IRADIMED Corporation — Q3 2022 Form 10-Q
Business context and period: Unaudited results for the three and nine months ended September 30, 2022, compared with the same 2021 periods. IRADIMED develops and sells MRI-compatible medical devices, accessories, disposables and related services, primarily to hospitals and acute-care facilities.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $13.4 million | $10.9 million | $38.4 million | $29.9 million |
| Gross profit | $10.5 million | $8.4 million | $30.1 million | $22.8 million |
| Gross margin | 78.6% | 77.1% | 78.2% | 76.1% |
| Operating income | $4.1 million | $3.1 million | $11.4 million | $6.7 million |
| Net income | $3.4 million | $2.6 million | $9.2 million | $5.4 million |
| Diluted EPS | $0.27 | $0.20 | $0.72 | $0.43 |
| Operating cash flow | Not provided for the quarter | Not provided for the quarter | $7.0 million | $7.9 million |
- Q3 revenue increased 22.9%; nine-month revenue increased 28.4%. Device sales drove most of the growth, including higher sales of patient vital signs monitoring systems. U.S. revenue was $10.8 million in Q3, up 24.6%; international revenue was $2.6 million, up 16.4%.
- Q3 gross margin improved primarily from price increases and an inventory standard-cost update. Nine-month margin improvement also reflected favorable geographic sales mix, partly offset by inventory reserve adjustments and overhead variances.
- Operating expenses rose in Q3 to $6.4 million from $5.3 million. General and administrative costs increased mainly from legal and professional fees and payroll; sales and marketing costs rose with commissions, sales activity and payroll.
- At September 30, cash and cash equivalents were $55.6 million; working capital was $66.2 million; total stockholders’ equity was $69.8 million. Total liabilities were $9.8 million, including $2.3 million of operating lease liabilities. The filing reports no borrowings or other debt.
- Cash and cash equivalents declined $6.4 million from year-end 2021. Nine-month operating cash flow was lower year over year, with receivables and inventory outflows among the drivers. Financing cash use included a $12.6 million special dividend paid in Q1.
Outlook, risks and notable items
- Management expected higher revenue for the remainder of 2022 than in the comparable 2021 period, supported by device, accessory, disposable and service sales. It also expected higher operating expenses, primarily sales and marketing and general and administrative costs. No numerical full-year guidance was provided.
- Management stated that available cash and expected operating cash flow should cover operating requirements for at least the next 12 months. The company expects to use cash for future facility development.
- On November 1, 2022, after quarter-end, the company agreed to buy approximately 27 acres in Orlando for $7.3 million, subject to customary closing, for future office development. Purchase commitments at September 30 totaled $7.9 million.
- Key risks include FDA and other regulatory clearances and actions, reliance on a limited product range, sole-sourced components, potential supply interruptions, and uncertainty from COVID-19. A 10% U.S. dollar movement against the yen was estimated to have an immaterial net-income effect; a 100-basis-point interest-rate change was estimated to change investment fair value by about $0.1 million.
- The headquarters and manufacturing facility is leased from an entity controlled by the CEO and board chair; nine-month payments to that entity were $364,825. Management said known legal matters were not expected to materially affect results or financial position. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether revenue growth and improved gross margins persist, particularly as device sales mix, pricing and geographic mix change.
- Whether the increase in accounts receivable to $10.7 million from $5.1 million and inventory to $5.2 million from $4.3 million affects collections, working capital or cash generation.
- The timing, closing conditions and total costs of the $7.3 million land purchase and subsequent facility development.
- Progress on regulatory matters, next-generation products and continuity of sole-sourced components.
- Future effects of the related-party facility lease, legal matters and potential tax, currency or interest-rate changes.