Welcome to the IRadimed Corporation Third Quarter of 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, October 31st, 2024, and contains time-sensitive accurate information only today. Earlier, IRadimed released its financial results for the second [sic] third quarter of 2024. A copy of this press release announcing the company's earnings is available under the heading News on our 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 over the Internet and on the company's website at iradimed.com, and a replay 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 are focused on future performance, results, plans and events that may include the company's expected future results. IRadimed reminds you that the future results may differ materially from those 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 would like to turn the call over to Roger Susi, President and Chief Executive Officer of IRadimed Corporation. Mr. Susi?

Thank you, operator. Good morning, and thank you, everyone, for joining us on today's call. Once again, I'm very happy to report yet another record quarter, in fact our 13th consecutive record quarter. Driving this quarter was revenue coming in at $18.3 million. Recall that the previous quarter was $17.9 million, so growth continues to be attainable by all involved here at IRadimed. In addition, gross profit remains impressive at 77.4%, with earnings very strong as well at $0.40 a diluted share. Again, pump orders remained strong and revenue likewise is following that strength, continued in this quarter as it had been in the previous two. I'll be deferring to Jack, our CFO, later for more details on revenue and earnings. But at this point, I'd like to briefly move on and discuss a subject near and dear to us all, which is the progress on the new pump. Basically, it's all about getting that FDA clearance. And as we had promised during the last call, we did make that filing. It was, I believe, September 11 when it finally got filed with the FDA. We have had some interactive questions arising from that almost immediately, which is not a bad sign where they call with a given question and most of them are housekeeping, where is this document, how is this tied to that document, etcetera. So I really can't give much color on that being a positive or a negative either way. But we are now -- we're just a day or two ago informed that they will be producing the actual AI letter, the initial AI, additional information, letter for us to work on. And so I'm sure by next quarter's end call, we'll have a lot more color on how that is progressing. Of course, it's…

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 third quarter of 2024 was $18.3 million, an increase of 11% compared to the third quarter of 2023. This increase was due to the continued strength of our IV pump product in the third quarter as our end-of-life replacement program continues to drive exceptional growth for our pumps. Domestic sales increased 9% to $15.2 million and international sales increased 22% to $3.1 million. Overall, domestic revenue accounted for approximately 83% of total revenue for Q3 2024 compared to 84% for Q3 2023. Device revenue increased 10% to $13 million, driven by a 78% increase in pump revenue. Revenue from disposables and services increased 12% to $4.7 million for the third quarter of 2024, while our maintenance contracts remained stable at $600,000. The gross margin was 77.4% for the third quarter, slightly below the 77.8% for the 2023 quarter. The higher mix of domestic versus international revenue contributed to the continued strength in our gross margin. Operating expenses were $8.4 million or 46% of revenue compared to $6.9 million or 42% of revenue for the third quarter of 2023. On a dollar and percentage of revenue basis, this increase is primarily due to sales and marketing expenses for higher sales commissions and sales activity, along with higher regulatory and quality expenses and payroll and benefits expenses. The noted increase in sales commission expense resulted in operating income slightly down from $5.9 million in Q3 of last year to $5.8 million for the 2024 quarter. We recognized a tax expense of approximately $1.4 million during the third quarter of 2024, resulting in an effective tax rate of 21.3% for the quarter, slightly higher than the effective tax rate of 20.9% in 2023. On a GAAP basis, net income for the quarter was $0.40 per diluted share, the same as for the 2023 third quarter. On a non-GAAP basis, adjusted income was $0.43 per diluted share for the third quarter of 2024, the same as for the 2023 third quarter. Cash from operations was a very strong $9.1 million for the three months ended September 30, 2024, up from $1.4 million for the same period in 2023 as we were able to drive efficiencies in our working capital management, particularly in accounts receivable and inventory. For the three months ended September 30, 2024, our free cash flow, a non-GAAP measure, was $5.1 million, up from $954,000 for the same period in 2023. In the quarter, the capital expenditure of $4 million was primarily for the construction of our new building. And with that, I will turn the call over for questions. Operator?

Thank you.[Operator Instructions] Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is now open.

Great. Thanks for taking the questions. I want to maybe start with one related to how we should think about growth by business line item. Obviously, IV pumps has been the standout growth driver this year. Monitor is a little bit softer. How should we think about that normalizing through both the fourth quarter of this year as well as into 2025 prior to the new pump being approved?

Roger here. Good to hear from you. Maybe I'll take that one. We've mentioned this a bit in previous calls. And as we get closer to the transition between the old pump and the new pump, given that we get the clearance in May, there's -- we've been anticipating that and we're going to start deemphasizing, in fact, the sale of the older pump. So tap on the brakes on that. So we should expect that that will slow down that train. Meanwhile, for the last couple of months, we've been modifying our plans, basically the comp plans that we'll be putting in place beginning with 2025 to really emphasize the monitor. So we expect -- I mean the bottom line of that is, I think it's natural to expect that there should be a dip in the old product as we start to transition to the new pump product. And to fill that gap, we intend to do -- really put the pedal to the metal on the monitor to fill in the gap. So we anticipate maintaining revenue to what you're used to seeing us do, but the mix will change. And we think that will occur rather briefly, but it may span, let's say, two quarters. And then when the new pump starts to kick in, that will turn back around and the story will once again be the new pump. So again, just to recap, to 2025 by the mid -- those mid-6 months, yes, we do expect a dip in the revenue from the pump and to be supplanted by increased revenue from the monitor. But again, in 2026, given that the new pump is hitting the streets strongly, that will turn back around rather quickly.

Got it. That's helpful. And then I think you called out in the press release, the backlog has given you good visibility for the next -- at least the next quarter, if not a little bit longer than that. Can you maybe talk about the composition of the backlog today? Is it mostly IV pumps, a little bit of monitors? Or what's that composition look like today?

Yes, sure. Frank, this is Jack. Yes, I think the -- as we said that our backlog, of course, has been very strong over the last -- probably over the last 1.5 years or more. And it continues to be going into the fourth quarter. Of course, a good portion of that is due to the strength in the pump. But I would also say that the monitor continues to be a good portion of that backlog as well. So that does give us pretty good visibility into Q4, as we mentioned in the press release.

Perfect. And then maybe just for my last one, I was hoping to ask a little bit about OpEx. I think typically, you've been seeing the bottom line outpace the growth of the top line and sometimes rather significantly. It looks like this quarter that was a little bit different with 11% growth on the top line and 1% growth with non-GAAP net income. Can you just talk about the OpEx a little bit more? Was there anything in there that was kind of onetime in nature or an anomaly? And how should we kind of think about that profile returning with nice bottom line leverage?

Yes, I'll take that one. So I guess the biggest piece of the difference between the quarters really comes down to on the sales side and the commissions that were paid or accrued for in that quarter. In Q3 of last year, frankly, we probably had probably a little bit of aggressive sales plan for the quotas for the salespeople. And so that resulted in a very, I would say, lower commission expense in that quarter. I would say in the current quarter we're in, that probably reflects more of our overall spend going forward as a percentage of sales on the sales side, about 20-so percent of revenues. And so that was the key difference between the two. And it just so happened that, like I said, in Q3, it's always a challenge, I guess, when you're -- as we put these sales plans together to make sure there's a balance there. And maybe, like I said, we were a little bit more aggressive on that in the Q3 time period of last year. So that's the biggest difference between the two. But going forward, I think you kind of see the overall OpEx spend as a percentage of sales kind of in line with what this quarter was.

Okay. Thanks for taking the questions.

Thank you. Our next question comes from the line of Jason Wittes with ROTH Capital Partners. Your line is now open.

Hi, thanks for taking the questions. It sounds -- obviously, the FDA is a little bit unpredictable, but it sounds like you're on track there. If you potentially get an earlier than second quarter approval, would that potentially move the impact of the new pump earlier. For instance, if we had a first quarter, we could see third quarter impact?

Not really. I mean we're -- all the planning, the materials, the processes and all of these things, even if it came in a month or two earlier, I mean, really wouldn't meaningfully be able to pull in the rest of the plans that it takes to launch the thing. So...

That makes sense. And then in terms of the monitor, maybe if you could outline kind of your plans for future products and sort of what you might do to expand the monitor business beyond where it is today?

Well, I mean, there's a lot of little things. But I think in a nutshell, the big point is it's just -- it's how you compensate the sales team. And so frankly, a little over a year ago, when we saw our pump business getting soft and we took some measures to fix that, well it worked better than we had planned, as I think everybody has become aware of this past year. And of course, what that meant was the sales team chased that good hunting. And to some extent, relaxed on their pursuit of monitor business. So the monitor business didn't grow -- grew a little bit, but not like what we otherwise would have had if their attentions weren't so focused on this big step change in the pump prospects. So as I mentioned, it's compensation. So that will be adjusted, and it will emphasize the monitor strongly. As I mentioned, we'll deemphasize the pump. Well, the other flip of that is it will be emphasizing the monitor quite strongly. So we're putting those -- we've been talking that and preparing for that now already for a couple of months, and we still have a couple of months before we start next year's plan. But we think we'll hit the ground running since we've been planning it and working it and it's not going to be news to any of our sales team. This is where we're going in 2025.

So that's helpful. And it kind of explains how you might -- how next year might flow in terms of the mix of monitor versus pump. It also kind of begs the question, I mean there's big expectations for the new pump. It's -- you've got a large installed base that's going to go through what we would anticipate will be a major upgrade cycle. So I imagine your sales force is going to be very focused, once this pump comes out, on the pumps and potentially leaves monitor business sort of flat. Obviously, you can compensate for that, but there seems like a real opportunity with pump sales. So does that beg the question, do you -- is your sales force set up right now for the new pump and to sell monitors? Or is it still going to be one or the other? Or is there changes that you think you can make to kind of compensate for two businesses? Yes.

Well, that's the hard part of organizing the sales team and all the sales territories. So we have 27 territories. So with big growth and this tremendous amount of increased revenue we expect from the new pump, then the opportunity to grow the sales team is there and create more territories and more salespeople to fill them. So yes, so the balancing act we're at now is when do you start to do that? If it's premature, then you get some -- you don't have enough to go around for each territory. And as it would lag, of course, that means that something is going to be, again, forsaken. And so I expect, yes, we're going to go through probably -- it takes a couple of quarters to hire and get salespeople up to speed. But we're planning on how those territories would end up being increased, the number of territories. And yes, but before we actually start to plug in more salespeople, we're going to need to wait until it's closer to -- I mean, when we're really launching this pump. So we mentioned that we're -- in the next quarter -- excuse me, next fourth quarter, next year, 2026, when we anticipate having this new pump, we're going to target the initial customers and try to keep a lid on it a little bit so that we don't end up with too few salespeople chasing too much business. And we'll manage it. It's one of those good problems to have, but it's a problem. We got to -- we recognize it and we'll be planning for it.

Got it. Thank you. Thanks for the color. I’ll jump back in queue.

Thank you. I would now like to turn the call back over to Roger Susi for closing remarks.

Well, thank you, operator. All right. Well, once again, it's been a pleasure to report our Q3 2024 performance. And as you see by our guidance, we plan to end the year very strongly, and we look forward to next year, even though with the ups and downs we've just discussed, we have our plans made, and we'll manage it. And we look very much forward to clearing the new 3870 pump and dealing with the challenges of the explosive growth we expect that to give us. So with that, we'll see -- we'll talk again next quarter.

Thank you. This concludes the call. You may now disconnect.