iRadimed Corporation

Welcome to the Eurotimed Corporation's first 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. To ask a question during the session, you need to press star 1 to go into the queue. As a reminder, this call is being recorded today, April 30, 2021, and contains time-sensitive information that is accurate only as of today. Earlier, Erotimed released financial results for the first quarter of 2021. A copy of this press release announcing the company's earnings is available under the heading News on the website at erotimed.com. A copy of the press release was also furnished to the Securities and Exchange Commission on Form 8K and can be found at sec.gov. This call is being broadcast live over the Internet on the company's website at erotimed.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 the future performance, results, plans, and events, and may include the company's expected future results. EradiMed reminds you that future results may differ materially from these forward-looking statements due to a number of 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 again may be obtained for free from the SEC's website at sec.gov. I would now like to turn the call over to Roger Sussi, President and Chief Executive Officer of Eradimed Corporation. Mr. Sussi.

Thank you. Good morning, everyone, and thank you for joining our call. I have the pleasant task to report that in Eradimed's case, we feel that the drag of the COVID pandemic is easing further and further each passing month and quarter. Though clearly there remain a high number of virus cases, both in the U.S. and abroad, we can see that many of our customer facilities are beginning to react and purchase with greater confidence. Early today, we reported first quarter revenue of 9.2 million, which is over 6% higher than the first quarter of last year and nearly 8% higher than fourth quarter of last year. Our adjusted earnings was 13 cents per share, though down from the previous year due to a $900,000 income tax benefit that we recognized during the first quarter last year. However, please note that on a pre-tax basis, income increased 112% from the first quarter last year and 167% over the fourth quarter, both metrics showing a real strength of our business. With revenue, ASP, gross margin, and pre-tax income all up, I am delighted and see this as a great start to the year. The entire team here at Aratamed is performing admirably, and though we are still cautious, the business challenges presented by the pandemic do appear to be lessening, showing us a path to a great year. For the past three quarters, we have been able to gain increasingly more access to our U.S.-based customers, which has provided us more opportunities to promote our products. This quarter played out much the same way with our sales team generating bookings in excess of our internal projections, which resulted in higher revenue than we had anticipated. While Chris will have more details, interestingly, much of the revenue growth came from sales of our IV pump, which saw an 81% increase in unit sales in the U.S. market. Additionally, the higher bookings resulted in further increasing our backlog from the already elevated level we reported at the end of 2020. This gives us greater confidence in our ability to grow during the second quarter and into the back half of this year, which is also when we expect a friendlier business environment that will allow us to gain even more access to our customers. including those in international markets, of course, all predicated on the diminishing impact of this pandemic. While we are seeing a greater ability to access our customers to our traditional call points, critical care remains relatively inaccessible. We are encouraged, however, with how the US is progressing against the pandemic and continue to believe that the second half of the year will be a better business environment for us, including the potential of beginning to regain access to the critical care areas of hospitals, even if on a limited basis. Though, again, I would point out that our pump business, which is rather dependent on access to critical care, is up significantly this quarter. Related to our international channels, while not as far along as U.S. regarding the pandemic, we are at an increasingly positive sign in most of our larger markets as the year progresses. progresses. From a regulatory perspective, we continue to have dialogue with the FDA on our 510K application for the new pump and remain unchallenged in our view that a launch very late this year or early next year is the base case scenario. Regarding our ferromagnetic detection device, we have completed all significant development activities and just recently released a product to our sales team. who are now actively engaging customers about the benefits of our device. As I said last quarter, we are excited about the opportunities that the FMD brings and our ability to leverage our domestic sales footprint, as well as the capabilities of our distribution partners in international markets. And I'd like to briefly comment about the overall cost impacts and supply shortages which have been headlines relative to the automotive industry and how this may affect Euratomid. We are seeing some stretching of lead times and difficulty in sourcing certain parts. At this point, it has been manageable, though we are being hit with cost increases and greater enforcement tariffs as well, which in some cases are collectively rather large. At present, as our overall materials cost is relatively small, these cost increases are digestible. However, boosting material orders and building inventory as a buffer to lengthy capacity building process in our electronics and materials supply chains to mitigate any negative impacts to production at Aratamed is what we are keeping in mind and planning. With that, I'll turn the call over to Chris to summarize our financial results. Chris? Good morning.

Consistent with past calls, I'll be discussing our financial results on a GAAP basis as well as on a non-GAAP basis. Our non-GAAP operating results exclude stock-based compensation expense. Free cash flow is cash flow from operations, less cash used for purchases of property and equipment. We believe the presentation of these non-GAAP measures, along with our GAAP financial statements, can be helpful in providing a more thorough analysis of our ongoing financial performance. You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release. As we reported earlier this morning, first quarter 2021 revenue was $9.2 million, an increase of 63% compared to the first quarter last year. We view this as an important milestone as it represents a return to growth when compared to what was largely a pre-COVID time period last year. Revenue from domestic sales increased 15% to $7.3 million during the current quarter, while revenue from international sales decreased 17.2% to $2 million. The increase in domestic revenue and decrease in international revenue was primarily driven by the geographic mix of IV pump sales, which Roger already mentioned. U.S. IV pump unit sales increased 81% over Q1 last year. Overall, domestic sales accounted for nearly 79% of total revenue, for the current quarter compared to approximately 73% for the prior year quarter. Device revenue increased 10% to 6.1 million for the first quarter of 2021. This increase was driven by a 31.5% growth in IV pump revenue, partially offset by a nearly 10% decline in revenue from sales of our monitoring system. The average selling price of our MRI-compatible IV infusion pump system During the first quarter was approximately $32,700 compared to approximately $29,900 for the first quarter last year. This increase in ASP relates to the higher domestic unit sales already noted. The average selling price of our MRI compatible patient vital signs monitoring system during the first quarter 2021 was approximately $38,300 compared to $35,400 for the same period in 2020. This increase primarily relates to favorable pricing adjustments along with a favorable product mix when compared to the first quarter last year. Revenue from disposables and service were consistent at approximately $2.6 million, and revenue from our maintenance contracts was also consistent at a half million dollars for both periods. In addition to the strong revenue growth from first quarter this year to first quarter last year, we feel it's important to continue pointing out our sequential progress during two COVID-impacted time periods. In comparing Q1 2021 to Q4 2020, the upward trend we have discussed over the past several quarters remains intact, with Q1 revenue increasing approximately 8% over Q4 last year. This increase was driven by a 31.3% revenue growth from sales of our IV pumps compared to Q4. In addition to this continued sequential growth, we were able to increase our already elevated backlog from the $4.4 million level that we reported at the end of 2020. Now continuing down the P&L. Gross margin was 76.6% for the 2021 quarter compared to 74.5% for the 2020 quarter. The increase in gross margin percent is the result of favorable geographic sales mix partially offset by unfavorable overhead variances. To add a little more context to Roger's comments regarding supply chain costs, we expect pressure on gross margin going forward due to these cost increases. However, we believe the impact will be limited and partially offset by favorable overhead adjustments due to anticipated growth and unit output resulting in gross margins that are very consistent with our historical ranges. Continuing on, operating expenses were $5.3 million or 57.3% of revenue compared to 5.7 million or 66% of revenue for the first quarter last year. On a dollar basis, this decrease relates to lower expenses for sales team travel and related costs, soft compensation expense, payroll, bonus and benefits, and legal and professional fees, partially offset by higher sales commissions. As a result, income from operations grew 141% to $1.8 million for the current quarter, compared to $700,000 for Q1 2020. During the first quarter of 2021, we recognized tax expense of approximately $384,000 compared to a tax benefit of approximately $933,000 for the last year quarter. Our effective tax rate for the current quarter was 21.7% compared to negative 111.7% for the 2020 quarter. The higher effective tax rate is primarily due to that tax benefit we recognized in the prior year quarter. we had higher taxable income during the current quarter compared to Q1 2020, which also contributed to higher current period tax expense. This all resulted in GAAP net income of 11 cents per share compared to 14 cents for the 2020 quarter. This decrease in earnings per share was the result of the tax impact just described. On a non-GAAP basis, net income was 13 cents per diluted share for the current quarter compared to 18 cents for the first quarter last year. And again, this decrease in non-GAAP EPS is also the result of the tax benefit from last year, as well as lower stock compensation expense during the current quarter. Moving on to cash flow, we generated a total of $700,000 of cash for the quarter. Cash from operations was $900,000 for the first three months of this year compared to $1.2 million for the same period in 2020. For the 2021 period, cash provided by operations was positively impacted. by cash inflows from deferred revenue and income tax refunds, and negatively impacted by cash outflows from inventory purchases, prepaid expenses, and accrued payroll and benefits. For the three months ended March 31st, 2021 and 2020, our free cash flow, a non-GAAP measure, was $0.8 million and $1 million, respectively. And lastly, we ended the quarter with combined cash and investments of $52.7 million and no third-party debt or other restrictive covenants. Now we'll turn the call over for questions. Victor?