Welcome to the IRadimed Corporation’s First Quarter 2021 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, April 30, 2021, and contains time-sensitive information that is accurate only as of today. Earlier, IRadimed released financial results for the first quarter 2021.

A copy of this press release, announcing the company’s earnings, is available under the heading News on their website at iradimed.com. A copy of the press release 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 to be furnished 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 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 the 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, please go ahead..

Thank you. Good morning, everyone. And thank you for joining our call. I have the plus in past to report that in IRadimed case, we feel that the drag of the COVID pandemic is easing further and further passing month and quarter. So clearly there remain a high number of virus cases both in the U.S. and abroad.

We can see that many of our customer facilities are beginning to react and purchase with greater confidence. Early today, we reported first quarter revenue of $9.2 million, which is over 6% higher than the first quarter of last year, and nearly 8% higher than fourth quarter of last year.

Our adjusted earnings was $0.13 per share, though down from the previous year due to a $900 income tax benefit that we recognized during the first quarter last year.

However, please note that on a pre-tax basis, income increased 112% from the first quarter last year and 167% over the fourth quarter, both metrics showing a real strength of our business. With revenue, ASP, gross margin and pre-tax income all up, I am delighted and see this as a great start to the year.

The entire team here at IRadimed is performing admirably and though we are still cautious. The business challenges presented by the pandemic do appear to be lessening, showing us a path to a great year.

For the past three quarters, we have been able to gain increasingly more access to our U.S.-based customers, which has provided us more opportunities to promote our products.

This quarter played out much the same way with our sales team generating bookings in excess of our internal projections, which resulted in higher revenue than we had anticipated. While, Chris will have more details, interestingly, much of the revenue growth came from sales of our IV pump, which saw an 81% increase in unit sales in the U.S. market.

Additionally, the higher bookings resulted in further increasing our backlog from the already elevated level we reported at the end of 2020.

This gives us greater confidence in our ability to grow during the second quarter and into the back half of this year, which is also when we expect a friendlier business environment that will allow us to gain even more access to our customers, including those in international markets.

Of course, all predicated on the diminishing impact of this pandemic. While we are seeing a greater ability to access our customers to our traditional call points, critical care remains relatively inaccessible. We are encouraged, however, with how the U.S.

is progressing against the pandemic and continue to believe that the second half of the year will be a better business environment for us, including the potential of beginning to regain access to the critical care areas of hospitals, even if on a limited basis.

Though, again, I would point out that our pump business, which is rather dependent on access to critical care is up significantly this quarter. Related to our international channels, while not as far along as U.S. regarding the pandemic, we are nascent and increasingly positive signs in most of our larger markets as the year progresses.

From a regulatory perspective, we continue to have dialogue with the FDA on our 510(k) application for the new pump and remain unchallenged in our view that a launch very late this year or early next year is the base case scenario.

Regarding our ferromagnetic detection device, we have completed all significant development activities and just recently released a product to our sales team, who are now actively engaging customers about the benefits of our device.

As I said, last quarter, we are excited about the opportunities that the FMD brings and our ability to leverage our domestic sales footprint, as well as the capabilities of our distribution partners in international markets.

And I’d like to briefly comment about the overall cost impacts and supplies shortages, which have been headlines relative to the automotive industry and how this may affect IRadimed. We are seeing some stretching of lead times and difficulty in sourcing certain parts.

At this point, it has been manageable, though we are beginning – being hit with cost increases and greater enforcement tariffs as well, which in some cases are collectively rather large. At present as our overall materials cost is relatively small. These costs increases are digestible.

However, boosting material orders and building inventory as it buffer to lengthy capacity building process in our electronics and materials supply chain to mitigate any negative impacts to production at a IRadimed is what we are, keeping in mind and planning. With that, I’ll now turn the call over to Chris to summarize our financial results.

Chris?.

Good morning. Consistent with past calls, 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. 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 we reported earlier this morning, first quarter of 2021 revenue was $9.2 million, an increase of 63% compared to the first quarter last year. We view this as an important milestone, as it represents return to growth when compared to what was largely a pre-COVID time period last year.

Revenue from domestic sales increased 15% to $7.3 million during the current quarter, while revenue from international sales decreased 17.2% to $2 million. The increase in domestic revenue and decrease in international revenue was primarily driven by the geographic mix of IV pump sales, which Roger already mentioned. U.S.

IV pump unit sales increased 81% over Q1 last year. Overall domestic sales account for nearly 79% of total revenue, for the current quarter compared to approximately 73% for the prior year quarter. Device revenue increased 10% to $6.1 million for the first quarter of 2021.

This increase was driven by a 31.5% growth in IV pump revenue, partially offset by nearly 10% decline in revenue from sales of our monitoring system. The average selling price of our MRI compatible IV infusion pump system during the first quarter was approximately $32,700 compared to approximately $29,900 for the first quarter last year.

This increase in ASP relates to the higher domestic unit sales already noted. The average selling price of our MRI compatible patient vital signs monitoring system during the first quarter 2021 was approximately $38,300 compared to $35,400 for the same period in 2020.

This increase primarily relates to favorable pricing adjustments along with a favorable product mix, when compared to the first quarter last year. Revenue from disposables and service were consistent at approximately $2.6 million and revenue from our maintenance contracts was also consistent at a $0.5 million for both periods.

In addition to the strong revenue growth from first quarter this year to first quarter last year, we feel it’s important to continue pointing out our sequential progress during two COVID impacted time periods.

In comparing Q1 2021 to Q4 2020, the upward trend we have discussed over the past several quarters remains intact with Q1 revenue increasing approximately 8% over Q4 last year. This increase was driven by a 31.3% revenue growth from sales of our IV pumps compared to Q4.

In addition to this continued sequential growth, we were able to increase our already elevated backlog from the $4.4 million level that we reported at the end of 2020. Now continuing down to P&L, gross margin was 76.6% for the 2021 quarter compared to 74.5% for the 2020 quarter.

The increase in gross margin percent is the result of favorable geographic sales mix, partially offset by unfavorable overhead variances. To add a little more context, to Roger’s comments regarding supply chain costs, we expect pressure on gross margin going forward due to these cost increases.

However, we believe the impact will be limited and partially offset by favorable overhead adjustments due to anticipated growth in unit output, resulting in gross margins that are very consistent with our historical ranges.

Continuing on operating expenses were $5.3 million or 57.3% of revenue, compared to $5.7 million or 66% of revenue for the first quarter last year.

On a dollar basis, this decrease relates to lower expenses for sales, for sales team travel, unrelated costs, stock compensation expense, payroll, bonus, and benefits and legal and professional fees partially offset by higher sales commissions.

As a result, income from operations grew 141% to $1.8 million for the current quarter, compared to $700,000 for Q1 2020. During the first quarter of 2021, we recognized tax expense of approximately $384,000 compared to a tax benefit of approximately $933,000 for the last year quarter.

Our effective tax rate for the current quarter was 21.7% compared to negative 111.7% for the 2020 quarter. Higher effective tax rate is primarily due to that tax benefit we recognize in the prior year quarter.

Additionally, we had higher taxable income during the current quarter compared to Q1 2020, which also contributed to higher current period tax expense. This all resulted in GAAP net income of $0.11 per share, compared to $0.14 for the 2020 quarter. This decrease in earnings per share was a result of the tax impact just described.

On a non-GAAP basis, net income was $0.13 per diluted share for the current quarter compared to $0.18 for the first quarter last year. And again, this decrease in non-GAAP EPS is also the result of the tax benefit from last year, as well as lower stock compensation expense during the current quarter.

Moving onto cash flow, we generated a total of $700,000 of cash for the quarter.

Cash from operations was $900,000 for the first three months of this year, compared to $1.2 million for the same period in 2020, for the 2021 period, cash provided by operations was positively impacted by cash inflows from deferred revenue and income tax refunds and negatively impacted by cash outflows from inventory purchases, prepaid expenses and accrued payroll and benefits.

For the three months ended, March 31, 2021 and 2020. Our free cash flow, a non-GAAP measure was $0.8 million and $1 million respectively. And lastly, we ended the quarter with combined cash and investments of $52.7 million and no third-party debt or other restrictive covenants. Now we’ll turn the call over for questions.

Victor?.

Thank you. [Operator Instructions] Our first question will come from the line of Scott Henry from ROTH Capital. You may begin..

Thank you. Good morning and congratulations on the strong results. A couple of questions. When we think about 2Q obviously you’re going to grow off of last year’s 2Q.

But do you think you could have sequential growth from Q1 into Q2?.

Yes. The short answer is yes. I think, I mean, hopefully it came out in the comments today. We feel very optimistic about how things are going. Bookings have been exceptionally strong being able to grow backlog for the first quarter from where we’ve reported at year end.

We – the $9.2 million that we reported in Q1 was above our internal thoughts of where we might come in. And I think the growing backlog and what we’re hearing from the field gives us a level of confidence and that we’ll be able to grow not only in Q2, but we continue to move similar growth patterns for the rest of the year..

So, I mean, it sounds like, from talking to a lot of medical technology companies, they’re growing off 2020, but they’re not quite up to 2019 prior highs. It sounds like you may be reaching new all time highs in revenues.

Is that a fair statement? I mean, it’s obviously early, but certainly pointing in that direction?.

It’s early. And it is pointing out direction. I think as we said in the prepared remarks, the $9.2 million represents the growth over the first quarter last year, which once again, it was largely a non- or a pre-COVID time period.

We didn’t – we weren’t really understanding COVID until or we won’t really reacting to COVID until maybe the middle of March last year, it’s – last two or three weeks of the quarter. So and we showed some very healthy growth over that timeframe. So we expect that, we’ll be able to show that growth over the pre-COVID timeframes..

Okay. That’s great. It’s great to see.

A couple other questions, first, with the next generation pump, how long does it take from kind of final approval to launch? What kind of lead time is between those steps? Should we expect?.

Well, Scott, it’s Roger here. Let me take that one given that we spent about 18 months in these FDA, cycles with an IV pump and anticipate, as I said, that will be cleared into this year, January next year. We’ll – this pump will be ready to launch in that first quarter.

So it’s a matter of – it’s a matter of a few weeks after we get the clearance letter not months or quarters..

Okay, great. Thanks for that color, Roger.

And then when we think about the FMD, just getting out into the sales team right now, should we look for any revenues into 2Q or should revenues really materialize in the second half of the year?.

I think I indicated in a previous call, we have a couple of initial let’s call them beta sites, those first adopters and we’re going to have orders, we are going to get revenue for those, but yes, they’re basically partnered pricing. So pretty discounted.

So there’ll be a little bit of revenue to answer your question in Q2, but it won’t move anybody’s needle. The revenue won’t really be it’s something you’ll recognize and appreciate until Q3 and 4..

Okay, great. And then final question, just on sales and marketing trends, as the sales force starts to open up as COVID starts to decline, should we expect to see modest increases there or more significant increases..

As a modest, did you say?.

Perhaps modest or perhaps even more than that, just trying to get a sense of the magnitude of how to think about that kind of $2.4 million number in Q1 going forward?.

I don’t want to say that there’s going to be significant increases in sales and marketing. I think the types of activities that are going to come back, we’ll start to see more travel related costs and expenses and things like come into play. I think that for right now is really the only missing piece from that cost structure over there.

And of course, those additional costs are going to be paid off or offset by the higher revenues, higher bookings that we’ll experience during those time periods too. So I would say, there’s going to be – I would call it modest increases with really the only piece being those travel related expenses that are not fully baked in right now..

Okay. Great. Thanks for that color, Chris. And thank you guys for taking the questions..

Thanks a lot, Scott..

Welcome..

[Operator Instructions] our next question is from the line of Lisa Springer from Singular Research. You may begin..

Good morning and congratulations on the strong quarter. Appreciate it..

Good morning, Lisa. Thank you..

My question concerns the international markets.

Could you give us a little more around there? Are they kind of universally weak or some international markets better than others? Do you expect the sales mix – the geographic sales mix to remain kind of consistent with what has been in the first quarter?.

Yes. So Europe is pretty weak. In Europe, our number one market is Germany, and from the Germans to the Italians, we see weakness. UK, we’re getting some orders, but they’re weak. On the other hand the Middle East continues to come on pretty strong. We just shipped a rather large order here the other day to Saudi Arabia.

And so Middle East is relatively on a good baseline. The Japanese market is a big market for us in Asia. And I’d say dip down a little weak and Japan, if you read the papers, they still feel that they’re very challenged by COVID, even though the number – the absolute number of cases seems very tiny compared to what we deal with in the U.S.

They take it rather serious. And I think that keeps the Japanese business a little bit held the underwater yet for another a quarter or two. I hope that as we get past the summer that’ll turn around for the Japanese market as well.

But yes, it’s a slower and picking up, certainly which is I think common knowledge, rather splashed all over the newspapers are how wealthy and how fast are U.S. economy is recovering compared to the others. And our sales prospects are somewhat in that same vein..

Okay. Thank you. That’s it for me..

All right. Thank you, Lisa. Good. Well, as I stated a moment ago, I am very pleased with these results and have growing confidence in the rest of the year. IRadimed is entering an exciting time with trending growth in our current product set what appears to be the weakening affects of a pandemic and being on the cusp of introducing new products.

While there are uncertainties, we are increasingly optimistic about our future. So thank you all. And speak to you again after Q2..

This concludes today’s conference call. Thank you for participating. You may now disconnect..