iRadimed Corporation

Ladies and gentlemen, welcome to RedMed Corporation fourth quarter and full year 2022 financial results conference call. Currently, all participants are on 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, February 2nd, 2023, and contains time-sensitive information that is accurate only as of today. Earlier, RedMed released its financial results for the fourth quarter in full year 2022. A copy of this press release announcing the company's earnings is available under the heading News on their website at erratimate.com. A press release 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 at erratimate.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 focus on future performance, results, plans, and events, and may include the company's expected future results. A red image reminds you that future results may differ materially from these forward-looking statements due to several risk factors. For 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 free from the SEC website at sec.gov. I would now like to turn the call over to Mr. Roger Susi, President and Chief Executive Officer of Eradimate Corporation, Mr. Sussi, please go ahead.

Thank you. And thank you all for joining us on today's earnings call. It's truly wonderful to report that once again, Eratomed has had yet another excellent quarter of revenue and earnings growth as we reported in this morning's release. Q4 2022 was our top revenue quarter ever and our sixth consecutive quarter record revenues. I'm also very pleased to announce Today, as you may have seen, our Board of Directors has approved a special cash dividend of $1.05 per share. Allow me to take a short dive into the financial performance we have achieved. As reported in this morning's release, fourth quarter revenue was $14.9 million, a 25% increase over the fourth quarter last year. We've gapped diluted earnings per share for that fourth quarter of $0.29. For the full year ended December 31, 2022, our revenue was $53.3 million, a 28% increase over the prior year ended in December 21. GAAP diluted earnings per share for the full year 2022 has come in at $1.02 per share, a 37% increase over the full year in 21. Our teams, from sales to purchasing, and production, engineering to service, regulatory to finance, dealt not only with the challenges of delivering this 28% growth, but they did it in the face of continuing supply disruptions and regulatory challenges, as well as worldwide tension. I'm extraordinarily pleased with the results and the extraordinary efforts of our entire Eratomed team. The sales team did an exceptional job this past year with bookings outstripping our fantastic 2022 shipment volume, such that we entered 2023 with an even larger backlog than we started. Customer demand is strong for all the product lines, and with the continuing problems of our competitor in the MR monitor space and their reported business directions, we feel very confident in continuing record revenue and earnings growth into 2023. Additionally, the strong backlog provides us excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise. 2022 sales growth was well balanced and strong for both the pump and the monitor product lines, with an increasing number of new FMD products shipping as well. Though we will expect the monitor line growth to become a leading driver in 2023. Last quarter, as reported previously, we withdrew the 510K for our new 3870MR IV pump. And we will refile it later this year. Although this was unfortunate and will lead to delay, of course, in the launch of this new pump, as you see, Eratomed's growth has been, and I firmly believe, will remain extraordinary. Though one door may have been closed temporarily, Another has apparently opened. The MR monitor business is simply on fire, and we expect 2023 to deliver revenue growth near 20% again. You shall hear more of this later, and I would welcome any questions regarding details of either revenue or FDA issues in our Q&A session. As we announced a few weeks earlier, we expect to report revenue in 2023 of $61 million to $63 million. with GAAP diluted earnings per share of $1.10 to $1.20, and non-GAAP diluted earnings of $1.23 to $1.34. For the first quarter, 2023, we expect to report revenues of $14.6 to $14.9 million, with GAAP diluted earnings per share of $0.23 to $0.25, and non-GAAP diluted earnings per share of $0.26 to $0.28. Now I'd like to turn the call over to our relatively new now CFO, Jack Glenn, to review the financial results of the quarter.

Thank you, Roger, and good morning, everyone. As in the past, our results are reported on a GAAP basis and a 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 measure on the last page of today's release. As we reported earlier this morning, revenue in the fourth quarter of 2022 was 14.9 million, an increase of 25% compared to the fourth quarter of 2021. On a sequential basis, revenue grew 11% over Q3 of 2022. Domestic sales increased 28% to 12.2 million compared to 9.5 million in the fourth quarter of 2021. International sales increased 8% in the quarter to 2.6 million. Overall, domestic revenue accounted for 82% of total revenue for Q4 2022 compared to 80% for Q4 of 2021. Device revenue increased 23% to $9.8 million. This was driven by a 51% increase in monitor revenue as our sales team continued to execute and gain market share in the monitoring business. Revenue from disposables and services increased 32% to $4.5 million for the fourth quarter of 2022, while our maintenance contracts increased 17% to $595,000. The gross margin was 75.5% for the 2022 quarter, compared to 77.9% for the 2021 quarter. For the full year 2022, the gross margin was 77.4%. The decrease in gross margin for the quarter was primarily due to higher input costs and variations in the product mix. Operating expenses were $7 million or 47% of revenue compared to $6.1 million or 52% of revenue for the fourth quarter of 2021. On a dollar basis, this increase is primarily due to higher sales commissions and sales activities higher general administrative expenses for additional headcount, and higher legal and professional expenses. As a result, income from operations grew 37% to $4.3 million for the fourth quarter of 2022. We recognize the tax expense during the fourth quarter of 2022 of approximately $1,031,000 compared to a tax benefit of approximately $779,000 in the fourth quarter of 2021. The tax benefit in the fourth quarter of 2021 was primarily due to a one-time benefit associated with stock-based compensation expense. The effective tax rate for the year of 2022 was 20.7%. On a GAAP basis, net income was 29 cents per diluted share compared to 31 cents for the 2021 quarter, with a difference due to the tax benefit of Q4 in 2021. On a non-GAAP basis, adjusted income was $0.32 per diluted share for the 2022 fourth quarter compared to $0.33 for the fourth quarter of 2021. Cash from operations was $3 million for the three months that ended December 31, 2022, down from $3.4 million for the same period in 2021. For the three months ended December 31, 2022 and 2021, Our free cash flow, a non-GAAP measure, was $2.6 million and $3.2 million, respectively. And with that, I will now turn the call over for questions. Operator?