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Operator: Ladies and gentlemen, welcome to IRadimed Corporation Fourth Quarter and Full Year 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, February 2, 2023, and contains time-sensitive information that is accurate only as of today. Earlier, IRadimed released its financial results for the fourth quarter and full-year 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 focused 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 the SEC website at sec.gov.

I would now like to turn the call over to Mr. Roger Susi, President and Chief Executive Officer of IRadimed Corporation. Mr. Susi, please go ahead.

Roger Susi: Thank you. And thank you all for joining us on today’s earnings call. It’s truly wonderful to report that once again IRadimed had yet another excellent quarter of revenue and earnings growth. As we reported in this morning’s release Q4 2022 was our top revenue quarter ever and our sixth consecutive quarter record revenues. I’m also very pleased to announce today that as you may have seen; our Board of Directors has approved a special cash dividend of $1.05 per share. Allow me to take a short dive into the financial performance we have achieved. As reported in this morning’s release, fourth quarter revenue was $14.9 million, a 25% increase over the fourth quarter last year, with GAAP diluted earnings per share for that fourth quarter of $0.29.

For the full-year ended December 31, 2022, our revenue was $53.3 million, a 28% increase over the prior year ended in December 2021. GAAP diluted earnings per share for the full-year 2022 has come in at $1.02 per share, a 37% increase over the full-year in 2021. Our teams from sales to purchasing and production engineering to service regulatory to finance dealt not only with the challenges of delivering this 28% growth, but they did it in the face of continuing supply disruptions and regulatory challenges as well as worldwide tension. I’m extraordinarily pleased with these results and the extraordinary efforts of our entire IRadimed team. The sales team did an exceptional job this past year with bookings outstripping our fantastic 2022 shipment volume such that we enter 2023 with an even larger backlog than we started.

Customer demand is strong for all the product lines and with the continuing problems of our competitor in the MR monitor space and the reported business directions, we feel very confident in continuing record revenue and earnings growth into 2023. Additionally, the strong backlog provides us excellent visibility and allows us to maneuver and reallocate resources as supply issues may arise. 2022 sales growth was well balanced and strong for both the pump and the monitor product lines, with an increasing number of new FMD products shipping as well, though; we will expect the monitor line growth to become a leading driver in 2023. Last quarter, as reported previously, we withdrew the 510(k) for our new 3870 MR IV pump. And we will refire it — re-file it, excuse me, later this year.

Although this was unfortunate and will lead to delay in it, of course, in the launch of this new pump, as you see IRadimed’s growth has been and I firmly believe will remain extraordinary. Though, one door may have been closed temporarily, another has apparently opened. The MR monitor business is simply on fire and we expect 2023 to deliver revenue growth near 20% again. You shall hear more of this later and I would welcome any questions regarding details of either revenue or FDA issues in our Q&A session. As we announced a few weeks earlier, we expect to report revenue in 2023 of $61 million to $63 million, with GAAP diluted earnings per share of $1.10 to $1.20 and non-GAAP diluted earnings of $1.23 to $1.34. For the first quarter 2023, we expect to report revenues of $14.6 million to $14.9 million, with GAAP diluted earnings per share of $0.23 to $0.25 and non-GAAP diluted earnings per share of $0.26 to $0.28.

Now I’d like to turn the call over to our relatively new now CFO, Jack Glenn, to review the financial results of 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 GAAP measure on the last page of today’s release. As we reported earlier this morning, revenue in the fourth quarter of 2022 was $14.9 million, an increase of 25% compared to the fourth quarter of 2021. On a sequential basis, revenue grew 11% over Q3 of 2022. Domestic sales increased 28% to $12.2 million compared to $9.5 million in the fourth quarter of 2021. International sales increased 8% in the quarter to $2.6 million. Overall, domestic revenue accounted for 82% of total revenue for Q4 2022 compared to 80% for Q4 of 2021.

Device revenue increased 23% to $9.8 million. This was driven by a 51% increase in monitor revenue as our sales team continued to execute and gain market share in the monitoring business. Revenue from disposables and services increased 32% to $4.5 million for the fourth quarter of 2022, while our maintenance contracts increased 17% to $595,000. The gross margin was 75.5% for the 2022 quarter compared to 77.9% for the 2021 quarter. For the full-year 2022, the gross margin was 77.4%. The big piece in gross margin for the quarter was primarily due to the higher input costs and variations in the product mix. Operating expenses were $7 million or 47% of revenue compared to $6.1 million or 52% of revenue for the fourth quarter of 2021. On a dollar 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 37% to $4.3 million for the fourth quarter of 2022. We recognized a tax expense during the fourth quarter of 2022 of approximately $1,031,000 compared to a tax benefit of approximately $779,000 in the fourth quarter of 2021. The tax benefit in the fourth quarter of 2021 was primarily due to a one-time benefit associated with stock-based compensation expense. The effective tax rate for the year of 2022 was 20.7%. On a GAAP basis, net income was $0.29 per diluted share compared to $0.31 for the 2021 quarter with the difference due to the tax benefit of Q4 in 2021. On a non-GAAP basis, adjusted income was $0.32 per diluted share for the 2022 fourth quarter compared to $0.33 for the fourth quarter of 2021.

Cash from operations was $3 million for the three months that ended December 31, 2022, down from $3.4 million for the same period in 2021. For the three months ended December 31, 2022 and 2021, our free cash flow, a non-GAAP measure was $2.6 million and $3.2 million, respectively. And with that, I will now turn the call over for questions. Operator?

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Operator: Thank you. We’ll now begin the question-and-answer session. . And our first question coming from the line of Scott Henry with ROTH Capital. Your line is open.

Scott Henry: Thank you. Good morning and congratulations on the strong results. I did have a couple of questions. First, perhaps I missed it, but did you give the average price of the pumps and monitors during the quarter?

Jack Glenn: No, we didn’t, Scott. And we’ve discussed internally, and we’re not going to be giving the specific as we have in the past on the ASPs, unless there’s any material change in it. There is — the calculation can get quite complicated and also just from a competitive standpoint, but also just the calculation can vary quite a bit with the different types of product, the monitors and pumps, et cetera. But I can — the ASPs in the quarter were solid, and there was no real difference from previous quarters.

Scott Henry: Okay. Thank you. That’s helpful. And then disposables and services wasn’t just strong, it was really strong, $1 million higher than we’ve seen before, often a number was a three in it. Could you tell me — could you give any color on what happened? And more importantly, is whether that should continue or was an aberration or a trend, I guess?

Roger Susi: Well, maybe I’ll jump in a little bit, then I’ll let Jack follow-up. But it shows we were selling a lot of IV sets. So the disposables mainly are leading the way from the pump perspective with the sterile sets. But also, we’ve seen this electrode, which is the largest of the, let’s say, accessory or disposable items that go with the monitor, the electrodes have been just running strong. As I said earlier, the monitors has been hugely successful since we launched it in this past year was just off the hook growth. And along with that, are going these electrodes. So — and then we’re selling maintenance quite well too. The maintenance sales had a — they’ve been deemphasized a bit about two years ago with a change in sort of the ideology of commissioning, if you will, of that item.

And we put that back. We sort of corrected that two years ago. And so you’re seeing the sale of the extended maintenance kicking in and returning to and passing where it had been prior to that change two years ago. So you put all those together and yes, we’re doing a great job with these accessory and maintenance items as well. So do we expect at this level to continue? With the continued growth of the monitor, that will keep pulling the electrode with — along with it, the growth rate of the disposables is just right along with the pumps, and we had good growth with the pump this past year. So yes, I mean, we see it as sustainable generally. That’s — we would be surprised if it hit some sort of plateau at this point.

Scott Henry: Okay. Great. Thank you, Roger. And since I got you on the line, maybe could you give a little more color on the competitive landscape? I mean you talked about competitor problems in the monitor market. Just any kind of at least big picture idea of what you’re seeing out there and how we should factor that into 2023 and beyond?

Roger Susi: Yes. Well, I don’t know how many of you out there on the call had the chance to listen in on the recent Philips’ earnings call that they had I believe Monday or to follow what they do. They don’t break out where we compete with them in this MR monitor space is a rather tiny portion of what they do. But I think if you read what they were describing on their call Monday, you could see that they made it very clear that they’re going to prune various items from their catalog and that they can’t be everything to everyone any longer, and they’re going to shoot for — they’re going to put their resources into high growth, large businesses that are scalable. So when I read those and hear those comments, I’d have to say that this line that we compete with them in, being MR patient monitoring, I don’t think it checks any of those boxes.

So — and we’ve seen them reduce the sales force radically that they one-time had — they had over 40 territories manned and now it’s well under 20, we understand. So all of that, I think are tea leaves that are not too hard to read. And I would just suggest everyone have a glance at Philips’ call.

Scott Henry: Okay. Thank you, Roger, for the color. That’s helpful. Shifting to the income statement, gross margins, they’ve been somewhat variable between — in a range between 76% and 80% or close to 80%. Second and third quarter were higher, first and fourth quarter were lower. I guess the question is, should I think about that as just the average of those numbers is a good number with variability throughout? Or do you think they’re trending in one direction or another direction?

Roger Susi: No, I think you hit it. If you look back many, many quarters, we’ve been just in that range. And I think that range is a fairly tight range, plus or minus 1.5% or 2% around that centroid of that average; I think is a fairly tight grouping. And yes, so I don’t expect that we will be able to break out of the high-end of that significantly and sustain it, but we won’t fall out of that range either. So that’s yes — to answer your question, yes, I believe the average of what you’re seeing in these last many quarters is the fact.

Scott Henry: Okay. Great. Thank you. And final question for Jack. Other income, it was — it’s starting to jump out at a positive 450, is that just higher interest rates for the cash balance or anything else going on there?

Jack Glenn: Yes, yes, exactly right. That’s what that is. Clearly, it’s — yes, with our cash and the higher interest rates that we are now seeing a nice interest income coming in on a quarterly basis.

Scott Henry: Okay. Great. Thank you, you both for taking the questions.

Jack Glenn: Thank you.

Roger Susi: Thanks, Scott. Good to talk to you.

Operator: Thank you. One moment for our next question. And our next question coming from the line of Christopher Sakai with Singular Research. Your line is open.

Unidentified Analyst: Hi, thank you, guys. This is Sean for Chris. I was wondering — first of all congrats on the great results and the dividend announcement, very encouraging. I was wondering if you can give me some color on the trend of gross margins on disposables.

Roger Susi: Well, it’s just pretty — I mean it’s just very steady. So yes, we’re not seeing — if your question is, are we seeing cost impacts, those plastic devices of PVC and polycarbonate and such. There have been increases in that sort of — in those commodities, but it hasn’t reflected by the time we mold those parts and turn them into what we turn them into, there’s still pennies in the cost of the IV sets. So we don’t see any — we haven’t had any negative impacts to the cost structure in the disposables.

Unidentified Analyst: Okay. And given on the inflation and supply issues and all can we assume that you guys have been reasonably able to pass on those price increases of the inputs to your customers?

Roger Susi: Short answer is yes. We did that rather early, I guess, and the COVID hit. We started getting hit; this is year-and-a-half ago, at least six, seven quarters ago. We started seeing the component issues, electronic components and whatnot primarily, really, really giving us heartburn. And we were able to negotiate increase the prices for these key products, the pump and the monitor. Some of that — because of the contracts and how long they take, some of those have become effective already. And some of them, though we negotiated them over a year ago, you’ll be — they’re yet to come — become effective still in these next six months. So yes, we’ve had price increases. Some have taken place and are reflected in our earnings and some have been negotiated in and aren’t actually physically accountable for yet, but will be over the next two quarters.

Unidentified Analyst: Great. And to an extent you can share with us the dynamic of disposable per device. I’m sure you track a rough color you can give how that is trending. That would be very helpful.

Roger Susi: Maybe you can jump in on that one, Jack.

Jack Glenn: I’m not sure if I visit on as far as the trend on the disposables.

Roger Susi: I guess sales of the disposable trend.

Unidentified Analyst: So essentially, like one way to look at your revenue model is, there is a disposable revenue stream and there is devices. And you know, I know you don’t divide it up by units, but if you can — and maybe if you guys track it, disposables per device? Or any color you can give, which can give us some understanding on how it is trending? Like maybe more disposables are going out per device or less? Or it is mostly on the price, something if you can give us a color on that.

Jack Glenn: Yes. I think — well, I think Roger touched on some of this earlier when we look at the disposables and certainly, the growth there is correlating with the growth in both the pumps and the monitors. As a percentage of our sales, I think it’s — total sales has gone range somewhere around 20%, 25%, this last quarter, I think it was around 30%. So it is has shown some growth. But I think it’s probably going to stay within that same range as a percentage of sales going forward, and again correlates pretty closely with our growth on the devices.

Unidentified Analyst: Perfect.

Roger Susi: I might add, IRadimed is a little bit different, though, we have a disposable that’s a nice piece of revenue and it has a nice margin, unlike a lot of companies, they may build their business model around the disposable and offer the thing that uses the disposable, the razor, if you will, at not so great a margin. If you delve into our margins at that detail, these gross margins that we talked about a few minutes ago, these are the same, whether it’s the device or the disposable. So I mean, that should tell you a lot more about our model. It’s not quite maybe typical in that regard.

Unidentified Analyst: Wonderful. And any color on in terms of further interactions you guys have had recently or over last six months with the providers in terms of their capital spending outlook. Things have changed a lot in the last two years or three years. So I was wondering, any color you can provide?

Roger Susi: Well, to us — I mean, to us, it looks like I mean it looks pretty good. As you can see, we’ve been increasing our revenues at quite a fantastic rate. So I think in the lines we are in, in this niche market, maybe we’re seeing CapEx expenditures are still quite healthy and enjoyable to us versus other markets that we don’t play in. Maybe where I’ve heard things can be more snug as far as the expenditures of various facilities. So — but I think you can see from what we do in our niche, we’re still enjoying a pretty good look from our customers.

Unidentified Analyst: Absolutely. So maybe one way to think for us is that things might look a little bit difficult or different for an average medical device provider, but considering your niche market, whatever capital constraints providers might or might not have, you guys are pretty much unaffected, right? Maybe that — would you agree with that?

Roger Susi: Oh, yes. I would say that in our little pocket — our little corner of the medical device universe, yes, we’re a little immune to — we haven’t been impacted by the other areas that you may see being a bit more dampened by CapEx allocation. Yes. We’re kind of under the radar there.

Unidentified Analyst: Yes, right. Good place to be on that. And finally, right, finally, it also looks like you guys have been maybe under the radar is not the right word, but sort of unaffected by the supply chain issues and generally, the device industry has been facing, especially offshore and all looks like that also has not affected you guys or maybe not as much as some of the other players. Any comments on that or any color on that?

Roger Susi: Well, it might look that way. But I can tell you, we’ve had a lot of sweat and we’ve had some near misses. It hasn’t been fun. That has been an everyday consideration at some point during really literally each day. But I’d say that with our size, and our margin, that helps, right? So we have seen components that we’ve just had to get I mean, we’ve gotten robbed on them. We’ve had I could think of hands full of components that were a $0.50 or $1 that we paid $20 for to get them. So we’ll do it. We’ll do it to keep ourselves moving. And we’re very agile at also substitution of components. So the design is all done here. All the expertise is here. It’s not scattered around the world, but larger companies tend to get as they grow and so it slows them down.

They’re not very agile at seeking alternative solutions as we can be. So you put all that together and yes, as I said earlier, thanks to materials — our purchasing people and our manufacturing people and to a good extent, thanks to having a nice backlog where we can shift between different things throughout the quarter as we solve one problem and another one pops up in another product line. So yes, there’s a lot of juggling going on, but we have managed to dodge it. And I will say, as you can probably read in the papers these days, supply chain issues are starting to fade back away. They’re not increasing. And we’ve seen it — we’ve seen ourselves starting to get deliveries of parts at the right price again where we’ve been in a waiting line for in some cases over a year.

Unidentified Analyst: Great.

Roger Susi: Hope that answers your question.

Unidentified Analyst: Yes, yes. So great, well, that kudos to execution and management here, considering there has been a lot of upheaval under the surface, but it looks like you have managed to keep the surface calm and deliver to your customers. So great. Thanks for the color. That’s all I got.

Roger Susi: You’re welcome. Good to talk to you.

Unidentified Analyst: Thanks.

Operator: Thank you. I’m not showing any further questions at this time. I would now like to turn the call back over to Mr. Susi for any closing remarks.

Roger Susi: Thank you, Operator. Well, we couldn’t be more pleased to have had this opportunity to report such a strong gain for 2022 and to share our expectations for 2023. IRadimed is running very efficiently and its products are being adopted at an accelerating rate, with margins at levels of that many of our peers may envy. All company areas are growing, including new physical plant at a recently purchased site, which we are now designing to meet our continuing growth needs. With that, I look forward to reporting our future successes as the year progresses, and thank you all.

Operator: Ladies and gentlemen, this concludes the call. Thank you for participating. You may now disconnect.