Roger Susi, President and Chief Executive Officer of IRadimed, will present opening comments; then Chris Scott, IRadimed's Chief Financial Officer, will summarize the company's financial results before opening the call up to questions.

Some of the information to be furnished in today's session will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are those focused on the future performance or results, plans and events may include the company's expected results for 2020.

IRadimed reminds you that future results may differ materially from these forward-looking statements due to a number of 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 Securities and Exchange Commission, which again 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?.

Thank you, and good morning. And let me say that the outset that I am very happy and indeed energized now that I've returned to the Chief Executive position. This is not an interim solution, but one which I look forward to maintaining for some time to come.

Having stepped back for nearly a year, provided time to focus on engineering developments as well as time to see and ponder IRadimed's operations from a rather fresh perspective. The future to me is as rich with opportunity as ever, and I relish helping us -- helping to lead us forward. It's good to be back. So now for a review of our second quarter.

Earlier today, we announced second quarter revenue of $6.8 million, representing a 26.3% decrease compared with the second quarter last year. We also reported a loss of $0.17 per share on a GAAP basis, with a non-GAAP net income of $0.05 per diluted share.

These results were significantly impacted not only by the COVID-19 pandemic, but also a one-time charge to G&A expense of approximately $2.7 million related to the separation of our former CEO.

The COVID-19 pandemic has certainly upset the orderly functions of governments, economies, markets, families and life generally, and most certainly, nearly all aspects of health care worldwide. It should come as no surprise to anyone to learn that our customers are straining under the various demands and limitations COVID-19 has created.

We salute those frontline caregivers dealing with the uncertainty and danger on a daily basis, bless them all. Of course, there are some locales harder hit than others as we see ICUs and hotspots can be vastly overloaded, while other areas experienced more manageable patient levels. However, it is not an exaggeration to say that most every U.S.

facility in preparing for the worst, has reduced their previous normal services, clearing beds to assure availability for an expected crush of COVID patients. At the same time, our customers overall have greatly expanded spending the stock on PPE, medicines, oxygen and various COVID necessary equipment, such as ventilators and so forth.

Further, in the interest of safety, our customers have severely limited access to their facilities. Face-to-face sales meetings are extremely hard to come by these days. The combination of limited access and COVID oriented spending by hospitals presents challenges for our sales force, and thus, our ability to provide financial guidance.

That said, we believe that by providing insight into what we are doing, some sense of the future can be drawn. But as we hear from health experts, the virus is setting the pace and certainly, IRadimed is not alone in experiencing this pressure. In lieu of financial guidance, I believe a review of our business and what we plan will be helpful.

Consider that IRadimed is in one niche market, MRI compatible medical devices with 2 primary products. The more mature product is our unique world's only nonmagnetic MRI IV pump system. For this device, we can identify two distinct types of customers. First is that large greenfield, the potential customers who have yet to adopt our device.

And for example, Steriline, [indiscernible] patients needing IV therapy during an MRI scan. These customers need a large amount of direct selling effort, which is very difficult without the ability to physically enter a hospital, demonstrate the equipment, engage clinicians and discover the decision makers.

Historically, these greenfield customers accounted for about half of our IV pump sales. The second half of our IV pump business derives from existing customers who are expanding their use of our equipment within the facility.

As you can imagine, sales into the greenfield have been hit the hardest, while new orders from existing company -- customers, though also challenging to obtain have been affected much less. Our second product, a relatively new MR patient vital signs monitor behaves more like the pump business from existing pump customers.

This market is more mature and has a robust replacement order process still functioning rather well. You will hear more about how sales of these products have been trending as we review the Q2 financial results in a few minutes.

A very positive sign is that international business for both product lines has been fairly robust, and we expect as the rest of the world continues to open, this trend will continue. So what can we do? First off, hospitals aren't completely shut to us.

We have continued to perform product training, both on-site and virtually and to service our products. Our clinical application specialist team is getting into hospitals and that need our support and training. And this is, in some cases, opening a door to increased needs within these existing customers.

Also, we still have managed to perform a limited number of in-person demos of our products, and we have seen an encouraging uptick in our ability to engage hospital personnel using other means, such as by phone or video conference. Plans to encourage customers, plans to engage customers, I should say, and draw in business have been formulated.

These plans are being deployed, modified and deployed again on a very frequent basis. We're honing our abilities in the area of virtual sales calls and moreover, demonstrations, producing various tools to assist this effort.

Though in its infant stage, we see promising signs that such new methods of engagement are workable and indeed yielding positive results. We're also formulating a sales method to take advantage of 2 recent developments. First was FDA's issuance of a guidance document regarding changes in their "enforcement policy" for infusion pumps.

That specifically and with reduced regulatory burden is advising pump manufacturers to provide remote monitoring under control of infusion pumps. Second event was the grant of a new patent to IRadimed for a system and method for remote communication with an infusion device.

Many, including us, imagine, FDA has seen news, photos of COVID crowded facilities with multiple IV pumps congesting the hallways. There IV lines extended dangerously from patients into hallway located pumps. FDA's guidance recognizes this as a pump use hazard thus the push to adopt remote controls.

With the remote control capability of our IV pump, the pump stays close to the patient, while staff can hear and respond to alarms, titrate doses and otherwise handle IV pump control issues at a safe distance from an isolated patient, not only increasing safety, but saving on PPE and medicines and so forth.

Our IV pump being the only one with a remote control, now with patient with patent protection, provides the FDA suggested use safety for those ICU beds with highly contagious patients. I hope to report on this use more in the coming quarters.

Our planning is being responsive to pandemics business complications has not all been entirely made up of exploring new sales methods in markets, but we have also looked within costs and the value. We had, for several weeks, for example, worked our production at 80% hours.

We've frozen hiring and reduced management's target bonus expectations and accruals as well. We also carefully reviewed our sales territories and found that a number of expansion territories may not be counted on for a timely development in light of the pandemic impacts. And so we collapsed 7 territories into the more established remaining 22.

This will allow us to focus sales plans on the more proven territories and reduce the cost of selling in territories in which meaningful revenue would likely be several quarters in the future.

Regarding our product development efforts, we have only experienced a relatively minor delay in our engineering efforts, mostly due to slowdowns at outside contractors, especially test houses. That said, we have made great progress with the development of our next-generation MRI IV pump.

The FDA filing will be submitted within the next several days, and we are becoming more and more excited as this new device has come together these past several months, and we can see it performing. Additionally, user interactions we studied during a number of human factors test scenarios were very encouraging.

Also, we've made good progress with the FMD device and still expect to have at least a small number operational before year's end. The launch of a new device may be significantly slowed if the pandemic still weighs on our customers. Now I'd like to turn the call over to Chris to summarize our financial results..

Thank you, and good morning, everyone. As always, I'll be discussing our financial results on a GAAP basis as well as on a non-GAAP basis. Our non-GAAP operating results exclude stock-based compensation expense and other operating expenses that we believe are not indicative of our ongoing core performance.

In free tax items are considered based on their nature and excluded from the provision for income taxes. These items are not taken of our normal provision for income tax. Free cash flow is cash flow from operations, less cash used for purchases of property and equipment.

We believe the presentation of these non-GAAP measures, along with our GAAP financial statements, can be helpful in providing a more thorough analysis of our ongoing financial performance. You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release.

As stated this morning, second quarter revenue decreased 26.3% compared to the second quarter last year. Revenue from domestic sales decreased 38.6% to $4.6 million during the current quarter. This decrease was primarily driven by lower device revenue, which we believe is tied directly to the COVID impact that Roger spoke about a moment ago.

Revenue from international sales increased 29.3% to $2.2 million for the current quarter. The increase in international sales was driven by higher monitor revenue. Revenue from sales of our devices decreased 41% to $3.8 million for the second quarter of 2020.

This decrease was driven by a 58.8% decline in IV pump revenue that was partially offset by a 1.9% increase in revenue from our monitoring systems. The average selling price of our MRI compatible IV infusion pump system during the 2020 quarter was approximately $30,200 compared to approximately $35,300 for the same period in 2019.

This decrease in ASP relates to higher international sales of our infusion pumps recognized in revenue when compared to the second quarter last year.

The average selling price of our MRI compatible patient vital signs monitoring system during the second quarter of 2020 was approximately $30,600 compared to approximately $32,200 for the same period in 2019.

This decrease in ASP also relates to higher international sales of our monitoring system recognizing revenue when compared to the second quarter of last year. Revenue from sales of our disposables, services and other increased 9.6% to $2.5 million for the current quarter from $2.3 million for the same quarter in 2019.

And lastly, revenue from the amortization of extended maintenance contracts was consistent at $0.5 million for both periods. Gross margin was 72.6% for the 2020 quarter and 79.9% for the 2019 quarter.

The decrease in gross margin percent is a result of higher international sales as a percent of total revenue and unfavorable overhead variances compared to the same quarter last year. Operating expenses were $7.6 million or 115.7% of revenue compared to $5 million or 54.1% of revenue for the second quarter last year.

During the second quarter 2020, we recognize G&A expense of $2.8 million related to our former CEO, of which $2.7 million relates to the separation. Additionally, we recognize higher salaries and benefits expense due to higher headcount. These increases were partially offset by lower legal and professional fees and lower sales activity expenses.

We recognized a tax benefit of $800,000 in the current quarter compared to tax expense of about $400,000 in the 2019 quarter. Our effective tax rate for the 2020 quarter was 27.4% compared to 14.9% for the 2019 quarter.

The higher effective tax rate is due to a limitation on the deductibility of certain executive compensation associated with the separation of our former CEO, partially offset by discrete items related to stock compensation and a U.S. state tax benefit.

Additionally, we recognized the benefit resulting from the CARES Act that allowed us to carry back our net operating loss to years prior to the enactment of the Tax Cuts and Jobs Act, which increases the benefit to the previously enacted federal tax rate of 35% versus the current federal tax rate of 21%.

On a GAAP basis, we recognized a net loss of $0.17 per share for the second quarter of 2020 compared to net income of $0.17 per share for the 2019 quarter. On a non-GAAP basis, net income was $0.05 per diluted share for the current quarter compared to $0.20 per share for the second quarter last year.

From a cash flow perspective, we generated $2 million of cash from operations for the 6 months ended June 30, 2020, compared to $3.1 million for the same period in 2019.

For the 6 months ended June 2020, cash provided by operations was positively impacted by cash inflows from accounts receivable and deferred revenue, and negatively impacted by inventory, prepaid income taxes, prepaid expenses, accrued payroll, benefits and accounts payable.

For the 3 months ended June 30, 2020 and 2019, our key -- our free cash flow, a non-GAAP measure was approximately $700,000 and $2.4 million, respectively. And lastly, we exited the quarter with a combined cash and investments balance of $47.8 million and no third-party debt or other restrictive covenants.

Now before going into questions, I thought I would provide some financial context to Roger's comments on how COVID is impacting our business by reviewing recent trends in bookings. For the first 6 months of 2020, total bookings were down approximately 14% compared to the first six months last year.

This decrease was led by a 44% decline in pump bookings, which shines a light on our past comments about roughly half of our pump business coming from the greenfield and Roger's commentary regarding the difficulty we are experiencing in accessing greenfield customers in the current COVID-induced environment.

Despite this decline, we saw healthy growth in other areas of our business, led by a 28% increase in monitor bookings and an 18% increase in bookings for our disposable products during the year-to-date time frames.

We view these as highly positive as the increase in monitor bookings is indicative of our ability to take share in this competitive market and higher exposable sales as an indication that our monitor and IV pump are being utilized more frequently.

As of yesterday, these product booking trends appeared to be holding in the July over June sequential time frame. And with that, I'll turn the call over for questions.

Brandy?.

[Operator Instructions]. Your first question comes from the line of Lisa Springer with Singular Research..

Do you expect this trend that the sales to be more heavily weighted towards international to hold for the second half of the year?.

I think it's a reasonable expectation, just given the diversity of the rest of the world and how the pandemic is impacting different parts of the world at different points in time and how different governments are responding differently compared to just -- just inside the United States.

So I think it's a reasonable expectation that we will continue to see international or strength in the international channel..

Okay. And during the second quarter, the device revenues were nearly 50-50 split of pumps versus monitors.

What are you seeing in the September quarter? Are you seeing a similar kind of split?.

Yes. I think it goes to the comment I just made about recent bookings trends. And so far, as of yesterday, the booking trends that we're seeing in July are pretty consistent with the comments about the 6 month periods..

Okay. And then 1 final question. You're very close to filing your 510(k) for the next-generation pump.

Could you remind us what are the advantages of that pump versus the current model?.

Yes. Be happy to. So the 510(k), of course, to see clearance for our device.

And as we've said in the past, the one thing that we find, let's say, is a weakness is that our pumps are relatively few in number being only associated with MRI imaging within a given hospital versus the larger number of general-purpose pumps, which they often have the ratio is sometimes skewed more than 101.

So we find that people tend to -- as a whole in the hospital, some user will shy away from using this more unfamiliar pump. And so to make that problem diminished, the primary design objective of the new pump was to make it, let's just in order, say, easier to use, more attractive, intuitive. This is the objective of this new pump.

And so what I mentioned earlier is that especially when we have to do these human factors studies, as part of turning in their submissions to the FDA, that's where you gather a good number of clinicians together, and they use the product in a lab setting.

Not on patients, but in a controlled laboratory setting, but there, we scrutinize deeply how they engage with the device. And that, as I said was exceedingly positive. I think we're all very pumped to see that this aspect, which is the key aspect of why we set sale I'm making this new pump is coming true..

We're very pumped..

Yes..

[Operator Instructions] There are no questions at this time. Mr. Roger Susi, you may go ahead..

Thank you. Thank you, and thanks, Chris, for the financial information. Since as we have seen, this pandemic exhibits wave like cycles, which likely will continue, providing guidance is not possible, unfortunately.

Unexpected positive versus negative twist and turns and their severity cannot be foretold, however, we are making and changing plans and methods to deal with the COVID-19 landscape and strive to show improving revenue and earnings in these next quarters.

We feel that since our products are not strongly tied to medical procedure, which can be postponed, for example, electric procedures and with recent findings that some COVID patients experience neurological issues. The use of our devices in support of MRI imaging will remain a useful clinical tool.

Plus with the safety offer and VR remote control capability, we expect to be able to maneuver the COVID-induced crisis and see increasingly positive sales trends. Of course, we look forward to seeing the positive effects of successful vaccine and return to life and business is normal without the schedule is pandemic.

So thank you all for participating in the call today..

Thank you. This concludes the call. You may now disconnect..