IRadimed Corporation (NASDAQ:IRMD) Q4 2023 Earnings Call Transcript February 8, 2024
IRadimed Corporation beats earnings expectations. Reported EPS is $0.39, expectations were $0.37. IRMD isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the IRadimed Corporation Fourth Quarter of 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, February 8, 2024, and contains time-sensitive information that is accurate only today. Earlier, IRadimed released its financial results for the fourth quarter of 2024. 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 focus on 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 free from 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?
Roger Susi: Thank you, operator. Good morning, and thank you for joining us on today’s call. I’m very happy to report our 10th consecutive record quarter. We believe Q4 2023 further demonstrates the strength of IRadimed’s product offerings and our ability to execute. As this morning’s press release announced, fourth quarter 2023 revenue came in at $17.5 million, representing a 17.4% increase over the fourth quarter of 2022. GAAP diluted earnings per share for the fourth quarter were $0.36, while non-GAAP diluted earnings were $0.39 per share, a 22% increase over Q4 ’22. Our entire team’s commitment, focus and can-do attitude pulls together to provide the winning performances we have achieved. The MRI patient vital signs monitor continues to gain acceptance and new customers, and once again, with some sizable orders this past quarter.
We have an expanded selling plan for these coming quarters to keep pushing the monitor business forward as we continue to gain a significant share of the market. Sales of our MRI IV pump came in very strong. And with our new program for field replacements of older pumps targeted to start after New Year, we received and pleasantly were surprised by having brought in orders in — per the plan in Q4 ahead of plan. Thusly, we are bullish regarding growth of this older product through 2024. With performance and the direction of the business, we once again feel comfortable providing our guidance for the year, which you shall learn in a moment. As I had indicated earlier in 2023, we plan to reduce our lead times, which in turn means reducing the backlog.
And although a strong backlog of bookings provides excellent visibility and it allows us to maneuver and reallocate resources as supply issues may arise, we are striving to reduce the backlog and deliver products with less customer lead time, thus — which what we started in Q3. However, we still have a bit more backlog and associated long customer delivery lead time than we preferred. So, we shall continue to shave the lead time by another 15 to 30 days in the coming quarters. This is being done through an acceleration of production and materials delivery. Once again, I’d like to provide progress regarding our FDA efforts surrounding the new 3850 MRI IV pump. Previously, I have spoken of massive testing that’s been underway, which continues with some test finished, while still others are in progress, but we are reaching the end.
Our external support consultants are now deeply involved, one for technical help and the other for statutory and relationship assistance. And these costs have been, in fact, impacting earnings, but I do not see them rising materially as we move forward. Still, we feel the outside help necessary to ensure 510(k) success and minimize FDA review time. We are planning the submission for May for refiling the 3870’s 510(k). But should our external help suggest additional or different elements that cause additional time, we will consider such input carefully. We feel that such external inputs would help us produce a more concise 510(k) filing and so shorten the lead time the FDA needs for clearance. Expecting clearance in Q1 2025, we would plan to show revenue from the new device in the back half of 2025.
As for our guidance for the full year 2024, we expect to report revenues 72 to 47 — sorry, $72 million to $74 million, with GAAP diluted earnings per share of $1.37 to $1.47 and non-GAAP diluted earnings per share of $1.52 to $1.62. For the first quarter of 2024 financial guidance, we expect revenue of $17 million to $17.3 million, and GAAP diluted earnings per share of $0.29 to $0.31, and non-GAAP diluted earnings per share of $0.33 to $0.35. Now, I’d like to highlight some of the details of our device sales performance during the year. The FMD product is still a relatively small contribution to overall revenue, increased over three-fold in 2023 from 2022. The 3880 MR patient monitor device sales increased 17% and the 3860 IV pump sales rose close to 35% in 2023, helped by the replacement strategy I spoke of earlier.
All in all, we are very proud to deliver such performance to our shareholders and look forward to 2024. Now, I’d like to turn the call over to Jack Glenn, our CFO, to review the financial results for the quarter and year. Jack?
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 GAAP measure on the last page of today’s release. As we reported earlier this morning, revenue in the fourth quarter of 2023 was $17.5 million, an increase of 17% compared to the fourth quarter of 2022. Domestic sales increased 12% to $13.6 million, and international sales increased 45% to $3.8 million. Overall, domestic revenue accounted for 78% of total revenue for Q4 2023 as compared to 82% for Q4 2022. Device revenue increased 31% to $12.8 million.
This was driven by a 60% increase in monitor revenue. Revenue from disposables and services decreased 8% to $4.1 million for the fourth quarter of 2023, while our maintenance contracts were down 13% at $518,000. The gross margin was 76.9% for the 2023 quarter compared to 75.5% for the 2022 quarter. The increase in gross margin is primarily due to the increased absorption of fixed overhead from the higher production volumes in the quarter. Operating expenses were $8.3 million or 47% of revenue compared to $7 million or 47% of revenue for the fourth quarter of 2022. On a dollar basis, this increase is primarily due to higher general and administrative expenses for additional headcount, higher regulatory expenses, legal and professional expenses and increased benefit expenses.
As a result, income from operations grew 21% to $5.2 million for the 2023 fourth quarter. We recognized the tax expense during the fourth quarter of 2023 of approximately $1.1 million, resulting in an effective tax rate of 20.1% for the quarter and an effective tax rate of 20.9% for 2024 — for 2023. This was relatively the same effective tax rate as the 20.7% in 2022. On a GAAP basis, net income was $0.36 per diluted share compared to $0.29 for the 2022 quarter. On a non-GAAP basis, adjusted income was $0.39 per diluted share for the 2023 fourth quarter compared to $0.32 for the fourth quarter of 2022. Cash from operations was $3.9 million for the three months ended December 31, 2023, up from $3 million for the same period in 2022. And for the three months ended December 31, 2023 and 2022, our free cash flow, a non-GAAP measure, was $3.3 million and $2.6 million, respectively.
And with that, I will turn the call over for questions. Operator?
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