Q1 2021 IRadimed Corp Earnings Call
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Welcome to the era already made of corporations first quarter 2021 financial results Conference call.
All participants on a listen only mode and at the end of the call. We will conduct a question and answer session.
Quick question during the session you will need to press the star one.
To go into the queue. As a reminder, this call is being recorded today April 30 of 2021 and contains time sensitive information that is accurate only as of today.
Earlier, you Rod and made released financial results for the first quarter of 2021, a copy of this press release announcing the company's earnings is available under the heading news on the web site at a variety of med Dot com.
Copy of the press release was also furnished to the Securities and Exchange Commission on form 8-K, and can be found at SEC Dot Gov. This call is being broadcast live over the internet on the company's website erotic net.
Dot com and you can and a replay of the call will be available on the website for the next 90 days.
Some of the information to be furnished in today's session will be 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 results plans and events and May include the company's <unk>.
<unk> net future results.
Are you writing that the reminds you that future results may differ materially from these forward looking statements due to the number of risk factors for a description of the relevant risks and uncertainties that may affect the company's business. Please see the risk factors section of the company's most recent reports filed with the F secure.
<unk> and Exchange Commission.
Which again may be obtained for free from the SEC's website at SEC Gov.
And I'd like to turn the call over to Roger Susi, President and Chief Executive Officer, everybody The Corporation the system.
Thank you good morning, everyone and thank you for joining our call I have the plus and pass to report that.
<unk> case, and we feel that the drag of the COVID-19 pandemic is easing further and further each passing month and quarter.
No clearly there remains a high number of virus cases, both of the U S and abroad. We can see that many of our customer facilities are beginning to react and purchase with greater confidence.
Early today, we reported first quarter revenue of $9 2 million, which is over 6% higher than the first quarter of last year, and nearly 8% higher than fourth quarter fourth quarter of last year.
Our adjusted earnings was <unk> 13 per share.
And though down from the previous year due to a nine 900000 dollar of income tax benefit that we recognized during the first quarter last year. However.
However, please note that on a pre tax basis.
<unk> increased 112% from the first quarter last year and of 167% over the fourth quarter, both metrics showing a real strength of our business.
With revenue ASP and gross margin and pre tax income all up.
I am delighted and see this is a great start to the year.
The entire team here at <unk> is performing admirably.
And though we are still cautious the business challenges presented by the pandemic do appear to be lessening showing us a path to a great year.
For the past three quarters, we have been able to gain increasingly more access to our U S based customers, which has provided us more opportunities to promote our products.
This quarter played out much the same way with our sales team generating bookings in excess of our internal projections, which resulted in higher revenue than we had anticipated while the.
Chris will have more details interestingly much of the revenue growth came from sales of our IV pump, which saw on 81% increase and unit sales and the U S market.
Additionally, the higher bookings resulted in further and further increasing our backlog from the already elevated level, we reported at the end of 2020.
This gives us greater confidence and our ability to grow during the second quarter and into the back half of this year.
Which is also one we expect the friendlier business environment that will allow us to gain even more access to our customers, including those international markets of course, all predicated on the diminishing impact of this pandemic.
While we are seeing a greater ability to access our customers through our traditional call points critical care remains relatively inaccessible.
We are encouraged however, with how the U S is progressing against the pandemic and continue to believe that the second half of the year will be a better business environment for us, including the potential of beginning to regain access to the critical care areas of hospitals, even if on a limited basis.
No again, I would point out that our pump business, which is rather dependent on access to critical care is up significantly this quarter.
Related to our international channels, while not as far along as U S and regarding the pandemic, we are <unk> and <unk>.
We are at and that's it and increasingly positive signs and most of our larger markets as the year progresses.
From a regulatory perspective, we continue to have dialogue with the FDA on our 500 10-K application for the new pump and remain unchallenged in our view that launch very late this year or early next year is the base case scenario.
Regarding our ferromagnetic detection device, we have completed all significant development activities and just recently released the product to our sales team who are now actively engaging customers about the benefits of our device.
As I said last quarter, we are excited about the opportunities of the the FMT brings and our ability to leverage our domestic sales footprint as well as the capabilities of our distribution partners and in international markets.
And I'd like to briefly comment about the overall cost impacts and supply shortages, which have been headlines relative to the automotive industry and how this may affect your adamant.
We are seeing some stretching of lead times and difficulty in sourcing certain parks.
At this point it has been manageable, though we are beginning of being hit with cost increases and and greater enforcement tariffs as well, which in some cases are collectively rather large at present as our overall materials cost is relatively small these cost increases are digestible.
However.
Boosting material orders and building inventory as a buffer.
Lengthy capacity building process, and our electronics and materials and supply change the to mitigate any negative impacts to production out of Radnet is what we are.
Keeping in mind and planning.
With that I'll now turn the call over to Chris to summarize our financial results, Chris and good morning.
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 free.
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 and.
It'd be helpful and providing a more thorough analysis of our ongoing financial performance.
And you can find the reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release.
Yeah.
As we reported earlier this morning first quarter of 2021 revenue was $9 $2 million and increase of 63% compared to the first quarter last year.
We view this as an important milestone as it represents a return of growth when compared to what was largely a pre COVID-19 time period last year.
Revenue from domestic sales increased 15% to $7 $3 million during the current quarter, while revenue from international sales decreased 17, 2% to $2 million.
The increase and domestic revenue and decrease and the international revenue was primarily driven by the geographic mix of IV pump sales, which Roger already mentioned.
U S IV pump unit sales increased 81% over Q1 last year.
Overall domestic sales accounted for nearly 79% of the total revenue for the <unk>.
Current quarter compared to approximately 73% from the prior year quarter.
Device revenue increased 10% of $6 1 million for the first quarter of 2021.
This increase was driven by of 31, 5% growth and IV pump revenue, partially offset by a nearly 10% decline.
And revenue from sales of our module and system.
The average selling price of our MRI compatible IV infusion pump system.
During the first quarter was approximately $32700 compared to approximately $29900 for the first quarter last year.
This increase in ASP.
Thanks to the higher domestic unit sales already noted.
The average selling price of our MRI compatible patient vital signs monitoring system. During the first quarter 2021 was approximately $38300 compared to 35400 for the same period of 2020.
This increase primarily relates to favorable pricing adjustments, along with a favorable product mix when compared to the first quarter last year.
Revenue from Disposables and service were consistent at approximately $2 6 million.
Okay.
And revenue from our maintenance contracts was also consistent on a $5 million for both periods.
Okay.
In addition to the strong revenue growth from first quarter of this year. The first quarter last year, we feel supported the continued pointing out our sequential progress during two COVID-19 impact of tongue periods.
And comparing Q1, 2020 one to Q4 2020, the upward trend we have been we have discussed over the past several quarters remains intact.
With Q1 revenue, increasing approximately 8% over Q4 last year.
This increase was driven by of 31, 3% revenue growth from sales of our IV pumps compared to Q4.
Okay.
In addition to the continued sequential growth, we're able and we were able to increase our already elevated backlog from the $4 $4 million level that we reported at the end of 2020.
And we're continuing down the P&L.
Gross margin was 76, 6% for the 2021 quarter compared to 74, 5% for the 2020 quarter.
The increase in gross margin percent is the result of favorable geographic sales mix, partially offset by unfavorable overhead variances.
To add a little more context to Rogers comments regarding supply chain costs, we expect pressure on our gross margin going forward due to these cost increases however.
However, we believe the impact will be limited and partially offset by favorable overhead adjustments due to anticipated growth and unit output, resulting in gross margins that are very consistent with our historical ranges.
Continuing on operating expenses were $5 3 million or <unk> 57, three percentage of revenue compared to $5 7 million or 66% of revenue for the first quarter last year.
On a dollar basis.
This decrease relates to lower expenses for sales for sales team travel and related costs.
The compensation expense payroll bonus and benefits and legal and professional fees, partially offset by higher sales commissions.
As a result and income from operations grew 141% to $1 $8 million for the current quarter.
Compared to $700000 for the Q1 for Q1 2020.
During the first quarter of 2021, we recognized tax expense of approximately $384000 compared to a tax benefit of approximately $933000 for the last year quarter.
Our effective tax rate for the current quarter was 21, 7% compared to negative 111, 7% for the 2020 quarter.
The higher effective tax rate is primarily due to the touch benefit we recognized from the prior year quarter. Additionally, we.
We had higher taxable income during the current quarter compared to Q1 2020.
Which also contributed to higher current period tax expense.
This all resulted in GAAP net income of <unk> 11 per share compared to <unk> 14 for the 2020 quarter.
This decrease in earnings per share was the result of the tax impact just described.
On a non-GAAP basis net income was <unk> 13 per diluted share for the current quarter compared to <unk> 18 for the first quarter last year.
And again this decrease and non-GAAP EPS is also of the result of the tax benefit from last year as well as lower stock compensation expense during the current quarter.
Moving on to cash flow, we generated a total of $700000 of cash for the quarter.
Cash from operations was $900000 for the first three months of this year compared to $1 2 million for the same period of 2020.
For the 2021 period cash provided by operations was positively impacted.
By cash inflows from deferred revenue and income tax refunds and negatively impacted by cash outflows from inventory purchases prepaid expenses and accrued payroll and benefits.
For the three months ended March 31, 2021 and 2020.
Our free cash flow and non-GAAP measure.
Was <unk> $8 million and $1 million respectively.
And lastly, we ended the quarter with combined cash and investments of $52 7 million and no third party debt or other restrictive covenants.
Now I will turn the call over for questions Victor.
Yes.
Thank you.
As a reminder, cash question, you'll need the press star one on the telephone to address your question press the pound key.
And while we compile the Q&A roster.
Our first question on comes from the line of Scott Henry from Roth Capital You may begin.
Thank you good morning, and congratulations on the strong results.
Good morning, Scott.
Couple of questions.
When we think about two Q.
Yeah, obviously youre going to grow off of last year's <unk>, but do you think you could have sequential growth from Q1 into Q2.
Yes, yes sure.
The answer is yes.
I think.
Hopefully it came out and the comments today and we feel very optimistic about how things are going book.
Bookings have been exceptionally strong.
And being able to grow backlog for the first quarter from where we reported at year end.
The $9 2 million that we reported and Q1 was above our internal thoughts of where we might come in.
And I think the.
The growing backlog and what we're hearing from the field gives us a level of confidence and that we'll be able to grow.
Not only of Q2, but but continue similar growth patterns for the rest of the year.
I mean, it sounds like and from talking to a lot of medical technology companies.
And the growing off of 2020, but not quite up to 2019 prior highs.
It sounds like you may be reaching.
New all time highs in revenues is that a fair statement I mean, it's obviously early but certainly pointing in that direction.
It's early and it is pointing out direction of it.
And our.
As we said in the prepared remarks, the $9 2 million.
Represents growth over the first quarter last year, which which again was largely.
Now onto our pre COVID-19 time period, we didn't we.
And we Werent really understanding COVID-19 until.
And what really reacting to COVID-19 until maybe the middle of March.
Last year, so towards the last two or three weeks of the quarter. So yes.
And we showed some very healthy growth over that timeframe. So.
We expect that.
We will be able to show that growth over the pre COVID-19 timeframes.
Okay, that's great.
Great to see a couple other questions.
First with the next generation pump.
How long does it take from kind of final approval to launch what's the.
The lead time is between those step should we expect.
Well Scott Roger here.
Let me take that one.
Given that.
And given that.
We spent about 18 months.
And these FDA cycles with an IV pump.
And anticipate as I said and all of that will be clear at the end of this year January next year.
Well the.
This pump will be ready to launch and that first quarter shell.
And it's a matter of it's a matter of a few weeks after we get the clearance letter not not months or quarters.
Okay, great thanks for that color.
Roger.
And then literally think about the FMT.
Just getting out into the sales team right now.
Should we look for any revenues and <unk> or should it should revenues really materialize and the second half of the year.
I think.
I think I indicated and our previous call and we have we have.
We have a couple of initial let's call on beta sites the first adopters.
And the.
Uh huh.
And we're going to have orders, so we're going to get revenue for those but they're basically.
Partnered pricing, so pretty pretty discounted so there'll be a little bit of revenue to answer your question and Q2, but it won't move anybody's needle.
Yes on the revenue.
And its something Youll youll recognize and appreciate until Q3 and four.
Okay.
Great and then final question.
Just on on sales and marketing trends as the sales force starts to open up.
COVID-19 starts to decline should we expect to see.
The modest increases there or more significant increases.
It's a modest did you say.
Perhaps modest or perhaps even and more than that just trying to get a sense of the magnitude of how to think about that kind of $2 4 million.
Number in Q1 going forward.
Yeah.
I think.
And I don't want to say that theres going to be significant increases in sales and marketing I think the types of activities.
And that are going to come back, we'll start to see more travel related costs and expenses and things like that.
Come into play I think for right now is really the only missing piece.
And from from that the cost structure over there and.
Of course, those additional costs are going to be paid off and are offset by the higher revenues higher bookings that will that will experience.
During those time periods too so I would say the theres going to be.
I would call it modest increases.
With really the only piece being those travel related expenses.
I'm not fully baked in right now.
Okay.
Great. Thanks for that the color, Chris and thank you guys for taking the questions.
Thanks, a lot of color.
Yes.
Once again thats going on for questions. Our next question from the.
Brian Lisa Springer from singular research.
Good morning, congratulations on the strong quarter I appreciate it.
Good morning, Lisa Thank you.
My question concerns the international markets could you give us a little more color around that or are they kind of universally weak or some international markets better than others. Do you expect the sales mix the geographic sales mix to remain kind of consistent with what it's been and the first quarter.
Yeah. So.
Europe is.
Europe is pretty weak.
In Europe, our our number one market is.
Germany and.
And from from the Germans to the Italians.
We see weakness U K.
And we're getting some orders, but there are weak.
On the other hand.
The middle East continues to.
Come on pretty strong.
Right.
We just shipped the rather large order here and the other day.
Saudi Arabia.
And so middle East this is relatively.
On a on a good baseline.
The Japanese market is a big Big market Force and Asia and.
Ed.
And so I'd say dipped to dip down a little weak and Japan. If you read the papers they still are.
They still feel that the.
They are very challenged by COVID-19, even on the number the <unk>.
Absolute number of cases it seems.
Tiny compared to what we deal within the U S. They take it rather serious and I think that keeps keeps.
It keeps the Japanese business, a little bit held the underwater yet for another.
On a quarter or two I hope that Oh.
As we get past the summer that will that will turnaround for the Japanese market as well, but yes.
It's it's slower and slower and picking up certainly.
Which is I think common knowledge and kind of range.
Splashed all over the newspapers are how well the <unk> and how fast our U S.
Economy is recovering compared to the others and the on.
And our sales prospects are.
Somewhat and that same vein.
Okay. Thank you that's it from me.
Alright, Thank you Lisa.
Good day and stated a moment ago I am very pleased with these results and have growing confidence and the rest of the year.
Out of Med is entering the exciting time with trending growth and our current product set and.
And what appears to be the weakening of effects of the pandemic and being on the cusp of introducing new products.
There are uncertainties and we are increasingly optimistic about our future. So thank you all and speak to you again after Q2.
This concludes today's conference call. Thank you for participating you may now disconnect.
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