IRadimed Corporation Q1 2023 Earnings Call
Operator: Please enter your conference dial-in PIN and press pound when finished.
Yes.
Jack Glenn: 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 Q1 2023 was $15.5 million, an increase of 26% compared to Q1 2022. Domestic sales increased 20% to $11.9 million, and international sales increased 50% to $3.5 million. Overall, domestic revenue accounted for 77% of total revenue for Q1 2023, compared to 81% for Q1 of 2022. Device revenue increased 24% to $10.5 million. This was driven by a 69% increase in pump revenue as we shipped a large percentage of the strong bookings of pump orders received in Q4 of last year.
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 first quarter of 2023 was $15 5 million, an increase of 26% compared to the first quarter of 2022.
Domestic sales increased 20% to $11 9 million and international sales increased 50% to $3 5 million.
Overall domestic revenue accounted for 77% of total revenue for Q1 2023 compared to 81% for Q1 of 2022.
Device revenue increased 24% to 10.5 million. This was driven by a 69% increase in pump revenue as we shipped a large percentage of the strong bookings of pump orders received in Q4 of last year.
Jack Glenn: Revenue from disposables and services increased 34% to $4.4 million for Q1 2023, while our maintenance contracts were consistent at a half a million dollars for both periods. The gross margin was 75.7% for Q1 2023, compared to 76.2% for Q1 2022. The decrease in gross margin is primarily due to the geographic mix, as international sales, with their inherently lower ASPs, represented a larger portion of total sales in the quarter as compared to Q1 of last year. Operating expenses were $7.7 million, or 49.7% of revenue, compared to $6.3 million or 51.2% of revenue for Q1 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount and higher legal professional expenses. As a result, income from operations grew 30% to $4 million for Q1 2023.
Revenue from disposables and services increased 34% to 4.4 million for the first quarter of 2023, while our maintenance contracts were consistent at a half a million dollars for both periods.
The gross margin was 75, 7% for the 2023 quarter compared to 76.2% for the 2022 quarter.
The decrease in gross margin is primarily due to the geographic mix as international sales with their inherently lower asp's represented a larger portion of total sales in the quarter as compared to the first quarter of last year.
Operating expenses were $7 7 million or 49.7% of revenue compared to $6 3 million or 51, 2% of revenue for the first quarter of 2022.
On a dollar basis. This increase was primarily due to higher general and administrative expenses for additional head count and higher and legal professional expenses.
As a result income from operations grew 30% to 4 million for the 2023 first quarter.
Jack Glenn: We recognized a tax expense during Q1 2023 of approximately $944,000, resulting in an effective tax rate of 21.7%, compared to a tax expense of approximately $573,000, with an effective tax rate of 18.7% in Q1 2022. This increase in the effective tax rate is largely due to the higher taxable income in the quarter as compared to the same period last year. On a GAAP basis, net income was $0.27 per diluted share, compared to $0.20 for the 2022 quarter. On a non-GAAP basis, adjusted income was $0.30 per diluted share for the 2023 Q1, compared to $0.22 for Q2 2022. Cash from operations was $4.6 million for the three months ended 31 March 2023, up from $1.4 million for the same period in 2022.
We recognized the tax expense during the first quarter of 2023 of approximately 944000, resulting in an effective tax rate of 21, 7% compared to a tax expense of approximately 573000 with an effective tax rate of 18, 7% in the first quarter of 2022.
This increase in the effective tax rate is largely due to the higher taxable income in the quarter as compared to the same period last year.
On a GAAP basis net income was 27 cents per diluted share compared to <unk> 20 for the 22 to quarter.
On a non-GAAP basis adjusted income was <unk> 30 per diluted share for the 2023 first quarter compared to 22 cents for the second quarter of 2022.
Cash from operations was $4 6 million for the three months ended March 31, 2023 up from 1.4 million for the same period in 2022.
Jack Glenn: For the 3 months ended 31 March 2023, our free cash flow, a non-GAAP measure, was -$1.9 million, which was due to the purchase of land for our future office and manufacturing facility of $6.2 million in the quarter. With that, I will now turn the call over for questions. Operator?
For the three months ended March 31, 2023, our free cash flow a non-GAAP measure was a negative 1.9 million, which was due to the purchase of land for future office and manufacturing facility of $6 2 million in the quarter.
And with that I will now turn the call over for questions operator.
Yeah.
Operator: Wonderful. Our first question comes from the line of Frank Takkinen from Lake Street Capital. Go ahead, Frank.
Wonderful.
First question comes from the line.
Okay.
As Frank Pakenham from Lake Street Capital go ahead Frank.
Frank Takkinen: Great. Thanks for taking the questions and congrats on all the progress in the quarter. I wanted to start with one related to the pumps and monitors expectations for 2023. Can you guys just kind of walk through what you're thinking for, roughly speaking, growth rates from each of those line items? Really trying to get at pumps was obviously disproportionately strong here. Monitors maybe was a little bit below where it's been in previous quarters, but sounds like it's not a demand thing and it's more supply related. Maybe kind of talk through the different factors you're thinking about in the growth of those two line items in 2023.
Great. Thanks for taking my questions and congrats on all the progress in the quarter wanted to start with one related to the pumps and monitors expectations for 2023 can you guys just kind of walk through what you're thinking for roughly speaking growth rates from each of those line items.
Really trying to get at pumps was obviously disproportionately strong ear monitors maybe it was a little bit below.
Or it's been in previous quarters, but it sounds like it's not a demand thing and it's more supply related to maybe kind of talk through the different factors you're thinking about in that in the growth of those two line items in 2023.
Roger Susi: Sure, Frank. This is Roger. Good to have you on the call. I'll just go over again, when you look at revenue in Q1, the pump revenue was large because of a holdback in pump shipments in Q4 due to some parts shortages. That doesn't equate to bookings at all. As we mitigate supply chain issues by picking and choosing different product lines off of our backlog. Let's answer now your question more directly. What do we expect for how we're going to book business and bring business in over the coming year, the rest of this year? Monitors are going to be the story. It's getting a lot of our attention from the sales team. I alluded to this last call.
Sure Frank is what Roger.
Good to have you on the call.
So I'll just go over again when you look at revenue in Q1.
The pump revenue was large because.
A hold back in pump shipments in Q4 due to some parts shortages.
So.
That doesn't that doesn't equate to bookings.
At all.
As we mitigate supply chain issues by.
Picking and choosing.
Different product lines off of our backlog.
Melissa This answer your question more directly what do we expect for how high.
We're going to book business and bring business yen over the coming year the rest of this year.
Monitors are going to be.
The story is getting a lot of our attention from the sales team.
I alluded to this last call.
Roger Susi: Basically, we have one competitor in that space being Philips. They're highly preoccupied with other difficulties there. They have been slashing their sales force that was in that group that sells their MRI patient monitor quite a bit. That's put a lot of wind in our sail here. As we went through last year, we started to see it. It continues to be giving us a lot of, let's call it low-hanging fruit opportunities as they seem to be not as present in the marketplace and certainly not as much of a competitive obstacle. Of course, the sales team gravitates to that. As hunters, they're going where the shooting's easy. That opportunity is going to continue to unfold here throughout this year, we expect.
Basically we have one competitor in that space being Philips and they're they're highly preoccupied with other difficulties there and they have been slashing their sales force that was.
Was in that group that sells their MRI patient monitor.
Quite a bit and so that's put a lot of a lot of wind.
In our sale here as we went through last year, we started to see it and it continues to be a.
Giving us a lot of let's call it low hanging fruit opportunities as they seem to be.
Not as present in the marketplace and certainly not as up as much of a competitive obstacle. So.
Of course, the sales team gravitates to that as hunters Theyre gone, where the where it's the chute zee and <unk>.
That opportunity is going to continue to unfold here throughout this year, we expect show up.
Roger Susi: You'll probably see the monitors, in this next couple of quarters, really be the higher growth story with the pump being much less, since these monitors are drawing attention, and we're going to pick up that more low-hanging fruit as we can. Having said that, there's still growth in the pump business, of course, but the monitor will be the story. Hope that gives you some color.
Youll, probably see the monitors.
In this next couple of quarters really be a the higher growth story with the pump.
Being.
Yeah.
And much much less since its.
These monitors are drawing attention and where we're going.
To pick up that more low hanging fruit as we can I Havent said that there is still growth in the pump business of course, but the monitor will be the story hope that gives you some color.
Frank Takkinen: No, that's great context, and directly related to that, can you maybe speak to your manufacturing capacity specific to the monitoring line and talk to the manufacturing expansion initiatives?
No that's good context and directly related to that can you maybe speak to your manufacturing capacity specific to the monitoring line and talk to the manufacturing expansion initiatives.
Roger Susi: Sure. Yeah. We're getting busy here, but we're still running just a single shift. I don't think the capacity will get tight here in the next quarter or two to where we'll be even looking at a second shift yet. The new building, which gives us, manufacturing space-wise, I think about triple the manufacturing space. That won't be ready until late in 2024. As we approach that time during 2024, if our opportunities continue to be so great in growing this monitor business, we'll surely be looking at extending work hours, maybe going to a second shift and so forth. Not in the very near term.
Sure Yeah.
While we're still running.
Getting busy here, but we're still running just a single shift.
I don't think the capacity will will get a tight here in the next quarter or two to where it will be even looking at a second shift yet, but the new building.
Which gives us.
Manufacturing space Wise, I think about triple.
The manufacturing space.
That won't be ready until late in 2024, as we approach that time during 2024.
If our if our opportunities continue to be so great in growing this monitor business will surely be looking at.
Extending work hours, maybe go into a second shift so forth.
But not in they're not in the very near term.
Frank Takkinen: Okay, that's helpful. Last one from me. Appreciate the updated commentary on the 3870 IV pump. Can you talk to the timelines that you're thinking related to maybe submission and response from the FDA after submission?
Okay. That's helpful. And then last one for me appreciate the updated commentary on the 30th Kevin 70, IV pump can you.
Talk to the timelines that you're thinking related to maybe submission and response from the FDA after submission.
Roger Susi: Yeah. We are getting the two sub questions out of the way so that we hopefully have a smoother path once we do file. We would anticipate filing in this Q4. Spending the next three or four quarters dealing with subsequent, hopefully smaller list of questions. There's always more. Ultimately having the clearance sometime in the latter part of 2024.
Oh, yes, so are we.
We are.
We are getting the two sub questions.
Out of the way so that we hopefully have a smoother path. Once we do file we would anticipate a filing in the fourth quarter.
And.
And spending.
The next.
Next three or four quarters.
Dealing with subsequent hopefully smaller list of questions there's always more.
And ultimately having the clearance sometime in the latter part of 2024.
Frank Takkinen: Okay, perfect. I'll stop there. Thanks for taking the questions and congrats again on all the progress.
Okay perfect I'll stop there thanks for taking the questions and congrats again on all the progress.
Roger Susi: Thanks.
Thanks.
Operator: Thank you. Our next question comes to the line of Henry Scott from Roth Capital. Go ahead, Scott.
Thank you our next question.
It comes from the line.
Henry Scott from Roth Capital go ahead Scott.
Scott Henry: Thank you, and good morning, gentlemen. Another strong quarter. I just have a couple follow-up questions to the prior questions. First, on the competitive landscape for the monitors. Everything you said seemed to indicate that it's just as favorable today as it was a month ago, and perhaps even a little more favorable competitive. Am I interpreting that correct? There's no signs of that competitor changing the momentum in any way.
Thank you and good morning, gentlemen.
Strong quarter.
I just have a couple of sort of follow up questions to the prior question.
First on the competitive landscape for the monitors.
Everything you said seem to indicate that it's just as favorable today.
As it was a month ago, and perhaps even a little more favorable competitive.
Am I interpreting that correct that there's no signs of that competitor.
Now changing the momentum in anyway.
Roger Susi: No. Just the opposite. If you're talking about some sort of increasing competitive momentum, it's decreasing, if anything. Yeah. Let's say over these last few quarters, we've just continued to see it become much more open field for us to go and hunt in.
No.
Just the opposite if you are talking about some sort of some sort of.
Increasing competitive momentum.
Decreasing if anything show up.
Yeah.
It.
It Yeah, let's say.
Yeah over these last few quarters, we've just continued to see it.
Come.
A much more open field for us to go and the Hunton.
Scott Henry: Wow. Fantastic. Appreciate that update. It seems like you're pretty much selling everything you can make. With regards to how much you can make, it doesn't sound like capacity is the issue, but is it more of, are there some bottlenecks on some certain parts that you can only make so many so fast? Maybe everything, it sounds like that was an issue in Q4 with the pumps, but maybe not anymore? Just could you talk about the individual parts? Are there any bottlenecks there worth mentioning?
Uh huh.
Fantastic I appreciate that update.
And then.
Yeah, I mean, it seems like you are pretty much selling everything you can make and with regards to how much you can make it doesn't sound like capacity is the issue, but it hit more of are there. Some bottlenecks on some certain parts that you can only make so many so fast or or or maybe everything it sounds like that was an issue in.
Fourth quarter with the pumps, but maybe not anymore.
Just could you talk about you know the individual parts are there any bottlenecks there.
Roger Susi: Yeah. No, that's a good question. Yeah, the real constraints are, as I said, we have heartburn on a weekly basis with some parts either used in a pump or a monitor. That continues. That's pretty much a constant. We set a course here, as we ended last year, and we're planning for this year's 2023, with procurement. We set a course to buy over our targets, as far as our target revenue would be by a good margin, right? That we could start to build, if anything, safety stock and, of course, get more visibility to any problem coming. That's the plan. What we're seeing, though, is still some parts very hard to get. Last quarter, the pump issue was, I believe, that was castings, that was metal, the chassis itself, castings. Not electronic, but a material issue nonetheless.
Yes.
It's a good question.
Good question so.
Yeah. The the real constraints are as I said we.
Have heartburn on a weekly basis with with.
Some part either used in a pump or a monitor.
And that.
10 use.
They are just.
Yes, that's a pretty much a constant so we are.
We set a course here.
As we ended up and it ended last year.
And we're planning for this year's 2023 with procurement, we set a course to buy.
Over over our targets as far as our target revenue would be by a good margin right. So that we could start to build if anything safety stock and and of course get more visibility too and a problem coming.
<unk>.
Yes.
That was that's the plan and so.
What we what we're seeing though is scale.
Some parts very hard to get.
Last quarter the pump issue was I believe.
That was castings that was metal the chassis itself castings.
So not electronic but.
A material issue it nonetheless.
Roger Susi: We have in this quarter, we had an obsolescence part with the monitor, and so we had to hustle around and redesign some new componentry into part of the base station for the monitor. That was a pretty big effort and a lot of white-knuckle flying there. We solved it, and so I guess I'm giving you the color that, if not for I guess, to say it this way, supply issues and getting adequate components, as you sort of alluded to when you started your question, that does keep us from just going crazy with what we can build. We are building, as you said, all we can build, not because of the physical capacity of the plant, but as we get materials. That's really the throttling thing.
You know we have in this quarter, we had an obsolescence part with the monitor and.
So we had to hustle around and redesign some some new componentry into part of the amount of the base station for the monitor and.
So that was a pretty big effort.
A lot of white knuckle flying there.
But.
We solved it and.
Yeah, So I guess, I'm, giving us a call or that area.
If not for.
I guess just say it this way right.
Supply issues.
And getting adequate components.
As you've sort of alluded to when you started your question that does does keep us from.
Just going crazy with what we can build.
So we are building as you said all we can build not because of the physical capacity of the plant, but you know it.
As we get material that's really the throttling.
Scott Henry: Okay, great. Thank you for that color, Roger. As well, the FMD device generated a bigger number this quarter, I think it was around $300,000. How should we think about the trend there? Is that an upward trend or is that just going to be lumpy? Just trying to get my arms around that one.
Same.
Okay, great. Thank you for that color Roger.
As well the F M D device generated.
A bigger number this quarter I think it was around 300000, how should we think about the trend there or is that an upward trend or is that just going to be lumpy.
Just trying to get my arms around that.
Roger Susi: Yeah. No, we think that's going to be quite an upward trend. I believe I mentioned this last call as well. The sale of the FMD is quite different. Our sales force is learning how to deal with it, right? They're used to going in and pulling a pump out of their case, they roll in with, or a monitor. They're small devices. They set them on a table, they turn them on, and they give the pizzazz to the clinical users, and that's what generates interest and ultimately gets orders. Well, an FMD is a sort of a set-it-and-forget-it device. It doesn't directly excite the clinician. They go in and they talk about it to these same clinical people, and everybody nods their head and smiles, Oh, yeah, that's great. We've got to have one of those. Who's in charge of making the order?
Yeah, No. We think that's going to be quite an upward trend. So I believe I mentioned this last call as well.
Sale of the F M D.
<unk>.
It's quite different so our sales force is learning how to deal with it right.
They're used to going in and pull on a pump out of out of their out of their sheetcase rolling with oral monitor their small devices. They set them on a table.
They turn them on and they give the pizzazz to the clinical users and that's what generates interest and ultimately gets orders well in F. M. D is a sort of a set it and forget it device it doesn't directly.
Excite.
Clinician.
And so they go in and they talk about it to the same clinical people and everybody nods their head and smiles Oh, Yeah. That's great. We've got to have one of those but who's going to who's in charge of making the order there theyre sorting through what seemed like pretty simple issues. They are but it takes a group of 26%.
Roger Susi: They're sorting through what seem like pretty simple issues. They are. It takes a group of 26 of our reps that are out there a while to get their hands around all that. They are, and they're learning how to deal with those things. Because of that learning, you'll see the orders start to follow. One thing we did to give them a little tool is we created a little demo ability. It's hard to demo the whole thing, right? You don't take it out of a case. It's got to be installed on a doorway. That gives them the curveball. We've given them a tool where they do have something now they can pull out of their hat and turn it on and walk through a display of the RALU box that comes with the system, and it has demo modes in it.
Of our reps that are out there a while to get their hands around all of that they are and they're learning how to deal with those things and because of that learning you'll see the orders start to follow.
One thing we did to give them a little tool is we created a little demo.
Ability.
It's hard to demo the whole thing right you don't take it out of a case, it's got to be installed on a doorway. So that gives them a curve ball. So we've given them a tool where they do have something now they can pull out of their hat.
And turn it on and walk through display of the rally box that comes with the system and it has demo mode in it and we think that'll get you guys more comfortable to sell in the way they like to and <unk>.
Roger Susi: We think that'll get our guys more comfortable to sell in the way they like to. They're learning how to find out who finally makes the decision. As those things progress through the year, will it be lumpy? It probably won't be a straight vertical line, but we think the trend will be definitely upward.
And they're learning how to find out who finally makes a decision and as those things progress through the year will it be lumpy.
I mean is it.
It probably won't be a straight vertical line, but.
We think the trend will be definitely upwards.
Scott Henry: Okay, great. Pricing, how would you kind of categorize the pricing environment, stable, improving, or worsening? Just in a big-picture sense, how do you think about pricing?
Okay great.
And then <unk>.
Pricing, how would you kind of categorize the pricing environment stable improving a worsening just just a big picture sense, how how do you think about pricing.
Roger Susi: Pricing's been improving these last four quarters, actually. That rate of increase, we're backing off a little bit, too. I think we've put in motion the biggest changes, and some of them are yet to roll out and affect what you'll see as revenue, which you'll continue to see throughout the rest of the year. Yeah, pricing is still a positive trend.
Pricing pricing has been improving these last four quarters actually.
<unk>.
That rate of that rate of increase were backing off.
Little bit too I think we've done the we put in motion there.
The biggest changes and some of them are yet to roll out in effect, what youll see is revenue which will.
Continue to see throughout the rest of the year, but yes pricing is still up.
Still.
It's a positive trend.
Scott Henry: Okay, great. Maybe I'll give one for Jack so he can participate. The G&A and sales, it looked like G&A was a little higher than I expected in the quarter, and sales was a little lower than I expected in the quarter. Was that noise or is there shifts going on? Just how should we think about those line items?
Okay, great and maybe a.
Give one for Jack so he can't participate.
Hi.
The G&A and sales.
It looks like G&A was a little higher than I expected in the quarter and sales were little lower than I expected in the quarter.
Is that noise or if there are shifts going on just how should we think about those line items.
Jack Glenn: Yes, Scott, the big reason primarily for on the G&A increase was in Q1, as we did have some additional headcount, and some of that has been focused on the regulatory side. Also in Q1, sort of had some expenses that are sort of inherent to Q1, and that would be we have some legal, professional, and audit, and also just with the higher payroll taxes, et cetera. Those are kind of the reasons for on the G&A side. The sales side is just a little bit as early in the year with the sales plan and so forth, the commissions were a little bit less, but I would expect overall, the OPEX will probably trend down just a little bit in the upcoming quarters.
Yes, Scott so the big reason primarily for on the G&A increase was in the first quarter as we did have some additional head count and some of that has been focused on the regulatory side, but also in the first quarter to sort of have some expenses that are sort of inherent to Q1 and that would be you know we have some legal professional and audit and also just.
The higher payroll taxes et cetera. So those are kind of the reasons for on the G&A side and the sales side is just a little bit as you know early in the year with the sales plan and so forth.
The commissions were a little bit less but.
I would expect the and overall the Opex will probably trend down just a little bit and in upcoming quarters.
Scott Henry: Okay, great. Thanks again, gentlemen, for taking the questions, and really strong quarter.
Okay great.
Thanks, again, gentlemen for taking the questions and and really strong quarter.
Roger Susi: Thank you, Scott.
Jack Glenn: Thank you.
Thank you. Thank you.
Operator: Thank you. I would now like to turn it over to Roger Susi for closing remarks.
Thank you I would now like to turn it over to Roger Susi for closing remarks.
Roger Susi: Well, thank you, operator. Again, thank you everyone for joining the call today. It's been a great pleasure that we reported yet another quarter of great growth, and with this outlook guiding to continue to expect strong performance as the year progresses. I look forward to having the new 3870 pump 510(k) filed later this year, as I mentioned, but more so continuing to generate stronger and stronger revenue and earnings results with the existing product lines. With that, I look forward to reporting our future successes as the year progresses, and thank you very much.
Well, thank you operator and again, thank everyone for joining our call today.
It's been a great pleasure that we reported yet another quarter of great growth and with this outlook guiding to continue to expect strong performance as the year progresses.
Look forward to having a new 3800 70 pump 500 10-K filed later this year as I mentioned, but more so continuing to generate a stronger and stronger revenue and earnings results with the existing product lines and with that I look forward to reporting our future successes as the year progresses and thank you very much.
Operator: Thank you. This concludes the call. You may now disconnect.
This concludes the call you may now disconnect.
Okay.
[music].
