Q3 2020 IRadimed Corp Earnings Call
And so well be we'll conduct a question and answer session.
Net Corporation third quarter 2020 financial results Conference call.
Daddy.
I agree all participants are in listen only mode.
That is accurate.
Uh huh.
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We will conduct a question and answer session.
Really.
As a reminder of the school is being recorded today.
Yeah.
Okay, Silver 32, South Cincinnati.
Release announcing the Companys earnings.
Formation.
So under the heading.
He asked off today.
Our website.
Our New York Iradimeds relief.
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Actual results for <unk> third quarter 2020.
Also furnished.
Both of these.
[laughter] piece.
<unk> release announcing the Companys earnings.
Yes.
Available under the heading news.
After that.
Upside website.
All is being broadcast live over the Internet.
The press release was also furnished.
Security piece and.
You play the whole they'll be available under website.
I put it.
Okay.
[music].
And can be fined attack that golf.
The agenda for today.
Is being broadcast live over the Internet.
Oh sure.
[noise] website.
The student and Chief Executive Officer of Iradimeds.
The hall will be available under that upside for the next.
They married bad math life.
Try Anda for today's call will be as follows.
A fan environments.
So see.
Some trend.
And Chief Executive Officer of Iradimeds.
And I know he.
They will present opening comments.
That's it.
Then Mary Beth.
Sure Officer.
That's right.
To summarize the Companys.
[music].
The financial results.
Cost of the current environment.
Okay.
Decent trends in customer orders.
Tend to be furnished entities.
I see.
Refreshing.
This is Scott.
Okay.
Forward looking statements.
[music].
Actual officer.
The private.
I'm right the Companys financial results.
1995.
It up to questions.
<unk> looking statements.
Some of the information to be furnished.
So performance.
Sure.
We sold.
They'll constitute forward looking statements.
Did the companies.
The private Securities Litigation Reform Act of 1995.
Theatrical.
Forward looking statements.
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So it was a focus.
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Well Barton bookings.
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And may include the company's Ics.
He's a description of certain inventory and certain piece that may affect the companys business.
If the future results may differ materially.
And if the Companys most.
All right looking statements.
We spelled.
A number of.
Yes.
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Each commission.
A description of their inventories and uncertainties that may affect the companys business.
Hi.
Yes.
What's that.
The risk factor.
I would now like.
So when he's most.
Over to Roger Susi.
Oh, Yeah, the Securities and Exchange Commission.
Iradimeds Corporation.
Maybe obtained for free from the Sac.
Good morning.
Site at SAP.
Hi, Bob.
The Kogan pandemic.
I would now like to turn the whole over to Roger Susi.
Our teams are fully focused on maintaining consistency in servicing and selling to our customers.
Mr. Susie.
Well caution ups and downs created by.
Good morning.
Have obscured our vision.
Oh, good pandemic continues to challenge traditional norms.
Revenue.
Our teams are fully focused on maintaining consistency in servicing and selling to our customers.
Decrease from our third quarter last year.
Created by the pandemic, having secured our business visibility I'm very pleased to report third quarter revenue.
We also reported earnings of nine cents per share on a GAAP basis.
There are 23% decrease from our third quarter last year, we feel that our efforts. During this difficult time are paying off.
It showed that sequentially.
Core 2020.
No it was 13% higher than in Q2.
On a GAAP basis.
Airbrushed Smith will speak about the overall sales environment in a moment.
Given the environment.
He view this sick.
But it is also important to note that sequentially.
[laughter] growth.
Free revenue was 13% higher than in Q2.
As ive already alluded to uncertainty around the coal bid a issues continue to swirling impact this daily.
We view this sick.
Right and positive.
Crease positively.
The U.S.
In the fourth quarter as well.
These actions from reinstating travel restrictions to the partial.
[noise] around a coded issues continued swirling impact this day.
World are preparing for yet another way.
Around the world, including in the U.S. has caused governments to take a number of actions.
Excuse me.
Dating travel restrictions to the partial closing.
[music].
Businesses.
As a result hospitals in many parts.
Last quarter.
We are preparing for yet another way.
Yeah.
We see being discussed in the daily news cycles.
Certainly.
Which continues to make.
The challenging environment.
'cause of future performance and cost.
Next to engage our customers.
To reiterate a point.
So our products.
For the virus continue setting pace.
Currently and will further pay off in the form of accelerated growth.
Revenue growth.
Challenging environment.
He posts.
We continue to find innovative ways to engage our customers.
Dave.
And drive the benefits of our products.
Ladies.
We believe these efforts are helping us currently and will further pay off in the form of accelerated growth.
Generation MRI.
Once we are in a post.
Scope in setting certainly.
[noise] was accomplished just days after that earnings call.
Tori activities.
Okay.
Last quarter, we reported that we would soon be filing a five 10-K application for our next generation MRI.
Hi.
Be pump with the FDA.
Impeding its release.
Office just days after that earnings call.
[noise].
Starting our development.
Hi, Thanks to take yet another 12 or 14 months. However.
The device.
Well site.
Currently in the final stages of development.
Their issues.
Well they should plans.
Please.
On change says we will.
Sports production.
The timber operational units available before the end of the year.
<unk> products, we continue to make progress on our.
<unk> sales of this.
[noise] Bice.
First we expect maybe.
The final stages of development.
Due to the current environment.
Asian plans remain unchanged as we will expect to have a small number.
Around what we are seeing in the field.
Before the end of the year.
As in customer orders.
The launch an actual sales of this device weeks.
Good morning to everyone.
Recently slowed.
And I do just that our ability to sell during the third quarter was negatively impact.
To provide more color around what we are seeing in the field.
Okay.
And recent trends in customer orders.
Oh and as the quarter progressed.
Thank you Roger and good morning to everyone.
The allergy.
And Roger just said our ability to sell during the third quarter was negatively impacted by co that.
The critical care areas Uh huh.
Yeah.
We remain in that.
Access to hospitals.
To offset these limitations on access.
Able to gain access to radiology.
As of engaging.
First.
Okay.
Through virtual meetings and demand.
Hey basis.
Got.
However, access to the critical care areas of the huh.
Billy disease.
I mean in accessible.
[laughter] manner.
To offset these limitations on access.
We're also learning.
Good with our strategy of engaging customers.
Our success with this strategy can be.
Restriction of our product.
These borders when comparing to cope with it.
Fights and our ability to sell in this manner.
Yeah.
[noise] manner.
Theres group.
Customers.
<unk> percent.
We are also learning.
Yes.
Detour in new ways.
Additionally.
With this strategy can be seen in the customer orders.
Okay.
When comparing to cope with it.
<unk>.
Active quarters Q3 2020.
Firemen.
<unk> customer orders grew 27%.
<unk> customer orders.
When compared to a pre cobot period.
Additionally.
<unk> strong showing.
I read 2020 orders.
To provide a little bit more.
Over Q3 last year.
The m. or IB.
If I remember.
I'm sorry.
I believe a six.
Yeah.
6% decline in customer orders when compared to a pre covered period.
It is a very strong showing.
20, Ivy pumps grew.
Ill provide a little bit more granularity orders for the M or Ivy pumps.
Personally.
First quarter 2020.
Thanks for M.R.
Pretty soon.
Our monitoring during Q3 2020 grew 26%.
320, 20, Ivy pumps grew.
Yes.
22%.
Monitors.
Second.
B, 2%.
Oh Dear.
Over Q2.
Recently.
This year.
Hi customer orders for EMR.
Orders for Ivy said.
During Q3 2020.
Three.
He is 6%.
He orders growing 23%.
Last year.
Were last year.
So.
12%.
<unk> grew 42% over Q2.
When she will increase its positively and indication.
He said.
Uh huh.
Printing positively with Q3.
Huh.
By 2020 orders growing 23%.
When new selling.
Last year and 12%.
If we look into Q4, we expect some of the level of growth.
Bill increases positively.
Ill reiterate.
In addition that there.
<unk>.
Is that a sign process is under way.
That said our pace.
And our customers are adjusting to a new selling process.
[laughter].
As we look into Q4 weeks.
It is around the globe.
Ex growth over Q.
Vision.
Yeah.
Various authorities through [laughter].
Earlier comments.
<unk>.
Okay.
On business.
Continues to set our pace of business.
Okay and proactive in adapting to these.
Lastly.
Yes.
With increased income the cases around the globe.
Financial result.
Visions by various authorities to [laughter].
Hi, everyone.
And then travel on business.
On past calls.
It will.
Especially on our financial results.
So proactive in adapting to these continuing change.
Our non-GAAP operating results.
Over to Chris to summarize the financial results.
And other operating expenses that we believe are not indicative of our ongoing poor operating.
<unk> performance.
[music].
Discussing our financial results.
When tax items are considered based on their nature.
<unk>.
Excluded.
GAAP operating results.
Actually.
Stock based compensation expense.
Indicative of our normal provision for income taxes.
Steve are not indicative of our ongoing core operating performance.
Cash used for purchases of property.
Items are considered based on their nature.
The presentation of these non-GAAP measures.
From taxes.
With our GAAP financial statements.
Not indicative of our normal provision for income taxes.
Of our ongoing financial.
Cash flow from operations.
You can find a reconciliation.
This is a property and equipment.
To the nearest GAAP measure.
We believe the presentation of these non-GAAP measures along with our GAAP financial statements.
Your report this morning.
And providing a more thorough analysis.
<unk> decreased.
Ongoing financial performance.
Compared to the third quarter last year.
So the Asian of these non-GAAP measures to the nearest GAAP measure.
Priest.
The last page of today's press release.
The $6.5 million during the current quarter.
Reported this morning.
Revenue from international sales.
Hey revenue.
26.
Priest.
60%.
2.7%.
2 million.
The third quarter last year.
The decrease in global sales.
Sales decreased.
Right.
The 1.9%.
Right.
The $6.5 million during the current quarter.
Disposables and service.
From international sales decreased to 26.6%.
Screen.
The 1.2 million.
Hi, Ken.
Core.
<unk> point $4 million for the third quarter 2020.
Net loss was primarily driven by.
4.8% decline.
Partially offset by higher sales of disposables and service.
The decline in revenue from our monitoring.
And your decreased 39.4% to $4.4 million for the third quarter 2020.
Central comparison.
This was driven by a 54.8% decline.
Oh, good impacted time periods.
And a 10.7% decline.
Current trends.
Monitoring systems.
[music].
Yes.
A purpose Q3 revenue.
About noted earlier.
10.3%.
As of Q3 to Q2.
Driven by a 16.7% increase.
Yes.
Our and sales of our devices.
About current trends.
As a 5% increase in our disposables and service.
The purpose Q3 revenue.
The increase in revenue from devices.
Uh huh.
Pumps grew 14.9% over Q2.
7% increase.
18.4% over Q2.
And a 10.5% increase.
For Q3, 2020 to Q3 2019 comparisons.
Recent revenue from devices.
Price of our MRI compatible IB infusion pump system during the third quarter 2020.
Green, 0.4% over Q2.
In $1800.
Going back to our Q3 2020 to Q3 2019 comparisons.
The same period in 2019.
Price of our MRI compatible IB infusion pump system.
Our revenue.
Quarter 2020.
And drug library components.
And $1800.
When compared to the third quarter last year.
$5100.
These components on asked.
In 2019.
Aspen due to a smaller number of Ivy pump units sold during the current quarter.
Revenue from the education and drug library components.
Okay Sps.
Systems.
Reflective of historical ranges.
Quarter last year.
The average selling price of RMR compatible patient vital signs.
Signs monitoring system.
Number of IB pump units sold during the current quarter.
$43000.
Were looking forward to Q4, we expect Asps.
$100 for the same period.
[noise] ranges.
[music].
The <unk> this increase in ASP relates to a favorable product mix.
Monitoring system.
During the third quarter 2020 was approximately $43000.
When compared to the third quarter last.
$3700 for the same period.
Sales of disposables service and other.
This increase in ASP relates to a favorable product mix.
<unk> billion dollars for the current quarter.
Domestic sales.
The $2.2 million for the same quarter in 2019.
So the third quarter last year.
And lastly revenue from the amortization of extended maintenance contracts.
Total service and other increased 29.6% to $2.8 million for the current quarter.
<unk> percent for the 2020 quarter.
$2000 for the same quarter in 2019.
Hi, my team quarter.
And lastly revenue from the amortization of extended maintenance contracts.
Variances.
And at a half million dollars for both periods.
Gross margin was 74.6% for the 2020 quarter.
His 0.4% of revenue.
<unk> percent for the 2019 quarter.
<unk> dollars or 53% of revenue.
The result of unfavorable overhead variances.
On a dollar basis.
In the same quarter last year.
Speech, primarily relates to lower sales expenses.
<unk> expenses were $5 million.
So.
4.4% of revenue.
Mostly offset by higher sales Commission.
Dollars or 53% of revenue for the third quarter last year.
We recognized a tax benefit of approximately $300000 in the current quarter.
Fences.
Our tax expense.
Small fees and regulatory regulatory costs.
19 quarter.
Slightly offset by higher sales Commission.
Our tax rate for the 2020 quarter was negative 35.3%.
As a tax benefit.
6%.
$300000 in the current quarter compared to tax expense.
Corrective tax rate.
For $1000 and the 2019 quarry.
Favorable discrete items.
The effective tax rate for the 2020 quarter was negative.
Generally.
5.3%.
Yeah.
Compared to 6.6%.
That allowed us to carry back our net operating loss.
Our effective tax rate.
Hi team.
But we do.
In 2020 today.
Well discreet items.
Hey, there's prior to the enactment of the tax cuts and jobs Act.
We recognized a benefit.
The benefit.
Cares Act.
Finally enacted.
That allowed us to carry back our net operating loss created during.
Good for all tax rate of 21%.
2020 to date.
Two years prior to the enactment.
Morning.
Thats cuts and jobs Act.
Nine cents per share.
The benefit.
Since.
Previously enacted federal.
This quarter.
<unk> tax rate.
Non-GAAP basis.
8%.
Net income was 11 cents.
Total tax rate of 21%.
Inspur.
Compared to 23 cents for the third quarter last year.
Good morning, we recognized net income of nine cents per share.
But.
So the 20 cents per share.
Point $3 million of cash from operations.
[noise] basis.
It's months ended September Thirtyth.
[music].
You have to be 20.
Chair for the current quarter.
<unk> dollars for the same period in 2019.
Our third quarter last year.
And for the nine months ended September 32020.
Hello perspective.
Great ones.
We generated $3.3 million of cash from operations for the nine months ended September Thirtyth 2020.
Once we impacted by prepaid income taxes.
One thing period in 2019.
The state expenses accrued payroll and benefits.
And then September 32020 cash provided by operations was.
Three months ended September 32020, and 2019.
Was pull in deferred revenue.
Our cash flow our free cash flow.
Compacted by prepaid income taxes.
3 million and $3.1 million respectively.
Through payroll and benefits and accounts payable.
[noise].
Excuse.
For the three months ended September 32020, and 2019.
Cash and investments.
Cash flow our free cash flow.
Once $1.9 million.
Point $3 million and $3.1 million respectively.
Restrictive covenants.
Please.
Now I will turn the call over for questions.
Excuse.
Okay.
Right.
Lastly, we exited the quarter with a combined.
Hi, My day to ask a question you'll need.
In $2.9 million.
No telephone.
Third party debt or other restrictive.
Fast upon key.
Now I will turn the call over for questions.
Can be Ross.
[music].
As a reminder to ask a question you'll need to the press star one on your telephone.
Oh your line is.
A question these fast upon key.
Good morning.
You can follow the candy roster.
Given the situation.
A couple of questions.
Afraid.
Right I know you.
Comes from Scott Henry of Roth Capital Your line is open.
Why the monitors.
Good morning.
Better.
Quarter.
Then the pumps.
Situation.
Sing environment.
Couple of questions and Roger I know Youve.
About this in the past.
Okay.
Okay.
Yes.
Perhaps reiterate.
B, maybe Mary Bethel.
Monitors.
I'll have some comments in that regard as well but.
Pumps.
It's fairly simple right.
The the monitors.
And.
Our.
I see.
That's a device where we're not the pioneers.
Maybe Mary Bethel.
There's a lot of that business.
In that regard as well but.
Now for some 30 years.
Right.
Since the introduction of MRM monitoring.
Peers.
In the late Eightys so.
Yes, that's that's a device where we're not the pioneers.
And the customers out there are fairly.
Businesses.
Okay.
Ongoing now for some 30 years.
Okay.
Since the introduction of MRI monitoring.
Essentially riding that wave.
This is a product that's in a pipeline and the customers out there are fairly.
Acted as.
So the replacement cycle every five six years yourself.
Yes.
So and we're essentially riding that wave.
Separated into two sort of sections right.
As business wasn't.
Hi, good bid of our pump business, that's repeat orders where customers were already sold by more.
Pump business.
But then another big chunk of it.
Also though separated into two sort of sections right.
Yeah.
We have.
[music].
Have a good bit of our pump business, that's repeat orders where customers were already sold by more.
As as years go by that Greenfield.
A chunk up and classically.
Spirited, maybe let's call it I see you.
About 50 50.
So.
As Mary Beth said.
Julie Greenfield right those people that have never.
In the hospital.
And as.
Yeah.
As years go by that Greenfield.
To use on a hot.
Even more targeted maybe less call ice use.
And.
[noise].
And essentially.
As Mary Beth said.
We just really.
These IC use.
We can't cultivate.
That will.
Yes that business that's.
Rona.
Totally.
USADA hotspot, where.
We have the pumps that we did sell.
Okay.
Im from.
And essentially.
This quarter even in Q2.
Right.
Primarily from.
[music].
Cultivate.
And I just need a few more.
Okay. That's.
Till end result.
Lastly, Burke.
A big chunk of the pump business is off limits.
Im from.
Finally locked out of.
Last quarter, even in Q2.
Business.
Primarily from.
Scott.
Leslie.
Customers need a few more comps.
TCC there are people they plan to buy.
Because our Pos business is off limits.
The only bins.
Spring locked out of.
Less damage.
The monitor business.
Because.
Yes.
Pretty much anything they're doing.
It's on autopilot, the only stretchy see you there our people.
Last month.
They plan to buy them.
So to answer your question.
And.
That was great Roger very clear.
Damaged.
And then.
Hi, because.
Right.
Pretty much anything they're doing it.
Uh huh.
They should spend that money now or wait another month.
Do we think about this is kind of a low point and perhaps starting to grow going forward or how should we think about Q3 reflective of.
For Chris.
Yes.
Op ex in the quarter.
In Q3 is a is a.
Think about this is kind of a low point.
Okay.
And perhaps starting to grow going forward or how should we think about Q3 reflective of coming quarters on opex.
Heatley next quarter and probably the early half.
I think Q3 is a is a.
I think this.
This level of this.
Yes.
$5 million levels.
Pretty good data point, when we think about going forward of course, there will be some level of growth.
Those periods.
But.
Okay.
Okay.
Right right.
Immediately next quarter and probably the early half of next year.
Numbers.
But will this.
Actually versus.
Bubbles.
You know perhaps.
October pretty indicative of what we might see.
In those periods.
Okay, Great and final question.
Yes.
Or the sales reps numbers.
Currently versus.
Perhaps.
Looking at.
Levels.
These border at 22.
We had made those changes is.
The number of sales people I'm not sure yet in the clinic.
[music].
Book, yet Oh, the number of people.
Thanks.
The number of sales.
Sales reps.
We remain as we started the quarter at.
Hi, there.
Q.
Their ability.
This changes as Roger announce.
The rise in hot.
I suppose so they've been able to get out.
Okay.
We went from 29.
Yes. It is.
And.
These trials and things.
MRI.
Main constant.
But they have had limited.
Our.
Expedite to you.
To access.
Explains some.
To summarize in hospitals, so they've been able to get out.
To do education, with our CSS do some trials and things in the MRI.
Yeah.
I remain calm.
Where they have had limited access.
Hey, just add.
Back to you.
I'd add Scott.
Add to our pipeline.
This limited access to the ice Houston.
This is Roger said is.
Oh I see use.
[noise].
So we.
And that.
Number of sales rep.
It's a timing issue that demand still exists and we're quite confident in our ability to go out and generate.
Yes.
And in the future once.
That access to the ice use and the decline in.
Really just the cadence of how we harvest this demand.
Bandits evaporated this is a timing issue that demand.
Comments about.
For quite confident in our ability to go out and generate this demand in the future once were able to re access these areas.
Again.
Really just the cadence of how we harvest this demand.
And then.
That's going to come through and that's sort of ties into Rogers comments about.
We'll need to go out and generate and harvest that to me.
Hi, Mike.
Tricked at right.
Accelerating demand and accelerating revenue growth.
And thank you for taking the question.
It's just once were able to re access those and I just want to make that point clear that the demand is not evaporating. Its just our ability to go out and generate and harvest that demand.
Sure.
And Thats.
Search your line is open.
Okay, great. Thank you for the color.
And thank you for taking the questions.
Well I think certainly selling effort for the the pump I wonder if you're starting to having filed for the FDA submission for the next generation pump I Wonder if.
The search your line is open.
Customers that may be.
Good morning.
We want to wait for the next generation.
The selling effort for the.
Huh.
The pump I wonder if you're starting having filed for the FDA submission for the next generation pump I wonder if in the sales effort you're encountering.
Customers that may be.
The pump in the validation.
We can pump.
In the waiting.
How you would handle that from a sales and.
Fault.
14 18 months.
So I have not.
Hi.
Some people holding up.
Door.
The next.
Next generation because the story hasn't changed that.
Our patient.
The pump in the validation of the pump.
And they go out in there.
So for another 12.
Yeah I know.
18 months.
Uh huh.
Hospitals.
That's not.
Yeah.
No really addressed or as part of our presentation, that's not part of our presentation.
<unk>.
And those are still the same for the sales.
You had the the CE Mark limited the sales of that because you really without them.
Most of the hospitals.
A lot of demand.
For.
And has that been worked through.
Oh, absolutely Asher I would say.
Thanks monitor.
I think we regain that CE marking.
See Merck limited the sales of that because you really without them.
And.
Is there a backlog of demand.
Of onto GAAP.
In the north.
Absolutely.
Absolutely Asher I was I think last.
Thereafter.
Asked where are we.
Now that was pretty much the story for Q1, probably want to add.
Our late November early December and then the backlog that we had held onto got flushed through.
To ask a question please press.
Shortly there within weeks thereafter.
[music].
Now that was pretty much the story for Q1 will probably want to address.
Seeing no more.
Okay. Good thank you very much.
Oh.
Thank you all for participating in the call and as I said in the beginning the pandemic continues to set our pace.
Our one on your telephone keypad.
Customers and show them the benefits of our products.
We can offer.
Seeing no more.
We believe the customers understand these benefits and find real value in our products such that.
As I said in the beginning the pandemic continues to set our pace.
I will.
However, we continue to engage our customers and show them the benefits of our products.
What we can offer.
So with you again.
We believe the customers understand these benefits and find real value in our products such that.
This concludes.
Well in a postcode world accelerated demand will as Chris said return.
Again, thank you for person dissipating in the call and we look forward to speaking with you again in February.
[music].
[music].
[music].
[music].
Welcome to the Iradimeds Corporation third quarter 2017 financial results Conference call all.
All participants are in listen only mode.
At the end of the call we've opened up a question and answer session.
Sorry, My during this call is being recorded today October 8th just south of tragedy and contains time sensitive information that is accurate only as of today.
Oh, Yes, Iradimeds released financial results for the third quarter 2020.
A copy of todays press release announcing the Companys earnings is available under the heading most on their website website up already Mad Dot com.
A copy of the press release was also furnished to the Securities and Exchange Commission on form 8-K, and can be found at <unk> Dot golf.
This call is being broadcast live over the Internet on the Companys website at <unk> Dot com.
And the replay of the call will be available on the website for the next 90 days.
The agenda for today's call will be as follows.
Roger Susi, President and Chief Executive Officer of Iradimeds.
Yes without opening comments.
Then Mary Beth Smith, Vice President of field sales.
Well this caused the current environment and vsan trends in customer orders.
And finally.
Yes, Scott Iradimeds in Med, Chief Financial Officer sales.
Right the Companys financial results before opening the call up to questions.
Some of the information to be furnished in todays session.
They'll constitute forward looking statements are they in the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements are those focused on future performance results than an event and may include the company's expected future results.
Iradimeds you might see that that feature called you did the future results may differ materially from these forward looking statements just a number of risk factors.
For a description of the <unk> Coast guard uncertainties that may affect the Companys business. These.
Please see the risk factor section of the company's most recent reports filed with the Securities and Exchange Commission.
[laughter] again may be obtained for free from the secs website at <unk> Dot golf.
I would now like to turn to hold over to Roger Susi, President and Chief Executive Officer of Iradimeds Corporation Mr. Shanghvi.
Oh, Thank you and good morning.
I asked the Colgate pandemic continues to challenge traditional norms. Our teams are fully focused on maintaining consistency in servicing and selling to our customers.
Caution ups and downs created by the pandemic have obscured our business visibility I'm very pleased to report third quarter revenue of 7.7 million.
So this is near a 23% decrease from our third quarter last year, we feel that our efforts. During this difficult time are paying off.
Well the third quarter 2020, we also reported earnings of nine cents per share on a GAAP basis, and non-GAAP earnings of 11 cents per share.
Given the environment.
I believe it is also important to note that sequentially Q3 revenue was 13% higher than in Q2.
Airbrushed Smith will speak about the overall sales environment in a moment.
We view this sick sequential increase positively and expect growth in the fourth quarter as well.
As ive already alluded to uncertainty around the coal bad debt issues continue to swirl an impact this daily.
The rise in positive tests around the world, including in the U.S. is caused government should take a number of actions.
Reinstating travel restrictions to the partial closing businesses.
As a result hospitals in many parts of the world are preparing for yet another way, we see it being discussed in the daily news cycles, all of which continues to make reliable projections of future performance and possible.
To reiterate a point made last quarter, the bars continue setting pace and iradimeds not alone in experiencing uncertainty.
To offset this challenging environment, we continue to find innovative ways to engage our customers and drive the benefits of our product. We believe these efforts are helping us currently and will further pay off in the form of accelerated growth.
Revenue growth once we are in a post kobin shutting sir.
As an update on our regulatory activities last quarter, we reported that we would still be filing a five 10-K application for our next generation MRI Ivy Park with the FDA.
That was accomplished just days after that earnings call.
We expect clearance to take yet another 12 14 months. However, the usual cycle at this time, we see no major issues impeding its release and are preparing for its production.
Regarding our development of new products, we continue to make progress on our FMD device and currently in the final stages of development. Our commercialization plans remain unchanged as we will expect to have a small number operational units available before the end of the year.
However, the launch an actual sales of this device, we expect maybe significantly slowed due to the current environment.
I'd like to turn it over to Barry to provide more color around what we are seeing in the field and recent trends in customer orders.
Thank you Roger and good morning to everyone as Roger just said our ability to sell during the third quarter was negatively impacted by code that.
We started the quarter.
With limited access to hospital and as the quarter progressed, we were able to gain access to radiology and MRI suite on a case by case basis. However, access to the critical care area that the hospital remain in accessible.
To offset these limitations on assets, we continued with our strategy of engaging customers through virtual meetings and demonstration of our products.
We have made significant strides in our ability to sell in this manner manner.
As our customers who are also learning to secure in new ways.
Our success with this strategy can be seen in the customer orders when comparing to cope it impacted quarters Q3 2020.
Customer workers grew 27% over Q2 2020.
Additionally, Q3, 2020 orders were down 6% over Q3 last year.
Given the current environment, we believe a 6% decline in customer orders when compared to a pre closing period is a very strong showing.
To provide a little bit more granularity orders for the M or IB pumps for third quarter 2020 declined 36% from Q3 last year.
However, Q3 2020, Ivy pumps grew 22% over the second this year. Additionally, customer orders for M., our patient monitoring during Q3, 2020 or 26% over Q3 of last year and it grew monitors.
42% over Q2 of this year.
Orders for ideas that are trending positively with Q3, 2020 orders growing 23% over last year and 12% over Q2.
We view these sequential increases positively and indications are that that that volume process is underway and that we and our customers are adjusting to a new selling process.
As we look into Q4, we expect some of the level of growth over Q3, but I reiterate Roger's earlier comment the pandemic continues to set our pace of business and our visibility remains largely [laughter].
The increase in other cases around the globe in recent decisions by various authorities.
[laughter] that travel business, we will remain flexible and proactive in adapting to these continuing changes now I'll turn over to Chris to summarize the financial results.
Thanks, Mike Good morning, everyone.
Consistent with past calls I'll be discussing our financial results on a GAAP basis as well as on a non-GAAP basis, our non-GAAP operating results excludes stock based compensation expense and other operating expenses that we believe are not indicative of our ongoing core operating performance.
Infrequent tax items are 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 taxes and free cash flow as 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. In 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 reported this morning third quarter 2020 revenue decreased 22.7% compared to the third quarter last year.
Revenue from domestic sales decreased 21.9% to $6.5 million during the current quarter.
And revenue from international sales decreased to 26.6% to 1.2 million for the current quarter.
The decrease in global sales was primarily driven by lower device revenue, which was partially offset by higher sales of disposables and service.
[noise] device revenue decreased 39.4% to $4.4 million for the third quarter 2020. This decrease was driven by a 54.8% decline in IB pump revenue and a 10.7% decline in revenue from our monitoring systems.
As Roger and Mary about noted earlier, the sequential comparison of Q3 to Q2, both being coded impacted time periods or abuse, when thinking about current trends and our selling environment.
For that purpose Q3 revenue increased 13.3% over Q2, driven by a 16.7% increase in AR and sales of our devices and a 10.5% increase in our disposables and service.
The increase in revenue from devices pumps grew 14.9% over Q2 and monitors grew 18.4% over Q2.
Now going back to our Q3 2020 to Q3 2019 comparisons.
The average selling price of our MRM compatible IB infusion pump system. During the third quarter 2020 was approximately $37800 compared to approximately $35100 for the same period in 2019.
This increase in ASP relates to higher revenue from the education and drug library components of our pump systems when.
When compared to the third quarter last year.
The impact of these components on ASP were magnified due to a smaller number of Ivy pump units sold during the current quarter.
Looking forward to Q4, we expect Asps that are more reflective of historical ranges.
The average selling price of RMR compatible patient vital signs monitoring system. During the third quarter 2020 was approximately $43000.
Compared to approximately $33700 for the same period last year.
The eight this increase in ASP relates to a favorable product mix.
And higher domestic sales of our monitoring systems, recognizing revenue when compared to the third quarter last year.
Revenue from sales of disposables service and other increased 29.6% to $2.8 million for the current quarter.
From $2.2 million for the same quarter in 2019.
And lastly revenue from the amortization of extended maintenance contracts was consistent at a half million dollars for both periods.
Gross margin was 74.6% for the 2020 quarter and 78.2% for the 2019 quarter. The decrease in gross margin percent as a result of unfavorable overhead variances compared to the same quarter last year.
Operating expenses were $5 million or 64.4% of revenue compared to $5.3 million or 53% of revenue for the third quarter last year.
<unk> dollar basis. This decrease primarily relates to lower sales expenses legal and professional fees and regulatory regulatory costs, partially offset by higher sales commissions.
We recognized a tax benefit of approximately $300000 in the current quarter compared to tax expense of approximately $200000 in the 2019 quarter.
Our effective tax rate for the 2020 quarter was negative 35.3% compared to 6.6% for the 2019 period.
Lower effective tax rate is primarily due to higher favorable discrete items related to stock compensation.
Additionally, we recognized a benefit resulting from the cares Act.
That allowed us to carry back our net operating loss created during 2019 and 2020 to date.
Years prior to the enactment of the tax cuts and jobs Act, which increases the benefit to the previously enacted federal federal tax rate of 35% versus the current federal tax rate of 21%.
For the third quarter 2014, we recognized net income of nine cents per share compared to 20 cents per share for the 2019 quarter on a non-GAAP basis net income was 11 cents per diluted share for the current quarter.
Compared to 23 cents for the third quarter last year.
From a cash flow perspective, we generated $3.3 million of cash from operations for the nine months ended September Thirtyth 2020, compared to $6.3 million for the same period in 2019.
For the nine months ended September 32020 cash provided by operations was positively impacted by cash inflows from accounts receivable and deferred revenue.
And negatively impacted by prepaid income taxes inventory prepaid expenses accrued payroll and benefits and accounts payable.
For the three months ended September 32020, and 2019.
Our cash flow, our free cash flow, a non-GAAP measure was 1.3 million and $3.1 million respectively.
Lastly.
Excuse me.
Lastly, we exited the quarter with a combined cash and investments balance of $49.9 million and no third party debt or other restrictive covenants.
Now I will turn the call over for questions Maine.
[laughter].
As a reminder to ask a question you'll need to press star one on your telephone sales.
We draw your question these fast upon key.
Please stand by while we can tell the county roster.
Okay.
Our first question comes from Scott Henry of Roth Capital. Your line is open.
Good morning.
Solid quarter, given the situation a couple of questions in Roger I know you've talked about this in the past, but could you perhaps reiterate why the monitors seem to do better.
Then the pumps kind of in this challenging environment.
Sure Scott did you hear your voice it.
Yeah, it's pretty easy maybe Mary Beth will have some comments in that regard as well, but it's fairly simple right.
The the monitors are Ah, yes, that's that's a device where we're not the pioneers and.
There is a lot of that business that's been ongoing now for some 30 years.
Since the introduction of MRM monitoring back in the late Eightys. So this is a product that's in our pipeline and the customers out there are fairly accustom to a replacement cycle every five six years or so.
And what were essentially riding that wave.
So that business wasn't nearly as impacted as.
As now you flip over to pump business.
Business. We have is also those separated into two sort of sections right. We have a good bit of our pump business, that's repeat orders where customers were already sold by more.
But then another big chunk up and classically we always talked in terms of it being about 50 50.
I was in a truly greenfield right those people that have never yet had a pop in and as as years go by that Greenfield. This is even more targeted maybe less color I see use.
Sure well as Mary Beth said.
These IC used in the hospital these especially with Corona they are to use on a hot spot where the top patients go up and and essentially as Mary Beth said, we just really can't get in there. So we can't cultivate.
Business that's totally.
Totally Burke.
On the other hand, the pumps that we did sell came from.
In the last quarter, even in Q2 came primarily from existing.
Existing customers, you're seeing a few more pumps, so and result.
A big chunk of the POS business is off limits temporary locked out of while the monitor business is.
More or less lets say its on autopilot. The only stretches you see there are people they plan to buy them. They are in the works and it's only been.
Somewhat less damaged in the pump side because.
Pretty much anything they're doing just great if they should spend that money now or wait another month or two.
So to answer your question.
That was great Roger very clear I and then a quick.
Question for for Chris.
Opex in the quarter I should we think about this is kind of a low point and perhaps starting to grow going forward or how should we think about Q3 reflective of coming quarters on opex.
I mean, I I think Q3 is a is a.
Pretty good a pretty good data point, when we think about going forward of course, there will be some level of growth.
But when I think about most immediately next quarter and probably the early half of next year I think this this level. This $5 million level is pretty reflective are pretty indicative of what we might see in.
In those periods.
Okay, Great and final question, how are the sales reps numbers Kurt.
Currently versus.
Perhaps below pre co bid levels.
You mean, you mean, the number of sales people I'm not sure yet down the credit book, yet the number of people.
The number of sales people remain as they started the quarter at 22, we.
We had made those changes as Roger announced at our last.
Conference call. We went from 29 to 22 sales reps that will remain constant and Ah there are their ability to access the.
To summarize in the hospitals, so they've been able to get out to do education with Rcs as do some trials and things and the MRI suite, where they have had limited access is tonight to you. So we are able to add to our pipeline from our limited ability for the pumped as Roger said this to the IC unit.
So we expect the number of sales reps assuming remain constant.
One thing I might just add one thing I might add Scott to this discussion around limited access to the ice use in the you know the decline and pump business is this.
This isn't demand that's evaporated. This is a timing issue that demand still exists and we're quite confident in our ability to go out and generate this demand in the future once were able to re access. These areas. So it's really just the cadence of how we harvest. This demand that's going to come through and that's sort of ties into Rogers comments about you know post.
Coated and whatever that might like.
Accelerating demand an accelerating revenue growth, but again once it's just once were able to re access those and I just want to make that point clear that the demand is not evaporating. Its just our ability to go out and generate and harvest that demand thats being restricted right now.
Okay, great. Thank you for the color and thank you for taking the questions.
Thanks Scott.
Our next question comes from Lisa Springer of singular singular research your line is open.
Oh good morning.
Our next question is sort of the selling effort for the.
The pump I wonder if you're starting having filed with the FDA submission for the next generation pump I wonder if in the sales separate you're encountering customers that may be one or wait for the next generation pump and how you would handle that from a sales and.
So I have not seen people holding up waiting for the next generation because the story hasn't changed that they still need the pump in the validation of the pump so waiting for another 12 14 18 months.
We have not really addressed or.
As part of our presentation, that's not part of our presentation. The goals are still the same for the sales force. They go out and there fulfilling the needs of the hospitals and the need for the pump.
Okay.
And regarding the vital signs monitor.
Yeah. When you had the CE Mark limited the sales of that because you really without that was there a backlog of demand.
As had been worked through.
Oh, absolutely Asher I was so I think our last December when we regain that CE marking.
Our late November early December and then the backlog that we had held onto got flushed through.
Good.
Shortly there within weeks thereafter, but now that we are pretty much the story for Q1, probably one yeah.
Yeah, Okay. Good thank you very much.
Again to ask a question. Please press star one on your telephone keypad.
Okay.
All right well up seeing no more no more questions off. Thank you all for participating in the call and as I said in the beginning the pandemic continues to set our pace. However, we continue to engage our customers and show them. The benefits are real products that we can offer and we firmly believe the customers understand these benefits and find real value in our.
Products, such that postcode postcode world accelerating demand will as Chris said return.
Again, thank you for person dissipating in the call and we look forward to speaking with you again in February.
Thank you. This concludes the call you may now disconnect.