Q4 2022 IRadimed Corp Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
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Ladies and gentlemen, welcome to revert to my Corporation fourth quarter and full year 2022 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 2nd 2023.
Time sensitive information that is accurate only as of today.
Earlier <unk> released its financial results for the fourth quarter and full year 2022.
This press release announcing the company's earnings is available under the heading news on their website at <unk> Dot com.
The press release copy 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> Com and a replay of the call will be available on the website for the next 90 days.
Some of the information in today's session will constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements focused on future performance results plans and events and May include the company's expected future results.
I'll write them. It reminds you that future results may differ materially from these forward looking statements. It just several 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 Securities and Exchange Commission, which may be obtained free from the SEC's website at SEC Gov.
I would now like to turn the call over to Mr. Roger Susi, President and Chief Executive Officer of <unk> Corporation. Mr. Susi. Please go ahead.
Thank you.
You all for joining us on today's earnings call.
It's truly wonderful to report that once again, you're out of Med has had yet another excellent quarter of revenue and earnings growth as we reported in this morning's release.
Q4, 2022 was our top revenue quarter ever and our sixth consecutive quarter of record revenues I'm also very pleased to announce today that as you may have seen our board of directors has approved a special cash dividend of $1 five per share.
But allow me to take a sharp dive into the financial performance we have achieved.
As reported in this morning's release fourth quarter revenue was $14 9 million, a 25% increase over the fourth quarter last year.
With GAAP diluted earnings per share for that fourth quarter of 29 cents.
For the full year ended December 31 2000.
Our revenue was $53 3 million a 28% increase over the prior year ended in December 'twenty one.
GAAP diluted earnings per share for the full year 2022 has come in at a dollar to per share a 37% increase over the full year in 'twenty one.
Our teams from sales to purchasing and production engineering to service regulatory to finance dealt not only with the challenges of delivering this 28% growth.
But they did it in the face of continuing supply disruptions and regulatory challenges as well as worldwide tension.
I'm extraordinarily pleased with the results and the extraordinary efforts of our entire <unk> team.
The sales team did an exceptional job this past year with bookings outstripping, our fantastic 2022 shipment volume such that we enter 2023 with an even larger backlog than we started.
Customer demand is strong for all the product lines and with the continuing problems of our competitor in the MRI monitor space and their reported business directions, we feel very confident in continuing record revenue and earnings growth into 2023.
Additionally, the strong backlog provides us excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise 2022 sales growth was well balanced and strong for both the pump and the monitor product lines with an increasing number of new F. M D products shipping as well.
Though we will expect the monitor line growth.
To become a leading driver in 2023.
Last quarter as reported previously we withdrew the 500 10-K for our new 38, 70, EMR IV pump.
And we will require re file excuse me later this year. Although this was unfortunate and will lead to a delay of course and the launch of this new pump as you see <unk> growth has been and I firmly believe we'll remain extraordinary.
The one door may have.
<unk> been closed temporarily another has apparently opened the MRI monitor business is simply on fire and we expect 2023 to deliver revenue growth near 20% again, you shall hear more on this later and I would welcome any questions regarding details of either revenue or FDA issues in our Q&A.
Yeah.
As we announced a few weeks earlier, we expect to report revenue in 2023 of 61 million to $63 million.
With GAAP diluted earnings per share of $1 10 to $1 20, and non-GAAP diluted earnings of $1 23 to $1 34.
For the first quarter 2023, we expect to report revenues of 14.6 to $14 9 million with GAAP diluted earnings per share of <unk> 23 to 25 cents and non-GAAP diluted earnings per share of <unk> 26 to 28 cents.
Now I'd like to turn the call over to our <unk>.
Relatively new now CFO , Jack Glenn to review the financial results of the quarter.
Thank you Roger and good morning, everyone.
As in the past our results are reported on a GAAP basis, and a non-GAAP basis, you can find a description of our non-GAAP operating measures in this morning's earnings release and a reconciliation of these non-GAAP measures to the GAAP measure on the last page of today's release.
As we reported earlier this morning revenue in the fourth quarter of 2022 was $14 9 million, an increase of 25% compared to the fourth quarter of 2021.
On a sequential basis revenue grew 11% over Q3 of 2022.
Domestic sales increased 28% to $12 2 million compared to $9 5 million in the fourth quarter of 2021.
International sales increased 8% in the quarter to $2 6 million.
Overall domestic revenue accounted for 82% of total revenue for Q4 2022 compared to 80% for Q4 of 2021.
Device revenue increased 23% to $9 8 million.
This was driven by a 51% increase in monitor revenue as our sales team continued to execute and gain market share in the monitoring business.
Revenue from disposables and services increased 32% to $4 5 million for the fourth quarter of 2022, while our maintenance contracts increased 17% to $595000.
The gross margin was 75, 5% for the 2022 quarter compared to 77, 9% for the <unk> 2021 quarter.
For the full year 2022, the gross margin was 77, 4%.
The decrease in gross margin for the quarter was primarily due to a higher input cost and variations in the product mix.
Operating expense were operating expenses were $7 million or 40%, 47% of revenue compared to $6 1 million or 52% of revenue for the fourth quarter of 2021.
On a dollar basis. This increase is primarily due to higher sales commissions and sales activities.
Higher general and administrative expenses for additional head count and higher legal and professional expenses.
As a result income from operations grew 37% to $4 3 million for the fourth quarter of 2022.
We recognized a tax expense during the fourth quarter of 2022 of approximately $1 million 31000, compared to a tax benefit of approximately 779000 in the fourth quarter of 2021.
The tax benefit in the fourth quarter of 2021 was primarily due to a onetime benefit associated with stock based compensation expense the.
The effective tax rate for the year of 2022 was 27%.
On a GAAP basis net income was 29 per diluted share compared to 31 for the 2021 quarter with the difference due to the tax benefit.
Q4 in 2021.
On a non-GAAP basis adjusted income was <unk> 32 per diluted share for the 2022 fourth quarter compared to 33 for the fourth quarter of 2021.
Cash from operations was $3 million for the three months ended December 31, 2022 down from $3 4 million for the same period in 2021.
For the three months ended December 31, 2022, and 2021, our free cash flow a non-GAAP measure was $2 6 million and $3 2 million respectively.
And with that I will now turn the call over for questions operator.
Thank you we will now begin the question and answer session.
And as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced so we draw a question. Please press star one again, please standby, while we compile the Q&A roster.
And our first question coming from the line of Scott Henry with Roth Capital. Your line is open.
Okay.
Thank you good morning, and congratulations on the strong results.
I did have a couple of questions.
First.
Perhaps I missed it but did you give the average price of the pumps and monitors during the quarter.
Yeah, we did Scott.
We've discussed internally and we're not going to be.
Given the specific.
As we have in the past on the Asps unless there is any material change in that there is.
The calculation can get quite complicated and also just from a competitive standpoint, but also just the calculation can vary quite a bit with the different types of product.
It monitors and pumps et cetera, but I can.
SBA asps in the quarter were solid and there is no real.
Difference from previous quarters.
Okay. Thank you that's helpful.
Then.
You have disposables and services was.
Is it just strong it was really strong in $1 million higher than we've seen before often.
Number with a three in it.
Could you tell me could you give any color on what happened and more importantly is whether that should continue or it was an aberration or a trend I guess.
Well, maybe I'll jump in a little bit then I'll, let Jack follow up with that.
It it shows.
We're selling a lot of IV sets, so the disposables up mainly on.
Leading the way from the pump perspective, with the sterile sets, but also we've seen this electrode which is.
The largest of the let's say accessory or disposable items that go with the monitor the electrodes have been yes.
Yes ill just running strong as I said earlier the monitors.
Has been hugely successful since we launched it in this past year was was was just off the hook growth and along with that are going these electrodes. So.
And then we're selling maintenance.
Quite well to the maintenance sales.
Had a.
They've been besides the bit about two years ago.
No.
With a change in sort of the ideology of commissioning if you will of that item and we put that back, but we sort of corrected that two years ago, and so youre seeing that the sale of the extended maintenance.
Kicking in and returning two in passing where it had been prior to that change two years ago. So you put all those together and yes, we're doing a great job with these accessory maintenance items as well so do we expect it at this at this level to continue.
With the continued growth of the monitor that'll keep pulling.
The.
The electrode with along with that.
The growth rate of the disposables is just right along with the pumps and we had good growth with the pump. This past year. So yes, I mean, we see it as sustainable generally that's a.
Ah.
Sure.
We would be surprised if it.
If it hit some sort of plateau at this point.
Okay, great. Thank you Roger.
Since I got you.
On the line, maybe could you give a little more color on the competitive landscape for me you talked about competitor problems in the monitor market.
Just any any kind of at least big picture idea of what Youre seeing out there and how we should factor that into 2023 and beyond.
Yeah well.
I don't know how many of you out there on the call I've had the chance to.
Listen in on the recent Phillips.
Earnings call that they had I believe Monday or follow what they do they don't breakout where we compete with them and as MRI monitor spaces.
I'd, rather tiny portion of what they do but.
I think if you read.
What they were describing.
On their call Monday.
You could see that.
They've made it very clear that they're going to prune various.
Yes.
Items from their catalog and if they can't be everything to everyone any longer and they're going to shoot for.
They're going to they're going to put our resources into high growth large busy.
Businesses that are that are scalable.
So when I read those and hear those comments.
Okay.
I'd have to I'd have to say that this line that we compete with them.
In being MRI patient monitoring.
I don't think it checks any of those boxes. So.
And we've seen them reduce the sales force radically.
Sure.
The one time had pet territory that they had they had over 40 territories manned.
Now, it's it's well under 20, we understand so.
All of that all of that I think our tea leaves that are not too hard to read and I would I would just suggest everyone have a glance at Philips is call script.
Okay. Thank you Roger for the color that's helpful.
Shifting to the income statement.
Gross margin.
They've been somewhat variable will be clean.
In a range between 76 and eight.
80% or close to 80.
Second and third quarter were higher first and fourth quarter were lower I guess the question is should I think about that is just the average of those numbers is a good number with variability throughout or do you think theyre trending in one direction or another direction.
No I think I think you hit it if you look back many many quarters.
We've been we've been just in that range and.
I think that range is a fairly tight range.
Plus or minus one and a half or 2% around that central ride of that average I think is a fairly tight grouping and yeah. So.
I don't.
I don't expect that we will.
Able to break out of the high end of that significantly and sustain it but we won't fall out of that range either so that's to answer your question yes.
I believe the average of what Youre seeing in these last many quarters is the fact.
Okay, great. Thank you and final question for Jack other income.
It is starting to jump out at a positive $4 50 is that just higher interest rates for the cash balance or anything else going on there.
Yes, exactly right. That's what that is clearly, it's yet with our cash and the higher interest rates that we are now seeing a nice interest income coming in on a quarterly basis.
Okay, great. Thank you both for taking the questions.
Thank you thanks, Scott, let's talk.
Thank you one moment please for our next question.
And our next question coming from the line of.
Christopher Sakai with singular research your line is open.
Alright. Thank you guys Bob was a theme park class.
One Brian .
First of all congrats on the great results and guide.
The dividend.
Last month.
And <unk> Zeng.
I was wondering if you can give me some color on the trend of gross margins on disposal buttons.
Yes.
Oh well.
It's just.
I mean, it's just very steady so yes.
Yes, we're not seeing.
Every question is are we seeing cost impacts those plastic devices.
PVC in polycarbonate and such.
Yes, there have been increases in that sort of in those commodities.
But it hasnt reflected by the time, we mold those parts and turn them into what we turn them into Theres still pennies in the cost of the IV set. So we don't see any we haven't we haven't had any negative impacts to the cost structure in a disposal.
Okay, and given you know all of that inflation.
Supply issues.
Can we assume that you guys have been reasonably able to pass on those.
Those are.
Price increases.
Inputs.
Customers.
Short answer is yes, we are.
We.
We did that rather early I guess.
In the Covid hit.
We started getting hit this.
This is a year and a half ago at least six seven quarters ago.
We started we started seeing the component issues.
Electronic components and whatnot, primarily.
Really.
Really given us heartburn and we were we were able to negotiate.
Increased prices for.
For these key products the pump on the monitor.
Some of that.
Because of the contracts and how long they take.
Some of those have become effective already.
And some of them, though we negotiated them over a year ago.
They are yet to come become effective still in these next six.
Six months, so yes, we have.
Price increases some have taken place.
Where are reflected in our earnings.
And some have been negotiated in and are actually physically accountable for yet but will be over the next two quarters.
Great and.
Your next step you can share with us the bottleneck.
Bob.
Disposable part of the wise.
Sure you track.
A lot of color you can give all of that is trending.
That would be very helpful.
You can jump in on that one.
Not sure if I was around as far as the trend on the disposables.
Sales.
In both trials.
So essentially.
Like one way to look at that.
The new model as that is the disposable revenue stream on the devices and.
A.
I know you don't divided up by units, but if we can and then maybe if you guys track it.
Yes.
<unk>.
Sure.
Our device or any any color you can give us some understanding on how it is trending.
Maybe more disposables up going out part of eyes or less or it is mostly on the price for something if you can give us a color on that.
Yes, I think I think Roger touched on some of this earlier when we look at the disposables and certainly the growth there is correlating with the.
The growth in both the pumps and monitors.
As a percentage of our sales I think it's.
Total sales its gun range somewhere around 20%, 25%. This past quarter I think it was around 30%. So it is showing some growth, but I think it's probably is going to stay within that same range as a percentage of sales going forward is again correlate pretty closely with that.
Growth in the devices.
Perfect I might add.
<unk> is a little bit.
Different.
Though we have a disposable that's a nice piece it revenue and has a nice margin.
Unlike a lot of companies they may build their business model.
The disposable and offer the thing that uses the disposable razor if you will.
Yeah.
Not so great a margin.
If you if you delve into our margins.
Detail.
These gross margins that we've talked about a few minutes ago. These are the same whether it's the device or the <unk> or the disposable.
So.
That should tell you a lot more about our model, it's not quite maybe typical in that regard.
Wonderful.
Any color on.
In terms of the traction you guys have had recently or over the last six months with the providers in terms of the capital spending outlook.
I'll change the law and lost.
Two or three years so.
I was wondering any color you can provide.
Well to us.
To us it looks like.
I mean it.
Pretty good as you can see we've been increasing our revenues at quite a fantastic right. So I think in the lines. We are in in this niche market.
Maybe we're we're seeing.
Capex expenditures are are.
Still quite quite healthy and enjoyable to us versus other markets that we don't play in maybe.
Where I've heard things.
Things can be more snug.
As far as.
<unk> expenditures of various facilities so but.
But I think you can see from what we what we do in our niche.
Ah.
We're still enjoying a pretty good.
A pretty good look from our customers.
Absolutely so maybe one way to think.
Far far for us is that things might look a little bit.
Difficult or different.
The average.
Medical device provider, but considering a niche market whatever capital constrained.
Why does might or might not have.
You guys are pretty much unaffected.
Maybe that would you agree with that.
Yeah.
Oh, Yes, I would say that in our little pocket, our little corner of the medical device universe, Yes, we're a little immune to.
We haven't been impacted.
Bye bye.
Other areas that you may see being a bit more dampened by capex allocation.
Kind of.
Under the radar there.
Yeah, Greg good place to be on that.
And finally right.
Lee.
Also looks like you guys have been.
Maybe under the radar there is not the right word but sort of unaffected.
By the supply chain issues and generally the device industry has been facing.
<unk> offshore and all it looks like that also has not affected you guys are maybe.
Not as much as well.
All.
All the players.
Any any comment on that any color on that.
Yes.
Well.
Look.
That way, but I can tell you we've had a lot of sweat and and we've had some near misses.
It hasnt been fun.
That has been in every day.
Consideration at some point during really literally each day.
<unk>.
But I would say that.
With our size.
And our margin that helps right.
So we have seen we have seen components that we've just had to get I mean, we've gotten robbed on them we've had.
I could think of hands full of components that were up 50 cents or a dollar that we pay 20 bucks for to get done.
<unk>.
So we will do it we'll do it to keep keep keep ourselves moving.
<unk>.
And we're very agile at also substitution of.
Components.
So the design is all done here all the expertise is here its not scattered around the world by larger companies tend to get as they grow and.
So it slows them down theyre not very agile.
Seeking alternative solutions as we can be so.
You put all that together and yes.
As I said earlier, thanks to <unk>.
Materials are purchasing people on our manufacturing people in to a good extent, thanks to having a nice backlog, where we can shift between different things throughout the quarter as we solve one problem and another one pops up in another product line. So yes, there's a lot of juggling going on but we have managed to Dodge it and we are.
I'll say as you probably read in the papers these days.
Supply chain issues are.
Our starting to fade fade back way theyre, not increasing and we've seen it.
We've seen ourselves starting to get deliveries of parts at the right price again.
No.
Where we've been in a waiting line for some cases over a year.
Hope that answers your question.
Yeah, Yeah, so so well.
Well kudos too.
You know I think we've shown on the management here.
Concerning thing that has been a lot of our CLO under the surface, but it looks like you managed to keep the southwest com.
And deliver to our customers so great.
Thanks for the color.
Thats all I got.
Youre welcome good to talk to you.
Thanks.
Yes.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Mr. Susi for any closing remarks.
Thank you operator, well, we couldnt be more pleased to have had this opportunity to report such a strong gain for 2022 and to share our expectations for 2023.
That is running very efficiently and its products are being adopted at an accelerating rate with margins at levels of many of our peers may envy.
All company areas are growing including new physical plant at recently purchased site, which we are now designing to meet our continuing growth needs.
With that I look forward to reporting our future successes as the year progresses and thank you all.
Okay.
Ladies and gentlemen, this concludes the call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
Okay.
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Uh huh.
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Yes.
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