IRadimed Corporation
Q4 2020 Earnings Call Transcript

Published: 5 Feb 2021

[Operator:]

Welcome to the IRadimed Corporation's Fourth Quarter 2020 Financial Results Conference Call. As a reminder, this call is being recorded today, February 4, 2021, and contains time-sensitive information that is accurate only as of today. Earlier, IRadimed released financial results for the fourth quarter 2020. A copy of this press release, announcing the company's earnings, is available under the heading News on their website 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.

[Roger Susi:]

Thank you. And good morning everyone. Earlier today, we reported fourth quarter revenue of $8.5 million and adjusted earnings of $0.07. Even though the year-over-year comparison, as can be seen in the accompanying press release, are down, I view this – these results as noteworthy and obtained in an environment that continues to be challenged by the cyclic and continuing effects of the global pandemic. While the effects of the pandemic are felt throughout the world, there are some bright spots during the quarter and two that I'd like to specifically call out. First, on a sequential basis, fourth quarter revenue continued its upward trend, increasing 11% over the third quarter. This was largely driven by a nearly 24% sequential increase in revenue from our IV pumps and a nearly 17% sequential increase in revenue from our monitoring systems. These increases are a continuation of a trend that we noted in our third quarter, and we believe they are indicative of a successful adjustment by us and our customers toward adding nontraditional sales methods to our traditional practices. We believe these sequential comparisons are important as we compare COVID-impacted periods and such a thought process should be enlightening to supplement other typical quarter-over-quarter analysis. Our second comparative bright spot is that customer orders for the fourth quarter were within 1.2% of our historical high watermark, which was in Q4 of 2019. This performance was, in large part, driven by orders for our monitoring systems, which continue to perform very well, even in an environment where our ability to conventionally promote our products has been diminished, by hospitals limiting access to vendors and causing us to rely more upon the new selling methods that we've developed.

[Chris Scott:]

Good morning everyone. Consistent with past calls, I'll be discussing our financial results on a GAAP basis as well as on a non-GAAP basis.

[Operator:]

Thank you. First question comes from the line of Scott Henry from ROTH Capital. Your line is now open. You may ask your question.

[Scott Henry:]

Thank you, and good morning. Just a couple of questions. First, in Q4, SG&A seemed to be a lot higher than previous quarters. Could you just talk about what's going on there and how we should think about that number going forward?

[Chris Scott:]

Hey, Scott. It’s Chris. SG&A for the current quarter – are you talking about the sales, because G&A by itself was down if you're including sales?

[Scott Henry:]

Yes, I'm talking about sales and marketing, my mistake.

[Chris Scott:]

Sales and marketing costs were up. In large part, it was – about 80% of the increase was due to sales commissions. And really, that resulted from us having to make some modifications to our commissions plan midyear to help compensate some of the impact from lower sales and how that relates to how our sales managers were ultimately being compensated. A large portion of their total compensation is variable or is commissionable. And we needed to make an adjustment there to ensure that our folks are being taken care of, and to help offset some of the negative adjustments from COVID. So I think we were able to accomplish that successfully. We saw – I think we – I think for the most part, Roger, I think, everybody was – that was helpful for everybody to get by. And as we think about plans for these coming years or in the future, we should see some normalization of the sales and marketing line back towards more historical levels or certainly movement in that direction in 2021.

[Scott Henry:]

Okay, great. Thanks. That's helpful. And then just trying to think of – you've had some strong sequential growth quarter-to-quarter. But Q4 does tend to be a strong quarter relative to Q1 of the next year. Should we expect sort of a sequential flat to down in Q1 or can you overtake that kind of seasonality of the calendar year?

[Roger Susi:]

Maybe, Scott, I can chime in on that one. I think what you're saying is, would we expect Q1 to be greater than Q4 was. Well, no – short answer is no. It never has been. And we certainly don't expect that to happen with this sort of resurgence of COVID that started to – we saw that effect beginning in the early part of December even. But that aside, Q4, as I said, was huge as far as the bookings. So it was exceptionally great for us. We really started to figure out ways to do business, as I mentioned, even in the COVID. But towards the last few weeks of December with the recurrence, we could feel the pinch returning. So we don't expect Q1 to set the world on fire at all.

[Chris Scott:]

Yes. But – and I think just to kind of balance out those comments, Roger, in your – in his prepared remarks there, we carried $4.4 million of backlog into the first quarter. And those are backlog levels that we haven't seen for several years. So I think that was – I think that's helpful as we think about 2021. But – so to Roger's point, though, the impact of COVID is still setting the pace and there's just so much uncertainty that we don't want – we're optimistic about the future. We want to balance that with just the environment that we're doing business in today.

[Scott Henry:]

Okay. Thank you. That’s helpful. And typically, would a backlog be filled fully in the next quarter or sometimes may it lag over a couple of quarters? Just trying to sense of – trying to think of how we should think about that backlog number.

[Chris Scott:]

There are times where customers will send us orders, maybe it's related to a new construction project, and they're not prepared to take the equipment for another six months or nine months or something along those lines. That said, the bulk of backlog is shippable. It's shippable currently. But I don't want to – your premise was, is all of backlog shippable? No, typically not all, but a significant majority of backlog is, yes.

[Scott Henry:]

Okay. Thank you. That’s helpful. Final question on the monitors. How was the mix between U.S. and international? Was it kind of 50-50 or did it favor one geography over the other?

[Chris Scott:]

For this quarter, we favored more international on a unit basis, about 56% of our units went international in the fourth quarter.

[Scott Henry:]

Okay. That should do it for me. Hey, congratulations guys on generating cash in a very tough year. Thanks for taking the questions.

[Chris Scott:]

Thanks Scott.

[Roger Susi:]

Thanks Scott.

[Operator:]

Thank you. I am showing no further question at this time. I would now like to turn the conference back to Mr. Roger Susi for any closing remarks.

[Roger Susi:]

Thanks. As I stated last quarter, COVID continues to set the pace of our business. With a changing status of the pandemic and the variable global response, we are focused on remaining internally and externally agile and serving our customers to the greatest extent possible. We are making every effort to engage our customers, motivate distributors and control costs to attain as optimum a business performance level as possible. We leave the year with positive momentum on our side. And while an elevated level of uncertainty still exists, we are optimistic about 2021. We believe the first half of the New Year will remain challenging, while anticipating a more favorable business setting during the second half. Thank you for participating in the call, and we look forward to reporting to you again after the first quarter.

[Operator:]

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