Q3 2021 IRadimed Corp Earnings Call
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Welcome to the Radnet Corporation third quarter 2021 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 October 29, 2021 and contains time sensitive information that is accurate only as of today.
Earlier at random it released its financial results for the third quarter 2021.
A copy of the press release announcing the company's earnings is available under the heading news on their website at <unk> 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 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 website for the next 90 days.
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 future performance results plans and events and May include the company's expected future results of random. It reminds you that future results may differ materially from these forward looking statements due to several risk factors for.
For a description of the relevant risks and uncertainties that may affect the company's business. Please see the risk factors section of the company's most recent reports filed with the Securities and Exchange Commission, which again may be obtained for free for the SEC's website at SEC Gov.
I'll now turn the call over to Roger Susi.
Isn't it and Chief Executive Officer of around <unk> Corporation, Sir you May now begin.
Good morning, and thank you all for joining the call today.
Again happy and very pleased to report a very good quarter of revenue and earnings growth.
As we reported in this morning's press release Q3 revenue was $10 9 million or nearly 42% over last year non-GAAP earnings were 23 cents or 103% over Q3 of last year and on a sequential basis, we continued along our well established.
Trends with revenue growth of over 11% from Q2, this year and earnings growth of over 74%.
I am proud of these results and the team's performance in what remains in many ways, a very challenging environment, the team's collective resiliency and dealing in dealing with the lingering effects of Covid are exhibited here every day.
From a sales perspective bookings for our products have been strong all year and that did not change during Q3. In fact, we saw record bookings again this quarter, surpassing our previous high watermark from Q2 this year by nearly 10%.
This level of demand for our products exceeded our expectations and allowed us to grow backlog, providing visibility into the coming quarters, along with growing our overall confidence.
What may also be telling about the demand for our products as a comparison to 2019 with our year to date revenue expectations for Q4, we are now firmly on pace at a pace to show revenue growth over the pre pandemic 2019 time period of approximately 8%.
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With this level of visibility and confidence we expect to report Q4 revenue of $11 5 million to $11 7 million with GAAP earnings per share of 17 to 18 cents and non-GAAP earnings per share of 'twenty to 'twenty one sense.
These earnings estimate.
In our oriented include anticipated one time costs related to our five 10-K application that Chris will discuss in just a moment.
We are also increasing our full year financial guidance and now expect revenue of 41.4 million to 41.6.
With GAAP earnings per share of <unk> 60 to 61 cents and non-GAAP earnings per share of <unk> 70 to 71 cents.
Our previous full year guidance called for revenue of 40 million to 44, and GAAP earnings of 53 to 55 and non-GAAP of 60 to 62 cents.
Now I'll turn the call over to Mr ran through some of the more some more of the details in depth.
Thank you and good morning, everyone.
First I'll start with an update on the regulatory status of our five 10-K application for our next generation IV pump.
We continued to progress through the process and have had some recent communication with FDA regarding their review of our application.
The review was comprehensive and as expected they have requested additional testing the performed on the new device.
Much of this testing can be performed in house, while other testing will need to be performed by third parties.
There are also administrative task that we need to work through in the form of meetings and other communications with FDA to clarify the need for additional testing regarding some of their requests.
While we expected to receive comments on our application the nature of their questions. We will take some additional time to resolve.
For these reasons.
We now believe clearance is more likely to come in the second half of next year.
We also expect to incur additional costs than initially anticipated.
Anticipating related to the testing and administrative matters.
We believe much of these costs will be incurred during Q4 and are not indicative of an ongoing run rate.
Our estimates on timing of potential <unk> are always based on our analysis of the information we have at the time.
Despite the movement in our current estimates we do not believe that this has any impact on our longer term success of the next generation IV pump or of the company.
Regarding supply chain, the trend of limited supplies and higher costs for certain materials that we noted last quarter continued during Q3.
However, we have also been able to obtain favorable pricing for many other components used in our products.
For the quarter, we placed orders for materials going out 12 months at prices that were slightly favorable to our historical costs.
Okay.
Please note that purchases are variable from quarter to quarter, and we not we may not be able to achieve favorable pricing on future purchases.
Regarding the limited supplies of certain materials, we continue to exert elevated levels of energy in our sourcing efforts.
Like many other companies. We expect this will continue for an extended period of time.
With that said to date, we have not experienced any significant changes to our production schedules.
We remain cautious regarding the global supply chain and the potential impact to <unk>.
Now I will review, our financial results for the quarter and as always I'll be discussing these results on a GAAP basis as well as on a non-GAAP basis.
You can find a description of our non-GAAP operating measures in this morning's release.
You can also find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's release.
Also please keep in mind that when comparing year to date results. During the first nine months of 2020, we recognized $2 $8 million.
G&A expenses related to our former CEO.
Excuse me.
As we reported earlier this morning, and Roger summarized a moment ago third quarter revenue third quarter 2021 revenue was $10 9 million and.
An increase of 41, 7%.
Compared to the third quarter last year on a sequential basis revenue grew 11, 2% over Q2 this year.
From geographic mix revenue from domestic sales increased seven 9% to $8 $7 million during the current quarter.
Revenue from International sales also increased 26, 2% to $2 2 million.
The increase in domestic revenue was primarily driven by higher sales of our devices.
Our domestic revenue accounted for 79, 5% of total revenue for the for the current quarter compared to 82% for the prior year quarter.
Device revenue increased 61, 1% to $7 1 million for the third quarter 2021.
This was driven by a 65, 6% increase in monitor revenue and a 56, 4% increase in IV pump revenue.
The average selling price of our MRI compatible IV infusion pump system. During the third quarter 2021 was approximately $33000 compared to.
Proximately $37800 for the third quarter 2020.
This decrease relates to higher international unit sales during the current quarter.
The average selling price of our MRI compatible patient vital signs monitoring system. During the third quarter 2021 was approximately $40600.
Compared to approximately $43000 for the same period in 2020.
This decrease also relates to higher international unit sales during the current quarter.
Revenue from disposable from disposables and service increased 17, 3% to $3 $3 million for the current quarter.
And revenue from our maintenance contracts was consistent at $5 million for both periods.
Gross margin was 77, 1% for the 2021 quarter compared to 74, 6% for the 2020 quarter.
The increase in gross margin percent is the result of favorable overhead absorption from higher unit production required to meet customer demand.
Going back to our comments about the global supply chain.
We remain cautious about materials at this time about material costs at this time however.
However, we continue to believe that any negative impact from higher costs will likely be limited and partially offset by higher levels of unit production required to satisfy customer demand.
Resulting in gross margins that are very consistent with our historical ranges.
Operating expenses were $5 3 million or 48, 8% of revenue compared to $5 million or approximately 64, 4% of revenue for the third quarter last year.
On a dollar basis. This increase was primarily due to higher sales commissions and sales activities expenses incurred during the current quarter, partially offset by lower stock compensation expense.
As a result income from operations grew three grew to $3 $1 million for the current quarter compared to 800000 for.
For the third quarter last year.
As mentioned earlier, we expect higher operating expenses in Q4 from increased regulatory and engineering costs related to our next generation IV pump and.
And again, we believe these additional expenses are limited to the five 10-K clearance process and not indicative of our go forward run rate.
We recognized tax expense of approximately $518000 this quarter compared to a tax benefit of approximately $281000 in the 2020 quarter.
This increase is due to higher taxable income in the current quarter.
And the benefit taken last year from the cares act that allowed us to carry back Nols to years prior to the tax cuts and jobs Act.
On a GAAP basis net income was <unk> 20 per share compared to <unk> <unk> for the 2020 quarter.
And on a non-GAAP basis adjusted income was 23 per diluted share for the current quarter compared to <unk> 11 for the third quarter last year.
Cash from operations grew to $7 9 million for the nine months ended September 32021 from $3 3 million for the same period last year.
For the 2021 period cash provided by operations was positively impacted by higher net income.
And cash inflows from accounts receivable and deferred revenue.
And negatively impacted by cash outflows for prepaid expenses income tax payments and inventory purchases.
For the three months ended September 32021, and 2020, our free cash flow a.
The non-GAAP measure was $3 2 million and $1 $3 million respectively.
And with that I'll turn the call over for questions operator.
Okay.
Jesse.
Thank you speakers participants we will now begin the question and answer session.
To ask a question over the phone you May press the star key followed by the number one to withdraw your request you May press the pound key.
Again, Thats star one to ask a question.
Florida power <unk> to withdraw your question.
Our first question is from the line of Scott Henry of Roth Capital. Your line is now open.
Thank you and good morning.
Really strong results.
I guess for starters.
Can you it seems like the monitors, particularly.
Are putting up some very solid numbers can you talk about.
What was the environment out there and.
Perhaps what's driving this upside.
Yeah, I can take a crack at that stock good to hear from you how you're doing and good question.
Yeah.
Sure.
I'd say number one is frankly.
All that.
We're learning this solid bet.
And.
I know I know, it's the investment world, sometimes it seems when a company makes a new device.
All of the effort is in getting designed in cleared and that assumes it's cleared you hand, it to the sales force.
They take us.
Just go from zero to 100 mile an hour selling it right out of the gate, but.
That that is not reality and.
And I think it's just taken a while for our era.
Our team to really learn and understand the product.
And the environment the use environment, the customers and most of all how to compete against.
Large well entrenched competition in the farm of Philips in that space.
So that's probably the number one thing thats been over these last couple of quarters, you've seen and mentioned that the monitor is just.
Is just picking up and picking up picking up there is also a little bit of lift here, we see in just the last couple of months.
Due to Philips, having some trouble, which is pretty well advertised in the news you know with their giant recall in the respiratory area.
And.
And I think generally they had a comp they had their earnings call just the other day and reported that revenue was was down because of supply chain issues. So.
I'd say a little bit of that is starting to help us too.
So I hope that answers your question, but that's I think the biggest factors were just.
Just better at getting out there and competing in.
And finding the customers plus once you get it.
You get over that.
You got a few units planted in critical areas, there and confidence that the product works to the next customer goes up so makes the job.
Yes.
Introducing a new a new device.
Again get less difficult because it's not quite so new it's more and more proven each day.
Okay, great. Thank you Roger for that color that was helpful.
Question.
With regards to the leg.
Excuse me the regulatory pathway with the pump we always knew it's a challenge to get pumps through the Fda's eventually it happens but.
It is expected to be a couple delays along the way, but my question is how.
How confident are you.
Of the the second half.
22 approval timeline versus where you were a quarter ago. I mean, we know it's going to be a little later, but how.
How is your confidence level given this increased inner.
Interaction that you've had with the FDA.
Well.
That's why Chris.
We're confident with.
At this point with what we see it no.
That the back half of the year as the likely spot.
Yeah.
The FDA has been a little challenge some of the reason discipline.
It was slow to get the whole thing started was there a little busy there at the FDA last year with all of the emergency use.
Issues they had to deal with that's been some of the explanation we've gotten from our our people at the FDA that are handling. This for this thing. So we hope that thats easing off right as Covid eases off.
And they'll start to go into work Theyre still working remotely most of them and and without the burden of all those things.
Things, which I think is trailing off.
They'll be able to spend more time on.
The conventional business of the FDA like clearing IV pumps.
Okay, Great and then the final question is a little bit more of a big picture question.
Given.
This supply supply chain issues.
Sort of.
Inflationary environment as well.
Do you expect to have some pricing power, perhaps to take price on some of your product offerings. Given this background backdrop. It seems like some of your competitors.
They struggle to fill their demand as well, but all of this could potentially lead to higher some pricing power for you.
What are your thoughts on that topic.
Well.
I think I've mentioned this before maybe the last call I mentioned that.
I kind of said this a priority earlier this year back in the spring to.
To start to try to move some of this pricing that we have especially with the big Gpo's upwards.
And.
Over the last nine months, we have been successful at.
Moving.
Moving prices in that direction so.
We think we think we're getting into a very good position with exactly that increasing prices a bit to cover.
Costs that have been coming up on us this past year and then I think it's I think it's starting to reflect in some of the.
When.
When you look at the earnings right.
Some of this absorption Chris mentioned, we've got better absorption so costs are.
From our burden the way we burden our labor here is is less of a negative factor.
But also we're starting to see the average pricing certainly in the more along the lines of the monitor equipment in the pump equipment that we've been able to move that northward pretty well.
Okay great.
Thank you for taking the questions and congratulations again on the strong results.
Thanks Scott.
Again participants its star one to ask a question, Florida power <unk> to withdraw your request.
Speakers. Our next question is from the line of Lisa Springer of singular research. Your line is now open.
Thank you good morning, and congratulations on very nice quarter.
Thanks, Lisa good morning.
I wanted to ask you do you feel that your access to customers. This back at pre Covid levels and could you comment on.
The companys efforts to make sales outside your traditional hospital departments.
In radiology.
Yes, I could take that I guess again so.
It's been pretty much opened up for.
For most of the year with the Delta variant here about seems like.
Early in.
In the third quarter couple of months ago.
We had heard of I believe it was only one particular hospital group that had gone back onto restrict access and we were for a time worried that that was going to spread like delta virus.
Irish itself, but it did so.
And I believe they came back off of.
That those precautions.
They re enacted so nobody else followed suit so yeah to answer your question just real directly it's it's not.
Access is not a big limiting factor anymore.
And I think the second part of your question was are we.
How are we able to get into now.
I was speaking about generally access to hospitals, and primarily our radiology and anesthesia context.
Second part of your question May be more about how we also have this.
This call point and ICU to really push forward the multi pump business, so our user still little snug.
Not like they were but yes.
They are still a bit of difficulty to actually get into the ICU.
And so maybe we don't actually have so many meetings actually eni SKU, but we can get the ICU people out of there for a meeting, let's say down the hallway that sort of thing so.
It still has.
A ways to go before it's business as usual.
Okay and did you have any sales of the F&B device during the quarter.
I believe we.
And we had we had a trip, but we had an order for three often hear about 60.
60 days ago.
So I think the sales occurred the deliveries have not yet occurred I think they are tied to.
Are there new construction or refurbishment of an existing MRI. So I think those will come.
Next year right.
I think the deliveries will come next year.
These things these things are going in on that.
The installation of the delivery timings way different for that device. Then then pumps and monitors it generally goes along as Chris said with construction so.
Getting an order and then getting that getting the exact time that they want to put in that's two different things.
Okay, and Roger could you comment on the R&D pipeline beyond the new infusion device what would be next up and do you anticipate maybe doing any other regulatory filings next year.
Well the short answer to that is no there won't be any other regulatory filings coming up in these next 10 to 12 months.
And.
Working on the next thing we've got we've got a couple of we've got a couple of irons in the fire, but frankly, we are we.
We are working very hard with the FDA to clear the current pump so.
We have as you can see by the amount of money we spend on R&D, we don't have a lot of extra people laying around.
And so when heavy demands come in for things like more testing as Chris mentioned for the pump.
That takes up our capacity pretty well.
Okay, great. Thank you very much.
Alright.
Thank you participants I'll now turn the call back over to Roger Susi for final remarks.
Alright. Thank you operator as I said at the beginning of the call very pleased with these results and proud of how the team continues to perform overall our business remains robust demand for our products is as high as it has ever been with Q3, representing our second high water Mark in a row.
As Chris mentioned, we are cautious about global supply chain issues. However, we have been able to hold gross margins at our historical levels and we are making progress on our 500 10-K application, although it will take a little longer and a little more money than initially anticipated.
We remain steadfast in our opinion and our optimism excuse me and look forward to speaking with you. Once again soon thank you all.
Okay.
And that concludes today's conference call. Thank you all for joining you may now disconnect.
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