iRadimed Corporation

Welcome to the IRETA-Med Corporation's second quarter of 2024 Financial Results Conference Call. Currently, all participants are in a listen-only mode, and at the end of this call, we will conduct a question-and-answer session. As a reminder, this call is being recorded today, August 1, 2024, and contains time-sensitive accurate information only today. Earlier, IRETA-Med released its financial results for the second quarter of 2024. A copy of this press release announcing the company's earnings is available under the heading News on our website at IRETAmed.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 and on the company's website at IRETAmed.com, and a replay will be available on the website for the next 30 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 that may include the company's expected future results. A RADMED reminds you that the future results may differ materially from those 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 now like to turn the call over to Roger Soucy, President and Chief Executive Officer of AritaMed Corporation. Mr. Soucy?

Thank you, Operator, and good morning, and thank you all for joining us on today's call. I'm very happy to report yet another record quarter, in fact, our 12th consecutive record quarter. Driving this record quarter was revenue at over $17.9 million. In addition, gross profit was up, reaching 78%, and earnings came in very strong as well, with gap-diluted earnings per share increasing 19% from Q1 of this year. Recall that the pump order intake rate in Q1 was very strong. And Q2 now reflects the revenue generated as we move to keep the pump backlog in check. Plus, this pump backlog, being mostly domestic, results in the sizable gross margin. Once again, our team is executing very well, and product demand remains strong, actually extraordinary in the case of the current 3860 model IV pumps. We are on target to have the strong year that we have planned, even though the new 3870 IV pump is still not on the menu. I'll defer to Matt, who's standing in for our CFO Jack Glenn this morning, for more details regarding the revenue and earnings comps. So let me move on to the new pump progress. It's all about getting that clearance that we've been working so hard to achieve, of course. Key to this is having a clear, concise, complete 510K filed, and soon. My recent commitment for 510K delivery was in August, and we are very confident that it will be in the FDA's hands in these next few weeks of August. Again, FDA will ask questions, and sometimes will transpire during the review and additional question period. We will have a better indication of the time required for final clearance of the 510K after receiving that first response and list of questions that we fully expect from FDA, which we expect to see in late October. At this point, as I've stated in the past, the 3870 will be a 2026 story revenue-wise. Clearance in mid-2025 means that we would expect only light revenues from this new device in Q4-25. as well as the sell and shipment cycles are measured in months, not days. Due to strong increases in sales of the existing pump, helped by order or replacement of these older pumps that are seven years and beyond, which we started seeing strongly in January 1, we have now stepped up efforts on the monitor business via new sales strategies and incentives. Though the monitor business has been steady and strong, We believe these new incentives and methods will drive monitor growth to get a new level. There's also been a steady adoption of the FMD device. This relatively new offering is gaining in the market, though there is an inertia due to the placement of many of these units tied to construction of new MR suites. Construction being a rather drawn-out process and subject to delay places a limit on the speed of delivery and revenue for the FMD line, similar to the pump and monitor. Still, as you will hear from Matt, revenue for the FMD is growing. Finally, a bit about our new headquarters. Construction is well underway and the weather has not been overly cruel to the schedule. The walls and roof should be up and nearly dried in by the time of my next report. With the exception of moving, with our expectation, excuse me, of moving just before next summer. right in time to begin production of the newly cleared 3870 MR pump. Now, before Matt steps in for Jack and comes online, I'd like to finish with a report of what we see in Q3. For the third quarter 2024 financial guidance, we expect revenue of $18 million to $18.2, with GAAP diluted earnings per share $0.34 to $0.37, and non-GAAP diluted earnings per share 38 to 41 cents. Accordingly, we reiterate our guidance for the full year 24, and we expect to report revenues of 72 to 74 May, with gap diluted earnings per share annually of $1.37 to $1.47, and non-gap diluted earnings per share of $1.52 to $1.62. Now I'd like to turn the call over to Matt Gardner, who, as I said, is going to stand in for Jack, who's out the on the leave this morning.

Matt? 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 measures on the last page of today's release. As we reported earlier this morning, revenue in the second quarter of 2024 was 17.9 million, an increase of 11% compared to the second quarter of 2023. This increase was due to strong bookings and resulting backlog for our pump in the first quarter. This strength in bookings for the pump continued into the second quarter. Domestic sales increased 19% to 15.5 million, and international sales decreased 23% to 2.4 million. Overall, domestic revenue accounted for approximately 86% of total revenue for Q2 2024, compared to 80% for Q2 of 2023. Device revenue increased 17% to 12.7 million. This was driven by a 52% increase in pump revenue. Revenue from disposables and services decreased 3%, to 4.7 million for the second quarter of 2024, while our maintenance contracts remain stable at 600,000. As Roger mentioned, the gross margin was 78.1% for the second quarter of 2024 compared to 75.5% for the 2023 quarter. This increase in gross margin is primarily due to favorable geographic sales mix of domestic revenue, a decrease in raw material costs, and direct labor efficiencies. Operating expenses were 8.4 million or 46% of revenue compared to 7.2 million or 44% of revenue for the second quarter of 2023. On a dollar basis, this increase is primarily due to higher sales and marketing expenses for higher sales commissions and sales activity expenses along with higher regulatory and payroll and benefit expenses. The noted strength in the gross margin resulted in income from operations growing 13.4% to 5.6 million for 2024 second quarter. We recognized a tax expense of approximately 1.4 million during the second quarter of 2024, resulting in an effective tax rate of 21.8% for the quarter, which is in line with the effective tax rate of 21.1% in 2023. On a GAAP basis, net income was 38 cents per diluted share, an increase of 15% as compared to 33 cents for the 2023 quarter. On a non-GAAP basis, adjusted income was 42 cents per diluted share for the second quarter of 2024, compared to 36 cents for the second quarter of 2023. Cash from operations was 6.6 million for the three months ended June 30th, 2024, which is up 3.5 million for the same period in 2023. For the three months ended June 30th of 2024, our free cash flow, a non-GAAP measure, was 5.4 million, up from 3.1 million for the same period in 2023. And with that, I will turn the call over for questions. Operator?