Q3 2024 IRADIMED CORP Earnings Call

and John Glenn.

Speaker Change: Welcome to the Eradamed Corporation 3rd quarter 2024 financial result conference call.

and the President, currently all participants are in a list-moly mode. And at the end of the call, we will conduct the question answer session. As a reminder, this call is being recorded today, October 31, 2024, and contains time-sensitive accurate information only today.

Earlier, Eradament released his financial results for the second quarter of 2024.

Speaker Change: A copy of this press release announced in the company's earnings is available under the heading news on their website at erratimet.com. A copy of press release was also furnished to the Security Smexchange Commission on Form 8K and can be found at sec.gov.

This is Call of the Game broadcast live over the internet on the company's website at eratimad.com and a replay will be available on the website for the next 90 days.

Some of the information in today's session will constitute for looking statements within the meaning of the private security's litigation will form back of 1995.

for Living Stainless Filkins on Future Performance, results, plans and events. And may include the company's expected future results.

Speaker Change: A ratimed reminds you the future results made different materially from these four looking statements due to several risk factors. For a description of the relevant risk in a certain piece that may affect the company's business, please see the risk factor section of the company's most recent report followed with the security and exchange commission.

which may be a tank 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 Eredemmit Corporation, Mr. Susi.

Thank you, operator, good morning and thank everyone for joining us on today's call.

and I'm very happy to report yet another record quarter. In fact, our 13th consecutive record quarter.

Driving this quarter was revenue coming in at 18.3 million. Recall that...

The previous quarter was 17.9, so growth continues to be attainable by all involved here at a Rathomit.

In addition, Gross Profit remains impressive at 77.4% with earnings very strong as well at 40 cents to the looted share.

Again, pump orders remain strong and revenue likewise is following that strength. I continued in this quarter as it had been in the previous two.

Speaker Change: I'll be deferring to Jack or CFO later for more details on revenue and earnings but at this point I'd like to briefly move on and discuss

Speaker Change: and Deerdo, that's all which is the progress on the new pump.

Speaker Change: Basically, you're so all about getting that FDA clearance and as...

As we had promised during the last call we did make that filing. It was I believe September 11 when it finally got filed with the FDA.

We have had some interactive questions.

Arriving from that almost immediately, which is not a bad sign where they...

They call with a given question and most of them are housekeeping where is this document? How is this tied to that document, et cetera?

So I really can't give much color on that being a positive or negative either way. But we are now just a day or two informed ago that...

They will be producing the actual AI, letter the initial AI, additional information, letter force to work on. And so I'm sure by next quarter's end call, we'll have a lot more color on how that is progressing.

of course it's tough, you know it's all important to get that 510k and again we are still.

Speaker Change: Planning on that happening sometime in the second quarter of 2025. And again, this week.

Speaker Change: mentioned in earlier calls. Given that, we would be planning to have some revenue, though only small amount initial revenue starting on that in the fourth quarter of 2025.

and I'm going to be a great singer.

We also have some news on our new headquarters, which we mentioned in the previous call. We had a couple of storms coming through the Florida area, but all in all, I believe we only...

have suffered about four days lost to the overall construction schedule. So, walls are up, ceilings being put on, paint's going on the walls, windows will be put in and it'll be as they call it, dry-in.

Roger: [inaudible] Roger.

Roger: and that of course coincide with the necessity of further production space to launch the new pump very well.

Roger: I'd like to finish with a brief report of what we see in Q4 coming up.

for the fourth quarter of 2024 financial guidance. We expect revenue of 18.8 million to 19.2 million. Gapped alluded earnings per share of 39 to 42 cents and non-gapped alluded earnings per share of 42 to 45 cents.

So, luckily, we'd expect to report revenue for the year of 72.7 to 73.1 million and we are raising our times on a gap deluded earnings per share of.

$1.49 to $1.52 from the previous guidance of $1.37 to $1.47. And non-gap diluter drinks per share.

Wimley Racing to a dollar sixty four to a dollar sixty seven from the previous dollar fifty two to a dollar sixty two

and with that, I'd like to turn the call over to Jack Glenn. Jack, thank you, Roger and good morning, everyone.

As in the past, our results are reported on a gap basis and a non-gap basis. You can find a description of our non-gap operating measures in this morning's experience release and a reconciliation of these non-gap measures to the gap measure on the last page of today's release.

As we reported earlier this morning, revenue in the third quarter of 2024 was 18.3 million, an increase of 11% compared to the third quarter of 2023.

Speaker Change: This increase was due to the continued strength of our IV pump product in the third quarter as our end of life replacement program continues to drive exceptional growth for our pumps.

Domestic sales increased 9% to 15.2 million in international sales increased 22% to 3.1 million.

Overall, domestic revenue accounted for approximately 83% of total revenue for Q3, 2024 compared to 84% for Q3, 2020, 3.

Speaker Change: Device revenue increased 10% to 13 million driven by a 78% increase in pump revenue.

Revenue from disposable services increased 12% to 4.7 million for the third quarter of 2024, while our maintenance contracts remain stable as 600,000.

Speaker Change: The gross margin was 77.4% to the third quarter, slightly below the 77.8% for the 2023 quarter.

The higher mix of domestic versus international review contributed to the continued strength in our gross margin.

Speaker Change: Operating expenses were 8.4 million or 46% of revenue compared to 6.9 million or 42% of revenue for the third quarter of 2023.

On a dollar and percentage of revenue bases, this increases primarily due to sales and marketing expenses for higher sales commissions and sales activity, along with higher regulatory and quality expenses in payroll and benefits expenses.

The noted increase in sales commission expense resulted in operating income slightly down from 5.9 million in Q3 of last year to 5.8 million for the 2024 quarter.

We recognize the tax expense of approximately 1.4 million during the third quarter of 2024, resulting in an effective tax rate of 21.3% for the quarter, slightly higher than the effective tax rate of 29% in 2023.

On a gap basis, net income for the quarter was 40 cents per diluted share, the same as for the 2023 third quarter. On a non-gap basis, adjusted income was 43 cents per diluted share for the third quarter of 2024, the same as for the 2023 third quarter.

Cash from operations was a very strong 9.1 million for the three months ended September 30, 2024, up from 1.4 million for the same period in 2023. As we were able to drive efficiencies in our working capital management, particularly in accounts for seavable and inventory.

Speaker Change: For the three-month-cended September 30, 2024, our free cash flow, a non-gap measure, was 5.1 million, up from 954,000 for the same period in 2023.

In the quarter, the capital expenditure of 4 million was primarily for the construction of our new building.

and with that I will turn the call over for questions operator. Thank you. We will now begin the questioning and succession. To ask a question, please press star one, one of your telephone and wait for your name to be announced.

To withdraw your question, please first start one one again. Please send by with a Q&A roster.

Our first question comes from the line of Frank Takenon with Lake Street Capital Market, Shuan is now open.

Great, thank you for taking the questions. Why don't we start with one related to how we should think about growth by...

Business Line Item. Obviously, Ivy Pumps has been the standout girl driver this year, monitors a little bit softer. How should we think about that normalizing through, both the fourth quarter of this year as well as in 2022, 2025, prior to the new pump being approved.

Speaker Change: Hi, yeah, well, hi Roger here, good to hear from you. Maybe I'll take that one. You know, we've mentioned this.

You know, there's what we've been anticipating that and...

Speaker Change: and we're going to start the emphasizing in fact the sale of the older pump.

So tap on the brakes on that, so you know we should expect that that will slow down that train meanwhile for the last couple of months we've been modifying our plans.

Speaker Change: in the next episode.

So we expect, you know, the bottom line of that is I think it's natural to expect it. There should be a dip in the old product as we start to transition to the new pump product. And to fill that gap we intend to do...

Speaker Change: and John Glenn.

Speaker Change: really put the pedal to the metal on the monitor to fill in the gap. So we anticipate maintaining revenue to what you used to seeing us do, but the mix will change. And we think that'll occur.

Bradley briefly, but it may stand let's say two quarters.

and then when the new pump starts to kick in, that'll turn back around and the story will once again be

The New Pop, so uh

So again, just to recap, you 2025 by the mid.

Those mid six months.

Speaker Change: Yes, we do expect a dip in the revenue from the pump and to be supply active by increased revenue from the monitor.

Speaker Change: But again, in 2026, given that the new pump is hitting the streets strongly, that'll turn back around rather quickly.

Speaker Change: and then I think you called out and the press release, the backlog is given you good visibility for the next, at least the next quarter, if not a little bit longer than that, can you be talk about the composition of the backlog today, is it mostly IV pumps, little bit of monitors, or is that composition look like today?

Oh yeah, sure, a prank this is Jack.

Yeah, I think the, as we said, our backlog of course has been very strong over the last year and a half or more. And it continues to be going into the fourth quarter. Of course, a good portion to that and very, you know, do the strengths in the pump.

But I would also say that the monitor continues to be a good portion of that backlog as well. So that does give us pretty good visibility and the queue for as we mentioned in the press release.

Perfect. And then maybe just from my last one was hoping to ask a little bit about Opx, I think typically you've been seeing the bottom line out-paste the growth of the top line and sometimes rather rather significantly. It looked like this quarter that was a little bit different with 11% growth of the top line and 1% growth with non-gap net income. He just talked about the Opx a little bit more was there anything in there that was kind of one time nature, nature or anonymity and how should we kind of think about that profile returning with a nice bottom line leverage.

You all take that one, so...

I guess the biggest piece of the difference between the quarters really comes down to on the sales side and the commissions that were paid or a crew for in that quarter. In Q3 of last year, frankly we probably had probably a little bit of a dress of sales plan for the quotas for the sales people. And so that, you know,

Resulted in a very, you know, I would say lower commission expense in that quarter. I would say in the current quarter we're in that probably reflects more of our overall, you know, spend going forward as a percentage of sales on the sales side about 20 so are a percentage of revenues.

Speaker Change: and so that was the key difference between the two.

and it just so happened and I said in Q3, it's always a challenge I guess when you're...

You know, as we put these sales plants together to make sure there's a balance there and maybe like I said we were a little bit more aggressive on that in the Q3 time period of last year. So that's the biggest difference between the two. But going forward.

Speaker Change: Okay, I make sense. Thanks take a quick question.

Thank you. Our next question comes from the line of Jason Witts with Roth Capital Partners, your line is now open.

Jason Witts: Hi, thanks for your questions. You know, obviously the FD is a little bit unpredictable, but it sounds like you're on track there. If you potentially get it earlier than the second quarter approval would that potentially move the impact of the new pump earlier, for instance, if you get a first quarter, we could see third quarter impact.

Speaker Change: Not really, I mean, we're all the planning, the materials, the processes and all these things, even if it came in a month or two earlier.

really wouldn't mean to be able to pull in.

Jason Witts: The rest of the plans that it takes to launch the thing, so you're gonna be eight.

and then in terms of the monitor, maybe if you could outline your plans for future products and sort of what you might do to.

Expanhing the monitor business at the on-ward is today.

Well, you know, I mean, there's a lot of little things. But I think in a nutshell, the big point is it's just...

Speaker Change: It's how you compensate the sales team.

So, frankly, you know, a little over a year ago when we saw pump business getting soft.

Speaker Change: and we took some measures to fix that. Well, it worked better than we had planned as I think everybody become aware of this past year. And of course,

What that meant was, you know, the sales team chased that good hunting.

Jason Witts: and to something that you know.

Relaxed on their pursuit of monitor business. So the monitor business, you know, it didn't grow in a little bit, but not like what we...

Otherwise would have had if their attentions weren't so focused on this big step change in the pump of prospects.

Speaker Change: So as I mentioned,

It's compensation, so that will be adjusted and it will emphasize the monitor strongly, as I mentioned, will be emphasized the pump. Well, the other flip of that is it'll be emphasizing the monitor quite strongly.

We're putting those, we've been talking that and preparing for that now already for a couple of months and we still have a couple months before, you know, we start next year's plan.

Speaker Change: But we think we'll hit the ground running since we've been planning it and working it and it's not going to be news to any of our sales team. This is where we're going in 2025.

So that's helpful and it kind of explains how you might, you know, on next year might flow in terms of the mix of monitor versus

Speaker Change: for the moment. It also kind of begs a question.

Speaker Change: I mean there's, you know, there's big expectations for the new pump that's, you know, you've got a large and tall base that's large. I'm going to go through it. We would anticipate would be a major upgrade cycle.

So I imagine your sales force is going to be very focused once this pump comes out on pumps and potentially leaves Montenergär business sort of flat obviously you can compensate for that, but there seems like a real opportunity with pump.

with Palm Cell. Does that take the question, do you...

Speaker Change: is your Salesforce set up right now for the new pump and to sell monitors or it's still going to be one of the other or changes that you think you can make to kind of compensate. Good two businesses. Well, that's the, yeah.

You know, that's the hard part of organizing the sales team and all the sales territories.

So we have 27 territories.

with big growth and this amount of increased revenue we expect from the new pump.

Speaker Change: and then the opportunity to go to the sales team to see their and create more territories and more sales people to fill them. So, you know, yeah, so the balancing act we're at now is, you know, when do you start to do that?

You know, if it's premature, then you get some, you know, you don't have enough to go around for each territory. And, you know,

Speaker Change: As it would lag, of course, that means that something's going to be again forsaken. And so I expect, yeah, we're going to go to probably three, it takes a couple of quarters, you know, to hire.

Gets salespeople up to speed, but we're planning on how those territories would end up being increased the number of territories.

Yeah, but before we actually start to plug in more sales people, we're going to need to wait.

until it's closer to when we're really launching this pump. So we mentioned that we're in the next quarter, excuse me, next fourth quarter, next year, 26, when we...

and just play having this new pump.

Speaker Change: You know...

Speaker Change: We're going to target the initial customers and try to keep...

People live on it a little bit so that we don't end up.

with two-few.

Sales people chasing too much business.

and you know, it's one of those good problems to have but it's, it's, it's problem, you know, we gotta, we, we recognize it will be, will be planning for it.

Thank you, thanks for all the color, I'm so back and cute.

Speaker Change: Thank you. I would now like to turn the call back over to Roger Susi for closing remarks.

Well, thank you, operator. All right. Well, once again, it's been a pleasure to report our Q32024 performance. And as you see by our guidance.

Speaker Change: We plan to end the year very strongly and we look forward to next year even though you know

with the ups and downs we've just discussed. We have our plans made and we'll manage it and we look very much forward to clearing the new 3870 pump and dealing with the challenges of the explosive growth we expect that to give us.

So, with that?

We'll see we'll talk again next quarter.

Speaker Change: Thanks. Thank you. This concludes the call. You may now disconnect.