iRadimed Corporation

Welcome to the RADMED Corporation Second Quarter 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, July 29, 2022, and contains time-sensitive information that is accurate only as of today. Earlier, RADMED released its financial results for the second quarter of 2022. A copy of this press release announcing the company's earnings is available under the heading News on their website at iradamed.com. A press release copy 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 iradamed.com, and a replay of the call will be available on the website for the next 90 days. Some of the information 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. The RADMID reminds you that the future results may differ materially from these forward-looking statements due to several risk factors. For a description of the relevant risk 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 for 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 Aratamed Corporation. Mr. Susi.

Thank you, operator. Good morning, and thank you for joining us on the call. I'm very happy to report that Eratomed has had yet another excellent quarter of revenue and earnings growth, as reported in this morning's release, which unfortunately, I must add, was earlier only on the SEC site and not in the broader news sources until just minutes ago, as there was as of yet a known issue with the service used for disseminating our filings broadly. As mentioned in our earlier release, this was our top revenue quarter ever, and the third in a string of our strongest growth quarters. And I'll add that the trend of strong demand for our products remains very much intact, and thus we feel very good about the coming quarters as well. As reported, our second quarter revenue was $12.7 million, nearly a 30% increase over the second quarter of last year. Non-GAAP earnings were 26 cents or 116% over Q2 2021. I'm very pleased with these results and the hard efforts of our team. With a half year behind us and growing at record levels, we look forward to achieving our guidance for the year. Though supply risks are very much with us on a near daily basis, The team has succeeded in finding ways to prevail, and we feel that measures put in place these last months will continue to help us mitigate supply risks. Our sales team continues to perform well, increasingly driving customer demand for our products, with total Q2 bookings continuing to reach record levels, once again coming in higher than shipments for the quarter. Additionally, The strong backlog provides great visibility and affords us the ability to maneuver and reallocate resources as supply issues may arise. Sales are well balanced and strong from both the pump and monitor product lines, with excitement and interest growing for the new FMD product as well. Our engineering and regulatory teams continue to work extremely hard responding to FDA to clear their questions and obtain 510 clearance for our next generation IV pump, the Meridium 3870. A large written response will be filed in August, and from there we expect to hear from FDA in September or October and learn of the next steps. Assuming this FDA reply will be straightforward, the team will next turn their efforts towards obtaining CE mark for the 3870, allowing sales into EU countries. though with economic conditions in Europe as they currently are, and with the euro having broken the buck, the business opportunities there are expected to be weak for some time. Regarding our new ferromagnetic detection system, we finished producing a small number of systems just at the end of the quarter, and along with an additional backlog of 12 units currently being prepared, we plan to report revenue for all these units in the upcoming Q3. As I said earlier, interest is building, and we expect the order rate to continue increasing in Q3. Regarding our financial guidance, with our current bookings trend, and with the added visibility we have through a growing backlog, we believe we are well on track to attain the goals we have guided towards, as well as our ability to continue growth at these record levels. We are reiterating our guidance for the full 2022 revenue of 52.5 million to 53.2 million, gap earnings of 89 to 95 cents, and non-gap earnings of 96 cents to $1.03. Additionally, for the third quarter this year, we expect revenue of 13.1 to 13.3 million, with gap earnings of 21 to 24 cents, and non-GAAP earnings of 22 to 25 cents. Now I'll turn the call over to our new CFO, Jack Glenn, to introduce himself and review the financial results for the quarter. Jack is reaching out to us from home as he is suffering a bit from COVID, but as a strong CFO would do, he's on the phone with us today. So Jack, please.

Thank you, Roger, and good morning, everyone. Before summarizing the financial results for the quarter, I would like to take a moment to introduce myself. My career as a CFO has spanned over 25 years, with most of that time spent in the medical device industry. Aradamit is my fifth public company as CFO, and I am thankful and excited to work with Roger and the Aradamit team to drive future growth and success. Now on to the financial summary. As in the past, our results are reported on a gap basis and non-gap 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 second quarter of 2022 was $12.7 million, an increase of 29.7% compared to the second quarter of 2021. Revenue from domestic sales increased 34.5% to $10.8 million, and revenue from international sales increased 7.8% to $1.9 million. Overall domestic revenue accounted for 85% of total revenue for Q2 2022, compared to 82% for Q2 of 2021. Device revenue increased 50.4% to 8.8 million. This was driven by a 45.7% increase in monitor revenue resulting from continued strong execution by our sales team on the conversion of the sales opportunity pipeline. The average selling price of our MRI compatible IV infusion pump system during the second quarter of 2022 was approximately 37,400 compared to approximately 41,600 for the second quarter of 2021. This decrease relates to higher international unit sales and an unfavorable product sales mix compared to the same period in 2021. The average selling price of our MRI compatible patient vital signs monitoring system during the second quarter of 2022 was approximately $48,700 compared to approximately $39,700 for the same period in 2021. This increase relates to higher domestic unit sales and price increases that we began implementing during the second half of 2021. Revenue from disposables and services decreased 1.7% to 3.4 million for the second quarter of 2022, while revenue from our maintenance contracts was consistent at half a million dollars for both periods. The gross margin was 79.7% for the 2022 quarter, compared to 74.7% for the 2021 quarter. The increase in gross margin percent is primarily due to maintaining the price increase implemented during the second half of 2021 and higher domestic sales compared to the same period in 2021. While the supply chain remains challenging, we believe any negative impact from higher costs will likely be limited and partially offset by higher unit production levels, resulting in gross margins consistent with our historical ranges. Operating expenses were 6 million or 47% of revenue compared to 5.5 million or approximately 55.9% of revenue for the second quarter of 2021. On a dollar basis, this increase is primarily due to higher sales commissions and sales activity, as well as higher research and development expenses related to the next generation pump offset by reduced legal and professional fees. As a result, income from operations grew 126% to 4.2 million for the 2022 quarter. We recognize the tax expense during the second quarter of 2022 of approximately $939,000, resulting in an effective tax rate of 22.5% compared to a tax expense of approximately $388,000 in the 2021 quarter. This increase is due to higher sales or higher taxable income partially offset by benefits associated with stock-based compensation and research and development credits. On a GAAP basis, net income was 26 cents per share compared to 12 cents for the 2021 quarter. On a non-GAAP basis, adjusted income was 26 deluded share for the 2022 quarter compared to 14 cents for the second quarter of 2021. Cash from operations with 3.1 million for the six months ended June 30, 2022, down from 4.5 million for the same period in 2021. This decrease was primarily due to increased accounts receivable on the higher sales volume. For the three months ended June 30, 2022 and 2021, our free cash flow, a non-GAAP measure, was 1.5 million and 3.5 million respectively. And with that now, I will now turn the call over for questions. Operator?