IRadimed Corporation (NASDAQ:IRMD) Q3 2022 Earnings Conference Call November 3, 2022 11:00 AM ET
Company Participants
Roger Susi – President and Chief Executive Officer
Jack Glenn – Chief Financial Officer
Conference Call Participants
Operator
Welcome to the IRadimed Corporation Third 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, November 3, 2022 and contains time-sensitive information that is accurate only as of today. Earlier, IRadimed released its financial results for the third quarter of 2022. A copy of this press release announcing the company’s earnings is available under the heading news on their website at iradimed.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 iradimed.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 are those focused on the future performance results, plans, and events and may include the company’s expected future results. IRadimed 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 for free from the SEC’s website at sec.gov.
I would now like to turn the call over to Roger Susi, President and Chief Executive Officer of Iradimed Corporation. Mr. Susi, please go ahead.
Roger Susi
Thank you operator. Good morning. And thank you for joining us on the call everyone. Today I am again having the pleasant task of reporting that Iradimed has had yet another excellent quarter of revenue and earnings growth as we reported in this morning’s release. Q3, 2022 has been our top revenue quarter ever and the third in a string of our strongest growth quarters. Further, I’ll interject here that the strong growing demand for our products remains intact, which gives us confidence in the coming quarters that we will also and gives you much more to be proud of there in the future.
As reported in this morning’s release, third quarter revenue was 13.4 million a 23% increase over the third quarter last year. GAAP diluted earnings per share were $0.27 or 35% above the third quarter 2021. I’m very pleased with these results and the hard efforts of our team. With three quarters behind us and growing at record levels we look forward to achieving our guidance for the year. Those supply risks are still very much a concern. The team has succeeded in finding ways to prevail, and we feel that measures put into place these past several months will continue to help mitigate supply risk.
Our sales team continues to perform exceptionally well, increasingly driving customer demand for our products. The total Q3 bookings reached record levels again coming in higher than shipments for the quarter, thus boosting backlog yet again to an even more comfortable level. Additionally, strong backlog provides excellent visibility and it allows us to maneuver and reallocate resources as supply issues may arise. Sales growth was well balanced and strong for both the pump and the monitor product lines with an increasing number of the new FMD product shipping as well this quarter. As discussed last quarter, we did file a very large written response to the FDA covering nearly 250 information questions related to the 510-K process of the new 3870 IV pump.
Though the FDA did engage to clear these questions, we had several email follow up questions as well. As the remaining time on FDA is 90 day total working time clock approached, the last four days we received a call indicating that they would not likely finish. This left us with little choice but to withdraw voluntarily and start a new application process. The FDA did indicate that should we voluntarily withdraw, they would engage with much greater numbers of direct dialogue calls as we prepared for resubmission. They indicated they to desire getting this 510-K cleared with greater speed through better understanding and minimal confusion with a direct dialogue should facilitate.
They also committed to providing a more explanation of the issues which had been remaining, along with any new questions in writing so that these can be addressed as well before a resubmission. The first such meeting was held last week and we are encouraged that these calls will indeed lead to a clear and complete 510-K for resubmission and ultimately a clear 3870 IV pump without repeat of lapse of time.
Now regarding our financial guidance. For the fourth quarter of 2022, our prior revenue guidance remains unchanged. We expect to report revenue of 14.1 to 14.8 million and a full year revenue of 52.5 million to 53.2 million. We are also increasing our earnings guidance as we expect report for the fourth quarter GAAP diluted earnings per share of $0.23 to $0.28 and non-GAAP diluted earnings per share of $0.25 to $0.30. These amounts would result in full year GAAP diluted earnings per share of $0.95 to $1 and non-GAAP diluted earnings per share of $1.03 to $1.08.
Now I would like to turn the call over to our new CFO Jack Glenn to review the financial results for the quarter.
Jack Glenn
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 gap measure on the last page of today’s release. As we reported earlier this morning, revenue in the third quarter of 2022 was 13.4 million, an increase of 23% compared to third quarter of 2021. Domestic sales increased 24.6% to 10.8 million and international sales increased 16.4% to 2.6 million. Overall domestic revenue accounted for 80.6% of total revenue for Q3, 2022 compared to 79.6% for Q3, 2021. Device revenue increased 32.2% to $9.4 million. This was driven by a 46% increase in monitor revenue as our sales team continued to execute and gain market share in the monitoring business.
The average selling price of our MRI compatible IV infusion pump system during the third quarter of 2022 was approximately $30,000 compared to approximately $33,000 for the third 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 third quarter of 2022 with approximately $46,000 compared to approximately $41,000 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 increased 5.3% to 3.4 million for the third quarter of 2022 while our maintenance contracts were consistent at a $0.5 million for both periods. The gross margin was 78.6% for the 2022 quarter compared to 77.1% for the 2021 quarter. The increase in gross margin percentage primarily due to maintain a price increase implemented during the second half of 2021 along with our ability to offset any higher input costs through higher unit production levels spread over our fixed overhead costs. Operating expenses were $6.4 million or 47.8% of revenue, compared to $5.3 million or 48.6% of revenue for the third quarter of 2021.
On $1 basis this increase is primarily due to higher sales commissions and sales activities, higher general and administrative expenses for additional headcount, and higher legal and professional expenses. As a result, income from operations grew 32% to $4.1 million for the 2022 quarter. We recognized the tax expense during the third quarter of 2022 of approximately $810,000 resulting in an effective tax rate of 19.1% compared to a tax expense of approximately $518,000 in the 2021 quarter. This increase is due to higher taxable income partially offset by benefits associated with foreign derived intangible income in research and development credits.
On a GAAP basis net income was $0.27 per diluted share compared to $0.21 for the 2021 quarter. On a non-GAAP basis adjusted income was $0.29 per diluted share for the 2022 quarter compared to $0.23 for the second quarter of 2021. Cash from operations was $3.9 million for the three months ended September 30, 2022, up from $3.4 million for the same period in 2021. For three months ended September 30, 2022 and 2021 our free cash flow and non-GAAP measure was $3.4 million and $3.2 million respectively.
And with that, I will now turn the call over for questions. Operator?
Question-and-Answer Session
End of Q&A
All right. Well, with that I’d like to make one last point regarding our expansion plans. Along with growth comes a need for increased physical operations. And we have very recently placed that large parcel under contract where we will build what will be the first phase of a new facility. The target move in time is expected to be sometime in late 2024 and we plan this first phase to be almost three times our current size, which by that time will be greatly needed as our revenue continues strong growth. Finally, we iterate our great pleasure reporting record growth especially in light of today’s economic tribulations the world over. Without I would look forward to reporting our future success as 2022 ends and on into 2023. Thank you all.
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