Ladies and gentlemen, welcome to IRadimed Corporation fourth quarter and full year 2022 financial results conference call. Currently all participants on 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. 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 focus 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 respective 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.
Thank you, thank you all for joining us on today's earnings call. It's truly wonderful to report that once again, IRadimed has 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 of 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 milleon, 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 their 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's 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 MRI IV pump, we will refile it, excuse me, later this year. This was unfortunate and will lead to delay in the launch of this new pump, as you see, IRadimed's growth has been, and I firmly believe will remain extraordinary. One door may have been closed temporarily, another has apparently opened. The MRI Patient Monitoring 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 our 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-$63 million, with GAAP diluted earnings per share of $1.10-$1.20, and non-GAAP diluted earnings of $1.23-$1.34. For the first quarter 2023, we expect to report revenues of $14.6 million-$14.9 million, with GAAP diluted earnings per share of $0.23-$0.25 and non-GAAP diluted earnings per share of $0.26-$0.28. I'd like to turn the call over to our relatively new now CFO, Jack Glenn, to review the financial results of the quarter.
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 decrease in gross margin for the quarter was primarily due to 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. With that, I will now turn the call over for questions. Operator?
Thank you. We will now begin the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw a question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question coming from the line of Scott Henry with ROTH Capital. Your line is open.
Thank you. Good morning, and congratulations on the strong results. I did have a couple questions. First, perhaps I missed it, but did you give the average price of the pumps and monitors during the quarter?
No, we didn't, Scott. You know, we've discussed internally and we're not gonna be giving these specific, you know, as we have in the past on the ASPs unless there's any material change in it. There isn't. You know, 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, you know, product, the monitors and pumps, et cetera. You know, actually, the ASPs in the quarter were solid, and there was no real, you know, difference from previous quarters.
Okay. Thank you. That's helpful. Then your disposables and services, you know, wasn't just strong, it was really strong. $1 million higher than we've seen before, often, you know, a number with a three in it. Could you give any color on what happened? You know, more importantly is whether that should continue or it was an aberration or a trend, I guess.
Well, maybe I'll jump in a little bit, then I'll let Jack follow up. It shows, you know, we were selling a lot of IV sets, so the disposables mainly are leading the way from the pump perspective with the sterile sets. 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, you know, just running strong. As I said earlier, the monitors has been hugely successful since we launched it, and this past year was just off the hook growth. Along with that are going these electrodes. Then we're selling maintenance, you know, quite well too.
The maintenance sales had a. They'd been de-emphasized a bit about two years ago with a change in sort of the ideology of commissioning, if you will, of that item. We put that back. We sort of corrected that two years ago. You're seeing the sale of the extended maintenance, you know, kicking in and returning to and passing where it had been prior to that change two years ago. You put all those together and, yeah, we're doing a great job with these accessory and maintenance items as well. Do we expect it at this level to continue? With the continued growth of the Monitor, that'll keep pulling the electrode, you know, 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. Yes. I mean, we see it as sustainable generally. That's, we would be surprised if it, you know, if it hits some sort of plateau at this point.
Okay, great. Thank you, Roger. You know, 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.
Yeah. 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 follow, you know, what they do. They don't break out. Where we compete with them in this MRI Patient Monitoring space is a rather tiny portion of what they do.
I think if you read what they were describing on their call Monday, you could see that, you know, well, they made it very clear that they're gonna prune various, you know, items from their catalog, and that they can't be everything to everyone any longer, and they're gonna shoot for, you know, they're gonna put their resources into high growth, large, businesses that are, that are scalable. When I read those and hear those comments, I'd have to say that this line that we compete with them in being MRI Patient Monitoring, I don't think it checks any of those boxes.
And we've seen them reduce the sales force radically, you know, that they one time had. They had over 40 territories manned, and now it's well under 20, we understand. All of that I think are tea leaves that are not too hard to read. I would just suggest everyone have a glance at Philips' call script.
Okay. Thank you, Roger, for the color. That's helpful. Shifting to the income statement, gross margins, they've been somewhat variable 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?
No, I think you hit it. You know, if you look back many quarters, you know, we've been just in that range. I think that range is a fairly tight range, you know? Plus or minus 1.5% or 2% around that centroid of that average, I think is a fairly tight grouping. Yeah. I don't expect that we will, you know, 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. That's, yeah. To answer your question, yes, I believe the average of what you're seeing in these last many quarters is the fact.
Okay, great. Thank you. Final question for Jack. Other income, it's starting to jump out at a positive $4.50. Is that just higher interest rates for the cash balance or anything else going on there?
Yeah. Yeah, exactly right. That's what that is. Clearly, it's, yeah, with our cash and the higher interest rates that we are now seeing a nice, interest income coming in on a quarterly basis.
Okay, great. Thank you both for taking the questions.
Thank you.
Thanks, Scott. Good to talk to you.
Thank you. One moment please for our next question. Our next question coming from the line of Chris with Singular Research. Your line is open.
Hi. Thank you, guys. This is Steve 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.
Huh. I mean, it's just very steady. Yeah, we're not seeing, if your request is are we seeing cost impacts, you know, those plastic devices, you know, PVC and polycarbonate and such. You know, there have been increases in those commodities.
Mm-hmm.
It hasn't reflected. By the time we mold those parts and turn them into what we turn them into, they're still pennies, you know, in the cost of the IV set. We don't see any. We haven't had any negative impacts to the cost structure in the disposable.
Okay. Given, you know, 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?
Short answer is yes. We, you know, we did that rather early, I guess, in the COVID hit. We started getting hit, this is a year and a half ago, at least six, seven quarters ago. We started seeing the component issues, electronic components and whatnot primarily, really giving us heartburn. 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 one year ago, they're yet to become effective still in these next six months. Yes, we've had price increases.
Some have taken place and are reflected in our earnings. Some have been negotiated in and aren't actually physically accountable for yet, but will be over the next two quarters.
Great. To an extent you can share with us, the dynamic of disposable per device, I'm sure you track, you know, a rough color you can give how that is trending, that'll be very helpful.
You can jump in on that one, Jack.
Was it on as far as the trend on the disposables?
I guess.
Yeah.
For sales of the disposable trend.
Essentially, you know, like, one way to look at your revenue model is there is a disposable revenue stream and then the 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.
Yeah.
disposables per, you know, device or any color you can give which can give us some understanding.
Yeah.
-on how it is trending. You know, 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.
Yeah, I think, well, I think Roger touched on some of this earlier when we looked at the disposables and certainly, you know, the growth there is correlating with the, you know, the growth in both the pumps and the monitors. As a percentage of our sales, I think it's, you know, total sales, it's gone range, you know, somewhere around, you know, 20%-25%. This last quarter, I think it was around 30%. It has shown some growth, but I think, you know, it's probably gonna stay within that same range as a percentage of sales going forward. It and again, correlates pretty closely with, you know, our growth in the devices.
Perfect.
I might add, you know, IRadimed's a little bit different. Though we have a disposable that's a nice piece of revenue and 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.
Right.
-at, you know, not so great a margin. If you delve into our margins at detail, these gross margins that we talked about a few minutes ago, these are the same, whether it's the device or the disposable. I mean, that should tell you a lot more about our model. It's not quite maybe typical in that regard.
Wonderful. Any color on, you know, in terms of the interactions you guys have had, recently or over last six months, with the providers, in terms of their capital spending outlook? Things have, you know, changed a lot, in last two or three years. I was wondering any color you can provide.
To us, I mean, to us, it looks like, I mean, it looks pretty good. As you can see.
Right
-increasing our revenues at quite a fantastic rate. I think in the lines we are in this niche market, maybe we're seeing, you know, CapEx expenditures are still quite healthy and enjoyable to us versus other markets that we don't play in, maybe, where I've heard, you know, things can be more snug, you know, as far as the expenditures of various facilities. I think you can see from what we do in our niche, we're still enjoying a pretty good look from our customers.
Absolutely. Maybe one way to think for us is that things might look a little bit difficult or different for an average, you know, 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?
Oh, yeah. I would say that in our little pocket, our little corner of the medical device universe, yeah, we're a little immune to. We haven't been impacted by the, you know, other areas that you may see being a bit more dampened by CapEx allocations. Yeah, we're kind of under the radar there.
Yeah, right. Good place to be on that. 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, you know, 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?
Well, you know, 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, you know, consideration at some point during really, literally each day. I'd say that, you know, with our size, and our margin, that helps, right?
Right.
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 $0.50 or $1 that we've paid $20 for to get them. We'll do it to serve. We'll do it to keep ourselves moving. We're very agile at also substitution of components. You know, 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. It slows them down. They're not very agile at seeking alternative solutions as we can be.
You put all that together and yes, as I, you know, as I said earlier, thanks to, you know, 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. Yeah, there's a lot of juggling going on, but we have managed to dodge it. I will say, as you can probably read in the papers these days, you know, supply chain issues are starting to fade back away. They're not increasing. We've seen it.
We've seen ourselves starting to get deliveries of parts at the right price again, you know, where we've been in a waiting line for some cases over 1 year.
Great.
Hope that answers your question.
Yeah. Yeah. Great. Well, the kudos to, you know, execution and management here, you know, considering there has been a lot of fever under the surface, looks like you have managed to keep the surface calm, and deliver to your customers. Great. Thanks for the color. That's all I got.
You're welcome. Good to talk to you.
Thanks.
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.
Thank you, operator. 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. The company 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. I look forward to reporting our future successes as the year progresses, and thank you all.
Ladies and gentlemen, this concludes the call. Thank you for participating. You may now disconnect.