IRADIMED Corporation — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; unaudited. IRADIMED develops and sells MRI-compatible medical devices, including IV infusion pumps and patient vital-sign monitoring systems, plus disposables, services and extended warranties. Management attributed significant business disruption to COVID-19.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $6.79 million | $9.23 million | $15.47 million | $17.66 million |
| Gross profit / margin | $4.93 million / 72.6% | $7.37 million / 79.9% | $11.39 million / 73.6% | $13.76 million / 77.9% |
| Operating income (loss) | $(2.93) million | $2.38 million | $(2.19) million | $3.89 million |
| Net income (loss) | $(2.11) million | $2.09 million | $(0.34) million | $3.93 million |
| Diluted EPS | $(0.17) | $0.17 | $(0.03) | $0.32 |
- Q2 revenue declined 26.3%; six-month revenue declined 12.4%. U.S. revenue fell 38.6% in Q2 and 25.1% for the six months, while international revenue rose 29.3% and 48.8%, respectively.
- Q2 device revenue declined 41.0%, chiefly reflecting a 58.8% reduction in infusion-pump revenue; monitoring-system revenue rose 1.9%. Disposables, services and other revenue increased 9.6%.
- Gross margin fell year over year, which management attributed to a higher international mix and unfavorable overhead variances, as well as lower revenue.
- Q2 general and administrative expense rose to $5.00 million from $2.46 million. It included $2.8 million related to the former CEO, including $2.7 million for the separation. Six-month stock-based compensation was $3.23 million, versus $0.85 million a year earlier.
- Six-month operating cash flow was $1.99 million, down from $3.15 million. Cash and cash equivalents increased to $45.46 million at June 30; investing activities provided $0.06 million and financing activities used $0.07 million.
Financial position and liquidity
At June 30, 2020, cash and investments totaled $47.78 million, working capital was $54.8 million, total assets were $68.82 million, and stockholders’ equity was $58.36 million. Total liabilities were $10.46 million. The filing reports no borrowings; liabilities include operating lease obligations, with a $2.84 million present-value lease liability. Management said available cash, investments and expected operating cash generation should fund requirements for at least 12 months, and it did not anticipate needing additional capital.
Outlook, risks and unusual items
- IRADIMED withdrew its 2020 financial guidance because of COVID-19 uncertainty. Management warned that hospital access restrictions, delayed orders, reduced capital spending, slower customer payments and possible supply-chain or distribution interruptions could adversely affect results and liquidity.
- The company described employee travel restrictions, remote-work arrangements, enhanced facility cleaning, and a temporary guarantee of a portion of variable compensation for affected employees.
- The CARES Act enabled the company to carry back net operating losses, contributing to income-tax benefits in 2020. The former CEO separation and related compensation materially increased G&A expense.
- The manufacturing and headquarters facility is leased from an entity controlled by the CEO and board chair; the lease was renewed through May 2024, with management accounting for further renewal options.
- Management reported no material changes to previously disclosed risks other than COVID-19-related risks. It stated that known legal matters were not expected to have a material effect and that there were no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether hospital restrictions and pandemic-related demand conditions continue to delay device orders, and whether withdrawn guidance is replaced.
- Whether the sharp U.S. sales decline, lower infusion-pump revenue and weaker gross margin persist or improve.
- The recurring versus one-time components of CEO-separation costs and elevated stock-based compensation, and their effect on reported profitability.
- Whether operating cash flow and customer collections remain adequate amid higher inventory and prepaid balances; also review the related-party lease terms and obligations.