iRadimed Corporation

Welcome to the IREDMED Corporation third quarter of 2023 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, November 3, 2023, and contains time-sensitive information that is accurate only today. Iratamed released its financial results for the third quarter of 2023. A copy of this press release announcing the company's earnings is available under the heading News on their website at iratamed.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 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. 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 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 like to turn the call over to Roger Susi, President and Chief Executive Officer of Aradamed Corporation. Mr. Susi, please go ahead.

Good morning. Thank you for joining us on today's call. I'm very pleased to report our ninth consecutive record quarter. With Q3 23, again, showing our ability to execute and grow our business. This morning's press release announced third quarter 23 revenue came in at $16.5 million, representing a 23% increase over the third quarter of 2022. Gap diluted earnings per share for the third quarter were 40 cents. Non-gap diluted earnings per share for the third quarter of 23 was 43 cents per share, a 48% increase over Q2 of 22. Our entire team remains strong, committed, and able to pull together to bring in orders, needed materials, production plans, delivery, and customer setup. The MRI patient vital signs monitor continues to gain acceptance and new customers with some very large orders this past quarter. Sales of our MRI IV pump remains strong. And with the new program for field replacements of older pumps, We anticipate growth of this older product line as well. As with last quarter, we again feel comfortable raising our guidance for the year, which you shall learn of in a moment. Q3 is typically our weakest quarter for new bookings due to the summer holidays. Yet still, our total backlog built year to date continues to be sizable. As I have said before, Though a strong backlog provides excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise, we are striving to reduce this backlog and deliver products with less customer lead time. However, we still have a bit more backlog and associated long lead times than we prefer. We recently quote domestic lead time to our customers of 90 days and international at 120. But we plan to shave off some lead time by close to 30 days in the coming quarter. This is being done through an acceleration of production and materials flow to provide customers quicker access to the products that they have purchased. Now, I'd like to provide progress regarding our FDA efforts surrounding the new 3870 MRI view pump. Last quarter, I spoke of the massive testing that's underway here. which continues with some tests finished while still others remain in progress. I'd like to note that the results are positive so far, and so it's a matter of continued forward efforts and progress to complete the testing. As further support for our internal 510 team, we have engaged two external support consultants, one for technical help and the other other for statutory and relationship assistance. Neither is inexpensive. Still, we feel it necessary to ensure 510K success with a minimal amount of FDA review time. We saw such a payoff for using external support with the recent eight-month approval of another manufacturer's new IV pump. Though we've been targeting late Q1 for refiling the new 3870's 510K, Should our new external help suggest additional or different elements that cost us additional time but pay off with reduced FDA review time, we will consider such input carefully. Again, the hope is that such an external input should shorten the time FDA needs for clearance. Now I'd like to recap our Q3 performance and indicate our confidence that this upward trajectory will continue. Therefore, we now announce an increase in our guidance with the expected revenue for the year 2023 of 65 to 65 and a half million. We also raised the forecasted annual gap diluted earnings per share to $1.34 to $1.37, and the non-gap diluted earnings of $1.48 to $1.41, I mean $1.51, excuse me. For the first quarter of 2023, we expect to report revenue of, Did I say fourth? Yes, fourth quarter 2023, we expect to report revenue of 16.9 million to 17.4 million, with GAAP diluted earnings per share of 35 to 38 cents, and non-GAAP diluted earnings per share of 38 to 41 cents. Now I'd like to turn the call over to Jack Glenn, our CFO, to review the financial results for the quarter.

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 measures on the last page of today's release. As we reported earlier this morning, revenue in the third quarter of 2023 was 16.5 million, an increase of 23% compared to the third quarter of 2022. Domestic sales increased 29% to 13.9 million, and international sales remained flat at 2.6 million. Overall, domestic revenue accounted for 85% of total revenue for Q3 of 2023, compared to 81% for Q3 of 2022. Device revenue increased 25% to 11.8 million. This was driven by a 40% increase in monitor revenue, Revenue from disposables and services increased 24% to $4.2 million for the third quarter of 23, while our maintenance contracts were consistent at a half a million dollars for both periods. The gross margin was 77.8% for the 2023 quarter, compared to 78.67% for the 2022 quarter. The decrease in gross margin is primarily due to higher overhead costs and increased raw material costs. Operating expenses were $6.9 million, or 42% of revenue, compared to $6.4 million, or 47.8% of revenue for the third quarter of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount, higher regulatory and legal and professional expenses, and increased benefit expenses. As a result, income from operations grew 43% to $5.9 million for the 2023 third quarter. We recognized the tax expense during the third quarter of 2023 of approximately $1,341,000, resulting in an effective tax rate of 20.9% compared to a tax expense of approximately $810,000 in the 2022 quarter. This increase is due to higher taxable income in 2023. On a GAAP basis, net income was 40 cents per diluted share compared to 27 cents for the 2022 quarter. On a non-GAAP basis, adjusted income was 43 cents per diluted share for the 23 third quarter compared to 27 cents for the third quarter of 2022. Cash from operations was 1.4 million for the three months ended September 30, 2023, down from 3.9 million for the same period in 2022. And for the three months ended September 30, 2023 and 2022, our free cash flow, a non-GAAP measure was 1 million and 3.4 million respectively. And with that, I will now turn the call over for questions. Operator?