IRADIMED CORPORATION (IRMD) Earnings Call Transcript

Welcome to the IRadimed Corporation's Third Quarter of 2026 Financial Results Conference Call. [Operator Instructions] This call is being recorded today, October 30, 2026, and contains time-sensitive accurate information that is valid only for today. Earlier, IRadimed released its third quarter 2026 financial results. 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 on the company's website at iradimed.com, and a replay will be available there 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's website at sec.gov. I want to turn the call over to Roger Susi, President and Chief Executive Officer of IRadimed Corporation. Mr. Susi?

Thank you. Good morning, and welcome to IRadimed's Third Quarter 2026 Earnings Call. I'm very proud to say that the new 3870 MR IV pump launch is showing itself to be everything we'd hoped for and more. So you may recall that we discussed the ramping of this new pump would be quite a stretch. We have been able to push very hard and make it happen. With our initial testing of the waters release of a few dozen pumps during Q4 and 1, to the broad market launch in Q2 and with having produced now over 400 systems during Q3, our teams have risen to perform extraordinarily well. Job of ramping production of this complex electromechanical device at the rate achieved is a very difficult task. And these hard-working ladies and gentlemen of your company have really risen to the challenge. The ramp rate of the 3870 production to achieve Q3's revenue was huge at over 125% increase from Q2's production, thus the large stretch goal or production. And to support the goal was a great selling effort, considered that during Q3, our sales team booked record numbers of both the 3880 monitor and 3870 pumps, proving the customer acceptance of these devices and building a very comfortable backlog for Q4. For Q4, we will again grow revenue of the new 3870 pump by another 50-plus percent. Again, very pleased to report that our teams have delivered. Here are the numbers. We achieved record quarterly revenue of $24.2 million, up 14% from Q3 of 2025, and an 18% sequential increase from Q2. Earnings were $0.51 per share GAAP and $0.55 non-GAAP, up from $0.41 and $0.46, respectively, in the second quarter. And as we expected, as our manufacturing teams climbs the 3870 learning curve, we began realizing efficiencies we had anticipated with the gross margin improving 2 full points sequentially to 76%. Behind these quarter end numbers is the performance of not only our production, engineering, quality and materials teams in-house, but a field sales team as well. We had concern that the long anticipated new 3870 pump could steal sales focus from the monitor. And so we put in place special targets to mitigate such an issue. Indeed, though, Q1 did show weak monitor bookings. However, this was quickly turned around in Q2 with a record number of monitors booked. And we are once again extremely proud to note that, that record was exceeded again in Q3. In short, monitor sales are strong and growing. This, along with what is now clearly becoming a successful launch of the long and awaited 3870 MR IV pump. Though our hospital customers usually need 4, 5 to 6 months or more to budget and finally issued purchase orders for new equipment we are finding a very significant number motivated to move to purchase our new pump in much shorter time frames. With this resulting in a growing backlog of 3870 pumps on the books after shipping over 300 in Q3 as we enter into Q4. It's this order rate and the backlog produced that give us confidence in our ability to clearly forecast revenue for Q4. But wait for our guidance just a moment longer. I'd like to recap this pump opportunity first. The rather low hanging and quick to attain fruit is the replacement opportunity we've been discussing from established users of the old 3860 pump system, as they replace an upgrade to the new 3870 MR pump. It's a great opportunity with still nearly 6,400 older, meaning over 5 years of age 6061 pump channels in the U.S. market. But it's proven to be better than simply replacing what was a $19,000 3860 channel with a similarly priced 3870. First off, we have approximately 70% of the replacement orders for two of the older model channels for one, new quad stack, meaning that for every 2 channels of the older 3860 or 61 setups being replaced, 70% of the customers are buying 4 3870 channels, so the 6,400 old pump channels translates to over 10,000 unit 3870 opportunity. With our plan to sell about 2,000 to 2,500 3870 per year, just this presently existing pool of older pumps takes years to replace. Meanwhile, more and more pumps turn 5 and become part of the replacement target. A second silver lining to the business is that the ASP of the new pump system is not equal to the older unit. It is not similarly priced, but rather commanding nearly $25,000 per channel, a lift from the older 3860 ASP of 23% to 25%. Finally, for a less stringent measure of success than the numbers just mentioned, our customers are loving what they see. This device practically selling itself, I'd say, it shows well and this operation is exciting to the user. This is being proven by the fact that we have also already received orders from facilities who did not care for the original 3860, thus remain part of our greenfield opportunity. But when showed the 3870, they have not hesitated to become a customer and decided quickly that the new 3870 was spot on and a welcome addition to their imaging practice. In a word, it's happening. The new 3870 pump system is doing what we thought it could do and more, more channels, higher ASP and penetration of the greenfield. At this point, it's execution, ramping production while building in quality and growing margin is where we are headed. Q4 will show more of this trend with giving us much run room to return to great growth of revenue, earnings and a business we are very proud of. Now I'd like to have Jack Glenn, our CFO, provide financial details, but I'll iterate as we entered Q4 with a solid backlog of our new 3870 pump and 3880 monitor systems as well as a strong backlog of the FMD system. Now I'll turn the call over to Jack Glenn, our CFO, to review the quarter's financial results and provide color on our outlook for the fourth quarter and full year.

Thank you, Roger, and good morning, everyone. As in the past, we report our results on a GAAP basis and non-GAAP basis. You can find a description of our non-GAAP measures in this morning's earnings release and a reconciliation to GAAP on the last page. For the 3 months ended September 30, 2026, revenue was a record $24.2 million, up 14% from $21.2 million in the third quarter of 2025, and up 18% sequentially from $20.5 million in the second quarter. Pump revenue was $8.7 million, up 4% year-over-year as 3870 shipments continue to ramp. MRI compatible patient vital signs monitoring systems contributed $8 million, up 17% year-over-year, and ferromagnetic detection systems contributed $0.5 million, up 28%. On the recurring side, disposables revenue grew 21% to $5 million. Amortization of extended maintenance agreements grew 31% to $0.8 million, and services and other grew 42% to $1.2 million. For the 9 months, revenue was $66.6 million, up 9% from $61.1 million in the prior year period. Domestic sales accounted for 82% of total revenue in the third quarter, down from 85% a year earlier. International revenue grew 45% to $4.5 million, while domestic revenue grew 9% to $19.7 million. Over the 9 months, domestic sales accounted for 82% of revenue, down from 85% a year ago, while international revenue rose 37% to $12.2 million. Gross profit for the quarter was $18.5 million with a 76% margin, up from $16.5 million and 78% in the third quarter of 2025. Sequentially, gross margin improved 2 points to 74% from 72% in the second quarter as 3870 production volumes increased, and we began realizing the manufacturing efficiencies we anticipated. The year-over-year decline reflects the remaining additional production inefficiencies on the new 3870. For the 9 months, gross profit was $50.4 million with a 76% margin compared with 77% a year earlier. We expect gross margin to continue to improve in the fourth quarter as 3870 volumes build. Total operating expenses for the quarter were $10.3 million, up 7% from $9.7 million, but declined to 43% of revenue compared with 46% a year ago. General and administrative expense was $4.5 million, up 4%, primarily due to higher legal and professional fees, consulting and payroll and benefits. Sales and marketing expense was $4.9 million, up 6%, primarily due to higher sales commissions on increased monitor and 3870 bookings in the quarter. Research and development expense was $0.9 million, up 30%, primarily reflecting lower capitalization of payroll costs for internal software development in the quarter. Income from operations for the quarter was $8.1 million or 34% of revenue, up 19% from $6.8 million or 32% of revenue a year ago. Tax expense for the quarter was $2.2 million with an effective tax rate of 24.9%, up from 23.6% in the third quarter of 2025. The rate differs from the U.S. federal statutory rate primarily due to state income tax expense and nondeductible compensation expense, partially offset by benefits from foreign-derived income and research and development tax credits. As we discussed on our last call, the windfall deduction tied to the vesting of equity grants, most of which occurs in the fourth quarter will be smaller than we originally anticipated, and we expect an effective tax rate of approximately 24% to 25% for the fourth quarter. Net income for the quarter was $6.5 million or $0.51 per diluted share, up 17% from $5.6 million or $0.43 per diluted share a year ago. Non-GAAP net income was $7.1 million or $0.55 per diluted share compared with $6.1 million or $0.47 per diluted share, excluding $0.6 million and $0.5 million, respectively, of stock compensation expense net of tax benefit. For the 9 months, net income was $17.5 million or $1.37 per diluted share, up 9% and non-GAAP net income was $19.3 million or $1.50 per diluted share, up 8%. We ended the quarter with cash and cash equivalents of $63.3 million, up from $59.1 million at the end of the second quarter and $51.2 million at year-end. Cash flow from operations was $7 million for the quarter, consistent with prior year quarter, and $21.2 million for the 9 months, up 12%. Capital expenditures were $0.2 million for the quarter and $1.1 million for the 9 months down from $8 million in the prior year period, which included construction of our new corporate office and manufacturing facility. Non-GAAP free cash flow was $6.8 million for the quarter, up from $5.7 million and $20.1 million for the 9 months, up from $11 million. On the dividend, our Board of Directors also declared a regular quarterly cash dividend of $0.20 per share payable on November 27, 2026 to stockholders of record as of the close of business on November 13, 2026. For the fourth quarter, we expect revenue of $25 million to $26.5 million, GAAP diluted earnings per share of $0.53 to $0.57 and non-GAAP diluted earnings per share of $0.57 to $0.61. For the full 2026, we are updating our guidance and now expect revenue of $91.7 million to $93.2 million compared to our prior range of $91 million to $96 million; GAAP diluted earnings per share of $1.90 to $1.94 compared to $1.90 to $2.05 and non-GAAP diluted earnings per share of $2.06 to $2.10 compared to $2.06 to $2.21. Our non-GAAP earnings per share guidance excludes stock-based compensation expense net of tax, which we expect approximately $0.6 million for the fourth quarter and about $2.5 million for the full year. And with that, I will now turn it over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Anderson Shack with ROTH Capital Partners.

Congrats on the strong quarter. So Third quarter bookings were a record, but the full year revenue guidance on the top end came down about $3 million. Could you discuss what you're seeing that drove this revision?

Yes, for sure. Good to have you on the call. This is Roger Susi. So yes, it was basically that the ramping these pumps was tough. And even though, as I pointed out, we increased things by enormous percentages to make up that difference of the $2.8 million or so you see for the year, would be required even a higher lift of the number of pump channels that we would have put out. So although the team did great lifting the output over -- with over 100% increase Q2 to Q3. And again, here, plus -- 50-plus percent in Q4 we're shooting for. We can't -- we can't get out over our skis pushing this ramp rates so hard that the quality slips. And so -- yes, you have to sort of -- you have to pay that piper and you have to be careful that the ramp rate is not so ridiculously high that you can't keep the quality up. And so yes, we have to have a little bit of a throttle on that.

Okay. Got it. And then disposables grew 20% or 21%. How much of that growth came from the newer 3870 installed base versus the 3860 basin. Now that the early 3870 sites have had a few months to use, I guess, what are you seeing in disposable pull-through per channel compared with a 3860 channel?

Well, frankly, not yet. Almost none. Though we ship these things, people don't start using them really until we get out there and do the in-servicing and that process takes -- that process takes itself 6, 8 weeks. So essentially, though, we shipped a lot of 3870s, great for revenue, the actual usage yet in the field would be would be only starting to ramp up. So that effect, we should see as we get towards the end of Q4. But what we see with thus far not so much impactful from the new pump. These disposable sales are still ramping from the original base, both of monitors and the older pump. So I guess the good news is -- again, as we pointed out, was 70% of our customers are basically doubling the channels they have going to the quad stack from having 2 channels of the older system, we do anticipate an effect on those disposables, but you're not seeing it yet, no too soon.

Okay. Got it.

Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets.

Great. Congrats on all the progress. I was hoping to take an initial stab at 2027. I know you're not providing formal guidance at this time, but trying to square between your commentary of selling in the neighborhood of about 1,000 channels of 3860 to going to 2,000 of the 3870 at that higher ASP. So going from in the neighborhood of kind of $30 million of pump revenue into the kind of $50 million range. How should we think about the time line to that? You've got obviously a lot of wind at your sales related to ordering patterns and your manufacturing scaling up, but how should we expect that to kind of translate to revenue in 2027 on the pump line.

Well, you said it, right? So as we start to get towards -- in Q4, what we're going to put out, as I said, another 50% or more channels over Q3. And to start to approach 500 channels. And that will continue through 2027. Now the ramp rate of the output won't be 50%, but we will go from 500 to 560 -- now those -- now added a number of channels throughout each quarter next year won't be at this 50% or 100% quarter-over-quarter rate. But the platform -- the base will start at -- in the 500s with Q1. So given the ASP that we've been reporting, right, it's a pretty simple math. And I think you got it. where these new pumps are going to take us from a standpoint of the revenue provided from the pump hardware. And then the other question is Also, as people start to use these new pumps, we expect that to begin to pull through IV [indiscernible], which I said we haven't seen that effect yet because they're just beginning to actually use them. And we see that will start to compound throughout 2027 as well.

Got it. Very helpful. Maybe to follow-up a little bit on your greenfield commentary. I would be curious how those decisions were made and how their ordering patterns are going related to if they're also pursuing quad stack configurations? Or what specifically maybe did they like more about the 3860 that they didn't like on the 3860 that got them over the line?

Yes. Great question. But we don't talk too much about the greenfield, the opportunity still remaining from this older installed base is just -- that's such a big number. It tends to suck up all the all the air in the room. But yes, the greenfield, as I pointed out, we have been pleasantly surprised that we have -- we've sold a few of those that I mentioned here in my comments earlier. Where basically there are customers that -- a matter of fact, we have 2 contributions to this greenfield. We had customers that Jon -- they've just remain doing it the old way with the long lines or refusing to do patients in the MR that need IV fluids delivered. They just were tickled by the design, the use model of the old 3860. I think I've spoken to this in years past that the the 3860 pump, of course, that things Genesis was 2005. It's 21 years old in its look and how it's used. And so people look at that and they think we really want something a little bit more updated and more automated, let's say, in its use, number one. And number two, we tailored that pump after -- there's 3 big manufacturers IV pumps in this market. And in the rest of the market outside of the MRI that is and we tailored it after one of them. So facilities that have been using one of those other 3 non-MRI pumps throughout the rest of the facility could warm up to the use of the 3860 because it kind of had the same look and feel. But the flip of that is, it didn't have the look and feel of the other 2/3 of the market. So people that had -- were schools of thought from those other 2/3 type pumps, we'd look at it, oh, it's too difficult for our team to learn something else we're worried. They'll make mistakes. There's a host of reasons. And they basically [indiscernible] it. So those are greenfield customers that we at least had reached and got turned down. And there's still a greenfield of customers that we haven't even talked to yet. And there's also some greenfield for customers who bought a 3860 and their usage, on, it went down. The champion who decided to buy the pump in the first place and the facility moved on, others didn't know how to use it. And some of these pumps at a little bit dormant, and we've talked about that in relationship to the number of disposables that are being consumed. We can tell whether where the users have gone pretty light on us. And that is essentially greenfield as well. We've also sold some of those customers who, though they bought 3860, they weren't -- they weren't fans. They weren't big fans. They weren't -- they were underutilized. And some of those when shown the 3870 as well as this other greenfield people that never bought it in the first place. They just find the pump very attractive use model. And I've spoken to this before, where this is really what the genesis of the new pump was. As a mechanism, the pumping, the heart of it, the mechanical electromechanical park that moves fluid, it's not much different. Accuracy, similar. Those things we didn't change much, pumps a pump. It's the user interface, and we put sensors and some intelligence into the device. So we could tell what the person is doing as well as we put little animations on the screen to help them learn to use the pump, so they're not fearful of it and they can -- their outcome is going to be great, and they're seeing it. This is what we're extremely proud of. What they're seeing, and I kind of mentioned that earlier. And I think this is what is really getting this attention from these users that kind of turned their back on us before. and coming back wheel strong and just loving this new pump.

That's great color. Maybe just one last one, Roger, and I appreciate you taking all the questions. Great to see monitors continue to be strong. How should we think about that outlook into 2027?

Yes. The monitor is doing great. So we've done a few things to enhance it. We expanded the -- we expanded the remote capability, which seems to be interesting to -- not a large group of hospitals, but a significant number where I don't know if you recall the configuration of the device, but we have these -- we have these wireless remote controls that we put in the control room for both the monitor and the pump because people aren't in that room, that magnet scan room with the patient, they're in the control rumor elsewhere. And so we have remotes out there, so you can completely monitor the vital signs, for example, of the monitor and set the alarm limits and so forth. From where we want to sit out in this area that's not inside that scan room. We expanded that recently. We made the capability where you can put another remote, actually 2 more remotes. Elsewhere in the building, and we hook them up through your network, the hospitals backbone wired Ethernet network. And so that fits the bill for some users, and it's given us more to talk about with the monitor. So yes, we see the monitor bottom line is -- it's still very much on point, competitors haven't done anything to shore up the deficiencies of the weaknesses they have vis-a-vis our monitor. And in fact, we've extended it a little bit with this extra twin remotes, you can place elsewhere in the building. So yes, monitor though its growth rate is not anywhere near what the new pumps growth rate is, of course, it's still growing. We're able to push up -- we're able to push that rope along. So very happy with that.

Got it. Great color.

Our next question comes from the line of David Saxon with Needham & Company.