Q3 2023 IRadimed Corp Earnings Call
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Okay.
Welcome to the I read a Meredith Corporation third quarter of 2023 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.
This call is being recorded today November three 2023 and contains time sensitive information that is accurate only today.
Earlier.
<unk> released its financial results for the third quarter of 2023, a copy of this press release announcing the company's earnings is available under the heading news on their website at <unk> Dot com.
Released copy was also furnished to the Securities and Exchange Commission on form 8-K, and can be found at SEC Gov.
This call is being broadcast live over the Internet on the company's website that I read the net dot 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 include the company's expected future results.
<unk> reminds you that future results may differ materially from these forward looking statements due to 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 like to turn the call over to Roger Susi, President and Chief Executive Officer of <unk> Corporation. Mr. Susi. Please go ahead.
Good morning, Thank you for joining us on today's call I'm very pleased to report our ninth consecutive record quarter.
With Q3, 23, again, showing our ability to execute and grow our business.
This morning's press release announced third quarter 'twenty three revenue.
<unk> came in at $16 $5 million, representing a 23% increase over third quarter of 2022.
GAAP diluted earnings per share for the third quarter were 40 shacks non.
non-GAAP diluted earnings per share for the third quarter of 'twenty, three with 43 cents per share a 48% increase over Q2 of 'twenty two.
Our entire team remains strong committed and able to pull together to bring in orders needed materials production plants delivery and customer shadow.
Alright patient vital signs monitor continues to gain acceptance and new customers with some very large orders this past quarter sales of our MRI IV pump remained strong.
And with a new program for field replacements of older pumps, we anticipate growth of this older product lines as well.
As with last quarter, we again feel comfortable raising our guidance for the year.
In a moment.
Q3 is typically our weakest quarter for new bookings due to the summer holidays, yet still our total backlog built year to date continues to be sizeable.
As I have said before.
Our strong backlog provides excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise.
We are striving to reduce this backlog and deliver products with less customer lead time. However.
However, we still have a bit more backlog and associated long lead times than we prefer.
We recently quote domestic lead time to our customers of 90 days in international at 120.
We plan to shave off some lead time by close to 30 days in the coming quarter.
This is being done through an acceleration of production and materials flow to provide customers quicker access to the products that they have purchased.
Now I'd like to provide progress regarding our FTAA efforts surrounding the new 38, 70, MRI IV pump.
Last quarter I spoke of the massive testing that's underway here, which continues with some tests finished while still others remain in progress.
Uh huh.
I'd like to note that the results are positive so far and it's so it's a matter of continued forward efforts and progress to complete the test.
As further support for our internal five 10-K team.
We have engaged to external support controls.
One for technical help and the other for statutory and relationship insistence. Neither is inexpensive still we feel it necessary to ensure a five 10-K success with a minimal amount of FDA review time, we saw such a payoff for using external support with.
Recent eight months' approval of another manufacturer's new IV pump.
That's what we've been targeting late Q1 for re filing the new 38, 75, 10-K should our new external help suggests additional or different elements that cost us additional time to pay off with reduced FDA review time, we will consider such input carefully again, the hope is that such a <unk>.
External input should shorten the time FDA needs for clearance.
Now I'd like to recap, our Q3 performance and indicate our confidence that this upward trajectory will continue therefore, we now announced an increase in our guidance with the expected revenue for the year 2023 of 65 to $65 5 million.
We also raised our forecasted annual GAAP diluted earnings per share to <unk>.
<unk> 34 to $1 37, and the non-GAAP diluted earnings.
Of $1 48 to $1 $41 51 excuse me.
For the first quarter of 2023, we expect to report revenue.
Of.
I'd say fourth yes fourth quarter of 2023, we expect to report revenue of $16 9 million to $17 4 million with GAAP diluted earnings per share up 35% to 38 cents and non-GAAP diluted earnings per share of <unk> 38 to 41 cents.
Now I'd like to turn the call over to Jack Glenn Our CFO to review the financial results for the quarter.
Thank you Roger and good morning, everyone.
As in the past our results are reported on a GAAP basis and 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 measures on the last page of today's release.
As we reported earlier this morning revenue in the third quarter of 2023 was $16 5 million, an increase of 23% compared to the third quarter of 2022.
Domestic sales increased 29% to $13 9 million and international sales remained flat at $2 6 million.
Overall domestic revenue accounted for 85% of total revenue for Q3 of 2023 compared to 81% for Q3 of 2022.
Device revenue increased 25% to $11 8 million and this was driven by a 40% increase in monitor revenue.
Revenue from disposables and services increased 24% to $4 2 million for the third quarter of 2003.
While our maintenance contracts were consistent at a half a million dollars for both periods.
The gross margin was 77, 8% for the 2023 quarter compared to $78 six 7% for the 2022 quarter.
The decrease in gross margin is primarily due to higher overhead costs and increased raw material costs.
Operating expenses were $6 9 million or 42% of revenue compared to $6 4 million or <unk> 47, 8% of revenue for the third quarter of 2022.
On a dollar basis. This increase was primarily due to higher general and administrative expenses for additional head count.
Higher regulatory and legal and professional expenses and increased benefit expenses.
As a result income from operations grew 43% to $5 9 million for the 2023 third quarter.
We recognized the tax expense during the third quarter of 2023 of approximately $1.341 million, resulting in an effective tax rate of 29% compared to a tax expense of.
Approximately 810000 in the 2022 quarter.
This increase is due to higher taxable income in 2023.
On a GAAP basis net income was <unk> 40 per diluted share compared to 2007 for the 2022 quarter.
On a non-GAAP basis adjusted income was <unk> 43 per diluted share for the 23 third quarter compared to 2007 for the third quarter of 2022.
Cash from operations was $1 4 million for the three months ended September 32023 down from $3 9 million for the same period in 2022 and.
For the three months ended September 32023, and 2022, our free cash flow, a non-GAAP measure was $1 million and $3 $4 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.
To ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one one again standby as we compile the Q&A roster.
One moment please for our first question.
Okay.
Okay.
Our first question will come from Scott Henry of Roth Capital Partners. Your line is open.
Thank you good morning, and congratulations on another strong quarter.
Just a couple questions first any any thoughts on what youre seeing on the pricing environment.
And perhaps with the monitors how the shift is between U S and O U S.
How are you doing there Scott is it Roger so.
Maybe I'll take that one so.
Our pricing has.
With the monitor specifically.
We increased debt.
By negotiating a lot of the contracts over the previous 18 months.
The largest I think to those.
Those increases actually began in July so.
Actually our prices are going up a bit and.
That's on the on the.
Monitor those decent increase their the pump increase was very very small actually so.
Relatively insignificant so so we're seeing.
We're not seeing it.
A pushback from from that sort of thing if that was your question.
As far as international goes with the monitor.
Monitor sales internationally are are are very strong.
Yeah, Yeah, the rate of the rate of adoption and growth in our sales internationally for the monitor has been pretty pretty stout.
From just penetrating the countries that we had been in historically, but as well as cultivating some new areas.
We've had some pleasant surprises.
In Mexico, and Colombia for example, with some some.
Nice nice opportunities for the monitor there Joe.
All in all.
Positive I guess positive things to report.
Okay, Great and then on the monitor side.
We know one of your competitors appears to be less focused on that segment.
Has anything changed on that landscape or do you feel you are in.
And to take share right now.
Well good question so.
Yes.
They are focused they still have huge problems that are in the news at least weekly.
So you can tell where their focus is.
But we had it we had another little manner during COVID-19.
From from them because not only were they not so focused which remains to be the case.
Generally but.
Their deliveries got.
STREAMWAY law, because they had a real supply chain issues much much greater than we did.
So we see them catching up there.
So that's.
That's let's say one point for that.
It removes it removes one of there why don't they are hurdles, but overall the focus is still light the size of the sales force is still lighter than it had been and.
And they have their hands full dealing with let's say bigger fish to fry.
Just to say.
Okay, great. Thank you Roger and final question gross margin strong in the third quarter.
As we start to think about 2020 for 2025 and in higher volume.
Of monitors and pumps.
Do you think about it you know it is 70, 879% does that start to move in on the ceiling for gross margins or do you think with higher volumes.
Could you could you get to that 80% level.
Another good question. Okay. Another good question so during COVID-19.
You cant really see it that much but we do we did lose some pricing advantage with suppliers we were paying.
We were paying through the nose, let's say for a lot of components just to get our hands on them and so worst.
For a fact just that last.
It's been a big subject for a few days this week that I've had with our materials people.
It is yes.
Visible impact to our raw materials costs that are up a couple of percent. So there is something there to be be corrected how long it will take of course, its not going to be like a one quarter fix but.
That's our mandate now for this coming year in 2024, we think.
You can see it right the semiconductor suppliers are now.
Theyre shortages have reversed where they have surpluses are not even thinking of cutting scaling back some output but.
So there's opportunity there to sort of recover ground that was lost to expedite in.
In an effort to get parts that were very short supply during COVID-19.
And upped our cost to turn that back around but it wont be quick but you should you can I'm counting on the effect over this coming year. So short answer to your question is yes.
Hope that that will be able to even boost our gross margin.
Okay, great. Thank you for taking the questions.
Great good to talking.
Thank you.
One moment please for our next question.
Our next question will come from Frank Tuchman.
Lake Street capital markets LLC Your line is open.
Hey, This is Nelson Cox on for Frank Congrats on another strong quarter Jack.
Jack you mentioned Q3, being a seasonally slower quarter for orders was hoping to hear your expectations for Q4.
Well the flip is Q4 is usually a big quarter for us yeah.
Q3 is conventionally light.
Q4 is is conventionally strong and last year I think we also had a pretty strong Q1, because a lot of stuff, even though we had a good Q4 last year. They were still stuff that carried over didn't get written as far as the orders until Q1. So.
Okay.
Yeah, I mean weeks, we don't expect that.
Seasonality factor to change.
Got it.
And then in relation to the customer announcement to discontinue service on IV pumps over seven years old can you help us understand your installed base better to try and place context around how many of your pumps could be over seven years old and how large could that increase per year going forward.
Oh well.
I believe.
Let me think somehow lost that number I think we think that somewhere in that 502000 units out there that are in that.
In that category over seven years.
Yeah, so large number of pumps and.
Okay.
And we've had we've quoted.
We've quoted I think close to 400.
Already so that kicks in at the end of December right. So we see that as being a factor that might bring in some orders certainly in the Q4.
But.
Much more so Q1 two.
Those'll those'll be.
We start we're going to start seeing those turn into orders here very soon but.
I think the strength of it.
Being great in Q1.
Got it that's great. Thanks for the color and congrats again.
Thank you.
Yeah.
Thank you.
As a reminder to ask a question. Please press star one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment please for our next question.
Our next question will come from Frank Dilorenzo of singular research. Your line is open.
Thank you and good morning can you expound upon the strength you saw in the ferromagnetic detection systems this past quarter.
And can you talk about to what extent that you may be able to maintain growth going forward for the fourth quarter and into next year. Thank you.
Okay Jack.
Okay, Yes.
Yes.
While the sales have been growing slowly frankly with the FMT product.
Yeah.
It's a matter of it's a matter of our sales force really learning what the what the critical call point is.
International demand has actually grown quicker.
Then our domestic but the market is is quite huge compared to where we're at now so.
We've got a.
Got it.
We've got a decent number on the backlog, but it is not up to our expectations. So.
I think with the U S with the domestic market. It's a matter of that sale is is.
It is a little different to our sales folks than it is to sell a pump or a monitor and.
They're learning how to come to grips with that and as they do we see different territories starting to shell.
<unk>.
As those different reps in those territories really learn who they should be talking to and the internationals it seems to be.
It seems to be a little a little bit more quick for them that they are picking up the ball on that one a little quicker so long runway yet for the F&B lots of opportunity and we hope to over the year 2024 in the U S gain the keys to Hao.
We position that product and to whom we position that product.
<unk> sales.
Okay, Thanks, and one other question rigs.
Regarding your next generation pump.
Can you talk a little bit about your strategy outside the U S for that as far as getting approvals and launch kind of the timing on that going forward. Thanks.
Oh, Yeah, we won't.
We won't we won't turn our guns to obtain the CE mark for that one.
Probably.
Until may.
Mid late summer.
That's when we'll have the capacity with our team that's working on the 500 10-K to deal with.
The Tex file and getting our notified body onboard to do that and with the changes in Europe, although they have delayed all this MTR staff for products like ours yet.
The notified bodies are still kind of applying.
The logic of the future mandatory MTR stuff currently so.
They're taking a long time to review Tech files and clear them. So an estimate of that.
Would be mid.
Mid 2025 before we'd have a CE marked up pump now haven't said that.
That's probably accounts for a third of our international business. The other two thirds of it doesn't need a CE mark and so we'll enter those markets.
Very soon.
Much sooner those lenders centers were launched in the U S.
Okay. Thank you.
Thank you.
Again to ask a question. Please press star one on your phone and wait for your name to be announced standby, while we compile the Q&A roster.
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One moment alright, alright.
Alright.
This will end the Q&A session I would now like to turn the conference back to Roger Susi for closing remarks.
Thank you operator.
Again, its with great pleasure that we report our Q3 2023 results demonstrating yet another quarter of strong growth it.
It is also a great pride that we can guide that we expect strong performance as the year concludes with that I look forward to reporting our yearend.
Year end success and thank you all for participating in today's call.
Okay.
Thank you.
Does conclude the call you may now disconnect have a pleasant day and enjoy your weekend.
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