Is that our pumps are relatively few and number and being only associated with them MRI imaging within a given hospital versus the larger number of general purpose of pumps, which they often have the ratio is sometimes skewed more than 101.
So oh, we find people tend to.
[music].
As a hole in the hospital some some user shy away from using this more unfamiliar pump.
And so to make that problem diminished the primary.
The design objective of the new pump wish to make it let's just in a word say.
Easier to use more attractive.
Intuitive.
This this is the objective of this new pump.
And so what I mentioned earlier is that that especially when we when we have to do the human factors studies as part of turning in their submissions to the FDA Thats, we gather a good number of of.
Of clinicians together and they use the product in a lab setting not on patients, but in a controlled laboratory setting, but there we scrutinize deeply how they engage with the device and that as I said was.
Was exceedingly positive I think we're all very pumped it to see that this this this aspect which is key aspect of why we.
Set sail on making this new pump is coming true we're verifone.
[laughter].
Okay. Thank you very much.
And again to ask your question. Please press Star then the number one on your telephone keypad.
Again that is scars ending number one.
Okay. They are no question that this <unk> at this time you Mr. Roger CZ you May go ahead.
Thank you. Thank you and the thanks, Chris for the financial information.
Since as we have seen this pandemic exhibits wave like cycles, which likely will continue providing guidance is not possible. Unfortunately.
Unexpected positive as a negative twists and turns on their severity cannot be foretold. However, we are making and changing plans and methods to deal with the co bid 19 landscape and strive to show improving revenue and earnings in these next quarters.
We feel that since our products are not strongly tied to medical procedures, which can be postponed for example elective procedures.
And with recent findings that some kobin patients experience neurological issues the use of our devices in support of Amreit. It imaging will remain a useful clinical tool.
Plus with the safety offered via our remote control capability, we expect to be able to maneuver. The kobin induced crisis and see increasingly positive sales trends course look forward to seeing the positive effects of a sex successful vaccine around and return to life and business is normal without the scourge of this pandemic.
So thank you all for participating in the call today.
Thank you. This concludes the call you may now disconnect.
[music].
[music].
[music].
[music].
Welcome to our Radnet Corporation second quarter 2000, entropy financial result.
Conference call. Currently all participants are any of us only mode and at the end difficult. We will conduct a question and answer session. As a reminder, this call is being recorded today July Thirtyth 2020, and contains time sensitive information that is accurate only as of today.
Earlier, a radnet released financial results for the second quarter 2020, a copy of this press release announcing the Companys earnings it's available under the heading news on their website at <unk> Dot com.
The press release will also be furnished to the securities and Exchange Commission on form 8-K, and can be failed at S. E C Dot Gov.
This call is being broadcast live over the Internet on the company's website at <unk> Dot com and it replay of the goal will be available on the web site for the next 90 days.
The agenda for today's call will be as follows Roger Susi, President and Chief Executive Officer of or Radnet will present opening comments, then Chris Scott a randomized <unk> Chief Financial Officer will summarize the Companys financial results before opening the call up two questions.
Some of the information to be furnished in today's session will constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements are those focused on the future performance reversals plans and events may include the Companys expected results for 2020.
Oh Radnet reminds you that future results may differ materially from them.
From these forward looking statements due to a number of risk factors for a description of the relevant risks and uncertainties that may affect the company's business. Please see the risk factor section of the company's most recent reports filed with Securities and Exchange Commission, which again may be obtained for free from the S. He sees website at <unk>.
Cc Dot Gov.
I would now like to turn the call over to Roger Susi, President and Chief Executive Officer, Urata Med Corporation Mr. City.
Thank you and good morning.
Let me say, but at the outset that I'm very happy and indeed, energize now that I have returned to the chief executive decision.
This is not an interim solution, but one which I look forward to maintaining for some time to go.
Every step back for nearly a year provided time to focus on engineering developments as well as time to see an honor iradimeds operations from a rather fresh perspective.
The future to me is as rich with opportunity is that and I relish are helping us a lead helping to lead us for.
It's a it's good to be back.
So now for a review our second quarter.
Earlier today, we announced second quarter revenue of 6.8 million, representing a 26.3% decrease compared with second quarter last year.
Also reported a loss of 17 cents per share on a GAAP basis.
With a non-GAAP net net income of five cents per diluted share. These results were significantly impacted not only by cope with my team and them, but also a one time charge to GNS expensed, approximately 2.7 million related to the separation of our former CEO.
The cold, but like gene pandemic has certainly upset the orderly function governments economies markets families. Unlike generally.
Most certainly nearly all aspects of health care worldwide.
It should come as no surprise to anyone to learn that our customers straining under the various demands and limitations cobot 19 has created.
We should those frontline caregivers dealing with the uncertainty in danger on a daily basis plus the mall.
Of course, there are some locales harder hit the numbers as we see ice use in hot spots can be vastly overload well other areas experience more manageable levels.
However, it is not an exaggeration to say that most every U.S. facility and prepare for the worst has reduced their previous normal surfaces clearing bedsit to assure availability for it and expected crusher cobot patients at the same time or customers overall greatly.
Expanded spending to stock up on P. P E medicines oxygen and various co business and assess necessary equipments, such as ventilators and show.
Further in the interest of safety, our customers have severely limited access to their facilities.
Face to face sales meetings are extremely hard to come by these days.
The combination of limited access and Colgate oriented spending by hospitals presents challenges for our Salesforce and that's our ability to provide financial guidance.
That said, we believe that by providing insight into what we're doing some sense of the future can be wrong, but as we are from health experts. The virus is setting the pace and certainly rather Matt is not alone and experience she was pressure.
In lieu of financial guidance I believe for a review of our business and what we plan will be helpful.
So does that around him at is you know one nish market MRI compatible medical devices with two primary products. The more mature product is our unique worlds only nonmagnetic denmar Ivy pump system.
This device, we can identify two distinct types of customers first is that large greenfield of potential customers that have yet to adopt our device. In for example, still rely on wall lines or refuse patients needing Ivy therapy during an EMR scan.
These customers need a large amount of direct selling effort, which is very difficult without the ability to physically after a hospital demonstrate the equipment engage clinicians and discover the decision makers.
Historically, because greenfield customers accounted for about half of our Ivy pump sales.
The second half of our Ivy pump business derives from existing customers, who are expanding their use of our equipment when the facility.
As you can imagine sales into the Greenfield have been hit the hardest well new orders from existing company customers. So also challenging to obtain have been affected much less.
Our second product relatively new edmar patient vital signs monitor behaves more like the pump business from existing customers. This markets more mature and has a robust replacement order process still functionally rather well.
You'll hear more about how sales of these products have been trending as we review the Q2 financial results in a few minutes.
I've heard positive sign is that international business for both product lines has been fairly robust and we expect as the rest of the world continues to open this trend will continue so.
So what can we do.
First off hospitals are completely shut to us have continued to perform product training, both onsite and virtually as a service our products our clinical application specialists team is getting into hospitals and that need our support in training and this is in some cases opening a door to increased needs within.
These existing customers also we still have managed to perform a limited number of in person down most of our products and we have seen encouraging up tick in our ability to engage hospital personnel using other means such as by phone or video pop.
Plans to encourage customers plans to engage customers I should say and draw and business have been formulated. These plans are being deployed modified deployed again on a very frequent basis, where honing our abilities in the area of virtual sales calls and Moreover, demonstrations producers.
In various tools to assist this effort.
I wanted to infant stage, we see promising signs as such new methods of engagement, a workable and indeed, yielding positive results.
We also formulating sales message that method to take advantage of two recent developments first was FDIC. This issuance of a guidance document regarding changes in their quote enforcement policy for infusion pumps that specifically and with reduced regulatory burden is advisor.
Pump manufacturers to provide remote monitoring and our control infusion pumps. So.
Second event, what's the ground up a new patent to Adam at four system and method for remote communication with an infusion device.
Many including US imaginary FDA has seen news photos of Kobin crowded facilities with multiple Ivy pumps congesting, the hallways narrow ivy lines extended dangerously from patient into hallway located comps.
FDA guidance.
Nicest this as a pump use hatcher, thus the push to adopt remote controls with remote control capability of our Ivy pump the pump stays close to the patient or staff can hear and respond to alarms tightrail doses and otherwise handle Ivy pump control issues at a safe distance from an isolated patient not only.
Are you seeing safety with saving up PPP and medicines itself.
Our people being the only one with a remote control now with patient patent protection provides the FDIC suggested use safety for those I see you beds with highly contagious page I hope to report on this use model more in coming quarters.
Our planning there is response being responsive to Pandemics business complications just not all been entirely made up of exploring new sales methods in markets, where they've also lumped with and costs and the value.
We had for several weeks for example worked our production at 80% we.
Frozen hiring and reduce management's target bonus expectations at accruals as well.
They also carefully reviewed our sales territories and found that a number of expansion territories may not be counted on for a timely development in light of the pandemics impacts and so we collapsed.
Seven territories into the more established remaining 22.
This will allow us to focus sales plans on the more proven territories and reduce the cost of selling territories in which meaningful revenue would likely be several quarters in the future.
Regarding our product development efforts.
We have only experienced a relatively minor delay in our engineering efforts, mostly due to slow down that outside contractors, especially testosterone that said, we have made great progress with the development of our next generation now MRI beep up [laughter] FDA filing will be submitted within the next several days and we are becoming more and more excited.
This new devices come together these past several much and we can see it forming.
Additionally, user interactions we studied during a number of human factors test scenarios were very encouraging.
Also we made good progress with the FMD device and it still expect to have it at least a small number operational before years end.
The launch of a new device may be significantly slowed the pandemic still ways on our customers.
Now I'd like to turn the call over to Chris to summarize our financial results.
Thank you and good morning, everyone as always I'll be discussing our financial results on a GAAP basis as well as our non-GAAP basis.
Our non-GAAP operating results exclude stock based compensation expense and other operating expenses that we believe or not indicative of our ongoing core performance.
Infrequent tax items.
Our considered based on their nature and excluded from the provision for income taxes.
As these items are not indicative of our normal provision for income tax.
Free cash flow is cash flow from operations.
Less cash used for purchases of property and equipment.
We believe the presentation of these non-GAAP measures along with our GAAP financial statements can be helpful and providing a more thorough analysis of our ongoing financial performance.
You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release.
As stated this morning second quarter revenue decreased 26.3% compared to the second quarter last year.
Revenue from domestic sales decreased 38.6% to $4.6 million during the current quarter.
This decrease was primarily driven by lower device revenue, which we believe is tied directly to the cobot impact that Roger spoke about a moment ago.
Revenue from international sales increased 29.3% to $2.2 million for the current quarter the increase in rough and international sales was driven by higher monitor revenue.
Revenue from sales of our devices decreased 41% to.
The $3.8 million for the second quarter 2020. This decrease was driven by a 58.8% decline in IB pump revenue that was partially offset by 1.9% increase in revenue from our monitoring systems.
The average selling price the market MRI compatible Ivy infusion pump system.
During the 2020 quarter was approximately $30200 compared to approximately $35300 for the same period between 19.
This decrease in ASP as it relates to higher international sales of our infusion pumps.
Recognizing revenue when compared to the second quarter last year.
The average selling price of our MRI compatible patient vital signs monitoring system. During the second quarter 2020 was approximately $30600 compared to approximately $32200 for the same period in 2019.
This decrease in NSP also relates to higher international sales were monitoring system recognizing revenue.
When compared to the second quarter last year.
Revenue from sales of our disposables services and other increased 9.6% to two and a half million dollars for the current quarter from $2.3 million for the same quarter and 2019.
Lastly revenue from the amortization of extended maintenance contracts was consistent at a half million dollars for both periods.
Gross margin was 72.6% for the 2020 quarter and 79.9% for the 2019 quarter.
The decrease in gross margin percent as the result of higher international sales as a percent of total revenue.
Favorable overhead variances compare to the same quarter last year.
Operating expenses were $7.6 million or 115.7% of revenue compared to $5 million or 54.1% of revenue for the second quarter last year.
During the second quarter 2020, we recognized DNA expense of $2.8 million related to our former CEO.
Of which $2.7 million relates to the separation.
Additionally, we recognize higher salaries and benefits expense due to higher headcount.
These increases were partially offset.
By lower legal and professional fees and lower sales activity expenses.
We recognized a tax benefit.
$800000 in the current quarter compared to tax expense of about $400000 into 2019 quarter.
Our effective tax rate for the 2020 quarter was 27.4% compared to 14.9% for the 2019 quarter.
Hi reflect attach rate due to a limitation, but due to a limitation on the deductibility of certain executive compensation associated with the separation of our former CEO.
Partially offset by discrete items related to stock compensation and the U.S. state tax benefit.
Additionally, we recognize the benefit resulting from a cares arc.
That allowed us to carry back our net operating loss two years prior to the enactment of the tax cuts and jobs Act, which increases the benefit to the previously inherited federal tax rate of 35% versus the current federal tax rate of 21%.
Yes.
On a GAAP basis, we recognized but not loss of 17 cents per share for the second quarter 2020, compared to net income of 17 cents per share for the 2019 quarter.
On a non-GAAP basis net income was five cents per diluted share for the current quarter compared to 20 cents per share for the second quarter last year.
From a cash flow perspective, we generated $2 million of cash from operations for the six months ended June Thirtyth 2020, compared to 3.1 million for the same period in 2018.
For the six months ended June 2020.
Cash provided by operations was positively impacted by cash inflows from accounts receivable and deferred revenue.
And negatively impacted by inventory prepaid income taxes prepaid expenses accrued payroll.
Benefits and accounts payable.
For the three months ended June Thirtyth, 2020, and 29 team.
Our keep our free cash flow a non-GAAP measure.
Was approximately $700000 and $2.4 million respectively.
Lastly, we exited the quarter with a combined cash and investments balance of $47.8 million.
And no third party debt or other restrictive covenants.
Now before going into questions I thought I would provide some financial context to Roger's comments on how cobot is impacting our business by reviewing recent trends in bookings.
For the first six months of 2020.
Total bookings were down approximately 14% compared to the first six months last year.
This decrease was led by a 44% decline and pump bookings, which shines a light on our past comments about roughly half of our pump business coming from the Greenfield.
And Rogers commentary regarding with difficulty we are experiencing accessing greenfield customers and the current code inducing bar.
Despite this despite this decline we saw healthy growth in other areas of our business led by a 28% increase and monitor bookings at 18% increase and bookings for our disposable products during that year to date time frames.
We view these as highly positive as the increase in monitor bookings is indicative of our ability to take share in this competitive market and higher disposable sales as an indication that our monitor and IP pump are being utilized more frequently.
As of yesterday these product booking trends appear to be holding in the July over June sequential timeframe.
And with that I'll turn the call over for questions Brandy.
Thank you at this time, if you would like to ask your question. Please press Star then the number one on your telephone keypad.
Again that is stronger than the number one we will pause for just a moment to compile the Q any roster.
Your first question comes from the line up at Lisa Springer Miller.
Research.
Thank you good morning.
Morning, do you expect this trend is that the sales to be more heavily weighted towards international to hold for the second half of the year.
Yeah.
I think I think it's a reasonable expectation.
Giving b.
The diversity of the rest of the world and how the pandemic is impacting different parts of the world at different points in time, and how how different governments are responding differently.
Compared to just Isnt just inside the United States I I think it's a reasonable expectation that we will continue to see international or strengthen the international channel.
Okay and.
During the second quarter the.
Device revenues were nearly 50 50 split up pumps versus a monitors Oh, what do you have seen in the September quarter, you're seeing similar kind of flip.
Yes, I think that goes to the comment I just made about recent bookings trends and so far as of yesterday.
Those.
The booking trends that we're seeing in July are pretty consistent with the comments about the six month periods.
Okay and.
And then one final question, you're very close to filing your fiber one k. for the next generation pump could you remind us what are the advantages of cell death versus the current model.
Yes, I'd be happy to sell it for the five 10-K as course seek clearance correct.
Device and as we've said in past the.
One thing that we find lets say as a weakness is.
Is that our pumps are relatively few and number at being only associated with them MRI imaging within a given hospital versus a larger number of general purpose of pumps, which they often have the ratio is sometimes skewed more than 100 watts.
So oh, we find people tend to.
As I as a hole in the hospital some some user shy away from using this more unfamiliar pump.
And so to make that problem diminished.
Primary design objective of the new published it make it let's just in a word say.
Easier to use more attractive intuitive.
This this is the objective of the pump.
And so what I mentioned earlier is that especially when we when we have to do the human factors studies as part of turning in their submissions to the yes, thats we gather.
A good number of of.
Of clinicians together and they use the product in a lab setting not on patients, but in a controlled laboratory setting, but there we scrutinized deeply how they engage with the device and that as I said was.
Was exceedingly positive I think we're all very pumped it does seem that this this this aspect which is key aspect of why we.
Set sail I'm, making this new pump.
Is coming true, we're very well.
[laughter].
Okay. Thank you very much.
And again you ask your question. Please press Star then the number one on your telephone keypad.
Again that is stores ending number one.
Okay. They are no question that this <unk>.
This time you Mr. Roger Susi you May go ahead.
Thank you. Thank you and the thanks, Chris for the financial information.
Since as we have seen this pandemic exhibits wave like cycles, which likely will continue providing guidance is not possible. Unfortunately.
Unexpected positive and negative twists and turns on their severity cannot be foretold. However, we are making and changing plans and methods to deal with the cobot 19 landscape and strive to show improving revenue and earnings in these next quarters.
We feel that since our products are not strongly tied to medical procedures, which can be postponed for example elective procedures.
And with recent findings that some cobot patients experience neurological issues the use of our devices in support of MRF. It imaging will remain a useful clinical tool.
Plus with the safety offered via our remote control capability, we expect to be able to maneuver the cobot induced crisis and see increasingly positive sales trends course look forward to seeing the positive effects of a set successful vaccine and weve turned the life and business is normal without the scourge of this pandemic.
So thank you all for participating in the call today.
Thank you. This concludes the call you may now disconnect.