iRadimed Corporation

Welcome to the ArataMed Corporation first quarter of the 2023 Financial Results Conference Call. Currently, all participants are in the 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, May 4th, 2023, and contains time-sensitive information that is accurate only as of today. Earlier, ArataMed released its financial results for the first quarter of 2023. A copy of this press release announcing the company's earnings is available under the heading News on their company's website at aratamed.com. A press release copy was also furnished to the Securities and Exchange Commission on Forms 8-K and can be found at the sec.gov. This call is also being broadcast live over the internet on the company's website. at iratamed.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. Looking forward statements focus on future performance, results, plans, and events, and may include the company's expected future results. IRATAmed reminds you that future results may differ materially from those forward-looking statements due to the severe 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 now like to turn the call over to Mr. D. Good morning, and thank you all for joining us on today's call.

Once again, I have the pleasant task of reporting that RADMED has had yet another excellent and exceptional quarter of revenue and earnings growth, as reported in this morning's release. Q1 2023 was our top revenue quarter ever and our seventh consecutive quarter of record revenues. As reported in this morning's release, first quarter 2023 revenue was $15.5 million, representing a 26% increase over the first quarter of last year. Gap diluted earnings per share for the first quarter were $0.27, with non-gap diluted earnings per share for the first quarter of 2013 at 30 cents per share, a 36% increase over the first quarter of 2022. These results make for a very proud CEO and validate the hard efforts of our team. With such a stellar start to the year, having growth at record levels, we feel comfortable in raising our guidance for the year, but more on that in just a little bit. Still, though, supply concerns have become a constant The team continues finding ways to overcome these rather frequent obstacles, which continue to mitigate supply issues from impacting upon revenue and earnings growth. Looking at bookings, our sales team continues to perform exceptionally well, increasingly driving customer demand for our products. The total backlog built through Q1 bookings continues to be at record levels. The strong backlog provides excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise. For example, the relatively large pump revenue as compared to monitor revenue in Q1 was not due to order intake differences, but rather a catching up of pump shipments that could not be made in Q4 due to part shortages then, which was rectified in Q1. Now, I'd like to touch upon our FDA efforts regarding the new 3870 MRI IV pump. Since last quarter, we have expanded our RA team, and there's been much solid work put forth. We have written three rather detailed, intricate Q-Sub request documents and received two confirmations so far of appointment dates that will occur in these next six weeks for meetings. We plan yet a fourth Q-Sub regarding human factors testing, which should be in the FDA's hand by the end of this quarter. As background, a Q-Sub is FDA speak for a meeting to clarify and hopefully obtain a sort of buy-in from the FDA as to the content and or methods we propose to supply regarding clearance information to FDA for coming, in our case, the 510K application. As discussed in previous emails, I've indicated that the FDA had given us several letters and follow-up calls regarding issues that need to be explained and are supported, which we generally consider as AI or additional information requests. With these two sub-meetings, we hope to now present FDA with our approach to answering their AI issues and obtain as clearly as possible FDA's okay with our approach and or indication as to exactly what more they would be expecting. Armed with more clarity from these two sub-meetings, we will push ahead with increased confidence that our information we subsequently file will affirmatively answer each AI issue and pave the way for expeditious clearance. Now I'd like to recap our performance and given the great level of business performance in Q1, our confidence that this upward trend will continue, plus increasing our outlook for revenue and earnings in 2023. We now expect revenue of 62 to 63 and a half million, gap diluted earnings per share of $1.12 to $1.20, and non-gap diluted earnings per share of $1.25 to $1.34. For the second quarter 2023, We expect to report revenue of 15.6 to 15.8 million, gap diluted earnings per share of 27 to 29 cents, and non-gap diluted earnings per share of 30 to 32 cents. Now, I'll turn the call over to our CFO, Jack Glenn, to review the financial results for the quarter in more detail.

Jack? 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 measure on the last page of today's release. As we reported earlier this morning, revenue in the first quarter of 2023 was 15.5 million, an increase of 26% compared to the first quarter of 2022. Domestic sales increased 20% to $11.9 million, and international sales increased 50% to $3.5 million. Overall, domestic revenue accounted for 77% of total revenue for Q1 2023 compared to 81% for Q1 of 2022. Device revenue increased 24% to $10.5 million. This was driven by a 69% increase in pump revenue as we shipped a large percentage of the strong bookings of pump orders received in Q4 of last year. Revenue from disposables and services increased 34% to $4.4 million for the first quarter of 2023, while our maintenance contracts were consistent at a half a million dollars for both periods. The gross margin was 75.7% for the 2023 quarter compared to 76% 0.2% for the 2022 quarter. The decrease in gross margin is primarily due to the geographic mix as international sales with their inherently lower ASPs represented a larger portion of total sales in the quarter as compared to the first quarter of last year. Operating expenses were 7.7 million or 49.7% of revenue compared to 6.3 million or 51.2% of revenue for the first quarter of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount and higher in legal professional expenses. As a result, income from operations grew 30% to $4 million for the 2023 first quarter. We recognize the tax expense during the first quarter of 2023 of approximately $944,000, resulting in an effective tax rate of 21.7% compared to a tax expense of approximately $573,000 with an effective tax rate of 18.7% in the first quarter of 2022. This increase in the effective tax rate is largely due to the higher taxable income in the quarter as compared to the same period last year. On a GAAP basis, net income was 27 cents per diluted share compared to 20 cents for the 22 quarter. On a non-GAAP basis, adjusted income was 30 cents per diluted share for the 2023 first quarter compared to 22 cents for the second quarter of 2022. Cash from operations was 4.6 million for the three months ended March 31st, 2023, up from 1.4 million for the same period in 2022. For the three months ended March 31st, 2023, our free cash flow, a non-GAAP measure, was a negative 1.9 million, which was due to the purchase of land for our future office and manufacturing facility of 6.2 million in the quarter. And with that, I will now turn the call over for questions. Operator?