Q4 2020 IRadimed Corp Earnings Call
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Welcome to day Readymade Corporation fourth quarter 'twenty 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 for 'twenty 'twenty, one and contains time sensitive information that is accurate only as of today.
It'll be a medical released financial results for the fourth quarter 'twenty 'twenty a copy of the press release announcing the company's is available under the heading news on their website I think about it that day.
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A copy of the press release was also furnished to the Securities and Exchange Commission on form 8-K.
It can be found at SEC Gov. This call is being broadcast live over the Internet on the Companys website that does that embed dot com and a 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 Radnet will present opening comments, then Chris Scott <unk>, Chief Financial Officer will summarize the company's financial results before opening the call up to questions.
Some of the information to be furnished at today's session will constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 minutes time forward looking statements are those focused on future performance results plans and events and May include the company's expected future results.
And remind you that future results may differ materially from these forward looking statements due to a number of feedstock price for a description of the relevant risks and uncertainties, which 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 again may be.
Obtained for free from the Secs website at SEC Gov, I would now like to turn the call over to Roger Susi, President and Chief Executive Officer of Radnet Corporation. Mr. Susi. Please go ahead.
Thank you and good morning, everyone.
Earlier today, we reported fourth quarter revenue of $8 5 million and adjusted earnings of seven cents.
Even though the year over year comparison as can be seen in the accompanying press release are down I mean. This. These result is noteworthy and obtained in an environment that continues to be challenged by the cyclic and continuing effects of the global pandemic, while the effects of the pandemic or felt throughout the world.
There are bright spots during the quarter and two that I'd like to specifically call out.
First on a sequential basis fourth quarter revenue continued its upward trend.
Increasing 11% over the third quarter.
This was largely driven by a nearly 24% sequential increase in revenue from our IV pumps and a nearly 17% sequential increase in revenue from our monitoring systems.
These increases are a continuation of a trend that we noted in our third quarter and we believe they are indicative of a successful adjustment by us and our customers towards adding non traditional sales message to our traditional practices.
We believe the sequential comparisons are important as we compare COVID-19 impacted periods.
And such a thought process should be enlightening to supplement other typical quarter over quarter analysis.
Our second comparative bright spot is the customer orders for the fourth quarter were within 1.2% of our historical high watermark, which was in Q4 of 2019.
This performance was in large part driven by orders for our monitoring systems, which continue to perform very well even in an environment, where our ability to conventionally promote our products has been diminished by hospitals limiting access of vendors and causing us to rely more upon the new selling methods.
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Our success in generating orders resulted in a backlog of $4 4 million at the end of the year. This backlog far exceeds previous backlogs going back several years.
Both of these bright spots give us optimism about our future. However, we temper that optimism with continued near term uncertainty created by the pandemic the global response to outbreaks and testing and vaccination rollout.
I would also like to point out that the fourth quarter is typically our best quarter for bookings, which it could be expected to cause breaks in the sequential comparisons beginning in Q1 of 2021.
Overall from a sales perspective, COVID-19 continues to impact our ability to sell our products. However, we are increasingly gaining access to radiology and M. Our suites, though access to critical care areas of the hospital remain rather minimal.
As I have alluded to we are overcoming these restrictions tower wherever possible by remaining persistent in our strategy of engaging customers through virtual means.
As a result, we are generating an increasing number of trials and demonstrations for our products during the second half of the year.
Okay.
In addition to selling into traditional hospital channels. We have also seen positive, but nansen trends selling into the veterinary market and outpatient MRI Center.
This should also assist in creating early traction for our ferromagnetic detection system as we began our commercialization efforts.
We remain opportunistic regarding these channels and we work towards capitalizing on every opportunity.
As an update on regulatory status of our next generation MRI pump, we continue to work through the five 10-K process and we will anticipate.
And still anticipate clearance to take yet another 12 months at this time, we see no major issues impeding the nextgen pumps clearance.
Regarding our development of new products to the engineering efforts on our ferromagnetic detection device are wrapping up and we expect to bring this product to commercialization in the coming months.
We recently introduced the F M D device to our sales team, where it was received very well as they quickly recognize the value of that it brings to customers.
We expect excited.
We excuse me we are excited about opportunities that this device brings in our ability to leverage our domestic sales footprint as well as the capabilities of our distribution partners in international markets now.
Now I'll turn the call over to Chris to summarize the financial results.
Good morning, everyone.
Consistent with past calls I'll be discussing our financial results on a GAAP basis, as well as long as 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.
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 fourth quarter revenue.
Fourth quarter from 'twenty revenue was eight $5 million or a decrease of 21, 5% compared to the fourth quarter last year.
Revenue from domestic sales decreased 11, 3% to $7 1 million during the current quarter and.
And revenue from international sales decreased nearly 50% to $1 $4 million for the current quarter.
The decrease in global sales was primarily driven by impacts from COVID-19, resulting in lower revenue from sales of our devices, which was partially offset by higher sales of disposables and service.
Device revenue decreased 33, 6% to $5 3 million for the fourth quarter 2020.
This decrease was driven by a 41, 2% decline in IV pump revenue and a 23, 7% decline in revenue from sales of our monitoring systems.
The average selling price of our MRI compatible IV infusion pump system. During the fourth quarter 2020 was approximately $37600 compared to approximately $33100 for the fourth quarter 2019.
This increase in ASP relates to higher domestic unit unit sales and higher sales of the education and drug library components of our pump system when compared to the fourth quarter last year.
The impact of these components on the Asps were magnified due to a smaller number of IV pumping that sold during the current quarter.
The average selling price of our MRI compatible patient vital signs monitoring system during the fourth quarter of 2020 was approximately $37500.
Compared to approximately 32000 and $600 for the same period in 2019.
Excuse me.
The increase in the S P.
Rates to higher domestic unit sales and a favorable product sales mix when compared to the fourth quarter last year.
Revenue from Disposables and service grew 13, 4% to $2 $7 million and revenue from our maintenance contracts was consistent on a $5 million from both periods.
Excuse me.
As we review as we reviewed our third quarter call and Roger spoke about to supplement an understanding a more current trends. It is useful to sequentially compare COVID-19 impacted time periods.
Considering that we have now seen two sequential quarters of revenue growth with Q4 revenue increasing 11% over Q3.
This increase was led by a 23, 8% increase in pump revenue.
Over Q3, and a 16, 7% increase in revenue from monitor sales over Q3.
Gross margin was 75, 3% for the 2020 quarter and 74, 8% from the 2019 quarter.
The increase in gross margin percentage is the result of favorable inventory reserve adjustments compared to the same quarter last year.
Operating expenses were $5 8 million or 67, 7% of revenue compared to $5 9 million or 54, 3% of revenue for the fourth quarter last year.
On a dollar basis. This decrease primarily relates to lower expenses.
For employee recruiting payroll and benefits and stock compensation.
Partially offset by higher sales commissions and legal and professional fees.
We recognized tax expense of approximately $27000 in the current quarter compared to a tax benefit of approximately $888000 in the 2019 quarter.
Our effective tax rate from 2020 quarter was four 1% compared to a negative 37, 7% from the 2019 quarter.
The higher effective tax rate is primarily due to a benefit recognized in the last years quarter associated with the cares act that allowed us to carry back our net operating loss created during 2019.
Two years prior to the enactment of the tax cuts and jobs Act, which increases the benefit to the previously enacted federal tax rate of 35%.
Versus the current federal tax rate of 21%.
For the fourth quarter 2020, we recognized net income of five cents per share compared to 26 from 2019 quarter.
On a non-GAAP basis net income was seven cents per diluted share for the current quarter compared to 34.
For the fourth quarter last year.
From a cash flow perspective.
We generated $5 $8 million in cash from operations for the year ended December 31 2020.
Compared to $10 2 million for the same period in 2019.
For the 2020 year cash provided by operations was profit was positively impacted by stock compensation.
Accounts receivable net income and depreciation and amortization.
Cash from operations was negatively impacted by prepaid income taxes prepaid expenses and other current assets.
For the three months ended December 31, 2020, and in 2019, our free cash flow a non-GAAP measure was $2 4 million and $3 8 million respectively.
Lastly, we finished 120th of combined cash and investments balance of $52 million and no third party debt or other restrictive covenants.
Now I'll turn the call over for questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star and then the number one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the husky.
Again that will be tier, one and I get to ask a question.
First question comes from the line of Scott Henry from Roth Capital. Your line is now open you may ask your question.
Thank you and good morning, just a couple of questions.
First in Q4 SG&A.
It's going to be a lot higher than previous quarters.
Could you just talk about what what's going on there and how we should think about that number going forward.
Hey, Scott it's Chris.
SG&A.
For the current quarter.
Picking up the sales because G&A by itself was down.
Including sales I'm talking about sales and marketing sales.
Marketing costs were up.
In large part.
It was about 80% of the increase was was due to sales commissions.
And really that resulted from us having to make some modifications to our common commissions plan mid year.
To help compensate some of the impact.
From lower sales.
And how that relates to how our sales manager managers are ultimately being compensated.
A large portion of their total compensation is variable commission.
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We needed to make an adjustment there to ensure that.
Our folks are being taken care of and to help offset some of the negative adjustments from COVID-19. So I think.
We were able to accomplish that successfully we saw.
I think we.
For the most part Roger I think everybody was it was.
That was helpful for everybody to get by.
And as we think about.
Plans for these coming years or in the future.
We should see some normalization of the sales and marketing line back towards more historical levels.
Certainly movement in that direction in 2021.
Okay, great. Thanks, that's helpful and then.
Just trying to think of.
You've had some strong second sequential growth quarter to quarter, but Q4 does tend to be a strong quarter relative to Q1 of the next year.
Should we should we expect sort of a sequential flat or to down in Q1 or can you overtake that kind of seasonality of the calendar year.
Hello, maybe Scott I could.
Chime in on that one I think what you're saying is.
Is.
We expect Q1 to be.
Greater than Q4 was no.
Short answer is no. It never has been and we certainly don't expect that to happen.
Right it with this.
Sort of resurgence of Covid that started to we saw that effect beginning no in the early part of December even but.
That aside Q4 as I said was huge as far as the bookings so it was exceptionally.
Great for US, we really started to.
Figure out ways to do business as I mentioned you know.
Even in the Covid, but towards the last few weeks of December with the recurrence, we could feel a pinch returning so oh.
We don't expect Q1 to set the world on fire.
At all yet but.
Just to kind of balance out those comments Roger.
And your interest.
Prepared remarks, there, we carried $4 $4 million of backlog into the into the first quarter.
And those are backlog levels that we haven't seen for several years. So I think that was.
I think that's helpful. As we think about 2021.
But to Roger's point, though.
The impact of Covid is still setting the pace.
And there's just so much uncertainty that we don't want while we were optimistic about the future we want to balance that.
With just the environment that we're doing business in today.
Okay. Thank.
Thank you that's helpful and typically would the backlog be filled.
Fully in the next quarter or sometimes made it lag over a couple of quarters, just trying to incentive I'm trying to think of how we should think about that backlog number.
There are times, where customers will send us orders, maybe it's related to a new construction project and they're not prepared to take the equipment.
For another six months or nine months or something along those lines.
That said the bulk of backlog is shippable, it's shippable currently.
But.
I don't want to you.
Your premise was all of backlog shipped.
Shippable node typically not all but a significant majority of backlog is yes.
Okay. Thank you that's helpful final question.
On the monitors.
How was the mix between U S and international what was it kind of 50 50 or did it favor one geography over the other.
For the for this quarter, we favor with more international.
On a unit basis about about 56% of our units one international in the fourth quarter.
Okay that should do it for me Hey, congratulations guys on generating cash and a very tough year. Thanks for taking the questions.
Thanks, Scott Thanks, a lot Scott.
Thank you again, if anyone would like to ask a question you will need to press Star then the number one on this telephone keypad again that will be tier one on the telephone keypad.
Okay.
I am showing no further question at this time I would now like to turn the conference back to Mr. Roger Susi for any closing remarks.
Thanks.
As I stated last quarter Covid continues to set the pace of our business with the changing status of the pandemic and the variable global response.
We're focused on remaining internally and externally agile in serving our customers to the greatest extent possible. We are making every effort to engage our customers motivate distributors and control costs to attain as optimum business performance level as possible.
We leave the year with positive momentum on our side and while an elevated level of uncertainty still exists.
We're optimistic about 2021, we believe that the first half of the new year will remain challenging while anticipating a more favorable business setting during the second half.
Thank you for participating in the call and we look forward to reporting to you again after the first quarter.
Thank you. This concludes this call you may now disconnect.
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